So what exactly is a Recession? And why does it sound scary???
Turn on any broadcast today and you will see the hand wringing and the fear that is in that station's spoke model du jours eyes. Its not rational fear but it is fear.
Its the fear of a recession.
The problem is those spoke models really have no idea what a recession is....BUT they dutifully read their teleprompter and tell us that the US is on the brink of a recession which is akin, in their minds, to the end of the world... and we all must be really afraid and hide.
These were the same spoke models that told us to be afraid and hide the last two years and the same ones that will tell you to be afraid and hide next year with what ever the coming disaster is. BUT...'please keep your TV tuned to their station' so they can continue to update you on being afraid....
(For those who didn't catch it last week, the talking heads and the weekend news shows tried to advance the end of the world scenario in the up coming MONKEY POX pandemic...the only problem is it really didn't scare anyone with a brain so its kind of petered out...)
OK, so enough of the lack of intelligence in our media.
WHAT IS A RECESSION? WHAT IS THE DIFFEREENCE BETWEEN A RECESSSION AND A DEPRESION? AND WHY SHOULD WE CARE?
According to Merriam Webster:
A recession is a downtrend in the economy that can affect production and employment, and produce lower household income and spending. The effects of a depression are much more severe, characterized by widespread unemployment and major pauses in economic activity. Recessions can also be more localized, while depressions can have global reach.
A further Definition of Recession
Recession refers to a phase of the downturn in an economic cycle when there is a fall in the country’s Gross Domestic Product (GDP) for some quarters. (2 is the generally accepted time frame)
It appears from a slowdown of economic activity in the economy - for a few months. It may result in the fall in employment, industrial production, corporate profits, GDP, etc. It is generally accepted that at the start of a recession there is a decline in consumer demand leading companies to contract, and when this happens they stop recruiting personnel. As a result of that, unemployment should rise in the economy and after sometimes lay offs begin. As the recession continues demand drops and consumer spending declines further and often housing prices fall. The recession may cause severe problems in the economy. In the past recessions have been overcome by the government using different strategies. Some have increased the money supply and through liberalized monetary policies. Depending on which party is in power the alternative to printing more money is to lower taxes, lower interest rates and increase public spending.
A further Definition of an ECONOMIC Depression
When recession, turns out to be more severe and continues for a long term, in one or more economies, the situation is known as Depression.
The basic rule to defining a depression is that there is a negative GDP of 10% or more, lasting for more than three years.
Depressions may result in price deflation, bankruptcies, bank failures, unemployment, financial crisis, business failures, etc. It may lead to the shutdown of the economy.
Ok, so a recession can lead to a depression. BUT a recession is really just a technical term and a recession does not automatically lead to a depression.
Oh gosh...so we may be in a recession...a down turn in the economy? It certainly would make sense that we are... gas prices are averaging $5 a gallon? there is a significant war in Europe. The Politicians have been printing money like its baby formula....oops,( I mean like its not baby formula because we have none of that,) like its ....well...free?
Yep, guess we are in or at least headed towards a 'technical' recession. But the world isn't ending and its not a depression.
So finally, Congrats! now you know more than the talking heads and you do not need to be afraid...