We already know we’re in a recession. But, are we headed for a depression? Karl Eggerss was interviewed on CBS to discuss this very topic.
Sharon Ko: With this unprecedented slowdown in the economy, there’s predictions out saying this recession is headed to a depression. Well, let’s look at some of the signs. Historic jobless claims, a sharp drop in consumer spending and a projected negative GDP growth. Here are the different kinds of economic recovery. So far, most economists have been saying, we’re looking at a U- shaped rebound. That’s a downturn with a slow recovery. A depression is that L-shape one, a sharp drop and recovery flatlines.
Karl Eggerss: I think the depression word gets tossed around a lot and that’s a very big, impactful word and it grabs headlines. A depression’s a very different animal. I mean, when we go back to the Great Depression, we’re talking about people sharing a piece of ham as a family together.
Sharon Ko: Financial advisor, Karl Eggerss take is the swoosh rebound, a steep downside with gradual recovery.
Karl Eggerss: I think we are having a severe recession and I think there will be a short recession, but I think it will be pretty deep. Back in the 1930s, during the Great Depression, we were a manufacturing economy. Now, we are a service economy. That’s a very big difference because of the fact that we can do things much, much quicker than we could before, primarily through technologies.
Sharon Ko: He says how quickly the economy will bounce back depends on a lot of factors, especially consumer confidence.
Karl Eggerss: The consumer is two thirds of the economy. How much the consumer, or our viewers, how much they are actually spending, drives the economy and we know spending grinded to a halt in March and April. So how quickly spending comes back will dictate how fast the recovery is, whether it’s a U or a swoosh.