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Farms turned to dust, livestock starved to death and migrant workers toiled for pennies a day, sleeping in barns at night and eating mush. Children went without shoes in winter.

“I never took a backward step in my life until that Depression whipped me, took away my wife, my home, a section of good land back in Saskatchewan,” 78-year-old Henry Jacobson told Canadian writer Barry Broadfoot in his chronicle of the Depression in Canada.

“Left me with nothing.”

The era was so punishing that it has become ingrained in Canada's psyche as something that must never be repeated. The D word is a painful one, used sparingly and with dramatic effect.

Now, however, as the U.S. economy craters, the global economy falters and Canada is clearly in recession, talk of depression has become commonplace. The 1930s are no longer a distant memory. The decade has become a poignant reference point, with policy makers drawing lessons and making comparisons, and some economists now warning that the world is at the precipice.

Dominique Strauss-Kahn, who heads the International Monetary Fund, has suggested that the world's major economies are “already in depression.” Economist bad-boy Nouriel Roubini warns that the United States is in a “near depression.”

Such seemingly casual use of the D word has many analysts balking, warning of the effect such a mindset can have in an already fragile economy plagued by a lack of consumer and business confidence.

“The Depression narrative is not merely a story about the past: It has started to inform our current expectations,” the influential Yale University economist and New York Times columnist Robert J. Shiller wrote recently.

To be sure, current economic conditions bear little resemblance to those of the 1930s. Today's job losses, tight credit, manufacturing rout and sliding house prices are still a far cry from the days of desperate westerners swapping recipes for gopher pie and ketchup soup. Back then, unemployment was 19.3 per cent, deflation was entrenched and the money supply was contracting.

“During every recession, there's always the worry that this is going to be the big one,” says Philip Cross, Statistics Canada's chief economics analyst and a key player in deciding when recessions begin and end in Canada.

But as confidence in the banking system continues to falter, jittery investors drive down stock markets and inflation hovers close to zero, more economists are grappling with the possibility that the deepening recession could turn into something worse and more intractable – a slump that may earn the D-word moniker, even if it doesn't replicate the misery of the 1930s. “It's a worry,” says Angela Redish, an economics historian at the University of British Columbia.

One of the challenges for economists is that there is no widely accepted, precise definition of depression. While a recession is commonly thought to be at least two straight quarters of economic contraction, a depression is thought to be far more severe.

It lasts longer, cuts deeper and feeds on itself. It requires extraordinary measures beyond the interest rate cuts and fiscal stimulus that can temper a mere recession.

One popular definition of depression is when unemployment is in double digits for more than two years. Others define it as a 10-per-cent drop in economic output, from peak to trough. Others see depression on one end of a continuum of economic bad times, with mild recession at the other end. And most agree that it doesn't have to be as bad as the Great Depression to qualify.

The chances of Canada, or even the U.S., facing a repeat of the 1930s is slim to none, most analysts say, because the North American economy is much different than it was 70 years ago. Employment insurance and social programs are beefier now, especially in Canada, and the population in general is much further away from the poverty line.

For Luc Vallée, former chief economist at the Caisse de dépôt et placement du Québec, the U.S. has already reached that point. The hugely expensive fiscal measures that Washington is throwing at the crisis, accompanied by interest rates near zero and ever-creative moves by the Federal Reserve to fix the financial system, mean that the economic trouble is extraordinary, not just a recession, he argues.

“It looks like maybe the big D has arrived. It may not be the Great Depression, because we have these stabilizers which prevent us from collapsing totally. But it looks like we're stuck in a place where it can't start on its own, because the financial intermediation is not functioning properly, and that's a big part of a market economy.”

Since Canada's financial system still functions, the tools needed to dig the country out of its rut are more traditional, and the country should be able to stay on the recession side of the misery ledger, Mr. Vallée argues. Most economists agree, but fear that the line could be crossed with alarming ease.

Deflation is one of the key differentiators between recession and depression, explains economist Robert Fairholm, director of the Toronto-area Centre for Spatial Economics.

If prices are rising, and some sort of inflation persists, it means consumers and investors are still somewhat active, and the economy should be able to start growing again. But if consumers and investors fear widespread falling prices, then a dangerous deflationary spiral – one that drives up the value of debt and prompts consumers to delay purchases – could take hold. And that would drive the economy into a long, deep depression.

So far, Canada's inflation numbers are in positive territory, and look poised to stay there – save for a few months of some negatives due to lower energy prices. In the U.S., however, the spectre of deflation is looming large, with officials from the Federal Reserve talking openly about it.

The risk for Canada is that a deflationary mentality in the U.S. would spread over the border, Mr. Fairholm said.

“I would still think a depression is less than [a] 50-per-cent chance,” he said. “It's a minority situation, but the consequences are so enormously bad. The outcome is so horrific that it sort of swamps the positive outcome. I still think we're on a knife's edge between deflation and very significant inflation. You're pushing so hard against it that the chance of an error is enormous.”

Central banks now have far more flexibility to fend off deflation than in the 1930s, UBC's Ms. Redish stresses. Back then, the gold standard that backed up most currencies constricted central bankers' ability to expand the money supply. Not so now.

“When you have the Fed able to print money and the Bank of Canada able to print money, you're not going to get those deflations,” she said.

Still, she's concerned the modern-day equivalent of the gold standard – global imbalances caused by vast Chinese holdings of U.S. dollar-denominated debt – may jump out and create economic chaos. “I'm worried that this is the piece we haven't paid enough attention to.”