From The LA Times
By Steve Fraser

A grisly banner was held aloft the other day at a demonstration on Wall Street. Its graphic message advised denizens of the street to “Jump!” It was a frightful reminder of perhaps the most widely believed legend about the Great Depression of the 1930s; that the sudden collapse of the economy filled the sky with the falling bodies of suicidal stockbrokers. As a matter of fact, there were very few such suicides. But the myth captured a deeper truth. Except for the Civil War, no event in American history proved more traumatic. It left scars that are with us today.

During the last few weeks, we’ve all grown reluctantly accustomed to comparing the current financial meltdown to 1929. Forebodings that this financial crisis may soon enough descend into a more widespread economic disaster are everywhere. Yet almost nobody is willing to use the word “depression.” We talk instead of a “slowdown” or “recession,” words that somehow fail to do justice to the specter that haunts the nation.

This taboo persists in the face of ominous signs to the contrary: an ever-accelerating rate of unemployment and home foreclosures, a credit freeze that touches everyone from major manufacturers to ordinary consumers, the accordion-like contraction of businesses from automobile plants in Detroit to software makers in Silicon Valley, the rapid erosion of the dollar’s value in world money markets, and so on. All of this resembles, at least in broad outline, the liquidity crisis that was prelude to the Great Depression. Still we avoid that word, and for reasons that are all too understandable.

To begin with, there is the profound matter of confidence. A market economy can’t function without it. Franklin Roosevelt is perhaps best remembered for gently chiding and reassuring his fellow citizens that they had nothing to fear but fear itself. He was speaking into that interstitial zone of our public life where psychology meets economic policy. Today, too, maintaining or restoring confidence is at a premium. It is a measure of just how bad things are that bankers and public officials whose demeanor is normally professionally upbeat have been as grimly candid as they have been about the seriousness of the situation. Raising the prospect of depression, however, goes too far.

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