Tuesday, December 2, 2008

The Recession is Official

Now that one argument has ceased how long to we start arguing about if we are in a depression. The standby argument seems to be that since the unemployment rate is not yet at 25% there is now way we are in a depression. It is as if everything must be the exact same as the Great Depression to officially be in a depression. We are not claiming that we are in a depression, just that it is short-sighted to only claim that a "depression" can only be real if it is an exact mirror image of the original.

Well, back to the news of the day - it is official that the recession has begun. It is what most of us have known - like the housing bubble - but is one of those areas where being wrong is preferable to being correct. From CNN Money, let look at an article titled Its official:Recession since Dec. '07. Here are some key parts of the article -

The National Bureau of Economic Research said Monday that the U.S. has been in a recession since December 2007, making official what most Americans have already believed about the state of the economy .

The NBER is a private group of leading economists charged with dating the start and end of economic downturns. It typically takes a long time after the start of a recession to declare its start because of the need to look at final readings of various economic measures.


The NBER did not give any reasons or causes of the recession. But it is widely accepted that the housing downturn, which started in 2006, is a primary cause of the broader economic malaise.

The fall of housing prices from peak levels reached earlier this decade cut deeply into home building and home purchases. This also caused a sharp rise in mortgage foreclosures, which in turn resulted in losses of hundreds of billions of dollars among the nation's leading banks and a tightening of credit.

The current recession is one of the longest downturns since the Great Depression of the 1930's.

One of the longest recessions since the GD. If the current projections are correct that an uptick will not take place until sometime next year it will be the longest downturn since GD. And everything traces back to the Great Housing Bubble.

But there as to be an upside to the story -

Still, [Lakshman Achuthan, managing director of Economic Cycle Research Institute] said he's not worried about the current recession turning into a depression, as many Americans fear.

"Even with indicators in a tailspin, this still is only a very severe recession," he said. "There's lots of gloom, but we don't see doom."

Don't fear - it is just gloom not doom. That is very comforting as we see more and more pictures like this -

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