I went to look for the definition of the word that’s in everyone’s mouth nowadays:
“In macroeconomics, a recession is a decline in a country’s real gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year”
Source: wikipedia.org
Aha, so recession is the consecutive decrease of the real GDP.
Then I went and looked for the GDP numbers to see if the real GDP of the US has had any negative economic growth during the last 4 quarters, this on the BEA website (U.S. Department of Commerce – Bureau of Economic Analisys)
Here are the GDP growth quarter to quarter since 2006
2006q1 4.8 2006q2 2.4 2006q3 1.1 2006q4 2.1 2007q1 0.6 2007q2 3.8 2007q3 4.9 2007q4 0.6 2008q1 0.6
These numbers from the BEA show the GDP rate of change in respect with each last quarter. If you look at the classical definition, there’s just been a slow growth, not negative grow, so we’re still not technically in recession, just in an economic slowdown.
The 0.6 growth has happened before (2007q1) and after that the q2 and q3 showed decent growth.
Maybe the economy can only grow so much its reaching a peak, what scares me though, it s the low interest rates added to the rising prices of OIL, they probably go in hand since we’re putting cheaper dollars out there so OPEC doesn’t want to loose the real value of their OIL, plus they like to abuse prices every now and then.
One thing is for sure, every world wide recession has been followed by the whims of the fuckers at OPEC whenever they decide to peak prices.
I believe a lot of this recession buzz has to do with the US elections, fear to get votes (they got us with the terrorists last time), it’s true there’s been a lot of shit happening with the mortgage crisis but that was something just waiting to happen when you give high risk loans to so many stupid people that can’t do basic math to consider all costs associated to purchasing a home while they already are deep in debt. Sadly most people in this country have no clue on how to manage their money, but I guess that’s good for the smart ones, you can sell anything to a lot of people.
In a real recession you don’t have movies with opening weekends of +$100M while the same week people sleep inline on video game stores to get the latest video games. You go out at night, and every restaurant is crammed with people, most businesses are doing good, at least in NY I don’t see the signs of recession anytime soon, what I see if probably a little inflation coming soon if something isn’t done.
You don’t see economy sectors like clothing and electronics have the growth they’ve recently had on a real recession (like the one I lived for years in my own country, where you have to worry about buying food day to day, and companies are closing left and right and finding a job is a blessing)
OIL Prices & US Presence in Iraq
The US is sitting in Iraq, “a country with at least 150 billion barrels of crude, and except for Saudi Arabia, the cheapest production costs in the world” – (Paul Roberts, The End of Oil), I believe it’s a good thing in a way that we’re there (for the economy, I’m against war by all means), but it seems even though there’s a strong US presence in the area, nothing can be done to mantain oil price stability and that could well send us in recession. Wish the government would explain one day in plain english “hey buddies, we’re gonna cut the bullshit, the war on terrorism was a nice lie we came up with to protect our economy, terrorism is the least of our worries compared to an energy crisis, we just need to keep the oil flowing at a decent price, please let us do our thing in Iraq, it was either us, or Saddam taking over Kuwait and maybe Saudi Arabia, and then we’d be in deep shit”
Let’s look at the GDP during and after the Golf War ((2 August 1990 – 28 February 1991)
1990q4 -3.0 1991q1 -2.0 1991q2 2.6 1991q3 1.9 1991q4 1.9 1992q1 4.2 1992q2 3.9 1992q3 4.0 1992q4 4.5 1993q1 0.5 1993q2 2.0 1993q3 2.1 1993q4 5.5
During the months of the war, we had negative growth, but look how nice growth was later down the line…, and we’re still growing, little but growing. Try to grow a trillion dollar economy quarter after quarter like the US, who’s your daddy?
Does the current administration want oil price stability?
The last 8 years of this nation have been run by two Oil men, Dick Cheney and George W. Bush, you’d think one of their goals would be to keep oil prices stable… or maybe not 😉
Let’s hope the next president of the U.S. will be able to do something about oil prices, they’re the one thing that can bring this nation down, terrorism is probably a minor threat compared to a $200 oil barrel.
Maybe now it’s a great time to invest, maybe not, I’ll just quote two things Warren Buffet said to Fortune Magazine in April 2008:
“…when people panic, when fear takes over, or when greed takes over, people react just as irrationally as they have in the past”
I believe the media, and politics are trying to scare people with this whole recession buzz, we have to think and act rationally.
the second quote goes:
“You should get greedy when others are fearful and fearful when others are greedy”
Let em buzz about recession, maybe it’ll affect some stock investors, prices will drop, and it’ll be good for greedy people during fearful times. Might be good to look at that cheap YHOO now that MSFT supposedly dropped their offer, but that’s another story, and probably unrelated since the stock market is a different beast and shouldn’t really be that much coupled with macroeconomics.