World Economy still Contracting.

[Just thinking]

Well, the world economy as a whole may not be expanding, but the head of the Bank of Canada released his economic forecast yesterday and claims that, in technical terms at least, the recession in Canada is over as he expects there to be positive economic growth in the third quarter.

I'm curious as to just what is being said with such a statement. Certainly, I doubt that things overall are back to what they were in 2006, early 2007, right? So, even if everything stopped shrinking, and a slow (SLOW) economic upturn had begun, I would not jump up and down claiming the recession was over. It would just mean that we're going to be swimming around the bottom of the pool for a while. A good many things are still going to be at recession (depressed) levels.

 

[bjornart]

I can think of 3 reasons to grow your own food. There are probably more than that.
1) Save money. I think this is ill placed reasoning. I have read a couple of studies that demonstrated that you don't save money and can often loose money when you grow your own food if you take the amount of time and effort you spend into consideration. Food logistics in wealthy countries is such a large market that it is difficult for an individual to compete with them $$$ wise.

What value are you putting on the time and effort you spend? What I'm spending is time I would otherwise have spent bowling and drinking beer, so the cost in time and effort is at least zero, if not less.

 

[Corsair 115]

I'm curious as to just what is being said with such a statement. Certainly, I doubt that things overall are back to what they were in 2006, early 2007, right? So, even if everything stopped shrinking, and a slow (SLOW) economic upturn had begun, I would not jump up and down claiming the recession was over.

Well, he was using the technical definition of recession, two or more quarters of negative economic growth. If there's indeed economic growth in the third quarter, then by definition the recession ended. Even heading into the slowdown though most economic experts and analysts, from what I had seen at any rate, had stated that Canada's economy was in a better position to weather the storm and rebound more quickly and strongly than the U.S. economy.

Part of the comments may also be about boosting public confidence and outlook. Psychology plays its role in economic matters.

 

[Just thinking]

Well, he was using the technical definition of recession, two or more quarters of negative economic growth. If there's indeed economic growth in the third quarter, then by definition the recession ended. ... Psychology plays its role in economic matters.

Yes ... that's exactly what I'm getting at. Technically one can say the recession is over with 2 quarters of growth, but when you're economically at or near bottom, that's not so hard to do. (A 2% gain in a heavy recession is much less growth than 2% during prosperity --- and much easier to achieve, if only by statistical chance. Plus, falling back 2% is just as easy.) And then the market psychology takes over and we get too big a jump in stocks ... which all too often then take much of it back.

I think we need (in the present situation) a much broader look at what we should call an end to the recession. Especially with regard to employment.

 

[ServiceSoon]

What value are you putting on the time and effort you spend? What I'm spending is time I would otherwise have spent bowling and drinking beer, so the cost in time and effort is at least zero, if not less.

The lowest I've seen is minimum wage. It does come down to personal preference. I would rather be drinking beer than maintaining a garden.

 

[drkitten]

I think we need (in the present situation) a much broader look at what we should call an end to the recession. Especially with regard to employment.

Ah, so this whole thread is an exercise in Humpty-Dumptyism.

The conventional meaning that words have had for decades, if not longer, doesn't sufficiently support you in your desire for gloom and doom. Therefore, we need to redefine the words.

 

[Cainkane1]

Shrinkage is a necessity before growth in other areas or new fields can come about.

I wouldn't say job loss or a shrinking economic are automatically a bad thing. I think it depends on what jobs are being lost and what products/services are no longer being provided.

If you lose your job there are no goods and services provided unless you've been saving your money over a period of many years.

 

[quarky]

The lowest I've seen is minimum wage. It does come down to personal preference. I would rather be drinking beer than maintaining a garden.

How about making your own beer?

 

[drkitten]

If you lose your job there are no goods and services provided unless you've been saving your money over a period of many years.

And you're confusing yourself with the entire world?

 

[Nosi]

What value are you putting on the time and effort you spend? What I'm spending is time I would otherwise have spent bowling and drinking beer, so the cost in time and effort is at least zero, if not less.

There are extreme droughts in California (an important fruit & vegetable producing state) and Texas (a prime beef state). There are acute weather related issues elsewhere in the country.

Is it not possible that we could have long term food chain disruptions? If so, what would be done about them? How would normally well fed Americans react?

 

[Corsair 115]

I think we need (in the present situation) a much broader look at what we should call an end to the recession. Especially with regard to employment.

Well, unemployment is, as the analysts constantly remind, a lagging indicator of the economy, so expect it to not be great for awhile yet. All things considered, though, I'd much rather live through this recession than the 1980-81 recession, given that the latter had double-digit inflation and interest rates (unemployment rates were comparable to the current slowdown).

 

[Just thinking]

Ah, so this whole thread is an exercise in Humpty-Dumptyism.

The conventional meaning that words have had for decades, if not longer, doesn't sufficiently support you in your desire for gloom and doom. Therefore, we need to redefine the words.

Given that many analysts have been quoted as saying this is the worst recession since the Great Depression, I hardly think my asking for more encompassing indicators is not entirely without merit. I also think it's a tad worse than what even the current administration thinks it is ... oh, wait --- they actually did say that. There are also a good many things happening that haven't happened either ever before, or in quite a long while. And wouldn't you know it .. just today on CNBC there were analysts looking at the possibility of another market downturn if ... you guessed it, the unemployment figures on August 7th come out to be as bad as expected. "People aren't going to be buying up all those record high foreclosures if they're not working", was pretty much the thrust of it.

So maybe you're right ... and we do need to carefully re-examine just what we decide to use as a metric for calling an end to this recession.

 

[drkitten]

Given that many analysts have been quoted as saying this is the worst recession since the Great Depression, I hardly think my asking for more encompassing indicators is not entirely without merit.

No, it is "entirely without merit."

You've just discovered that unemployment levels are a lagging indicator. Congratulations. Welcome to the 20th century,.... oh wait, the rest of us are already in the 21st.

So maybe you're right ... and we do need to carefully re-examine just what we decide to use as a metric for calling an end to this recession.

Not at all. Recessions are specifically defined in terms of production instead of either stock prices or employment levels for a very good reason. Stock prices tend to be leading indicators (as people buy or sell proactively), employment levels tend to be lagging, because employers dislike firing people and therefore dislike hiring them if they're not sure they'll be able to keep them. So economists define recessions in terms of data related to the current economic climate, not the climate of six months ago or six months from now....

 

[oggiesnr]

Well, unemployment is, as the analysts constantly remind, a lagging indicator of the economy, so expect it to not be great for awhile yet. All things considered, though, I'd much rather live through this recession than the 1980-81 recession, given that the latter had double-digit inflation and interest rates (unemployment rates were comparable to the current slowdown).

I've been self-employed through both reccessions and this one is easier than the last one. This may be down to the fact that having been through one I know to be nimble on my feet (like the traders at Godman Sachs).

Steve

 

[Just thinking]

No, it is "entirely without merit."

You've just discovered that unemployment levels are a lagging indicator. Congratulations. Welcome to the 20th century,.... oh wait, the rest of us are already in the 21st.

Really? ... it seems that opinions from The Wall Street Journal are beginning to see things differently this time around as well ...

Can we find comfort in the fact that employment has long been considered a lagging indicator? It is conventionally seen as having limited predictive power since employment reflects decisions taken earlier in the business cycle. But today is different. Unemployment has doubled to 9.5% from 4.8% in only 16 months, a rate so fast it may influence future economic behavior and outlook.

That is the entire opposite of what a lagging indicator is suppose to do.

And then there's this ...

... the economy will barely grow if it does at all, and it may well oscillate between sluggish growth and modest decline for the next several years until the rebalancing of excessive debt has been completed.

Funny how it rings similar to what I said earlier in post #24 ...

A 2% gain in a heavy recession is much less growth than 2% during prosperity --- and much easier to achieve, if only by statistical chance. Plus, falling back 2% is just as easy.

 

[drkitten]

Really?

Yes, really.

That is the entire opposite of what a lagging indicator is suppose to do.

Nonsense. If unemployment figures didn't "influence future economic behavior and outlook" economists wouldn't have been tracking them for sixty years. Merely being a lagging indicator doesn't mean they're not informative.

It does, however, mean that they're not particularly informative about the current state of the economy.

 

[Just thinking]

Well, I'll consider all sides of the argument during these times, thank you.

BTW ... the article gave the impression of unemployment numbers this time around as being influential ... not merely informative, as you argued.

Merely being a lagging indicator doesn't mean they're not informative.

 

[drkitten]

Well, I'll consider all sides of the argument during these times, thank you.

The problem is that the WSJ article you cite isn't arguing that our definition of a recession should be changed. It's arguing that we are not actually near the bottom of the recession despite the fact that the stock market (a leading indicator) suggests that we should be, because other indicators suggest a form of structural weakness in the economy that will not lead to increased production.

(In particular, high unemployment is usually a good thing in the early stages of a recovery, because it represents a reserve of labor that can be deployed quickly to increase production. However, in this case things are different, because (in part) the organizations that would be increasing production no longer exist. From your article, "instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes in the way they conduct business. General Motors and Chrysler, closed hundreds of dealerships and reduced brands. Citigroup and Bank of America cut tens of thousands of positions and exited many parts of the world of finance."

So if you want to argue that this recovery is likely to be more anemic than previous ones,.... you're in good company. I don't think anyone will disagree. But if you're suggesting that an anemic recovery is not a recovery, that puts you in the economic tinfoil hat brigade.

You're welcome to consider all sides of an argument. I encourage that. However, misrepresenting what people are saying in order to manufacture a "side" that doesn't really exist is just stupid and dishonest.

 

[drkitten]

BTW ... the article gave the impression of unemployment numbers this time around as being influential ... not merely informative, as you argued.

Not if you read it correctly. It says that they may become influential, a single strongly-hedged passing phrase in the middle of about fifteen paragraphs about their informativeness.

 

[Just thinking]

The problem is that the WSJ article you cite isn't arguing that our definition of a recession should be changed. It's arguing that we are not actually near the bottom of the recession despite the fact that the stock market (a leading indicator) suggests that we should be, because other indicators suggest a form of structural weakness in the economy that will not lead to increased production.

(In particular, high unemployment is usually a good thing in the early stages of a recovery, because it represents a reserve of labor that can be deployed quickly to increase production. However, in this case things are different, because (in part) the organizations that would be increasing production no longer exist. From your article, "instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes in the way they conduct business. General Motors and Chrysler, closed hundreds of dealerships and reduced brands. Citigroup and Bank of America cut tens of thousands of positions and exited many parts of the world of finance."

So if you want to argue that this recovery is likely to be more anemic than previous ones,.... you're in good company. I don't think anyone will disagree. But if you're suggesting that an anemic recovery is not a recovery, that puts you in the economic tinfoil hat brigade.

And there's the rub. I appreciate a good dialog on this issue, and am not running around in my Chicken Little outfit ... not yet, anyway. But, an anemic recovery is something that somehow to me rings a bit hollow. The points you just mentioned put a severe damper on making this recovery (when it actually does come) anything like past ones. Too many growth industries have shrunk considerably, or gone out of business. Plus, consumer confidence is very low ... something I believe is needed for a true recovery for our economy.

So all in all, I just think things are not going to be rosy anytime soon ... and trying to put a point in time when this particular recession does indeed end won't be so easy. Is that being one of doom and gloom?