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Recession, Depression, and Financial Crisis: Everything Economists Want to Know But Are Afraid to Ask


  • Graeme Donald Snooks


Once again the economic experts are telling us that the current (October 2008) financial “crisis” will lead to a deep recession or depression. The financial press is even claiming that we are headed for “global meltdown”. Heard it all before? The last time was in 1998 when we were told that the financial difficulties in the East would generate the “East Asian meltdown”, which would last for at least a decade and would generate a “global economic crisis”. The economic summit called by President Bush for later in 2008 is reminiscent of the G7 and G22 meetings called to discuss similar issues in 1998. And yet nothing happened. Of course the financial gurus, such as Alan Greenspan were quick to claim the credit, but the truth is that financial crises are supply-side happenings that generate a lot of excitement among the stock market speculators but have little real-world fallout as long as the dynamic strategies being pursued by the world’s leading societies are viable. The stock market crash of 1987 is another case in point: nothing serious happened in the real economy. Depressions only occur when dominant dynamic strategies are finally exhausted and new ones are slow to emerge: as happened in the USA during the 1920s and 1930s. The conventional wisdom among the orthodox economic fraternity, that the Great Depression was the outcome of the 1929 Wall Street crash, is totally incorrect. Economists and their political masters will only understand the relationship between recession, depression, and financial crisis, when they have developed a realist general dynamic theory of human society. Until then, economic policy will be confused, ineffective, and distorting. A general dynamic theory is presented in this paper and used to analyse financial crises and economic downturns. To the degree that the real global economy is in trouble, it is due not to financial mismanagement, but to the misconceived policy of inflation targeting pursued for the past decade or so. Once again, our compulsion to intervene exceeds our capacity to understand the implications of our actions.

Suggested Citation

  • Graeme Donald Snooks, 2008. "Recession, Depression, and Financial Crisis: Everything Economists Want to Know But Are Afraid to Ask," GDSC Working Papers 007, Institute of Global Dynamic Systems.
  • Handle: RePEc:auu:wpaper:007

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    Cited by:

    1. Costa Cabral, Nazare, 2010. "Breve guia temático e bibliográfico sobre o estudo da actual crise financeira e económica
      [Short thematic guide to the study of current financial and economic crisis]
      ," MPRA Paper 20743, University Library of Munich, Germany.
    2. Graeme Donald Snooks, 2009. "Climate Mitigation or Technological Revolution? A Critical Choice of Futures," GDSC Working Papers 010, Institute of Global Dynamic Systems.
    3. Kodila-Tedika, Oasis & NGUENA, Christian L., 2017. "Recession and financial development: An empirical analysis," MPRA Paper 81527, University Library of Munich, Germany.

    More about this item


    financial crisis; depression; dynamic-strategy theory; inflation targeting; economic policy; global meltdown.;

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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