When doing interviews for my new book on the Great Depression, a natural question comes up: will the present crisis turn out as bad as the 1930s?

My standard answer is typical for an economist: "yes and no." On the one hand, there were very specific reasons that unemployment broke 25 percent in 1933, and we don't have those factors in place today. So I don't think the official unemployment rate will get anywhere near that catastrophic level, though it could very well come in at the #2 spot in US economic history.

This morning the Fed announced a surprise rate cut of 75 basis points, the biggest cut in 24 years.  Yet the stock market nosedived anyway, with the S&P 500 shedding 1.1% during the session, bringing its total losses to 10.75% for 2008.  The Fed is finding that it has lost control over the market:  If it stays pat, investors gripe about a credit crunch and stocks plunge, while if it cuts aggressively, then investors assume things are worse than they realized and rush to Treasuries.

In his 12/26 op ed for the Wall Street Journal, former Treasury Secretary John Snow blamed the “current situation” in our housing and credit markets on the “accumulation in recent years of large pools of excess savings around the globe.”  Yet Snow’s theory doesn’t add up, and overlooks the role of Greenspan’s Federal Reserve in fostering the housing bubble.

What if there was a way to live a life without meaningful consequences? What if individuals could participate in a virtual economy largely separate from the one surrounding us in the real world? What if policies could be applied to real people, but with laboratorial consequences? Second Life, an internet-based virtual world often compared to a computer game, and its derivatives may offer answers to those questions.

On January 1, 2008 California’s minimum wage will increase once again, this time from 7.50 dollars per hour to 8.00 dollars per hour. According to the U.S. Department of Labor, that translates into a 6.7 percent increase, compared to a median wage increase of 4.4 percent for the Golden State. That is bad news for Californians and the state’s economy.

A couple of months ago former Federal Reserve Chairman Alan Greenspan ruffled feathers by criticizing the fiscal record of the Bush Administration.  Dick Cheney himself responded in a Wall Street Journal op ed.  Yet largely lost in the argument was Greenspan’s suggestion that we switch from a cash flow to an accrual method when measuring the federal budget deficit.  (See this interview , about 2/3 of the way down.)  In this post I explain the difference.