David Rosenberg of Merrill Lynch, published a note to clients today declaring that the United States has probably entered a depression. Not a pleasant thought.

Although recessions have an official definition set by the National Bureau of Economic Research, depressions do not. That means it is open for discussion whether the US is in one or not. Nevertheless, falling asset and home values, and rapidly declining employment numbers suggest it’s still far from getting better.

While job numbers tend to be trailing indicators of the economy, there’s no getting around the fact that businesses are facing lockdown due to tighter lending requirements, and what’s worse, consumers seem to have burried their wallets in the back of their freezers. Without a turnaround in consumer spending, it’s likely to get worse before it gets better.

Rosenberg’s analysis is based on the following: history: Basically, depressions are long recessions that last anywhere from three to seven years, compared to the typical recession’s 18 month duration. We are already 13 months into the current recession, and by nearly every measurable standard the situation is still deteriorating.

In that climate, how does one approach the “buy and hold” mentality of equity investing as pushed by the financial planning community. When do we, as consumers of RRSPs, mutual funds, stocks, say “enough is enough”, that’s it’s bad enough to have lost 50% of our asset base last year, we don’t want to do it again next year.