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Recession Or Contraction?

Sun Aug 14, 2011 9:13 am

I was listening to NPR while I was driving today Harvard Economist Professor Rogoff made mention of the fact that were in a "economic contraction", not a recession. In fact he eludes to say that we were never in a recession to begin with.The phrase "Recession" has been coined for the economic downturn. So which is it?

Some of the points mentioned on the radio were that if we were in a recession or more importantly one that was as severe as experts say then it would take probably 4-5 years to even get back to the the same growth and numbers proceeding the economic downturn of 2008. Deflation fears were also mentioned.




At any rate it made interesting food for thought. So what are the opinions of everyone else on the subject maybe some of you can shed more light.

Regards, Mike
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RE: Recession Or Contraction?

Sun Aug 14, 2011 12:06 pm

Hmm - recession and contraction should be the same thing, at least in the common use of language. In a recession, the economy "contracts" in the sense that the value of all goods and services diminishes, and the level of economic activity declines. So I don't think this can be an either-or questions, unless someone wants to change the definitions.
Samson was a biblical tough guy, but his dad Samsonite was even more of a hard case.
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RE: Recession Or Contraction?

Sun Aug 14, 2011 12:37 pm

Quoting Rara (Reply 1):
So I don't think this can be an either-or questions, unless someone wants to change the definitions.

The first link provided the difference in the economist's thinking


Well, a contraction is a much much more severe version of a recession. It's accompanied by a financial crash. You have a recession, they last a year, at most two years. And then, once the recovery starts, six months later, you're back to where you started.

The financial crisis we had was clearly different and I can accept that definition. For general purposes people aren't going to change terms - calling it the Great Recession is bad enough.

But it should be understood that, for far too many people, recovering from this recession/contraction will take years. And some will never recover.

For the Average American with a reasonable home & mortgage their debt on their home could stay underwater because of the economy, not because of anything they have done. That is going to impact their spending for 5 to 10 years, another indicator of the problems we face.

Not really good news these days, especially with the poetical instability in DC preventing any significant jobs creation programs.

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