Podcast – COVID Recession Versus the Great Depression

The pandemic has plunged the economy into a COVID Recession. In this episode of the Econ Café 2020/21 podcast, Mike Mandel and Sean Flynn discuss why the COVID Recession is different from the Great Depression of 1929, and how government policy has changed since then. Sean told how his father and his father’s family suffered mightily during the Great Depression.

We then discuss why the Great Depression lasted so long and the key reasons why the COVID Recession is likely to be much shorter. First, during the Great Depression, the Federal Reserve made some bad decisions. The central bank did not lower interest rates fast enough or deep enough. Upwards of 10000 banks went out of business, and account holders in these banks lost all of their money because there was no deposit insurance

Today is different because the Federal Deposit Insurance Corporation, the FDIC, which was created in 1933, protects bank deposits. People can save and spend without worrying that their money or their banks will disappear. Moreover, as soon as the pandemic started, the Federal Reserve aggressively cut interest rates and offered a wide variety of low-cost loans to corporations and financial institutions.

Another important difference this time is that the government moved aggressively to support aggregate demand by distributing money to individuals and businesses.  In the Great Depression. It took years for policymakers to get to that point. With any luck, better policy will ensure that the COVID recession, while deep, will be much shorter than the Great Depression and that Americans will prosper afterwards.

Questions/Discussion:

1. What are some differences between the COVID Recession and the Great Depression?
2. How did bad policy help prolong the Great Depression?

Source: Covid Recession Versus The Great Depression Podcast