Transcript

CHRISTINA ROMER:  To start, I think it's important that I point out that there's a current recession, is unquestionably severe. It pales in comparison to what our parents and grandparents experienced in the 1930s. Last Friday's employment report showed that the unemployment rate in the United States has reached 8.1 percent, a terrible number that signifies a devastating tragedy for millions of American families. But at its worst, unemployment in the 1930s reached nearly 25 percent, and that quarter of American workers had painfully few of the social safety nets that today help families maintain at least the essentials of life during unemployment. Likewise, following last month's revision of the GDP statistics, we know that real GDP has declined almost two percent from its peak, but between the peak in 1929 and the trough of the Great Depression in 1933, real GDP declined by 25 percent.

Now, I don't give these comparisons to minimize the pain that the United States economy is experiencing today, but to provide some perspective. Perhaps it's the historian and the daughter in me that finds it important to pay tribute to just what truly horrific conditions the previous generations of Americans endured and eventually triumphed over. And I guess I should say it's the new policymaker in me that wants to make it clear that we're doing all that we can to make sure that the word "great" never applies to the current downturn.

Well, what we are experiencing is less severe than the Great Depression. There are parallels that make it a useful point of comparison and a source for learning about policy responses today. Most obviously, like the Great Depression, today's downturn has its fundamental cause in the decline in asset prices and the failure or near failure of financial institutions.

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