360 INDEPTH: STOCKS DROP AMID GLOBAL RECESSION FEARS

Dow Closes 312 Points Down

Wall Street has ended the week with another sharp loss, joining stock markets around the world that fell on the growing belief that a punishing economic recession is at hand.

The blue chips ended the day down 312 points at the 8,378 level, while all the major indexes fell more than 3 percent. It was a dramatic day on the Street, with the Dow Jones industrials falling more than 500 points soon after trading began, and, following the pattern of recent sessions, recovering ground only to fall sharply again. Grim news from big global companies including Sony and Daimler, coming after disappointing outlooks from some big U.S. corporations, has investors believing there will be a long and deep global recession. The selling also came from hedge funds that had to unwind positions to pay back debts.

Jobs Lost On Wall Street

The fallout from the continued global credit crisis has claimed jobs on all corners of Wall Street, from hedge fund managers to floor traders. More than 110,000 have lost their jobs so far this year. Some industry experts forecast it could come close to 200,000 before the year is over. Goldman Sachs Group, the world's biggest investment bank, made plans on Thursday to cut 3,200 positions from its staff of 32,000. Barclays Capital is in the midst of purging 3,000 jobs as part of its takeover of Lehman Brothers, and Bank of America's acquisition of Merrill Lynch is likely to add thousands of additional cuts. Michael Williams, dean of the graduate school of business at New York's Touro College, believes up to 250,000 financial workers could be without jobs by the second quarter of next year.

The Good News: Numbers Don't Add Up To Another Depression
Economists Agree, Depression Is A Long Way Off

Whether it’s accurate or not, news of financial instability around the world has sparked the conversation for many.Are we headed for another depression? A CNN/Opinion Research Corp. poll taken recently found that more than half of American believe another economic depression is likely. Most economists don’t take quite as dire of a perspective.

“On a 1-10 scale, the Great Depression was a 10 and we are now around a 3 or a 4,” Dr. Ali Malekzadeh, dean of the college of business at Xavier University told WLWT-TV in Cincinnati. Malekzadeh and other economists point out that while many younger Americans have not seen such difficult financial periods in their lifetime, the numbers just don’t spell disaster as they did in the 1930s. Consider:

The Dow Jones Industrial Average Dropped 40 percent in two months at the beginning of the Depression. Currently, the Dow has only dropped about 20 percent over the last year.

Unemployment during the Depression reached 25 percent. Now, the jobless rate is around 7 percent

The gross domestic product plunged 13 percent in 1932. Even in worst-case scenarios, several economists have stated that they don’t see the GDP dropping more than 4 percent over the next year.

That’s not to downplay the current economic situation, but rather to suggest the U.S. is merely in a recession and not yet close to a depression.A depression is defined officially only as “prolonged” recession. The U.S. has seen 10 recessions since World War II. There are mixed opinions on what actually triggered the Great Depression. Many believe it was the stock market crash in 1932. However, the Economist.com reports that the Federal Reserve began getting signals of a serious downturn years before.

“As early as 1928 the Federal Reserve, worried about financial speculation and inflated stock price, began raising interest rates. In the spring of 1929, industrial production started to slow; the recession started in the summer, well before the stock market lost half of its value between the end of October and mid-November,” according to the site’s economic research tool.

One factor that may play to the favor of current times is that Federal Reserve Chairman Ben Bernanke spent most of his career studying the Great Depression as an economics professor at Princeton.“It’s hard to imagine anyone who is more qualified to try to minimize the damage from the current crisis,” wrote David Leonhardt, of the New York Times. And if the opinion of economists and the qualifications of the chair of the Federal Reserve aren’t enough to convince Americans that a depression is not imminent, perhaps they should consider the words of those who actually lived through it.

Top Global Markets Follow Wall Street's Moves

Nikkei Index

Japan's Nikkei225 is the most watched Asian stock market index. Trading on the Tokyo Stock Exchange, the Nikkei has been calculated daily by the Nihon Keizai Shimbun (Nikkei) newspaper since 1971.

FTSE 100

London's FTSE is an independent company jointly owned by the Financial Times and the London Stock Exchange. The FTSE 100 is the most often used market indicator in the United Kingdom.

Hang Seng Index

Hong Kong's Hang Seng Index is used to record and monitor the largest companies of the Hong Kong stock market and is the main indicator of the overall market performance in Hong Kong.

CAC 40

France's Cotation Assistée en Continu (Continuous Assisted Quotation) is a capitalization-weighted measure of the 40 most significant values among the 100 highest market caps on Euronext Paris. The CAC 40 is considered the benchmark index in France.

DAX 30

Germany's Deutscher Aktien Index 30 (DAX 30) is a Blue Chip stock market index consisting of the 30 major German companies that trade on the Frankfurt Stock Exchange.

Shanghai Stock Exchange

The Shanghai Stock Exchange is the fifth largest exchange in the world and largest in mainland China. It is smaller than the Hand Seng, which is China's largest exchange.

Walter

Sources: Wall Street Journal, Economist.com, The New York Times, WLWT-TV, Xavier University