It's Official - We're in a Recession

Thanks so much for adding perspective from the UK, Vanessa. It is important to remember that this is not just a US recession but a truly interconnected global one.

I believe that many of these problems are unprecedented and looking at historical models such as the Great Depression will not provide the answers. I don't know that anyone knows how to solve these problems and that it is going to take some creative approaches.

Personally I think there has been too much dependency on making money by moving paper around. London's role as a financial and banking center probably helped usher in the problems you are experiencing. Also, short term stock market forces demanding companies focus on ever increasing quarter to quarter profits has exacerbated problems. I don't think going back to pioneer days in terms of how we structure the economy is the answer nor trying to demonize consumption as the source of all evil. However, I do think we need to figure out how to lessen the growing inequity gap (the tiny percentage of people at the top - like hedge fund managers who "earn" half-a-billion dollars a year - when the vast majority of the population is seeing erosion in their earnings and an increasing percentage is falling into poverty which is inherently unsustainable) and figure out how to create paths to a sustainable global economy.

It's going to be one of the most difficult problems to solve. Certainly I don't have "the" answer. But along with others (I have also found Michael Moore's perspective interesting) I will certainly raise my voice with thoughts and ideas. We all have to.

A big part of the length of time it took to get an "official" definition is that we have not yet had 2 consecutive quarters of negative GDP growth. Also, the defining body deliberately takes a cautious approach.

But, even without an official definition I think it's not an excuse for denials and inaction from officials. It would be great though if, as you suggest, that in a few month we begin to wonder if we are recovering from having hit bottom. But with the recovery as with the decline, I think we will all know it long before any official word.

Thanks for your comments.

The whole thing does feel a little, "well duh."  Of course we're in a recession.  Because, holy crap, if we aren't in one, what does it take to get to one?  The definition of a recession being 2 consecutive quarters of negative GNP growth is just the best way that we have to identify a recession, too bad it takes months of feeling it before it's confirmed.  Hopefully, in a few months we'll all start wondering if the recession is over...

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Maria have you seen when our government is doing in the UK to help ease the economy?  They dropped VAT from 17% to 15% in the vein hope that ALL businesses will join their plan and pass on the saving to their customers via price drops on items. 

We pay tax via our wage as you do (lots of it lol) and then on top of goods we also pay a value added tax. It means that businesses buy stock at a reduced rate but add the VAT to the final price of the product. Their mark up if you will. 

VAT was hiked up to 17% but as the cost of inflation grew here people were reluctant to spend, even grocery stores felt the pinch - coupled with high interest rates on morgages (which is a separate issue) people were living off credit just to survive. Then the recession was announced officially and even more hell broke loose. Now the UK governement is stuck and trying to bail the country out any way it can - starting with the discount in VAT - to basically attract people back to the stores to buy.

What they didn't think about was the small business owners who bought in lots of stock at the old VAT rate. They still have to mark-up their stock right? But what to?

Let me tell you - I live in the centre of London and although the streets are still busy as ever the stores are not. One friend even told me his girlfriend haggled in a well known highstreet store and got over £200 off a video camcorder. This is how desperate stores are to shift their stock. 

I'm not a snob but I would only haggle at a car boot sale, never in a well known high street store. LOL. but good for her that she did and got an amazing deal. Not so good for the store though, huh?

Not all stores have priced dropped in line with VAT because for small businesses it takes a long time to recoup the VAT back from what I understand.

It's the small businesses I feel most sorry for in this whole debacle.

Of course the whole argument is; will people hord cash with extra savings or will they raise the British economy again by going out and spending money on attractive sales?

From what I've seen so far in London people are being very careful with their money and that will be the downfall of many small busineses.

I always watch what America is doing, a country I hold dear to my heart because some of my best friends live there. I feel for the US most because your economy is also held up by tourism. But who can afford to travel right now to the States and for me personally with the pound not giving me much for a dollor it's not going to spend spend spend as usual when I do go to visit.

Have you been to Micheal Moore's site? He has some interesting views on what to do with America's car industry. You should take a look.

What is the answer do you think? 

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that some analysts think that Michigan never recovered from the 2001 recession. And, yes, too many politician seem to focus on the financial health of Wall Street and their corporate cronies rather than average Americans. I can only hope that Obama's administration will be able to relatively quickly undo some of the financial damage done while too many of those in power were poo-pooing what most of us already knew in our wallets.

Thanks for your comment and perspective, Jill.

Nice to know that it takes a declaration to put a name, officially, on what Ohioans & Michiganers have been experiencing for at least two and maybe up to five or six years (sarcasm).  It makes me think of the NYT magazine's pieces they do once in a while on medical diagnoses?  Where someone has some complex of things and slew of docs say it's nothing or get it wrong and then, one random medical person who happens to have knowledge of something recognizes what is going on.

But all along? The patient knew something wasn't right.  The patient knew how sick they felt, how wrong they were functioning, how much they needed something. The diagnosis is of course welcomed when it comes and it's finally right, but these cases always make me think about all the doctors who came before who maybe didn't listen or were too cock-sure of themselves or didn't go the extra mile or give the patient the benefit of the doubt.

Or, in the case of Ohio and Bush, he just wrote us off, literally, in 2004 when he was campaigning and talking about the economy, saying that the country was doing well, except Ohio and a couple of other states. I'll never forget that.

Maybe they should have been paying closer attention when the "heart of it all" and "the heartbeat of America" start to have palpitations.  That was enough to take Cheney to the doc.  Not sure why it didn't matter when, years ago, it was Ohio and Michigan.

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I had the same reaction, Cadelaria ;)

But you are absolutely right. It may be difficult and painful but we will make it through.

Thanks so much for your comments!

That's what I felt when I saw the headlines.  We knew the emperor had no cothes but officials didn't want to own up to it.

I'll, we'll, make it some how.

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Good and plenty!

Edited to clarify: That is we haven't had 2 consecutive quarters of negative GDP growth.

Shocking, huh? That's the short answer for why it took so long. Jeff Frankel's blog has a bit longer explanation.

The NBER indeed confirms what we already knew. Though many economists were willing to speak the truth before the official announcement. But yes, that year-long delay allowed many politicians, George W. Bush included, to attempt to perpetrate the fiction that the economy wasn't really in recession as deegospel points out. Conservative columnist George Will was pushing the optimistic line as late as Sunday ( http://thinkprogress.org/2008/11/30/george-will-ec... ). But I think the apparent decline of the economy which most Americans felt in their pocketbooks gave momentum to Obama's win in the face of deniers.

I've seen several estimates that this recession will be the longest and deepest since WWII. I think it will force us to change our behavior in ways which might not be bad but probably will be painful. But your reminder is a good one, many of us have survived previous recessions and we will survive this one.

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 We have been in a recession for over a year. We felt it, but our government wouldn't own to it. I think mostly because of the election and also our president's request to increase more funding for Iraq operations last year. 

First, I know it takes 2 quarters of negative GNP to officially name a recession, so it's not a process that comes quickly. Still how could we have been in a recession for 12 months without anyone calling it -oh- 6 months ago?

Did they not want to say the word in the middle of the presidential campaign? Did the economists think we weren't feeling the effects of a recession because they didn't speak the word?

The last several recessions were only 8-13 month long; did they hope we'd be out of it before we noticed?

I don't think we've seen the bottom of this one yet, which means we're in for a 2-4 year down cycle. I've lived through them before; so I'm not too panicked about this one. Just thankful the economists have finally admitted the truth.

But why did it take them so long?

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