It's Official: We Are In A Recession
(Authors note 5-14-2012: This article was published in 2009. This article however can be used for educational and historical purposes)
ORIGINAL ARTICLE:
The big news that none of us knew about and all of us wondered about has finally been released today by THE NATIONAL BUREAU OF ECONOMIC RESEARCH.
The Headlines Scream:
WASHINGTON (AP) -- It's official. The U.S. economy has been in a recession for the past year. The start of the downturn was announced Monday by the National Bureau of Economic Research. The NBER -- a private, nonprofit research organization -- said its group of academic economists who determine business cycles met and decided that the U.S. recession began last December.
So not only is it now official.... but it's officially been happening since last December. Oh wow, thanks for letting us know! Maybe now we can begin to make some changes!!
So Exactly What Is A Recession Anyway?
We've all been hearing news of this recession for months now. Recession, depression,recession,depression........
All I know is that we certainly knew things weren't going well in the economy - and things have been getting even worse these past couple months. Massive layoffs, the 700 billion dollar bailout bill, foreclosures in the neighborhoods, rising gas prices, the rising cost of food, and a general feeling of all is not right with the world..........
So exactly now that we are being told that hey - yeah - we are officially in a recession, what exactly what does that mean for the average laymen like me? Or maybe you?
"By one benchmark, a recession occurs whenever the gross domestic product, the total output of goods and services, declines for two consecutive quarters. The GDP turned negative in the July-September quarter of this year, and many economists believe it is falling in the current quarter at an even sharper rate."
So OK - What Next?
So I don't think we needed an official announcement of this recession for us to get the fact that our economy is in deep trouble..... If anything the announcement that we are officially in a recession is probably only good for the fact that now we know exactly what we are facing and that there is an official word for it.
(Kind of like when we are sick and don't know what's wrong with us, then finally the doctor gives it a name - even if it's not good we feel some relief that we finally know what's really going on?)
So OK ...now that we know we are officially in this recession - what can we do about it? Or can anything be done? Or does this mean we are heading for a depression now????
Didn't They Just Tell Us News We Already Knew?
Well according to the same news source this is how we should handle this "official" recession:
"What's important is what is being done about it," Fratto said. "The most important things we can do for the economy right now are to return the financial and credit markets to normal, and to continue to make progress in housing, and that's where we'll continue to focus."
Ok, ahhh, maybe I missed something here but isn't this something we should have been doing all along???
(Dorsi Diaz is a freelance writer/publisher who writes on a variety of topics including political change and conspiracies. Please feel free to join her reader club and subscribe to her RSS feed to be updated on her latest articles. Thanks for reading)
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It's definitely upsetting that we aren't warned of these things in time, and what's worst is that those in charge decide to take action in the last minute when it's too late and don't actively do anything to prevent us from reaching such a ridiculous point in the economy. If this has happened before, every measure should be taken to avoid this, so now the world is laughin at us for being retards. Hopefully this causes us to think in a smarter way financially so that this doesn't happen again, and if it does, the effect won't be so widespred.
OK I get it - NOW we are in a Recession!
The whole world has been waiting for two quarters of negative GDP growth to come and go before anyone would technically and officially declare the recession. However, once again the National Bureau of Economic Research (NBER) comprised of scholars, Nobel Prize winners in economics, and hundreds of learned university professors have finally conducted enough empirical research, developed enough statistical measurements, and made enough economic estimates to have concluded that hey, guess what, we are, indeed, in a recession.Excuse me, but I could have saved them a lot of trouble. For anyone paying attention, it would have been clear that we’ve been on the road to recession since December 2007. But it’s typical for official recession announcements to get released just as we are about to hit bottom, or even when the economic cycle is actually beginning to reverse itself into recovery mode. In other words, these reports are USELESS. You might as well close the barn door after the. . .well, you know. These announcements are not just old news, they’re an insult to the intelligence of consumers. It’s not as if we haven’t noticed that we’ve been living in a world that’s every bit as uncertain as it was after the 1930s. If we’d kept track of the following events and tied them all together, we would have known that something catastrophic was coming.
• The credit-induced mess really began when interest rates were slashed between 2001 and 2004. Easy credit led to over-borrowing and everybody was getting in over their heads. But interest rates started to climb. In 2004 rates peaked at 5.25% and that’s when the stuff started to hit the fan. • In 2006 the blow-up started to unfold—all those low-interest, adjustable-rate mortgages began resetting. It brought dramatically higher interest rates and increased monthly mortgage payments. It was not uncommon to see a $1,500 monthly payment balloon to two or three times that amount—way beyond the budget for many unqualified buyers. • That led to a 42% increase in mortgage foreclosures between 2005 and 2006—according to Realty Trac. By 2007, nationwide foreclosure rates were 0.75% compared to the previous year. An early victim was NovaStar Financial, which reported a 7% jump in delinquencies in 2006 compared to a 2% rise in 2005. By January 2008, their share price had dropped to $1, down from $150 in May 2006. For the first quarter of 2008, foreclosure filings, according to the Realty Trac index, were 112% higher compared to the same period during 2007.• During the first quarter of 2008 Robert Shiller, the famous Yale University economist and economic author, warned that home prices could drop by over 30%—a precipitous drop not seen since the Great Depression.• Meantime, the cracks in the central core of the financial system in the U.S. began to reverberate across the entire globe.• On July 9, 2007 the Dow hit an all time record, surpassing the 14,000 mark. But two months later, it had slid 8% to 12, 845. The aggressive actions by the Fed triggered a fragile and short-lived recovery.• After October 2007, the sub-prime mess was getting messier. Major financial institutions kept on reporting billions in losses, and the economy was flirting with recession. • By March 10, 2008, the blue chip benchmark of the U.S. industrial might, sank to 11,740, a 17% drop from a high reached in October. The biggest investor decline in eight decades has sent investors fleeing to U.S. Government instruments, bank deposits and other cash funds• From mid July to August of 2008, just about every financial market in both developed and emerging countries had registered double-digit losses.• In October 2008, U.S Mutual funds were hit hard by record investor withdrawals as $127 billion were moved to the safety of treasury and cash. Balances fell from a May total of $12.3 trillion peak to $9.6 trillion by the end of October. • SP 500 index slumped nearly 41% YTD—its worst performance since 1931, the MSCI World Index has dropped 47%, the average diversified U.S. equity fund has declined 48% this year through November 21—according to Morningstar—and the average non-U.S. fund has plunged 54%.• 1.2 million jobs have been cut in the last three months with 533,000 jobs lost in November alone, according to labor statistics—the biggest cut in more than 30 years—bringing the unemployment rate to 6.7%.
As we’ve been reporting on financialspeculation.com, Bear Stearns and Lehman Bros. are kaput, AIG was rescued, many banks failed, well-known companies have gone bankrupt, millions of small business are closing shop, and the government’s $700b bailout has yet to unlock the credit markets. Then there was Citigroup and now the auto industry.It’s a disaster of epic proportions and there’s still more waiting in the wings—the unraveling of commercial real estate and the explosion of credit card debt and the defaults that are sure to follow. It is true that the most, if not all, economies from the U.S. to China to Spain and Argentina have provided stimulus packages, but it appears that we are in the midst of a prolong recession. How do we know? Not because the NBER tells us so. Actions taken to prevent deflation instead of inflation, to ignite economic activity and reduce the cost of access to credit, have thus far been fruitless. Meanwhile, the housing market continues to slide, GDP is dropping, consumers are not spending, the financial markets are in disarray and we have a U.S. team of economic fixer-uppers that keep tripping and stumbling into walls. Now we are holding our breath waiting to see what will shake out from the failing/flailing auto industry. If we are going to survive this, somebody had better come up with a workable plan—and fast! A plan that provides clear transparency, open communication and fewer surprises. On the other hand, who knows? We might actually be in the recovery period . . . but of course we’ll have to wait until the NERB formally announces it . . . sometime in 2010.
I would like to recommend you read a great new book called "The Big Gamble" by Jose Roncal and Jose Abbo as they delve and provide great insight on the recession and the current economic crisis
I can only echo Eric's line:
We are so freakin' doomed!
Thanks Dorsi!
This is really a very big problem for all of us...........We should all get together & think about this together so that we can aome out of this easily..............
actually it affected even far places
P.S. I wonder how one goes about getting a job as a pundit. I'd be happy collecting a paycheck for sitting around stating the obvious!
Well, at least gas is back under $2 a gallon again. It ain't much, but every little bit helps these days. Time to get creative in our thinking.
Hey, I know! Maybe the petroleum industry could fund the bailout of the auto industry out of its record profits.
You're right William.
But if you have no resources because all of your 110% of your income goes in living expenses, if you've believed all the "expert advice" about the value of your house rising forever, and if you've trusted that the government has the interests of its citizens at heart, then I still say that you're freaking doomed.
I'm far from being rich, but know the value of being able to buy shares in selcected companies for less than one tenth of what I paid for them a year ago. They will certainly bounce back when this madness is over.
What disturbs me however, is that those who built the foundation of the worlds financial system with dodgy materials are trying to repair it with the same dodgy materials after its collapse.
Cheers, Eric G.
Recession and depression are inevitable, in my opinion, when the greed and corrupt reach their zenith. The everything has to depress to a point that they can resume their greediness and corruption. That's the point, Eric, where opportunity to knocks. Only the poor and middle class miss out on the gravy train. Thanks, Dorsi.
For some people recession is spelt OPPORTUNITY!
Depression is really a state of mind and not 'officially' an economic term. So although we call it a depression it's really just a deep recession. Most people get depressed but others get excited because it means BIG OPPORTUNITY.
Some people are making a fortune and the sensible people saw it coming years ago.
Robert Kyosaki in Cashflow Quadrant (1998) wrote that a depression was overdue and that when it came there would be "a massive transfer of wealth". When did he say it would it happen? Before 2010.
Warren Buffet's investment strategy is to "be afraid when others are greedy and greedy when other are afraid" ... and he's on a spending spree right now!
It all depends on how you look at things.
Ask yourself, "Where is the opportunity in this bad news?" It is there!
This economy is one of the main reasons I have chosen to start to focus on accumulating some food storage. My husband lost his job and we have been blessed to have a lot of food stored away.
I wonder if Bush has one of those 9/11 moments when he first heard the news, remember when he decided he would not stop reading to the first graders after the towers attacks.... nevermind, I'm sure this one different, its not like he didn't see this coming way off in the distance and had put some thought into what he's going to do when the news broke. Uncle Cheney, what do I do now? Go tell them pray to Jesus in these tough times and that we Americans overcome adversity, thats what we do, we don't run from a fight, we run into it. Yes, Uncle Cheney.
I used to be disgusted. Now I'm just amused.
It just goes to show that all these high priced government economic officials are taking their paychecks under false pretences. They haven't got a clue.
Even more so when they try to stop a problem caused by too much cheap credit by providing even more cheap credit.
They're pulling on the economic levers, turning the fiscal wheels, and prety soon the smoke you see on the horizon will be the motors of the printing presses overheating as they print more and more banknotes.
None of them seems to have a clue.
hahahahahahahha
We are SO freakin' doomed.
- AUTHOR
Well yes I'm being pretty sarcastic in this hub. after seeing the gas price manipulations in the last year I'm just pretty darn fed up as is everyone else. You know darn well the reason the gas prices have gone down is to intice us back out to spend money, and if we can't afford the gas we can't afford to shop. Yet Exxon and other oil companies have been making record breaking profits over the last year on the backs of the working people. What a sham!
We all knew it but announcing it officially is very disturbing. But we have to accept it that we are in recession.........
Those studies are always awfully late to make the declaration.. certainly all the individuals across the country knew this!
I was just emailing my spouse who is the office next to mine, :) that today it was announced it's official, we are in a recession. We all knew about this, but somehow making it official makes it more disturbing to me, but by the same token, knowing its official helps to take responsibility for how we spend. I guess, this is what you say anyway in your hub.
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