Recessions are defined in terms of negative GDP. Recessionary periods are defined by sub-2% growth in GDP, a high rate of joblessness and decreasing property values.
Officially, when our Gross Domestic Product (the sum total of all goods and services - 47% of our GPD is service - sold in the United States) actually runs into a negative percentage compared to the 3 month quarter before, and does so for two consecutive quarters, we are in a "recession." With the current recession, that did not happen until the last two quarters of the Bush term. But, beginning with the first two quarters of that year, 2008, it felt like we were in recession. The first quarter of that year saw only a .7% increase over the previous quarter, and the 2nd quarter of that years registered a mere .6% increase over the 1st quarter. That is exactly where we are, today. The first two quarters of 2008 and 2011 have the same GDP averages, and that is why many economists are worried that we are about to enter a second recession.
We officially entered into "recession" with the last two quarters of 2008. And, we have not averaged more than 1.3% positive [GDP] growth since that time. Most of 2008 fits into the category of "slow growth" and all of 2009, 2010, and 2011 to date. In fact, the first two quarters for 2011 are "in." The first quarter grew at .4% and the second quarter looks like it will be revised downward to between 1% and .8%. This two quarter average is almost exactly the same as the two quarter average for the beginning of 2008.
What is especially worrisome, as we compare the current 4 year recessionary period with the Great Depression, are the similarities between the housing market of the 1920 - 1950 and the current housing mess we are in. In many parts of the country, homeowners have lost 3/4 of their equity and 11% owe more than their houses were worth at the time they purchased their homes. In other words, they have minus equity. It is believed that this will not rectify itself for another 20 to 30 years, ala the same period of time as in the Great Depression.
How have we dealt with recession since the 1930's and the introduction of Keynesian economics?
We have lowered taxes, increased domestic spending and ignored the deficit. At least, that is how we have handled the problem before Obama and the current crop of Economic Infidels currently running the Democrat Party. They want to increase taxes as they push for the continuation of the last two categories.
Understand that keeping taxes low, during a recession (or anytime, for that matter) has a preemptive effect on the economy. In other words, you do not know you are doing any good, but you are. An example of a "preemptive effect?" Well, if we had killed Osama bin Laden during the Clinton years, and we could have done so, 9/11 would not have happened. There is no way of measuring a "preemptive effort" precisely because we have prevented a certain reality from taking place.
As regards taxes, the only time you realize that keeping taxes low is a positive growth provider is when you raise them, significantly. Take Illinois, for example. At the beginning of this year, Governor Quinn, raised individual taxes by 67% and corporate taxes a whopping 44%. As a direct result and beginning with the first day of these increased taxes, that state has lost 89,000 jobs and counting - in six months.
Raising taxes, especially during a recession, is always bad.
The long and short of this discussion is this: we have been in a recessionary period since the beginning of 2008 after 52 consecutive months of economic growth, a record in American economic history (under George Bush !!). And, the comparisons to the Great Depression are becoming scary. Repressed property values that promise to continue for at least a decade; a jobless rate that has not changed for more than two years and effects more than 20% of the work force, and a huge deficit that is growing at break-neck speed, if taken together, make the case for worsening times, even a Depression, at some level.
Before ending this post, I should address the fact of a so-called "robust Stock Market." First, "robust" is not my word for it. "Volatile" is much more to the point. No one really knows what is going on in the Market. We have already had one of the worst Market crashes in history, during this period of time. Understand that many believe the Market's "health" is not related to the larger economy so much as it is related to the huge sums of money given to it in the TARP (as much as 24 trillion dollars), QE 1 and QE 2.
The derivatives market, totally unregulated and out of control, just might play a major roll in our nation's financial stability sometime in the future, as well. I am an admitted laymen in these matters, but I know that the total in derivatives trading is around 700 trillion dollars. Know this: all the world's economies combined total $62 trillion. 700 trillion?? Wow. What that tells me is this: there is a whole lot of nonsense going on. I believe that anytime there are huge sums of money "laying around," without any accounting as in the Federal exchange or Fannie Mae or Freddie Mac or the derivatives market, someone is stealing and profiting . . . . big time and in ways that might be extremely harmful to others.
Think about it: if you could put your hands on 5 billion dollars, for example, and you stole 5 million and put it in your pocket, who in the world would catch you, especially if there is no accounting of the money ? You have 5 million in your pocket and you know that no one is going to come looking for a 10th of one percent of anything !!!
What am I saying? On top of the obvious comparisons presented in this post, in the dark, deep waters of the world of monetary gamesmanship, there are those who collect dollar bills, simply because they can, and the end result may be a total collapse of all that we hold as historic and essential including law, order and supply in the market place.
We may be on the verge of discovering the full impact of the statement: the love of dollars is the root of all evil.
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