Recession For Dummies...

Seriously, Some may not know what a Recession is. I sure didn't and with the talk on the news of one coming, I figured I'd check it out.

I hope we can take this thread and the information I'm providing below and put all this in terms that each and everyone of us can understand.

What Is Recession:

In macroeconomics, 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. However, in the United States the official designation of recessions is done by the business-cycle dating committee of the National Bureau of Economic Research.[1] That Bureau defines a recession more ambiguously as "a significant decline in economic activity spread across the economy, lasting more than a few months." A recession may involve simultaneous declines in coincident measures of overall economic activity such as employment, investment, and corporate profits. Recessions may be associated with falling prices (deflation), or, alternatively, sharply rising prices (inflation) in a process known as stagflation. A severe or long recession is referred to as an economic depression. A devastating breakdown of an economy (essentially, a severe depression, or a hyperinflation, depending on the circumstances) is called economic collapse. Newspaper columnist Sidney J. Harris distinguished terms this way: "a recession is when you lose your job; a depression is when I lose mine."

Wiki : Recession


How Stuff Works : Recession

This is a decent article, lots to read though.

On November 26, 2001, the news media announced the United States was officially in a recession, and had been since March. To most Americans, this wasn't all that surprising: Rising unemployment and a weak stock market had been in the news for months.

But the announcement did raise a lot of questions. Who decides when the economy is in recession, and on what grounds? What actually constitutes a recession anyway?

In this article, we'll find out what recessions are, see why they occur, and examine the criteria economists use to identify them. We'll also look at the effects of recession as well as explore some of the ways a country can turn the economy around again.

Recession



Recession? Depression? What's the difference?

Recession: The Newspaper Definition
The standard newspaper definition of a recession is a decline in the Gross Domestic Product (GDP) for two or more consecutive quarters.
This definition is unpopular with most economists for two main reasons. First, this definition does not take into consideration changes in other variables. For example this definition ignores any changes in the unemployment rate or consumer confidence. Second, by using quarterly data this definition makes it difficult to pinpoint when a recession begins or ends. This means that a recession that lasts ten months or less may go undetected.


Recession: The BCDC Definition
The Business Cycle Dating Committee at the National Bureau of Economic Research (NBER) provides a better way to find out if there is a recession is taking place. This committee determines the amount of business activity in the economy by looking at things like employment, industrial production, real income and wholesale-retail sales. They define a recession as the time when business activity has reached its peak and starts to fall until the time when business activity bottoms out. When the business activity starts to rise again it’s called an expansionary period. By this definition, the average recession lasts about a year.

Depression
Before the Great Depression of the 1930s any downturn in economic activity was referred to as a depression. The term recession was developed in this period to differentiate periods like the 1930s from smaller economic declines that occurred in 1910 and 1913. This leads to the simple definition of a depression as a recession that lasts longer and has a larger decline in business activity.

Recession / Depression



So, does that make sense to anyone? I understand a little bit of it, but I hope that our economic talented members can join in on this discussion and help us understand it better?

As of 6:39 am, my time: Dow 11,663.67 - 435.63

Source

That is the about 500 points we saw from futures market.

The real question is will it drop another 500 today.

As a minor note, many people here are all proud and happy about American finicial problems, until they get reality biting them on the arse, the world is economicly all interconnected.

If or as the US markets go down, so will all the other countries markets.

[edit on 1/22/2008 by mrmonsoon]

Fed Cuts Interest Rate - I'd like to include this in our discussion, how does it help prevent a recession?

ATS - Feds Cut Rate

Well to equal 1987 we would have to drop 2700 points I don't think that is going to happen at least not this week...


Respectfully,
GEO

Dow 11,996.23 - 103.07

Source

Does not seem like the melt down we were promised.

the War for Oil (known as War on Terror in the US) has finally taken it's toll..

An attach on Iran..? No Sir.. Not now.. Not in the near future..

the myth that Afghan and Irag occupation only cost the American pocket change is now broken..

How does the FED cut interest rates?
you do it by creating more money out of thin air which is exactly what is causing the dollar to lose value

but banks don't get affected cuz they get the money first
so only the middle/lower class people get affected

reply to post by elevatedone

thank you for posting that

well it is official: Bush is the only president in history to
have 2 recessions while in office. First in 2001 and 2nd
in 2008. Great job Bush !!!

Thanks for the replies everyone.. but I was hoping we could take this thread and turn it into a "layman" terms for the recession and explain it to those us of who might not still "get it".

anyone...

There is always much disagreement on defines a recession, but less on what a depression is. A depression rare and is usually spawned by some external stimulus - like the great depression. A recession is part of a normal economic cycle which occurs at frequent intervals - depending on the literature, anywhere from 5 to 8 years between small recessions is normal. They last for about 10 months on average.

Determining a recession cannot be done by looking at the stock market. The stock market can go down and up during a recession - the stock market's direction is fueled in part based on emotion rather than economic influences. The stock markets movements beyond the emotional based selling/buying is reactive, and moves based on _historical data_ which may or may not be reflective of a trend or the current economy. But of course, as you notice in even this thread, people try to do it anyways. Its completely inaccurate, and the media knows this - but I think people get the perception that you can somehow judge the overall well-being of the economy through the DOW average due to media hype. It just isn't that simple.

Statistically significant and successive decreases in the gross domestic product - or the actual (market) value of everything produced in the country - is usually the widely accepted measure of a recession, as you have already quoted. The good news is the GDP is not fueled by emotion like the stock market is, but it is still based on historical data. An examination of GDP must be concurrent, as you cite, with unemployment claims and consumer spending. However, we also know that unemployment and consumer spending acts in yearly cycles, and the beginning of the year is usually marked by high unemployment (Christmas layoffs) and slow-downs in consumer spending. These numbers need to be examined in a seasonally adjusted way to be accurate.

Everyone will know it when we enter into a depression. A depression is so extreme that you'll see riots, massive sale offs that make the current volatility look like child's play, and extreme inflation or deflation (depending on the external stimulus). I have to chuckle at some of the people on the board calling for a depression, as I have seen NO economist - even the most "negative" one - predict a depression. The most I've seen called for is a severe recession on the "negative" side, and a mild recession on the "positive" side.

[edit on 24-1-2008 by LightinDarkness]

A recession is when you experience two quarters of negative economic growth, an example;

Q1 -.1.4 Q2 -2.3

Then, that would be called a "recession". But the US does operate under a different system, but many use the international standard (which I've just explained).

An economic depression, is just a recession over a long period of time. The US is not facing an economic depression, no signs are point to a recession which is going to last years.