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Monday, October 20, 2008

We are in a recession! The only questions are how deep and how long.


Once again the talking heads are at it. The folks on CNBC are saying they wonder if all of this bail out stuff has been done fast enough to avert a recession. Ah, too late there boys. James Hamilton (http://www.econbrowser.com/) is on record as saying he thinks the recession started last December. That would put us at 11 months right now if you think he is right (I am a gambler and I know where my $$$ is). The average post-WWII recession has lasted 11 months. The recession of 1981-82 lasted 16 months and was the worst downturn since the Great Depression. The recessions of July 1990 - March 19991 and March 2001 - November 2001 were both short but had the longest most drawn-out recoveries in the 20th century history of the business cycle. Now we are looking at a recession in the midst of truck loads of financial goop with credit markets doing their impersonation of a cigar store indian together with the prospect of a long stretched-out recovery.

Please don't get excited here folks looking for a quick exit from this fever swamp nor a return of the elevator to the top floor again quickly. History says you would be wrong.

3 comments:

Just a dumb horseplayer said...

How are we in a recession if our economy is still posting positive GDP growth numbers? We grew in Q1 and Q2 this year so the recession could not have started last December - right?

Randall Parker said...

Two negative quarters of real gdp growth is a guide and not a hard and fast rule, contrary to public opinion. You can't look at the labor market figures and not believe we are in a downturn.

Read this: http://www.econbrowser.com/archives/2008/10/the_downturn_wo.html#more

TAXGUY77 said...

Dr. Parker,

If this recession started in Dec. 2007, when would be your prediction to a turnaround or climb toward positive growth(GDP)?
Do you think we could experience a mild depression with our current situation?
The bank runs earlier this year, the foreclosure crisis, investment companies merging or filing bankruptcy, unemployment possibly reaching 8-10%, etc. have created havoc in our economy. It's global now. Markets overseas are reaching new record lows as well.
It's a crazy time. I feel no one really has a plan. Maybe your blog can help put a gameplan together.
Keep up the good work. This was a great idea.
Regards,
taxguy77