They are different in kind not just size. The rule of thumb that a Depression is a Recession of 10% or greater drop in GDP is more misleading than helpful. A Recession is typically caused when the central bank RAISES rates to cool off an economy. A Depression is caused by a banking crisis that comes from the central banking LOWERING rates, spurring a credit bubble which leads to the banking crisis.

A Recession is when your friend loses his job A Depression is when you lose your job A Great Depression is when an economist loses his job

Given the very different causes, the solutions are also different. This lack of understanding is causing us (as we did in 1931) to prolong and deepen the downturn by excessive intervention that is poorly designed. For example, Bernanke has recently criticized Andrew Mellon, the much maligned Treasury Secretary in 1929 who urged the government to sit back and "purge the rottenness from our system." Yet Hoover ignored his advice and actively intervened with public works, tariffs, taxes, bank bailouts and more.

Recessions tend to be short (less than a year) and modest (less than 5% drop in GDP). A recent study The After Math of Financial Crises looks at all the post-war (WWII) banking crises and concludes that Depressions are much deeper and longer than Recessions:

five years for unemployment to bottom (worse by 7%)

six years for housing to begin to recover (down 35%)

three and a half years for stocks to bottom (down 60%)

two years of severe GDP decline (down 9%)

Typically government debt increases by 86%, largely from a dropoff in tax revenues. Bailouts of banks tend to relatively small compared to other causes of a massive increase in government debt, including big increases in spending to attempt to fight the downturn.

The authors, both professors (Harvard and UMd) and members of the NBER which officially calls recessions, note that so far this crisis has seen asset prices decline as expected from prior bankng crises. They urge caution: "one would be wise not to push too far the conceit that we are smarter than our predecessors." Unlike the other post-war banking crises, "with the notable exception of the Great Depression", this one is not isolated to a country or region like Sweden or Japan, but is global. "The global nature of the crisis will make it far more difficult for many countries to grow their way out through exports, or to smooth the consumption effects through foreign borrowing."