The case for pessimism

Amid all the talk of green shoots and renewed economic growth, Vince Cable and Martin Wolf pop up today to warn that the nightmare is, potentially, far from over.  

Of the two, Wolf’s is the more useful article; linking, as it does, to a paper by the economic historians Barry Eichengreen and Kevin H. O’Rourke, entitled A Tale of Two Depressions.  I recommend that all CoffeeHousers check that paper out, as the graphs in it are, as Wolf puts it, “worth more than a thousand words”. They suggest that – across a range of indicators, from world industrial output to the volume of world trade – we remain on an equally harsh, or even worse, downwards path as during the early period of the Great Depression. I’ve reproduced one of the graphs below: it makes for a compelling picture.  

Now, I’m not saying that we’re entering our own Greater Depression – I don’t have the economic nous or predictive ability to make that call.