My thoughts on this: first of all yes there are some danger signs, most notably a possible debt and housing bubble.
That said, you have to look at what was actually happening in the Great Depression.. would *all* these things hit us at once just like the Great Depression? :
#1 : global trade war
#2 : asset panic
#3 : interest rates at higher than equilibrium
#4 : massive liquitity / money velocity reduction
#5 : bankrupcy / default of collateral chain reaction
#6 : massive expansion in government, tons of new programs and taxes created
#7 : massive amount of regulations added
So my point is this.. right now we may (or may not) be close to problem #2 with the stock/housing/debt potential bubbles. That could lead to #5 if it was bad enough. However, the Fed is eager to avoid a repeat of #3, which is why interest rates are at 1% right now. Also, the government did expand noticeable during the last several years, but still nothing at all compared to the '30s + '40s. And I don't see us moving more protectionist honestly, except perhaps very slowly in the worst case. So even with some panics, as long as the government doesn't go too crazy and they just let things run their course, we should be limited to a maximum 50% drop in stocks and housing, with a sharp recession for 5 years with unemployment hitting 12%. And then our economy would bounce back and it would be a thing of the past. I don't think it would get worse than that. That is a LOT better of a situation than having an 80% drop in stocks, unemployment hitting 20%, and a recession becoming a Depression for 20 years with little growth. But every economy, including ours, has occassionally experienced a sharp temporary slowdown and as long as the government doesn't do anything too stupid we have always bounced back (and usually in much less than 5 years).
In fact the last 3-4 years were a perfect example-- we've had tons of external shocks including terrorist attack, war, corporate scandals, NASDAQ crashed, etc. Yet even with all that, unemployment barely went up more than 1% (and that from a low-level to begin with!), and GDP didn't go down more than about a couple tenths of a percentage for 2 quarters. It was the lightest recession on record, our economy barely took a small breather. Of course the sensationalist political campaigns and media always try to make things look scarier than they are, if you just watched news you'd probably think we had something worse than the Great Depression the last few years lol.
-Taric
