Recession or Depression: You Be the Judge


Gaye Levy, Contributing Writer
Activist Post

There is an old joke among economists that states: A recession is when your neighbor loses his job. A depression is when you lose your job.

Jokes aside, we all have an intuitive idea of what makes up a recession:  unemployment, plant and business closures and tough financial times for families.

But what about depression?  To laymen like me, depression is a more extreme form of recession.  It is characterized by extraordinary and unprecedented increases in unemployment, the reduced availability of credit, mass bankruptcies, the collapse of banking and financial systems and volatile financial markets.

Sound familiar?

Now to some there may be a fine line between the two.  As a matter of fact, I recently read that when the economy crashed in 1937, FDR and his advisers didn’t want to use the “D” word, so they came up with the term “recession”. Until that time there were no “recessions (from Murray N. Rothbard’s book America’s Great Depression).

The official, economist’s definition of a recession is this: a recession occurs when the nation’s GDP declines for two consecutive quarters.  On the flip side, a recovery is therefore an increase in GDP after a period of two (or more) quarters of decline.

The reality?  I asked my friend George, who is an economics guru, for his take.

If you are a member of the party in the White House, then it’s three quarters to make a recession, which means that if the nation is stuck in a depression for a year or two after taking office, the first year can be written off as being caused “by my predecessor” and then two quarters from there – so one and a half years.

You then only need one quarter of GDP gain in order to scream “green shoots!” at the top of your lungs and then you can blame opposition party in Congress for holding up your legislative package, and failing to pass that (even after line-item vetoing to your heart’s content) you can blame Congress for any return of a recession.

On the other side, if you are NOT in the White House, the definition of a recession falls back to the classical economist’s two quarters of falling GDP and the “honeymoon” between when your president left and the new fellow came in drops back to 90-days.  By the 4th quarter, the President takes the rap no matter what, and then you block anything productive for the economy since the idea is to make the president look bad so your party can get back to the front of the lobbyists soup line with a greater margin.

Practical economics is, above all else, flexible, depending on who is wielding the numbers.

Unlike the term recession, there is no agreed-upon definition for the term economic depression. Two currently popular definitions, however are the following:

  • a decline in real GDP exceeding 10%
  • a recession lasting 2 or more years

Cripes.  With the so-called authorities uncertain of the real definition of depression, you begin to wonder who is calling the shots. In the meantime, our daily MSM is citing a recovery with each headline and each news broadcast.

So okay, I am not good at economics but I am good with people and feel competent with my understanding of the human condition.

With that in mind, I decided to take the question of recession versus depression to the masses.  Not a large mass, mind you, but a diverse number of people from North America that shared my recent voyage in Europe.  There was a bias, of course, in that this was a mostly older group and, further, this was a group that had the means and opportunity to travel, whether employed or not.

The question I posed was:  Do you feel we are in a Recession, a Depression or Recovery?  The results from my sampling of 81 people is below:

  • Recession – 21
  • Depression – 39
  • Recovery – 21
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Surprisingly, or perhaps not so, is that although 48% of the respondents maintained that we were in a depression, this was a group that could not really be suffering in the current economy.  Yes, there was some belt tightening and the extravagances a la the ’90s were gone.  But still they felt that, overall, our economy was in a depression.  Even more significant, a majority felt they would not see a change in their lifetime.

What does all of this mean?  Well I tend to believe real people in real life.  Not a bunch of scholarly economists that have been bought and sold by the political machine.  I tend to believe what I see with my own eyes, and what I feel each time I pull out my wallet to pay for necessary goods and services.

And as a layman I tend to believe the so-called joke I cited at the beginning of this article:

A recession is when your neighbor loses his (or her) job.
A depression is when you lose your job.

A weak recovery is when your neighbor gets their job back.
And a solid recovery is when both you and your neighbors are all back at work.

The Final Word

Times are tough.

And even though I am blessed with the ability to prepare for an uncertain global financial future, in my opinion the defining factor with our current economic woes is the length of time we have been stuck with no real positive movement forward.  Add to that the time it is going to take to dig out of this hole and, well, it sounds depression to me.

One more thing: Prosperity is when you and your partner can go out to dinner, and perhaps purchase a new car or boat.

Prosperity is what we strive for, but, alas, prosperity is elusive and indeed may not happen for long, long time. If ever.

Please leave your own view in the comments section below — recession, depression, recovery?

Enjoy your next adventure through common sense and thoughtful preparation! 

Gaye Levy, the SurvivalWoman, grew up and attended school in the Greater Seattle area. After spending many years as an executive in the software industry, she started a specialized accounting practice offering contract CFO work to emerging high tech and service industries. She has now abandoned city life and moved to a serenely beautiful rural area on an island in NW Washington State. She lives and teaches the principles of a sustainable, self-reliant and stylish lifestyle through emergency preparation and disaster planning through her website at SurvivalWoman speaks her mind and delivers her message with optimism and grace, regardless of mayhem swirling around us.  Enjoy your next adventure through common sense and thoughtful preparation!

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