Our Great Recession

This recession, which began in December 2007, has already lasted longer than the average postwar recession. If it turns out to be as bad as the most protracted of the postwar downturns, we will touch bottom next month.

But my strong suspicion is that we are now in something more like a Great Recession. It won't produce as steep a fall in American output as the Depression did, but it may prove to be as prolonged.

The depression that began in August 1929 did not hit its nadir until 43 months later. The one that started in October 1873 was shallower but lasted 65 months. If the economy were to keep shrinking for that long, we wouldn't start coming out of this until after May 2013.

Is that possible? This is a crisis of excessive debt, the end of the Age of Leverage. It will take longer than a few more months to resolve bank and household insolvency, especially with asset prices continuing to fall so rapidly. Even with zero interest rates and huge deficits, Japan suffered a "lost decade" in the 1990s - and that was when the rest of the world was doing well. This recession is taking place as the rest of the world is doing even worse than the United States. The collapse of trade as measured by East Asian export data is petrifying.

So far in this recession, remember, we have had only two consecutive quarters of declining gross domestic product. At the moment, I find it quite easy to imagine two consecutive years of contraction. And I don't rule out two more lean years after that.

Niall Ferguson is a professor at Harvard and the author of "The Ascent of Money: A Financial History of the World."