A depression is a long and deep economic recession, many consecutive quarters of decreased aggregate output (commonly measured by GDP), adjusted for prices and the number of people living in the country. High levels of unemployment, increased burdens on borrowers, and social unrest are the boon companions of depression. America has suffered through several depressions, including most recently the Great Depression of 1929-1933. That depression had many causes, some of which, like severe disruption of financial markets amidst a period of profound structural economic change, are eerily familiar to recent events.

Optimists counter that the Federal Reserve has much more depression-fighting power today than in 1929 because it is no longer fettered by the gold standard and because it better understands its role as lender of last resort. That's right, but optimists forget that the Federal Reserve today faces a more fearsome foe than the gold standard.

America's national debt, which in 1999 the government projected would be completely paid off by 2008, has swelled to literally astronomical proportions. The U.S. Treasury now owes holders of its bonds almost $9.4 trillion, or 6,300 miles of $100 bills. That is $31,000 per American, twice the per capita national debt of Canada. It's also two-thirds of U.S. GDP, less than the level reached at the end of World War II, but twice what it was after the American Revolution, the Civil War, and World War I. About 10 cents of every tax dollar goes to interest for bondholders, many of whom are foreigners like the communist government of China. The debt grows larger every day the federal budget remains in deficit.

AN EVEN BIGGER THREAT