A recession is bad. A depression is worse. Economists use the term for a prolonged, severe downturn marked by mass unemployment, widespread business failures, and collapsing output. There is no precise threshold, but the Great Depression of the 1930s is the standard. Unemployment in the United States reached about 25 percent. Banks failed by the thousands. World trade shrank by two-thirds.

Depressions are rare because policymakers have learned some lessons. Central banks now act faster to cut rates and inject liquidity. Deposit insurance prevents bank runs from spiraling. Governments spend countercyclically, borrowing to cushion the fall. These tools do not always work perfectly, but they have prevented another 1930s-style collapse so far.

That does not mean depressions cannot happen again. The 2008 crisis came close. Only massive intervention by central banks and governments kept it from becoming another Great Depression. The experience left deep scars: slow growth, high debt, and political backlash that is still playing out.

Depression hallmarks

• Unemployment above 20 percent
• Sharp, sustained fall in GDP
• Deflation or very low inflation
• Mass bankruptcies and foreclosures
• Frozen credit and bank failures