26 Jan Recession vs. Depression.
What is a recession? There is so much going on with the economy today and words such as recession and depression are used with high frequency. A recession is defined as a period of 2 or more successive quarters where there is a decline in our gross domestic product or GDP. A very simple definition of GDP is the total of market value of all goods and services produced within a country during a period of time, such as a quarter or a year.
Since the first quarter of 2006 our GDP has been on a roller coaster ride. Although we have not had two successive quarters of decline yet, overall there has been a decline in our GDP. So based on the figures listed on the Bureau of Economic Analysis the average response would be that we are not in a recession. However, economists are like attorneys. You gather six economists in the room and you will have six different opinions. As you can see here in this gathering of economic articles in the New York Times.
A depression is a long term recession or a very severe recession. President Truman said, “When your neighbor losses his job its a recession, when you lose your job its a depression.” Overall I think our economy is in for a rocky future over the next 2 years based on the unemployment rate, gross domestic product, and the foreclosure rates.
So are we headed for a depression? Only time will tell.