Recession or Depression?

The Dollar Stretcher Blog
by Gary Foreman

What’s the difference between a recession and a depression?
Which one are we in now?
Is it possible that the other will happen?
Thanks, Carrie

Perhaps an article on the definition of a recession would be helpful. Love the Stretcher, but you seem to accept that we are in a recession. Not by the numbers – not yet, at least. We are experiencing inflation. But maybe not a recession. Time will tell. Just makes a great website and newsletter look less than stellar when you buy in to the conventional wisdom instead of stating facts…
Jennifer

Carrie & Jennifer,
Let’s start with the facts. A recession is when the economy shrinks for 2 consecutive quarters. A depression is when the economy shrinks by more than 10%.

So far we have not even had 1 quarter where the economy has shrunk. So we’re not in either a recession or a depression.

It’s possible (likely?) that we’ll go into a recession? We haven’t had even one quarter of economic decline since Q3 2001 (think the aftermath of 9/11) and no recession since before 2000. That’s a very long period of uninterrupted economic growth. So it’s remarkable that we haven’t had one before now. Based on past economic cycles we are long, long overdue.

As to forecasting the future? That’s something that I really don’t think I can do. Nor is it really necessary.

Do I buy the ‘conventional wisdom’ that we’re already in a recession? No, I really don’t. I think that the media will always promote a potential crisis. It helps them to keep readers/viewers and to make money. You’ll never see a big headline saying “Everything Is OK”. That doesn’t sell newspapers or keep TV watchers from reaching for the remote. In fact, I get bugged when they hype a recession that doesn’t exist. Frankly, they’ve got a lot of people scared who don’t need to be.
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I was glad to see this article. People are entirely too worried about the economic condition of the country. The economy has been overinflated for a long time. We are having an adjustment. These kinds of adjustments occur all the time. Some of them are more noticeable than others. This is one of the ones that is more noticeable.

There is a shift in the jobs sector. The change will most likely involve a move to more home based work and more locally-clustered branches of larger businesses.

The energy sector will probably involve even more changes that are difficult to forecast. They probably will involve less reliance on oil and more reliance on other forms of energy. If I were a betting and an investing person, I’d put my money on natural gas and nuclear. with smaller amounts on solar and wind. I think we will end up drilling off shore, in the western shale oil fields and in ANWR. But I believe it will take another couple of years and gas getting to over $6.00 a gallon before Congress gets off its collective bohunkus to allow it. Of course, I’m not in the energy business, nor in the energy speculation business. I just sit by and make observations which may or may not be correct.

If the energy and economic / jobs sectors change, then our living sector will also change. If we are working more from home, we will need more well-defined work areas and living areas – areas that are distinct from each other. We will also need more assistance around the house with housekeeping and cooking.

There will be increased opportunities for blue collar workers in home keeping and other activities. Construction, maintenance, and service industries will provide ample opportunities for jobs for those who are willing to work. Those who do not wish to work will have to suffer the consequences. The rest of us won’t have the time or the patience for them.

Those who genuinely cannot work will have other opportunities – training for work in computer skills, telephone help-lines and other new positions not even thought of at this time will become available. Those who cannot do these low-energy jobs will be cared for through new technologies only now being developed.

There is a “brave new world” “out there,” but it bears little resemblance to the world envisioned by Aldous Huxley.

By the way, I’m really enamoured of the Dollar Stretcher newsletter. It has some wonderful budget and money management helps. I don’t get the “premium” edition, however. I don’t mind a few ads, and I don’t need most of the “free” e-books. Besides, if I wait long enough, he offers them free for tips being sent in, and I have a raft-load of ‘em!