Friday, February 15, 2008

Sh... Sh..... Don't say the "R" Word

Recession - Recession - Recession!

There I said it! And I feel better about it. So why all of the reluctance to admit that we are in a recessionary economy? Is it because the current administration doesn't want to give the opposition any ammunition in this election year? Perhaps they don't want to scare the population with the truth. Or maybe we just can't agree on what a recession really is.

One commonly accepted definition of a recession is: "A recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year." The problem with this definition is that as soon as someone figures out that we are in a recession, we've already been in it for at least two quarters.

There's another more complicated and less accepted definition of a recession:

This definition of recession is "a downward trend in the rate of actual GDP growth as promoted by the business-cycle dating committee of the National Bureau of Economic Research. That private organization defines a recession more ambiguously as "a significant decline in economic activity spread across the economy, lasting more than a few months."

There.... So I suppose it's harder to diagnose if you don't really know what you're looking for. I happen to believe that if it "Looks like a Duck, sounds like a Duck, and smells like a Duck" - It Must be a Duck! And the last year or so has felt like a recession to me. Furthermore, when I think about recessions I'm usually reminded of the economists joke that says- What's the difference between a recession and a depression? "A recession is when your neighbor loses his/her job. A depression is when you lose your job."

A lot of truth in that statement as well. Needless to say that there's a very delicate balancing act required to ease inflation without sending the economy into recession and to mitigate slowing growth without fueling inflation. And somehow by managing all of this we have to avoid a process called stagflation.

Clearly these aren't easy undertakings. However, when I see the fed making drastic emergency cuts of .75 points preceded and followed by cuts of .25 - .50 points and the government giving tax rebates to fuel a slowing economy, I can't help but wonder if we shouldn't have been more proactive a few months ago.

If you want to be proactive as an individual, I've run across a post by Scobleizer - titled: Surviving the 2008 recession. Looks like he has some pretty good general tips that might help us all.

Have Fun!

No comments: