Ukraine, the Depression canary?

"What are the chances that the industrial output numbers from Ukraine signal a second Great Depression?"

Almost nill. Ukraine is a tiny economy, and was even tinier before its recent boom. It trades primarily with Russia, whose economy is driven primarily by oil revenues and is now tanking because oil is becoming cheap again*.

But hey, why worry about facts when your primary concern is to post every single piece of bad economic news the world over and then to fret that the End is Upon Us!

* On the subject of oil becoming cheap - don't let the fact that the economic scare scenario you were peddling most of the last year (peak oil) is evaporating deter you from hawking the latest economic scare scenario. In the future the air will be intolerably hot and intolerably cold - At The Same Time!!

Evans-Prichard noted that the British economy contracted only 5% during the Great Depression, while the American economy tanked to the tune of 30%.

The Brits established a favored trading block that was free from tariffs during that period, an apparently successful strategy. I hope our new administration looks at such factors in dealing with this economic downturn that can already be characterized as a depression.

The Brits established a favored trading block that was free from tariffs during that period, an apparently successful strategy.

Well, I’m not an expert on Imperial Preference, but by Evans-Pritchard’s account:

Britain and the Dominions retreated into Imperial Preference. Other countries joined. This became the "growth bloc" of the 1930s, free from the deflation constraints of the Gold Standard. High tariffs stopped the stimulus leaking out. [Emphasis added]

It would appear that only trade _within_ the bloc was “free from tariffs”. Not exactly an unqualified endorsement of free trade.

Others have noted that current-account deficit countries (e.g., the US) might benefit significantly from protectionist measures, even if such measures prove deleterious for the world as a whole. See, e.g.,

mpettis.com/2008/12/dani-rodrik-is-letting-the-cat-out-of-the-bag/

rodrik.typepad.com/dani_rodriks_weblog/2008/12/some-unpleasant-keynesian-arithmetic.html

From the former:

The fact is that “rebalancing” trade (a code word for eliminating trade deficits, usually through mercantilist policies) is likely to be expansionary for deficit countries and contractionary for surplus countries...I think it would be dishonest to say that reducing trade cannot create any benefits - it can help many trade-deficit countries struggling with insufficient domestic demand by diverting domestic demand that used to go abroad.

Combine such arguments with Jacksonian xenophobia & unilateralism, and Smoot Hawley Redux becomes far more plausible.

Actually, FDR's policies did work, until 1937. At that point, FDR thought he had brought the depression under control, and decided to balance the budget, which is the platform he had run on. He cut spending, and suddenly the economy was back to 29. And wouldn't come out of it until 42, with the massive spending for the war.

Stimulus programs do work, in general. The problem is that in a country like ours, with such vast trade imbalances, a stimulus package may do more good for China and Saudi Arabia than for us.