The R Word
| Jan 28, 08 in Business |  4 Comments |
It's recession. And this article by Henry Blodget sent me over the top. It begins:
"Morgan Stanley economist (and perennial bear) Stephen Roach says the current US recession..."
Like anyone that has ever successfully prevented themselves from completely glassing over during macroeconomics I can tell you that a recession is defined as a decline in the country's gross domestic product (GDP) for two or more successive quarters of a year. BTW, GDP is simply the value of all the goods and services produced by a country.
In Q3 of 2007 GDP grew at a very robust 4.9%. I am no economist but I can tell you that is a huge number. While the Q4 figures will not be released until January 30, the estimates that I have seen are in the 1.5% range. While we may be heading toward one, currently we are not in a recession. It's not technically possible.
When doing a little research for this article I came across a story by Brian Wesbury in today's Journal. According to Brian, "models based on recent monetary and tax policy suggest real GDP will grow at a 3% to 3.5% rate in 2008, while the probability of recession this year is 10%."
Is there a housing crisis? Yes, but deep rate cuts should fix that. Are we in a bear market? Darn close. Are we in a recession? No.
And until we are people need to be a little more responsible when they are tossing that word around.
Lance -- it's an election year, the incumbent is a Republican, and essentially all of the media are Democrats. By definition, we're in a recession. Facts are immaterial.