Econ Lesson

There's no doubt, things are really screwed up, econ-wise. Some basic definitions are interesting, though not necessarily helpful. Kind of like watching people explain the stimulus plan.

Question 1: what's a recession?

Answer: A recession is two consecutive quarters of economic contraction. In other words, when the GDP, the total value of economic goods and services, declines for six months, that's a recession. There could be no growth, or negative movement, for a longer period of time, but until it triggers the magic two quarters measurement, it's not technically a recession.

Question 2; what's a depression?

Answer: there's two answers. One answer is three years of economic downturn. Another answer is a sustained recession during which the populace has to dispose of assets to pay for everyday living.

We are in the 17th recessionary month. People are selling stuff to pay living expenses. So maybe we're in a depression.

Question 3: what happened in The Great Depression?

Answer: from 1929 to 1932 the economy shrank 27%, unemployment hit 25% and the stock market lost 90% of its value. Unemployment today is around 8% and the market is down about 50%. The guys who work on stuff like this are working on calculating how much the economy has shrunk.

Question 4: why is this information valuable?

Answer: it isn't. Like a lot of these data, this is all rear view mirror stuff. You gotta live through it, look back at it and evaluate it in order to figure out if the definitions have been satisfied. It's like reading an autopsy: might be interesting, but the subject is still dead.

The media are screaming all the bad news, as often and as loud as we'll have it. People who have no idea of what composes the Dow track the number daily and seem to obcess about it.

So what really matters?

When the bad stuff happens to you, or me, or someone we know. Like now.

But we still have kids to raise, birthdays and anniversaries to celebrate, games to play...lots of living to do. Start now, time's wastin'.