Odds of a Depression? 1 in 5

Economist crunches historic stock-market data to gauge the chances of depression

By Rob Quinn, Newser Staff

Posted Mar 4, 2009 7:15 AM CST

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Odds of a Depression? 1 in 5 — A bread line forms outside the Rescue Society in Doyers Street, New York City, during the Great Depression, 1929. (Getty Images)

The bad news is that this recession is likely to be America's worst since WWII—but the good news is there's only a 20% chance it will become a depression, Robert Barro writes in the Wall Street Journal. The Harvard economist crunched numbers from 251 stock-market crashes in 34 countries to determine the odds of a 10% or higher economic decline that defines a depression.

The lack of any major global conflicts means the chance of a depression being a major one—a decline of 25% or more—is only 2%, according to Barro's data. Recovery will be well under way by next year if the recession doesn't deepen, Barro writes, but if it becomes a depression things may not start looking brighter until 2012.
(More economy stories.)

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