<div class='quotetop'>QUOTE (shookem @ Jan 23 2008, 12:08 PM)
<{POST_SNAPBACK}></div><div class='quotemain'>there's a definition to what a recession is though. I believe it's two straight quarters of negative ecomonic performance.
all i know is that a strong Canadian dollar and weak exporting enviroment mean bad news for us in the manufacturing part of the country.
the plus side is that i can still get great deals on hookers in Buffalo (I kid, i kid).</div>
That's the general "common definition", more or less. If GDP goes down for two or more quarters.
The BEA tells us real (inflation adjusted) GDP grew 4.9% in the 3rd Quarter above the 2nd quarter. Obviously they can't measure the 4th quarter yet, but "by the book, that would mean we couldn't say we're actually in a recession until April at the earliest. Of course, that doesn't mean we wouldn't actually be in a recession, it just means we haven't had time to tabulate the results.
Economists typically think this is very imprecise, since the recession could wind up totally undetected if it lasts only a few months, for example. The NBER gets a committee together and tries to figure out exact dates by looking at all sorts of things.
I don't look at a recession as something that fundamentally can or should be avoided. The idea of a recession, fundamentally, is related to what sort of economic activity is going on. In any economy, good or bad, some companies and people are making good decisions and some are making bad ones. On average, folks are pretty smart, their assumptions are pretty good, and thus, the winners outweigh the losers.
A recession is when changing circumstances lead to otherwise good decisions being bad ones, and an above normal number of bad decisions being made. I think it's pretty clear in this case that there were some bad incentive structures and bad decisions made in the housing market, and that's going to 1) cause losses for folks and 2) require time to readjust things into the right direction.
When I look at the economy as a whole, however, I don't see things fundamentally messed up at large much beyond the financial sector. Some things are better than others, but I don't see a disaster in the offing. Stocks will go down, some businesses will suffer but I don't see a widespread disaster in the offing due to obvious economic problems.
My bigger fear is that in readjusting, we go overboard in one way or another scaring folks too much, creating too many incentives for bad investments again, or not fixing the ones that were broken in the first place.
