Thread: Recession - Where Is It?

Originally Posted by Cruzi

Technically a ressesion is one Quarter of negative growth, a depression is more than one quarter.

Actually, Cruzi, a recession is just a sustained contraction in aggregate output which is usually measured by gross domestic product (GDP).

The conventional rule of thumb is that a recession is two consecutive quarters of negative growth (contracting GDP).

However that's just a convention and not an official definition, and not all countries or edonomists use it. It has problems - like what if you got three quarters of big contractions but they're interrupted by two quarters of little expansions?

In the US, people generally defer to the National Bureau of Economic Research which is a private sector non profit think-tank. They look at a bunch of indicators including GDP and employment and a couple of others then the final decision is made - not joking - by a committee.

There's no official benchmark for measuring or defining a depression either, it's just a deeper and more prolonged recession, a recession that won't go away. If a recession is the flu, a depression is glandular fever.

Having said all that, the definitions that I like best are these:

A recession is when you lose your job. A depression is when I lose mine.

Originally Posted by Eli

I don't understand why you guys keep saying Yanks when what you mean is Banks. The Y and B keys are nowhere near each other on the keyboard. You're still slagging a nation (and calling it 'fact').
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Don't get too hot under the collar Eli. People tend to talk in shorthand. No one is attacking the American people. What we are saying is that a system failed because of lack of government control. American financial structure , being the powerhouse of present economic thinking, the monetarist theory, was an obvious spark waiting to create the fire. England under Thatcher followed that theory which is why it too is in deep trouble. The Geat Depresson of the 1930's started in America and reverberated around the World and, as now, the American people were not responsible and suffered badly. Again it was the system that was out of control.

Originally Posted by Rossluck

I'm with Eli on this. Blaming the US of A for this economic downturn strikes me as scapegoating on a large scale. Booms and recessions are a component of capitalism. We're all involved in the system, the system functions to a large extent by borrowing, and confidence that we're able to pay money back. History shows us that every now and then that confidence contracts, as it has now. Blaming the mortgage scam in the US for this downturn is a little far fetched.

Without wishing to lay blame, I'd be glancing in the direction of India and China, and their recent and spectacular plunge into the system. Now there is absolutely nothing ethically or morally wrong with the sudden increase in their economic activities, but it must change the function and balance of the system. Maybe this recession is an indication of these changes?

I have argued from the start that finance is a house of card built on confidence, but it is also built on trust. The morttgage scam is universally recognised as the spark that ignited the fire, because it exposed the point I made earlier that the one dollar was not turned into an equal dollar debt but was sold on until it generated thirty dollars in debt. Banks and financial institutions had become too greedy. A collapse has a starting point and the sub prime was it.

"Without laying the blame" Then what are you doing? To bring them into the equation without facts or argument as to their part in this is difficult for me to grasp. You might just as well blame Australia. We have had a spectacular mining boom. That has caused a noticable capital inflow over about ten years. You might equally have argued that the rise of the oil producing countries was responsible because they too "changed the balance".

What all three of these areas of economic activity did was to invest in America's debt. To finance it's deficit. To imply blame here for the present crisis is really pushing things a bit far. Where we might worry is that these countries call in that debt and who would blame them? If you lend money to a business and it goes wobbley, wouldn't you think of getting some of it back?

Jerry

Add a little humour to the discussion.
Look in on "Woodies' Jokes" and read Breslauer's "Financial Vocabulary"
It just might alter your perspective!!

Originally Posted by jerryc

A collapse has a starting point and the sub prime was it.

"Without laying the blame" Then what are you doing? To bring them into the equation without facts or argument as to their part in this is difficult for me to grasp. You might just as well blame Australia. We have had a spectacular mining boom. That has caused a noticable capital inflow over about ten years. You might equally have argued that the rise of the oil producing countries was responsible because they too "changed the balance".


Jerry

It's not just members of this forum who (to quote Prime Minister Curtin in another context) "look to America". Our pollies are doing it as well. What I'm trying to suggest is that the blame game itself is a little spurious given that these ups and downs are historically destined to occur. With a stronger and upward bound world/capitalist economy, very few of us would have heard the words "sub prime". It's a symptom rather than the cause of the disease. What Eli and other Yanks are suffering from is a world that is inclined to say "we're suffering now because a bunch of greedy people in the US lent people money that those people couldn't afford". I don't think my kids would buy that yarn.

Originally Posted by Rossluck

world that is inclined to say "we're suffering now because a bunch of greedy people in the US lent people money that those people couldn't afford". I don't think my kids would buy that yarn.

It's exactly what happened, cause and effect.

So will anything change???

I cannot see it happening with the government desperately trying to keep the status quo going..

Anyway, I hereby declare that I know nothing of economics, and that's the way I want to keep it.

But from a historical perspective, this recession was bound to happen sooner or later. We're all part of a sine wave I'm afraid ....