Friday, July 31, 2009

Recession: A Word for Political Manipulation

A recession is defined by many economists as when Gross Domestic Product growth is negative for a period of two or more consecutive quarters.

Before we were officially in a recession, the average consumer and business was feeling the pinch. People were missing debt payments, making want vs. need decisions, and cutting discretionary spending. Savings started to increase.

Look at what the average Joe and Jane are doing and you'll get the real economic pulse of a city, state or nation. They anticipate the positive and negatives in the economy from their unique micro prospectives. People know what's looming even before hiring is stopped, wages are frozen, benefits cut, and layoffs initiated. Only idiots think "it will never happen to me."

As a small business owner, I feel it first hand with my partners. Everyone else gets paid first. If there is nothing left, we don't get paid. We pay for our health insurance out of our pockets. We pay for our mobile phones out of our pockets. Everything associated with normal business, if there is no money, we either do without or pay for it out of our savings. We work hard, smart and hope we can save our business, but times are very tough for us.

Today's revised national numbers have shown that:
The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing.

The economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books
I am certainly not doing anything to boost the economy, keeping as much money as I can in the bank. When I start golfing again and spending money on home projects I have been putting off due to costs, the recession will be over for me. I don't see that happening anytime soon.

1 comment:

Javelin said...

The flow of money makes the economy stronger. Eventhough you are not spending your money on fun things like golfing, you are working (money flows) and paying bills (money flows). That is why the stimulus was so important.