Odds of a Depression? 1 in 5

Economist crunches historic stock-market data to gauge the chances of depression
By Rob Quinn,  Newser Staff
Posted Mar 4, 2009 7:15 AM CST
A bread line forms outside the Rescue Society in Doyers Street, New York City, during the Great Depression, 1929.   (Getty Images)
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(Newser) – The bad news is that this recession is likely to be America's worst since WWII—but the good news is there's only a 20% chance it will become a depression, Robert Barro writes in the Wall Street Journal. The Harvard economist crunched numbers from 251 stock-market crashes in 34 countries to determine the odds of a 10% or higher economic decline that defines a depression.

The lack of any major global conflicts means the chance of a depression being a major one—a decline of 25% or more—is only 2%, according to Barro's data. Recovery will be well under way by next year if the recession doesn't deepen, Barro writes, but if it becomes a depression things may not start looking brighter until 2012.