Recession Speak
| December 1st, 2008 by Robert | Word Count: 605 | Reading Time 2:25 | 2,478 views |
Today, the National Bureau of Economic Research confirmed what any sensible American citizen has known for a very long time… we are in a recession. For those late to the party of realization, the last few months of increasing home foreclosures, the massive federal bailouts required to keep many key institutions above water, and the dramatic reduction in our stock markets have “put to rest” any notion that we were not in recession. The key to the Bureau’s statement is that America has been in an economic recession since December 2007…
I’m pretty sure most of us already knew this, but now the cat is “out of the bag.” The announcement, coupled with other dire news, sent our stock market plummeting nearly 8% in a single day. Shouldn’t the stock market have already accounted for the fact that we were in a recession? Shouldn’t the “pros” of the financial world have seen the writing on the wall and knew for a fact, like many of us average Joe Citizens, that we were in a recession? Were their bank accounts brimming with untold thousands or millions of dollars that they simply could not foresee the situation outside of their multi-million dollar households?
The voters knew things were bad economically long ago. All of the voter poll data showed that the number one issue was the failing economy… before the bailouts became the hot topic. But here we are, with the stock market diving and becoming even more volatile. I think there are some underlying issues in the market that are driving selloffs and price run-ups. I believe there are some people and institutions that are purposefully driving the volatility in the market to make money in the wide ranging marketplace we are in at the moment.
One day, you will see a huge price increase across the board, the very next, we see a huge selloff. The people with money are raking in billions of dollars at the expense of people with less investment ability. Retirement accounts are being destroyed while people are exploiting the market and stripping cash like a forest fire driven by 100mph winds.
People get rich during bad times… at the expense of the average citizen. Even in a recession, there is money to be made. Since WWII, the recession we are currently in has lasted longer than all except two (this is the 11th). If the economy doesn’t pull out quickly, it will become the longest (16 months being the longest – happening twice).
Things are bad, but they appear to be getting worse. We are not pulling out of the recession, but falling deeper in. Jobs are being cut by the thousands and corporate earnings are continuing to fall short. As there is less money at the consumer level, there will be less purchasing power and with less purchasing followed by lowered consumer confidence levels, corporations will be left reeling from the trickle of revenue.
I mentioned yesterday that this year’s hot topic word and issue could very well be bankruptcy. Given that we are in fact in a long term recession, the likelihood of that coming true has just increased exponentially. Our previous recessions were not tied to such extreme and dire economic circumstances and could be dealt with by natural economic cycles and minimal government intervention. What we have now is a full blown economic downturn that trillions of governmental bailout dollars has so far failed to prevent.
Recession? Did anyone really think we weren’t in one? But since 2007? That’s scary to know that we are 12 months into the issue and it’s still getting worse…
on December 8th, 2008 at 1:20 pm:
I find it odd that the National Bureau of Economic Research claims our nation has been in a recession since December of 2007, when the economy grew in both of the first two quarters of 2008. It didn’t begin to contract until the third quarter (-0.3 percent).
A recession is defined as two consecutive quarters of negative GDP growth, and since the fourth quarter hasn’t ended yet, we won’t know for a fact that we’re in a recession until January of 2009.
While I have little doubt that an assessment of the fourth quarter will show that we are indeed in a recession, it did not begin until July of 2008.
As for the average citizen believing that the economy was bad prior to this past summer, all I can tell you is that the majority of people I talk to are economic illiterates. Most people thought the economy was in trouble following Hurricane Katrina in August of 2005, due primarily to the high cost of oil and gasoline, not because American GDP actually stopped growing.
Some folks have been warning of an imminent recession since Bush first took office, and for purely political reasons have been talking both he and it down ever since. I prefer to simply let the facts speak for themselves.
on December 8th, 2008 at 6:32 pm:
I agree that the Bureau confirming actual data regarding the beginning of the recession as December 2007 is a bit odd considering the actual GDP numbers… but they are constantly being rewritten as time passes.
As for the economy being bad prior to the actual negative GDP numbers, the country was in fact heading towards recession with many economic indicators pointing downward and falling near zero. Depending on which state, city, or job market you were in, you could have been experiencing the downturn much sooner than even December 2007.
Generally people are economically illiterate just as they are politically illiterate and common sense illiterate. Numbers are a good factual point of view, but they cannot be the only things we hang our hats on. The first thing I was taught about numbers is that they lie.
Mark Twain so eloquently stated, “There are lies, damned lies, and statistics.”
on December 8th, 2008 at 8:33 pm:
You can call it what you will,but the people that have lost their homes,jobs and livelihood would in all probability call it a depression. I personally went through the rough times in the 70s and that was only a minor setback to what we are seeing today, and just as the current President and the President in waiting have both said “It will get worse before it gets better.”
In the area that I live in, 214 of the 218 homes that have been sold this year have been foreclosures. This is a very serious concern even if it don’t fit into someones classification of a recession.
Just like I don’t need a weatherman to tell me if it is raining outside, I don’t need statistics to tell me when times are bad. People manipulate numbers every day, to make money or to hide money for any number of reasons.
Mark Twain was a very intelligent man and lots of good common sense.
on December 10th, 2008 at 9:45 pm:
Very good post. People’s points of view and actual living circumstances are vastly different when compared to a national statistic that is skewed by monstrous corporate earnings (including the massive earnings from gas and oil companies).
The designation of a recession truly means that the majority of our country is facing a terrible economy. Even though we’ve had “non-recession” quarters, our economy hasn’t been firing on all cylinders for a couple of years. Basically, you can track the slowing economy with the rising gas costs. Correlation or coincidence? I’m putting my money on a strong correlation. Now that the economy has stuttered and the stock market slashed, fuel costs have returned to normal… because consumer demand has drastically reduced.