Are we in a recession or a depression? A recession usually means a temporary dip in an otherwise growing economy. A depression is much worse, feeding on itself and dragging the economy lower and lower. A recession carries hope. A depression is pure hopelessness.

We have all kinds of forecasts, from extreme optimism to bleak pessimism. Government officials and the mainstream media are touting this as a dip in a long-term growth cycle.

As if the credit crunch recession hasn't been painful enough, some economists have warned at the depth of the recession that the it could tip over into a full-blown depression. So what exactly is a depression, and how could it be any worse than a recession?

"A recession is when your neighbor loses his job. A depression is when you lose your job," according to About.com. This definition may be an example of economist black humor, but it does contain a seed of truth.

The conventional definition of a recession, however, is where the Gross Domestic Product (GDP) declines for two or more consecutive quarters. This is a fairly crude measure, so some economists like to factor in additional measures such as unemployment, industrial output and retail sales. The key point, however, is that a quarter-on-quarter deterioration in these measures will result in a recession being called out.

It has been about a year since Lehman Brothers failed and this financial crisis started, and it has hit many of the banks hard including Bank of American (NYSE: BAC), Citigroup (NYSE: C) and America International Group (NYSE: AIG).

There has been one thing that has been bugged me in the coverage of it since then. Frequently, reporters use words like unprecedented or unparalleled to describe it. That is false! Financial crises, panics, crashes, bubbles, and bank failures are really about a dime a dozen.

Everyone has an opinion about whether the economic stimulus package is too big or too small, but he's an opinion worth listening to: Robert Shiller.

As one of the few people to publicly call the internet and real estate bubbles for what they were, he has more credibility than just about anyone. And he's saying the stimulus package is too small and we need more if we are to avert another depression.

In an op-ed piece for Bloomberg, Shiller writes that "In the face of a similar Depression-era psychology today, we are in need of massive pump-priming again. We appear to be in a much better situation due to the stronger efforts to date. Still, there is a danger that, because of a combination of faulty economic theory and inadequate appreciation of human psychology, as well as deep public anger, we will not continue with such stimulus on a high enough level."

Ah, yes. Tuesday, baseball season, and new NCAA champs. Sigh. Online classified ad growth skyrocketed by 84% in February, according to Hitwise (tip to MarketingCharts.com). The bad news? Craig's List and other free classified sites dominated the growth, further sealing the doom of newspapers. Steve Ruble of Micropersuasion interviewed Jeff Jarvis of "What Would Google Do?" fame (and Buzzsaw, of course) and asked what the future of online advertising was. The reply? Bleak to non-existent.

Another day, more wonderful news. If the rally last week left you feeling peppy, alas, global debt markets didn't share your enthusiasm -- witness the extremely tepid reception a new round of U.S. and U.K. debt offerings got from buyers today. Air travel numbers were horrific, indicating, by some opinions, a dire summer for the perennially strapped industry.

Former Federal Reserve chair and current presidential adviser Paul Volcker says that the global economy may be deteriorating even more precipitously than it did during the Great Depression.

"I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world," he said at a Columbia University luncheon. He also dismissed the notion that the financial innovation of the past decade has had any positive results: "There is little correlation between sophistication of a banking system and productivity growth."

General Motors Corp.'s (NYSE: GM) problems are well known: declining growth, huge debts, and enormous contingent liabilities (such as for retirement and health care benefits).

Yes, it also sounds like the U.S. economy, huh?

Well, this is the gloomy assessment from Ray Dalio, who is the chief investment officer of Bridgewater Associates. A few years ago, he warned about the overleveraged economy. More importantly, he positioned his portfolio for the New Reality.

In fact, in 2008 the Bridgewater Pure Alpha 1 fund was up 8.7% and the #2 vintage increased 9.4%.

So, what's is his thinking now? Unfortunately, it's fairly gloomy (this is according to a great interview in this week's Barron's, which is a paid publication).

Jeff Immelt, the CEO of General Electric (NYSE: GE), said the economy could get worse, much worse. According to the FT, he said "Unlike the other downturns that I've been a part of, this one is faced with limited liquidity," Mr Immelt, GE's chief since 2001 told a conference. "Once you break through '74-'75, you don't stop 'til you get to 1929."

There is a lot of shock value to the comment, but GE shareholders ought to consider the statement as their stock trades at multi-year lows.

This post is part of AOL Money & Finance's Best & Worst in Money 2008 feature.

The year 2008 brought the word "greed" to new levels with major companies going bankrupt thanks to the greed of their top execs, who were more worried about lining their own pockets than about the interests of their customers and shareholders. This greed also helped to fuel the housing bubble that burst and sent home prices falling in what seems like an unending downward spiral. As the financial news continues to worsen, it's hard to pick the biggest money story of the year. We've pulled together our top four picks, and it's up to you to vote on the biggest money story of the year.

Here are our top four picks in alphabetical order:

Collapse of Wall Street
The world hasn't seen so many Wall Street firms go bust since the Great Depression, and we seem to be teetering on the edge of another worldwide depression. Top Wall Street execs pocketed millions, and in some cases, billions of dollars thanks to sales of complex financial instruments that it appears no one truly understood (or if they did understand their toxic natures they perpetrated a huge fraud on the investors who bought them). Now these same executives pocket millions in golden parachutes as they leave the firms they destroyed. And, while they enjoy their millions, investors, customers and employees of these now defunct or badly bruised firms face destroyed careers and/or portfolios.

If people don't know this, it is worth pointing out. If they do, it is worth repeating. Unemployment in the U.S. is well above 10%. The government numbers do not include those people who are "no longer looking for work" or those who are not receiving unemployment payments.

According to The New York Times, "The Labor Department does publish an alternate measure of unemployment, which counts part-time workers who want full-time work, as well as anyone who has looked for work in the last year."

That would put the total "unemployment" rate closer to 13%.

It raises the issue of how close the U.S. is to the much higher rates of joblessness in the Great Depression. The number of people without work rose to 25%. The government did not make the distinctions then by subtracting people who were part-time.

If, using the government's yard stick, unemployment in the U.S. gets to the double digits next year, the economy is closer to a depression than it might appear.

Douglas A. McIntyre is an editor at 247wallst.com.

The CBOE Volatility Index (VIX) is recently up 3.62 to 71.26, above its 500-day moving average of 20.77, 200-day moving average of 30.38, 100-day moving average of 38.09, 50-day moving average of 53.53 and 10-day average of 64.18 according to Track Data. This suggests that the market is pricing in an upcoming soft economic depression.

Yahoo Inc. (NASDAQ: YHOO) is recently down $2.10 to $9.45. Microsoft (NASDAQ: MSFT) Chief Executive Steve Ballmer said today that talks with YHOO are "finished." Ballmer remains open to a potential search deal with YHOO. YHOO December option implied volatility of 133 is above its 26-week average of 63 according to Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

The stock price of Pfizer Inc. (NYSE: PFE) has been declining this morning. Pfizer canceled the development of an obesity drug for which many had high hopes, especially in light of the looming 2011 Lipitor blockbuster cholesterol drug patent expiration. Pfizer may find it hard to post growth without it.

Pfizer is not the only pharma that has recently canceled the same class of obesity drugs. Only Wednesday, Sanofy Aventis (NYSE: SNY), after stopping sales in Europe of its version of the drug, Acomplia, also stopped clinical trials on humans. Merck & Co. (NYSE: MRK) stopped development of a similar drug candidate called Taranabant a few weeks ago. Those companies all had high hopes the drug could be used for smoking, diabetes and high cholesterol along with obesity. According to Bloomberg, only Bristol-Myers Squibb Co. (NYSE: BMY) is still developing a similar medicine.

Why are they all stopping? Mostly because they figured regulators around the world will not approve the drug due to negative psychiatric side-effects. This class of drug works on blocking the pleasure centers in the brain, specifically, it blocks the cannabinoid type 1, or CB1, receptors. If cannabinoid sounds familiar, it is because this is the very same pleasure centers that give marijuana smokers the "munchies." By blocking these centers, studies have shown people have become depressed and had suicidal thoughts.

Perhaps not having chemical and pharmaceutical degrees I'm missing something, but it seems rather straight forward that if one's pleasure centers are blocked, depression could ensue. Even if it just blocks one specific type, that could be enough to create an imbalance.

Usually regulators weigh costs, risks and benefits of the drug and the condition treated, often approving drugs with severe side effects. These drugs are our best option currently. But drug companies should change their attitude somewhat, and when developing new drugs, place more emphasis on looking at the the body as one whole entity, and see how the drug interacts with the rest of the body, not just if it can treat the specific condition.

The Financial Times was good enough to ask what the difference between a "recession" and a "depression" is. The paper did not have an answer. The author of the articles writes what any historian of the economy already knows: "From 1929 through 1933, the United States saw real economic output fall by nearly a third and unemployment soar from 3 per cent to 25 per cent."

Depending on who is counting, the U.S. has had ten recessions since the end of WWII. These are identified by the classic definition that says a recession is two quarters of GDP growth shrinkage.

The oil embargo of 1973 caused the last really nasty depression that most Americans can remember. Unemployment went over 8%. In the 1981 recession, that figure moved over 10%.

What would a depression look like? Probably a period when GDP dropped by 5% for three or four quarters in a row and unemployment was steady above 10%. That may seem arbitrary, but the numbers would be much worse than any period since WWII. Almost no one living would remember a similar period. People's memories of what is economically awful should be taken into account. Bad times are only really bad if someone can put them in reference to their own memories and experience.

Most of what the public hears from the government and from the media indicates that the economy is sliding into a recession, perhaps a deep one. Consumers is not buying that at all. They see the world in much more dire shape.

According to the CNN/Opinion Research Corp. poll, "Nearly six out of ten Americans believe another economic depression is likely." And those surveyed know what a depression is. They understand that it would mean a 25% unemployment rate, bank failures and an increasing number of homeless Americans.

Most economist asked to respond to the results said that no depression is likely. They government's current programs to buttress the economy are too widespread. Unemployment might hit 7% or a bit more, but that would be it.

Of course, many economists were slow in calling the recession, so their track records as forecasters are in doubt.

What stands out from the survey is the extent to which Americans have succumbed to a feeling of despair and hopelessness. To be resigned to the near-complete death of the economy and almost unimaginable national suffering gives every indication of people being certain that the worst is coming and believing it is a near-certainty.

The depression may not come to the economy, but it has certainly come to the minds of the average working person.

Douglas A. McIntyre is an editor at 247wallst.com.