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The "technical Recession" Myth - Back Of An Envelope Economics

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Apologies if this has been posted before.

http://waugh.standard.co.uk/2008/12/why-technical-r.html

Amid all the talk of "technical recession" (and fresh ONS growth figures out today may prove difficult for the Treasury), it is worth noting that the current definition is totally arbitrary.

Thanks to Peter Jay, the former British ambo in Washington and sometime BBC Economics Editor (a Pesto before Pesto) , we learn that the definition of two successive quarters of negative growth was dreamed up purely to get LBJ out of a political hole in 1967.

Like many, I had assumed the widespread use of this definition stemmed from some academic tome. But Jay appeared on Radio 4's Today prog at the ungodly hour of 6.15am (you may have missed it but that's well into my working day) to reveal that it was an artificial construct devised by Art Okun, Johnson's chairman of economic advisers.

Jay, who for some reason was in the room at the time, said LBJ was planning to run for re-election in 1968 and didn't like indications that there might be recession that year.

"Art had the neat idea that if we had a definition of recession which meant that people could say we are not actually in a recession, not technically, that would get the president out of a difficulty. So on the back of an envelope he invented the idea that in order to call it a recession you had to have had two consecutive quarters of negative growth."

"This was completely arbitrary. It was just a neat device by a clever economist trying to help his chief who was faced with a political challenge. It is entirely spin, entirely semantics. The whole argument about are we or are we not in recession in completely barmy. The rest of the world, as in so many things - often for good reasons - followed the United States."

Proof, if you needed it, that economic spin didn't start with G Brown's elastic economic cycle...

Considering all the spin in politics the idea that a "technical recession" is just spin is priceless.

Perhaps NuLabour should reinvent what a recession is and call it 4 years of negative growth, then they could continue to call this a downturn?

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I recall the 2008 Q2 figure which 'magically' came out at 0.0% growth, so postponing our 'recession' for three months as opposed to all the other badly run countries around the world.

As for those nasty Americans...

You spin me round like a record, round round like a record... (sorry, just went dizzy :rolleyes: )

Edit: year corrected, thanks. Told you I was dizzy!

Edited by tinker

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I recall the 2008 Q2 figure which 'magically' came out at 0.0% growth, so postponing our 'recession' for three months as opposed to all the other badly run countries around the world.

As for those nasty Americans...

You spin me round like a record, round round like a record... (sorry, just went dizzy :rolleyes: )

Fixed

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I recall the 2007 Q2 figure which 'magically' came out at 0.0% growth, so postponing our 'recession' for three months as opposed to all the other badly run countries around the world.

As for those nasty Americans...

You spin me round like a record, round round like a record... (sorry, just went dizzy :rolleyes: )

Q2 2008 you mean?

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Has anyone been talking of a technical recession? I haven't seen it.

ISTM that a technical recession is when the numbers go down, but the econony doesn't notice.

No-one anywhere is suggesting that this recession is going unnoticed.

tim

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Has anyone been talking of a technical recession? I haven't seen it.

ISTM that a technical recession is when the numbers go down, but the econony doesn't notice.

No-one anywhere is suggesting that this recession is going unnoticed.

tim

The BBC said this morning if it was 1.4% or greater it would be a full blown recession.

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meh GDP is falsified and fraudulent anyway upwards the same way Hedonics reduces CPI, hence GDP is artificially inflated.

Also CPI as we all know is also fraudulent due to Hedonics and subsitution principle. This reduces the headling inflation rate.

Hence GDP is falsified upwards ,

To get inflation adjusted GDP you take off CPI , if CPI is fraudulently reduced then almost ALL the 3.5% growth Qs of the last 10 years can be reduced to negative figures hence a 10 year recession where borrowing has filled the gap.

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The BBC said this morning if it was 1.4% or greater it would be a full blown recession.

god, what about the 4% drop in manufacturing? was that a turbocharged recession?

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meh GDP is falsified and fraudulent anyway upwards the same way Hedonics reduces CPI, hence GDP is artificially inflated.

Also CPI as we all know is also fraudulent due to Hedonics and substitution principle. This reduces the headline inflation rate.

Hence GDP is falsified upwards ,

To get inflation adjusted GDP you take off CPI , if CPI is fraudulently reduced then almost ALL the 3.5% growth Qs of the last 10 years can be reduced to negative figures hence a 10 year recession where borrowing has filled the gap.

Quite. Take out the MEWing and borrowing from the future (borrowing to consume) and you will almost certainly have negative GDP growth in those 60 quarters of which Brown boasted. Spin and deception. Ain't that the truth?

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Has anyone been talking of a technical recession? I haven't seen it.

tim

Yeah for the last year or so, I'm not surprised if you haven't picked up on it but if you read the more financially aware websites then they always go on about a technical recession. e.g gloomberg, reuters

I think there's a bit a logic to waiting 6 months to declare it, in around half of cases by the time its declared you know there's not that long to go before you're out of it.

Not this time tho' :(

Theres still time for the q2 2008 figure to be revised, allowing for statistical errors though there's a decent chance that we've been in recession for 9 months.

Take into account understated inflation rates (CPI) longer.

Take into account growth due to debt expansion rather than productivity gains even longer.

Edited by slurms mackenzie

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so its not a downturn anymore?

will the bbc change their logo??

the technical recession.. :unsure:

what qualifies a depression (I mean technically, not a real one of course) :lol:

They have done (well it's recession)

and i'll tell you what its crap , i preferred the downturn logo, to think they had 9 months to prep it.

Depressions are even hard to define than recessions, i once heard 10% off GDP (source: bloke in the pub).

The longest ever contraction of the US economy contracted was just under 4 years. (source: I read it once on bloomberg , hic!)

Edited by slurms mackenzie

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1) Your currency devalues (avg) 30% against most other currencies

2) Your exports drop 30% also, despite you massive devaluation.

2) You live in a nation that is massively dependant on imports

3) You live in a country experiencing the biggest house price boom in centuries (Crazy %'age increase since 1998)

4) You live in a country that sold the dream of making money from nothing to everyone, and failed massively, so much so, they won't even answer you phone calls, let alone invest more cash.

5) You're borrowed up to the hilt, your governments borrowed up to the hilt, you would be taxed to the hilt, if you hadn't just lost your job.

6) You believe in deflation, because everyone you know that is still working earns less than before.

Yip Yip!

Edited by Yoss

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Surely one mans deflation is another mans inflation.

Aye and it is a very simple equation.

Over production = deflation

Over consumption = inflation

It really is that simple! always has been...always will be...Equilibrium will be reached (regardless of Chinease currency interventions) and for the better of human kind as a whole, but either change will be a painful one, for those living through it.

Yip Yip.

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wikipedia now says 10% off GDP ;)

I quite like that definition.

Then again - I quite like the two quarters of negative growth for a recession. Don't really care who made it up and why (some-one had to do it). It's enough that it's a definition that pretty much everyone understands.

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god, what about the 4% drop in manufacturing? was that a turbocharged recession?

Can't remember exactly what was said but it was something along the lines that 2 straight quarters of negative growth was a technical recession, however it becomes a full blown recession if the YoY figures where negative. Although I wasn't fully awake when I heard this so I might not be 100% accurate on the technicalities.

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Can't remember exactly what was said but it was something along the lines that 2 straight quarters of negative growth was a technical recession, however it becomes a full blown recession if the YoY figures where negative. Although I wasn't fully awake when I heard this so I might not be 100% accurate on the technicalities.

I read the same thing today on the beeb so yar we be in a full blown un.

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  • 284 Brexit, House prices and Summer 2020

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      • down 5% +
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      • up 5%



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