Wednesday, August 25, 2010

ECONOMIC DEPRESSION: DEFINING WHAT IT IS

I was just wondering when you declare a depression, or does the govt just continue on with the endless recession declaration. "Summer of Recovery" and all that. What constitutes a depression? Here's a look--you decide if we're in one. Obama says we're not, that we're well into the recovery phase but that it will take time, you know. Obama lies most of the time at a 180 degree angle. So, I wonder...

"In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen by economists as part of a normal business cycle.

"Considered a rare and extreme form of recession, a depression is characterized by its length, and by abnormally large increases in
unemployment, falls in the availability of credit— quite often due to some kind of banking/financial crisis, shrinking output and investment, numerous bankruptcies— including sovereign debt defaults, significantly reduced amounts of trade and commerce— especially international, as well as highly volatile relative currency value fluctuations— most often due to devaluations. Price deflation, financial crises and bank failures are also common elements of a depression."

"There is no widely agreed definition for a depression, though some have been proposed. In the United States the National Bureau of Economic Research determines contractions and expansions in the business cycle, but does not declare depressions.[1]

"Generally, periods labeled depressions are marked by a substantial and sustained shortfall of the ability to purchase goods relative to the amount that could be produced using current resources and technology (potential output).[2] Another proposed definition of depression includes two general rules: 1) a decline in real GDP exceeding 10%, or 2) a recession lasting 2 or more years."

More on depressions here. And HIT THE TIP JAR at Noisyroom.

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