Yes, It's Bad, But the Depression It Ain't

Economist sees differences and remains optimistic
By Sarah Quinn,  Newser Staff
Posted Oct 8, 2008 6:50 PM CDT
Fed Chairman Ben Bernanke is seen on a TV screen on the New York Stock Exchange trading floor Tuesday Oct. 7, 2008, during his luncheon address to the National Association for Business Economics.    (AP Photo/Richard Drew)
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(Newser) – The economic news out of Wall Street and Washington is scary and shocking, but there's no reason to use the "D" word anytime soon, Jay Hancock writes in the Baltimore Sun. He talks with economic historian and professor Louis Galambos, who remains guardedly optimistic about the "core of the economy." Today's financial system is far more complex and diverse than that of the 1920s and '30s, and fundamental changes in how it operates should guard against doom.

He cites in particular the health of the solid-state electronics industry—our "third industrial revolution"—along with the "sheer size and inertia of modern government." Another difference between today's crisis and the Depression is reaction time, Galambos says. Depression-era policymakers initially froze, then acted incorrectly, and, finally, too timidly. "It's amazing how stupid it was," says Galambos. Henry Paulson and Ben Bernanke could be wrong, but there's enough safeguards to prevent an out-of-control spiral.