Monday, December 1, 2008

A recession ? Really ?

Now that we have all seen the endless reporting on what the retail industry so poorly refers to as "Black Friday", and heard about how much better it was than was previously thought. Better even than last year. Now we are being told that we are in a recession that is already a year old.

From the time I was learning about the economic conditions and reactions to "The Great Depression" I have been told that the definition of a recession is "The contraction of national economy as seen in the negative growth of GDP in two consecutive quarters".

I have never been informed by any of my educators throughout my whole career as a student that a recession is called by political opinion. Yet, it was just that earlier today.

In the second Quarter of 2008 the GDP grew 2.8%. In the third quarter of 2008 the GDP grew -0.3%.

Since we do not yet have the numbers for the fourth quarter there are not yet two consecutive quarters of negative GDP growth.

Has there been a slowing of the economy that has been seen for at least a year ? Yes. Has there been a reduction of consumer spending that has been seen for at least a year ? Maybe.

Have there been two consecutive quarters of negative GDP growth ? No. Not yet. There will be. When new guys have control of the numbers.

So, do not put too much stock in government numbers. See for yourself. If you are spending less and saving less because you have less, then no matter what anybody's numbers say it is a recession in your home

But there is reason to call something worse than it is. That way it is harder to look wrong. When it is better than expected, no-one remembers that you were wrong, and when it is that bad you seem prescient and become very popular. Kinda like a Liberal/Progressive. (even the ones with an R by their name)

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