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Thanks for this post Livio. This is stuff I need to know.

It mostly confirms what I suspected. The one (two?) big surprise is the very low unemployment and very high growth in 1928. Was there a massive boom, compared to previous years? Was the high GDP growth mostly due to immigration? Is that extremely low unemployment rate credible, or was it maybe measurement differences?

Actually the 1920s opened up with a large recession but then there was a period of very high growth - the so called roaring twenties. However, i think measurement differences may play a role - the "official" GNP/GDP numbers go back to 1926.

Thanks Livio.

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Some preliminary points
i) Doom and gloom talk about the Canadian economy is perfectly appropriate. We're a country of the old, and this just can't keep on going. I repeat: this cannot keep going. We're running out of freaking beef and eggs, people. There's a reason we used to have famines. It's not just some quaint thing that Medieval people did for fun.
ii) "Secular stagnation" is an idea from 1938. (1939, if you're like me and picked up the idea from The Economist's "A Correspondent in New York.") The story that we are experiencing now is what the North American economies experienced in 1938--9 is completely and utterly the opposite of a "doom and gloom" story. Because the 1938/9 story ends in September of 1939 with the beginning of thirty-five years of robust economic growth. It's like turning a key or pressing a button. If we could just figure out what button was pressed, we could do it again!

Dumb comment of the kind usually reserved for Nick Rowe's posts

Does anyone else find it odd that the eight year comparison begins in 1928? Or even 1929? The canonical beginning of the Great Depression is 29 October 1929, and while there were already signs of economic softening in 1929, the event most directly comparable to the failure of Lehmans is that of Creditanstalt on 11 May 1931. An eight year period comparison 1931--9/2009--2015 would take in the recession of 1938, which is the event that comes to my mind in connection with the late downside GDP numbers.

This is obviously slightly different from the claim that the "Long Recession" has so far lasted longer than the "Great Depression" and shows signs of being more damaging because of its longer run; but since the "Long Recession" isn't over, it's a bit premature to be proclaiming victory!

As for the data, I eventually rustled up this (not from StatsCan, because they're just intimidating): Year/change GDP; 1936/+5.39; 1937/+9.41; 1938/+2.61; 1939/+5.96. Unemployment rate: 1936/16.7%; 1937/12.5; 1938/15.1; 1939/14.1.

It is the surprising depth of the 1938 dropoff --a global, and not just American phenomena-- followed by the weakness in 1939, made less distinct in the annualised data by the pushing of that mysterious button, whatever it could have been, on 9 September 1939, that drew attention to Hansen's thesis. If the "recovery" of 1935--8 was just a "dead cat bounce," something was deeply, deeply wrong with the Canadian (as the world) economy.

But then some crazy, mysterious thing happened at 4:40 in the morning, central European time, on 1 September 1939, and everything changed, and it turned out that Hansen, with his crazy theory that secular stagnation could only be ended by only "permanent government deficits" to maintain demand, was wrong! Hurrah!

America's dropoff was already ending by the spring of 1939 and 2nd/3rd quarter growth accelerated rapidly. There wasn't much deficit spending either. During the war investment spending was nationalized and everybody capitalized for the war effort.

The American economy did, indeed, recover in late 1938 --but only to a point. I took a quick stroll through my press coverage notes, but mainly came away with the realisation that The Economist was basically always pessimistic in those days. So I will direct you instead to Wikipedia. You'll find there the claim that a substantial spending public spending package played a significant role in the recovery.

In this vein, I direct you to the 1939 Federal budget. (Receipts, 78.2 billion; outlays, 114, equal to 3.1% of GDP). You will note that Allied armaments purchases began in the spring of 1939, and really ramped up after September. Nevertheless, employment did not reach 1937 peaks until the outbreak of war.

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