What are the actual conditions for acceptance of a recession and a depression?

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krogoth's picture
krogoth
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What are the actual conditions for acceptance of a recession and a depression?

What are the actual conditions for acceptance of a recession and a depression? I know it may be a stupid question, but it seems we are in a recession now and nobody wants to admit it. What are the factors that decide these conditions? And when does the American media report this data? What is the data?

 

 

 

 

TIA

 

 

 

 

 

 

 

carparker's picture
carparker
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MSM will deny this til the end
The MSM will deny we are in a recession until the first hedge fund manager jumps. They will deny we're in a depression until we have long since climbed out of it.
krogoth's picture
krogoth
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Not quite what I was looking for

I think I was looking for a more scientific, data based answer to this.

 

 

 

 

 

 

 

 

 

 

 

lundsta's picture
lundsta
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Re: Not quite what I was looking for

The textbook definition is a significant decline in these measures:

 

1. GDP ( is negative for 2 or more quarters)

2. Real Income

3. Industrial Production

4. Wholesale-retail sales

 

In college I was taught a decline of 10% or more in GDP signals a depression. These are the factors the media uses. Who knows if we can really trust the information we are given. Did you want the equations for each one?

 

krogoth's picture
krogoth
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Hi

I had heard that the GDP needs to be lower, but I didn't know the time period. No that's the info I needed, Thanks Lundsta!

 

 

 

 

 

 

JoeNemeth's picture
JoeNemeth
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Re: What are the actual conditions...

An anecdote:

Two weeks ago, my wife and I were taking the shuttle bus from the airport parking to the airport. Across from us was a man and his wife. He was furiously text-messaging and cussing about what he was reading. We gathered from his spontaneous comments, and some of the casual in-bus conversation, that he was from Colorado Springs (meaning he was probably a far-right Republican), and had something to do with Washington DC. He might have been a congressman, for all I know. His wife commented at one point that she was scandalized by the rapacious increase in Co Spngs utility costs, that she had just learned about - something about a 45% increase, following something like a 30% increase just last year. He was surprised, irritated, and slightly incredulous.

I smiled, and said, "Well, that's what happens in an inflationary economy."

He looked even more irritated, not looking up from his cell phone, and said authoritatively, "But we aren't in an inflationary economy."

I shrugged, and commented, "They keep printing money."

That was the end of the conversation. The bus arrived, people got off and went their separate ways. I thought about this on our flight, however, and remembered the astonishment with which "stagflation" was greeted during the Reagan years - as though inflation is logically and mathematically the opposite of recession, so that you could not possibly have both happening at the same time.

I have no idea who this guy was, but I'm pretty sure he was part of the Washington DC culture, and according to the Washington culture, we aren't in an inflationary economy: even though we are printing money like mad, and prices for utlities and grocery store items are spiralling up at double-digit rates. Ummm. So what does it take to have an inflationary economy?

I think the same is true of a recession or a depression. You don't use those words unless there is some political gain to be made from using them. In the current chaos, there is no gain to be made by anyone for using the words, so regardless of the definitions, they won't be used. We are not in "a recession," we are not in "an inflation," we are certainly not in "a depression." If there is a number (like 10%) that economists use, then the GDP and CPI figures will be adjusted so that no one needs to use those words.

Denny Johnson's picture
Denny Johnson
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Posts: 348
Re: What are the actual conditions...

A recession is when your neighbor loses his job.

A depression is when you lose yours.

Ray Hewitt's picture
Ray Hewitt
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Joined: Apr 5 2008
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conditions for acceptance of a recession and a depression?

Krogoth says:

I think I was looking for a more scientific, data based answer to this. 

There ain't none.  In my estimation, broad public consensus is as good as any. Austrian theorists make a valid point when they argue that human behavior is too unpredictable for reliable statistical analyses. Even if we were to accept statistics and ignore their flaws, there is no common definition of recession. I believe mainstream economists accept the definition published by the Bureau of Economic Research. If memory serves, it is something like three quarters of declining GDP. Problem is, it is an arbitrary definition and published long after the fact. 

Perhaps Denjohn's at #6 is as good as any. So far, none of this chaos has affected me. I owe my good fortune to seeing it coming long before it hit. My job situation was a matter of luck.

krogoth's picture
krogoth
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Posts: 576
recession and depression?

That's probably the reason I can't find credible information or a benchmark for defining these condition's, or where we need to be to accept them. An earlier post describes the recession conditions, but it's really hard to find the depression conditions. Basically the most I can find is in relation to the jobless rate.

 

 

 

 

 

 

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