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April 01, 2009

How is this one different?

This recession will likely go down in the books as one of the worst, if not the worst, in 50 or 60 years. Is there one thing you can put your finger on that has made this recession so different?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"I think it's the fact that in the investment component of the recession everything has been hammered. Let's go back to the 2001 recession. People lost their jobs. Of course, we had the big tech bubble burst, and we had a big drop - a very big drop - in the stock market. But housing values, the money that you had in your home and the equity in your home, continued actually to go up. And I think that provided a safe backstop for people. They could at least be assured that they still had the money they had in their house. Well, this time we've not had that. Both the stock market and the housing market have been battered, and indeed, when this recession finally works its course, we'll probably see the average house will have lost approaching 20 percent of its beginning value. And in some sense, this recession has really left households with nowhere to hide, nowhere to put their money, and that's why many people literally almost are putting their money in a mattress. And I think again this is one reason this recession will be very long remembered."

Posted by Dave at April 1, 2009 08:00 AM