From: John Conover <john@email.johncon.com>

Subject: News: Futurist: markets, attacks, point to possible depression

Date: Mon, 05 Nov 2001 06:34:36 -0800

Always, in times of tribulation, doomsday prognostications capture the media's attention. We might be headed into a depression, and we might not. Whether we are, or not, is not knowable. However, the odds of a depression being imminent are not very significant. The standard deviation of the increments in the US GDP, over the 20'th century, was about 10% per year, (0.099733 from 1930-1995.) During the US Great Depression of 1930-1933, the GDP dropped about 50%, (in 1930, it was $96.8 billion, in 1933, it bottomed at $56.8 billion-the GDPs in the Asian Contagion in the late 1990's did about the same.) The standard deviation of the decrease in the US GDP during a depression that lasts at least three years is about sqrt (3) * 0.1 = 0.17. Or, a 50% decrease would be about a 0.5 / 0.17 = 2.887 standard deviation incident, which has a chance, on average, of once in 526 years, or about twice a millennia-quite a rare event, indeed. John BTW, assumptions: Black-Scholes paradigm, erf (3) = 1, statistical independence in the marginal increments of the US GDP-all reasonable first order approximations, (depending on who is telling the story, of course.) Statistical estimate on the standard deviation of marginal increments of the US GDP being 10% is about 1 / sqrt (95 - 35), or about 12%, or a confidence level of about 88%. Call it a 90% confidence level. Data references: 1996 US Federal budget, gopher://sunny.stat-usa.gov:70/11/BudgetFY96, and the 1997 US Federal budget, http://www.doc.gov/BudgetFY97/index.html. Data from Table 1.2, "SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS(-) AS PERCENTAGES OF GDP". Data not adjusted as constant 1987 dollars, nor inflation. So there. http://www.computeruser.com/news/01/11/05/news15.html -- John Conover, john@email.johncon.com, http://www.johncon.com/

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