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Why Can't We Call It A Depression?

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This Is A Depression. Yes Or No?

A couple of recent blogs in A Fistful Of Euros ponder this issue.

Why aren't we calling this recession a depression? Alex Harrowell argues quite reasonably that 'it's been four years already . . . isn't that depressing enough?' :)

More seriously, the point is that not calling it for what it is only fogs and fuzzes any way out.

I think I can go along with this. The idea that there is a make-believe recovery stifles any attempt to get out of this mess.

Well . . . look at the current objection to banking reform. 'It would hurt the fragile recovery'. Some truly bananas bankster lobbyist even talked about 'this moment of growth peril'. Well, no perilous danger of growth for a decade at this rate, chum.

And there are similar excuses peddled for any number of other things, like tackling inflation. Oh, it might hurt the jobless, homeless, consumerless, you fill in, 'recovery'.

So, it's a mindset, which Alex calls AirFrance 447 economics.

Actually, the aviation analogy worries me; I keep thinking of the pilots of Air France 447, who flew an entirely airworthy aeroplane from 35,000 feet into the sea in a fully developed stall without seriously trying to recover because (as far as anyone knows) the immediate effects were counterintuitive.

A while back, the BBC pitched up with the phrase, ' the downturn' . And a logo to boot.

So where's the 'upturn' logo? If anything changed, I must have missed it.

Edit . . For the usual dyslexic typos

Edited by copydude

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This probably won;t forat very well but it shows how less than ten years of short term money printing and utterly detructive monetary policy (together with corporate/political greed) has devastated the US economy, the producion has gone, it is not coming back 0 not with current policies it isn't. A decade of total malinvestment.

http://nextbigfuture.com/2010/08/history-and-future-of-us-and-china-gdp.html

China revised GDP growth in 2006 for 1973-2004 with the 2005 economic survey.

Year GDP(yuan) GDP growth.. Yuan/USD. China GDP US GDP Japan China%of US

2000 9.92 8.4 8.27 1.20 9.76 4.65 12.3%

2001 10.6 8.3 8.27 1.32 10.1 4.09 13.1%

2002 11 9.1 8.27 1.45 10.42 3.90 13.9%

2003 13 10.0 8.27 1.64 10.92 4.23 15.0%

2004 15.9 10.1 8.27 1.92 11.68 4.58 16.4%

2005 18.31 9.9 8.1 2.23 12.42 4.53 18.0%

2006 20.94 10.7 7.97 2.67 13.2 4.34 20.2%

2007 24.66 11.9 7.6 3.38 13.8 4.38 24.5%

2008 31.4 9.6 6.83 4.59 14.3 4.87 32%

2009 34.1 9.1 6.83 5.03 14.3 5.07 35%

2010e 38 10.5 6.65 5.71 14.6 5.3 39%

2011e 42 9.6 6.49 6.47 14.9 5.6 43.4%

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Maybe this will help.

--------

Deflation improvements in the UK National Accounts

As part of wider developments to improve the quality of the UK National Accounts, ONS will introduce

two key improvements to the methods by which volume estimates of gross domestic product (GDP) are

calculated in the Blue Book 2011 consistent Quarterly National Accounts release, which will be published

on 5 October 2011. The first will be the harmonisation of the deflators used across the accounts. The

second is replacement of Retail Price Index (RPI) series with Consumer Price Index (CPI) series in

forming the deflators.

ONS_deflators.gif

--------

(Can't link to the sources I'm afraid because ONS has removed them from its old website. They should be on the new site somewhere.)

Of course any uplift in GDP should apply to past years as well, but the overall impact remains to be seen. ONS has said it will document how this change has affected GDP when the National Accounts are released in October.

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The ruling ideology cannot admit that its ideas are running out of steam and we're in a prolonged recession if not depression. Like all orders, Liberalism's mandate to rule comes from its ability to deliver results.

According to the official party line, as a nation we are the most educated ever, the healthiest we have ever been, the most prosperous and the most opportunity.

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It's a depression.

Fortunately few realise this.

Shush, we don't want to frighten the Express readers, the more that pile now in the cheaper houses will be when it all goes tits up :lol:

Edited by MrFlibble

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That's a very interesting post. I quite agree - the inability to make any move that makes things worse in the short term, is leading, long-term, to disaster.

Unfortunately, I think it might be 'baked in the cake' for democracies.

The Tories might have had the chance to come in and make the painful changes.. blame it all on the last government, then hope things get positive momentum going by the next election.

Of course another argument is that things are so far gone, that the painful changes needed would actually kill the patient anyway.

Either way trying to talk the economy up is a stupid idea. People naturally want to spend cash, if the masses of people have lots of cash they will spend it. They get real cash by doing real productive work. Like a big mining operation and metal smelting complex in an area.

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Recessions are defined as a period of negative growth (at least 2 quarters as a rule of thumb), not the time it takes for nominal gdp to return to peak. So, no, its not a depression technically.

Edited by Terribad

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It gets on my nerves when people call it a recession when the economy isn’t shrinking (although that might be about the change). I think a depression is a better way to describe it than recession although I like the term “The Great Correction” as that feels more like what this is.

By mid 2009 I was telling everyone it will be over soon, they always are. I changed my tune about 3 months ago and now realise this is the new norm. Quite scary really, but hey, it’s only money, it’s not the end of the world…..yet

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But those definitions have a history and the changes in wording were politically/propaganda driven. Up until the 'Great Depression', there was very little government intervention and slumps were very clear events, and all such recessions were called 'depressions'. After the 1930s most slumps have been ameliorated (at a long term cost we are facing now) so they have not been very easy to spot. Somewhere along the way, somebody thought 'recession' sounded better than 'depression', and people began to argue in turn about how to define them, and a technical definition was made. (One that has about as much use as me trying to define a 'twig' as compared to a 'branch'.)

If this turns into what I think it is, there will be no arguments as to what it is by the end.

I'm just saying its not a depression (or even a recession right now) by the most commonly used definition.

Personally I think we will look back and call it something worse than a recession due it's length, even if there are a few years of growth thrown in.

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The Misery Index is as good an indicator you will find to define a depression from the perspective of the man on the street.

But the inflation part of the index is based on 'official' inflation rates, so obviously under-estimated.

http://www.miseryindex.us/customindexbymonth.asp

The misery rate now is higher than at its worst in 2008-09, so the 'recovery' is more painful than the actual recession preceding it. So assuming we do go into another recession (prolonged negative growth) then we ain't seen nothing yet.

I want to laugh and say we told you so, but its actually very depressing.

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I'm just saying its not a depression (or even a recession right now) by the most commonly used definition.

Personally I think we will look back and call it something worse than a recession due it's length, even if there are a few years of growth thrown in.

What's "the most commonly used definition" of a depression? I'm not aware there is one.

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What's "the most commonly used definition" of a depression? I'm not aware there is one.

I was refering to the definition of recession - 2 quaters of negative growth, and presume a depression is at least as bad as that.

My point was that officially were are not in one, but it sure feels like it, and in retrospect will probably be refered to as one.

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It gets on my nerves when people call it a recession when the economy isn’t shrinking

GDP = G+C+I+(x-i)

G Government spending

C Consumption

I Investment

x Exports

i Imports

£150Bn p.a. of G is being borrowed and will therefore have to be repaid. The economy is shrinking but it's being deferred to the future.

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I was refering to the definition of recession - 2 quaters of negative growth, and presume a depression is at least as bad as that.

My point was that officially were are not in one, but it sure feels like it, and in retrospect will probably be refered to as one.

Not trying to be picky, but we can never be in an 'official' depression because it has no official definition (but I agree with you that this period may well be referred to as one in retrospect).

As Durch says above, recessions used to be called depressions, and if you read a selection (say) of TIME magazine issues for the 1930's you'll see that they talk of Depression I (1929-33), Recovery I (1933-37) and Depression II (1937-38). In other words they had a double-dip recession. It's only in retrospect that we now call the whole period 'The Depression'.

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Not trying to be picky, but we can never be in an 'official' depression because it has no official definition (but I agree with you that this period may well be referred to as one in retrospect).

As Durch says above, recessions used to be called depressions, and if you read a selection (say) of TIME magazine issues for the 1930's you'll see that they talk of Depression I (1929-33), Recovery I (1933-37) and Depression II (1937-38). In other words they had a double-dip recession. It's only in retrospect that we now call the whole period 'The Depression'.

Yeah we all agree and still being pedants. Lets stop.

I like these depression phots, but without benchmarks of the good times preceding them I'm struggling to gauge just how depressing they are.

I like the dam ones.

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Recovery, recession, correction or depression.

What would it have been without 200 billion of QE?

Over sooner, and in a less painful way than what may be coming?

You can't organise real capital (humans, machinery, land, natural resources) more efficiently by creating binary currency on a hard drive in London.

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ONS New Orders in the Construction Industry Q2 2011 released this morning.

Headlines:

• New orders in the second quarter of 2011 fell by 16.3 percent in comparison with quarter one

• The total volume of all new orders is now at its lowest total since the third quarter of 1980

• New construction orders fell by 23.2 percent compared with the same period in 2010

• Private industrial was the only sector which showed a positive growth from the first to the second quarter (6.6%)

http://www.ons.gov.uk/ons/dcp171778_230785.pdf

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