Could the Great Depression happen again?

Gather top local economists together and ask them one question: Are we heading for another Great Depression? And their views are as diverse as the city and suburbs. Yes. No. Possibly. They do agree that our country is in one of its worst economic times ever. Yet as we mark today's anniversary of the start of the Great Depression in 1929, don't be too quick to compare then and now.

At least not yet.

The major difference this time is Federal Reserve Chairman Ben Bernanke, who studied the Great Depression and aims to learn from the past, said James Langenfeld, adjunct professor at Loyola University School of Law in Chicago and director of the Law and Economics Consulting Group. "Bernanke will not make the same mistakes as the 1930s," Langenfeld said. "But he could make new mistakes. What they are taking is a completely different path."

Here are other thoughts:

Diane Swonk, a suburban resident and chief economist, senior managing partner, Mesirow Financial in Chicago:

I may be depressed about the economy, but that doesn't make it a depression. However, we are in a very bad recession, the worst since the early 1980s, and conditions will continue to get worse before they get better.

Moreover, the economy will continue to struggle even as overall growth moves back into positive territory. I am expecting unemployment to hit 7.5 percent, 1.5 points higher than it is today. It could go even higher if we do not see some additional fiscal stimulus and calming in financial markets soon.

David Klein, a Long Grove resident and senior vice president/financial consultant with RBC Dain Rauscher Inc. in Vernon Hills:

We are not in a depression and likely won't be. During the Great Depression, they raised income taxes from 25 percent to 63 percent, the largest peacetime increase in U.S. history. Second, the gross domestic product fell four years in a row. Third, unemployment went as high as 25 percent, and remember, in those years, women did not work outside the home, and there was only one worker per household. Also during the Hoover administration, we artificially held the high prices up and we didn't have competition. When you hold up higher prices, consumer spending plunged. About 9,000 small banks failed.

Today, the federal government is pouring money into the banking system. This will keep the money flowing, avoid having it freeze up and having the system come to a halt. Today, about 15 major banks have failed. The government is attempting to loosen the credit crunch and help the housing market. Also, the GDP had only one quarter so far that was negative. By definition, a recession has to have two straight quarters that are negative.

Thomas Rowen, a Bartlett resident and director of institutional portfolio management at Fifth Third Bank in Chicago:

I do not believe that the United States is headed into a depression and the risk of an actual depression is minimal. It is much more likely that we are in a recession, comparable to the 1991 and 1982 recessions in terms of severity and length. We expect the third quarter 2008 gross domestic product performance to be in the range of -0.5 percent to -1.0 percent, likely followed by negative GDP in the fourth quarter and first quarter 2009. It is probable that slow economic growth will resume in the course of next year. It is also unlikely that national unemployment will exceed 8 percent next year. By comparison the country suffered unemployment in excess of 20 percent during the Great Depression.

Also, during and after the Great Depression significant reforms were put into place by the U.S. government. There was little regulation of the banking industry or the capital markets before the 1930s. The New Deal produced the Securities Act of 1933, Securities Exchange Act of 1934, the Investment Company Act of 1940, the establishment of the FDIC, Securities and Exchange Commission and other regulatory institutions. Despite the weakness of the regulatory measures and the impact of the current housing and credit problems, it is a much better understood and regulated environment than leading up to the last depression.

Most U.S. industries are financially healthier and have a broader base of global business than during the 1930s. Though corporate profits have declined, most U.S. companies are making money and a surprising number are still experiencing earnings growth. Also, many industries have markets that are global in scope. Though the economic slowdown and credit problems are global in their impact, many economies around the world are comparatively healthy. Further, we see a much stronger degree of global cooperation on the part of central banks and global leaders than in past eras.

Finally, our government is taking major steps to avert an economic crisis. The government response is considerably more significant and better crafted than that of President Hoover in the early 1930s.

Diana J. Joseph, a Lincolnshire resident and managing director of Dearborn Partners in Chicago:

Our country, and most of the developed world, is certainly experiencing or heading into a recession, which is defined as two quarters of declining gross domestic product or when the totality of economic activity peaked versus when it troughs. It looks at many more factors - the totality of employment, income, production and business activity. All of these factors are declining. In fact the U.S. financial system is virtually frozen and this is slowly freezing economic activity. Surprisingly, there is no standard definition of a depression. A common rule of thumb is a 10 percent contraction in economic activity coupled with high unemployment and asset deflation over a prolonged period.

The current crisis is more serious than anything witnessed since the Great Depression and is certainly larger in scope and breadth than the beginnings of the Great Depression. The Great Depression was made in the stock market of the United States and spread quite slowly to the rest of our economy and eventually to other lands. The current crisis had its genesis in a toxic combination of easy money, high leverage, greed and deregulation. It was spawned not in one asset class, but all. This crisis has become global in a matter of months.

It is also unraveling much more quickly. In a short period of time we have nationalized Fannie Mae, Freddie Mac and many of the largest financial intermediaries in the world to avoid their failure. We have witnessed the failure of Bear Stearns, Lehman, and forced some of the nation's biggest banks into shotgun marriages. We have guaranteed bank debt, insured money market accounts temporarily, hiked FDIC limits, agreed to buy toxic assets of all ilks and arranged a $700 billion bailout just as an example of the extreme measures taken.

If our government's measures succeed in putting a finger in the dike, they can arrest the slide and we will only have a recession. Or, the vast quantities of liquidity will reflate the system. If these measures do not "unlock" the financial system fairly quickly, a depression is possible and can be measured by continuing falling prices for real estate, stocks and other assets; high and rising unemployment; a deepening of negative economic growth; lack of confidence in financial intermediaries; and the passage of time. I believe that the answer will be apparent within 12 months.

Nancy Coutu, owner of Money Managers Advisory Inc. in Oak Brook:

We are definitely heading for another depression. All the indicators are there. Truly, there are some differences now than there were during 1929 to 1933 that could potentially make ours not as bad. We have unique issues that the older era didn't have. They had heavy unemployment then and most of them were farmers. There was a severe drought and a food shortage and a job shortage. We also were more manufacturing-oriented then. We're not anymore. We're more of a service country now and that could be to our advantage.

But we have major housing problems. Housing now is bad and it will be far worse next year. We still have not seen the end to the adjustable rate mortgages and what they can do to our economy. Many were coming due last quarter and we have thousands of adjustables still coming due, especially on major pieces of real estate. When you have a million-dollar property and will need to refinance, it won't be worth a million dollars anymore. - It could take years to eat up the (housing) inventory.

We're beyond the recession that the government will admit to. We've been in it for a year. Yet our dollar has dropped in value and the euro has increased. That means foreign investors have been coming to America to buy our best real estate in the world, buy our goods and buy our cars for exceptionally low value. They have, in a way, helped to stimulate our economy.

No matter who the next president is, if they have to increase taxes, then it will be worse. About 80 percent of our workforce is employed by small businesses. If these small employers are taxed more, they will increase their prices and lay off workers. That's when we move from a recession to a depression. More of these small businesses will then go out of business. It's a horrible phenomena. I see unemployment reaching double digits. No one will have money to buy things. Still, I believe we'll come out of this faster than they did during the Great Depression.

Our government has been holding the lid down with (not) raising interest rates and with the bailout plan. But we can quickly go from deflation to inflation and everything will spiral. Everything is at risk. Social Security. Medicare. Retirement savings. People have to feel secure. But everyone is terrified right now.