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A Depression By Any Other Name



October 30, 2009 – Comments (0) | RELATED TICKERS: SPY

Awhile back I mentioned that the talking heads did not want to acknowledge a recession, much less a depression, in the United States.  The level of denial about the economic dire straits in the United States struck home with me when I read one vehement poster on a website that I peruse absolutely deny that the United States was in a recession, much less a depression.  I was so shocked that I posted (under a pseudonym) the following, "about 20% of the people in the country are unemployed or underemployed, do you think they are depressed?"

What is a Recession

There is so much misinformation in the financial media, I thought I would review what a recession actually is.  Let's start with what it is not:

A recession is not back to back quarters of negative GDP (gross domestic product).  That definition is a shortcut for people whose job it is to report and explain use so that they do not have to report and explain what is really happening in the economy.  No self-respecting economist (if there is such a beast) would use that definition. 

Here's what the National Bureau of Economic Statistics says: "The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales." 

The NBER's definition is important because they are the ones who identify and catagorize economic expansions and contractions.  It's their job to figure out what a recession is and when it occured.

Taking from their guidelines we can surmise about where we are at today: read the complete post and because I hate embedding charts, click here to continue.

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