As you all know, the United States economy is now in a full blown recession. The likes of which has not been seen since the Great Depression of the 1930s.
Or is it?
Ben Stein had a great piece over at his How Not to Ruin Your Life column at Yahoo Finance last week. It’s titled ‘Rethinking the Recession’ and you can read it here.
It’s basically a calming piece in which he uses facts and perspective to counter the hysteria in the over-emotional, over-hyped media. He applies logic and his brand of humor to dissect the impression of recession and imminent return of the great depression as supplied by the US media on a daily basis for about 6 months now. But enough of my fumbling preamble… I should just let Ben speak…
“Are we in a recession? No one knows. Indeed, it’s literally impossible to know.
A recession is six consecutive months of negative economic growth. At most, December 2007 would be our first month, so we wouldn’t know until sometime in June 2008 if, by the end of May 2008, we’d been in a decline for six straight months. So no matter what anyone tells you, we can’t know if we’re in a recession yet”
This is in stark contrast to the impression the media has been generating for months now. Indeed, only last October Jim Rogers was telling Reuters that the U.S. was “undoubtedly in recession.” Next time you hear a “news source” comment on the “current recession”, just ask yourself when was the last time they defined a recession. Chances are they haven’t. This is the age of the 24-hour news cycle and more competition than ever before. They’re not in the business of informing the public any more – they’re in the business of selling ratings, fear and panic.
“There have been 10 recessions in the last 63 years. The average length of these downturns has been about 10 months. The average decline in economic activity from peak to trough was about 2.5 percent. No decline has been worse than about 3.7 percent.”
To listen to the media, we haven’t had a recession since 1929 just before the Great Depression!
“In the past 25 years, there have only been 2 recessions, which is an extremely good record. The two recessions — in the early 1990s and the 2000-2001 correction — have been extremely brief. The really severe recessions of the postwar era have been engineered by the Fed to fight inflation — in the early 1970s and early ’80s.”
This is good news indeed. However, we should consider that through those 2 recessions we had Alan Greenspan at the helm and Ben Bernanke seems to either lack Greenspan’s measured pace or has not yet found his own. Let’s hope he finds it. Soon.
“Unemployment always rises in recessions. The degree of the rise is usually modest, generally only about 2 percentage points, although some — like the one engineered by the Fed in the early Reagan years — have gone as high as 4 points. The average length of involuntary unemployment during recessions is about six weeks.”
This too is less of a negative than I was expecting. How many of you thought unemployment would have been up 5 or 6 or even more points during an average recession?
He goes on to make some more points about how best to survive this rise in unemployment, as well as the Federal Reserve’s role in recession creation and elimination. Well worth the read.
So what should you do?
What you should always do. Pay down and avoid debt. Invest wisely (the markets are having a big sale as I write this). Keep your job skills marketable, sharp and in demand. Work hard, play hard and enjoy life – it’s not as bad as they want you to believe!
Nice info…
The Great Depression is often viewed as the longest and worst economic downturn in America’s history. The immediate result of which threw millions of people into poverty and unemployment. To say that we are witnessing the next Great Depression would require a much closer study of the causes and effects of the original. I would recommend you have a look at Shmoop history guide for a more detailed time line of the events that led to the Great Depression and then make a more informed judgment on what we should expect in the immediate future and maybe learn a few lessons from the past as well, along the way.
Emotional depression caused by economic factors can be overcome and controlled. I know there are new ways to really achieve in controlling depression. I have learned this through eft training which is really helpful.
Our country had been so much affected by this Economic Recession. there are lots of job cuts and company shutdowns. We are seeing some signs of economic recovery right now and we hope that it would continue.
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