Sober Words from Barro
By David Henderson
In yesterday’s Wall Street Journal, Bob Barro points out that the stock market crash could portend another depression. I had never been able to answer students who asked me what distinguishes a depression from a recession except that it’s more serious. Barro defines a depression as a drop in real GDP or consumption per capita of 10% or more. That would do it, I think.
Barro also takes on Paul Samuelson’s quip about the stock market predicting 9 of the last 5 recessions, pointing out that the stock market portends probabilities, not certainties. Well worth reading.