Anybody here speak the language of economics?

The "official" definition of recession is two consecutive quarters (6 months) of actual decline in GDP. That means that "extremely slow/no growth" is not a recession even though people like to call it that. We apparently have been in a recession since March according to data released today. The reason we know so late is that you have to have 6 months of data (March through September) to actually know that you're in a recession.

<B>What is GDP (gross domestic product?)? </B>

GDP is basically the total amount of goods and services purchased BY END USERS in the US (not sure on the end user part). In other words, I think if steel is produced and then sold to Ford to produce a car, only the car counts towards GDP.

GNP (Gross National Product) has a slight distinction. I believe it includes American companies in foreign countries, whereas GDP only includes companies on US Soil (I may have reversed GNP/GDP).


<B>What causes everything to go down and what causes it to go up? </B>

Basically, people buying stuff makes it go up and vice-versa. This is why consumer confidence is such an important part of the economy. If people think things are going to be good, they'll be more willing to buy a new house/car/etc, which raises GDP, which actually makes the economy good.

On the flipside, during a recession fear, people get scared and don't spend as much, causing the recession that was feared in the first place.

(On a side note, I believe Clinton was a great President partially because of his ability to make people feel good about themselves and their future. While his hokey speeches and "I feel your pain" stuff certainly didn't start the economic growth, I do believe it helped fuel it over time. He was a big part of the consumer confidence remaining high for 8 years).

 

<B>Is it the natural course of things for this to happen occasionally, or is it a result of bad conditions elsewhere in the country? </B>

Both can cause recessions. As I described above, people being scared can cause it. On the other hand, you can only be supremely confident for so long. At some point, people have to stop buying new stuff, and when it happens a little, it will snowball when people start the cries of "a recession is coming!".

 

shanna you correctly distinguished between GDP and GNP

GDP is the total worth of all the end products by any companies/individuals, domestic or foreign, made in the US(involving certain components like investment(capital), consumer spending, net exports and govt spending).
(The steel/car reference is correct because that would be double counting if not)

GNP is the total worth of all the end products by any US individuals or companies, here and abroad-same components but subtract net foreign income from the 4 component equation above.

 

One thing not mentioned is that major events and technology affect growth.

Situations like the end of wars and new tchnology can really drive an economy. The recovery from the reccession of the early 90's was sustained by the growth of telecomminications and the internet. The economy was rocking after the gulf war, then the internet and telecomunication boom threw gasoline on the fire. A whole new type of infrastucture was born.

This war with Afganistan could produce similar results. It always starts with good consumer spending, then some sort of technological jump. The introduction of the personal computer was another great technology that spurred the economy.

Not sure what will be that technology for the next boom. My best quess is an explosion in the use of everything bandwidth. Entertainment mixed with business uses could once again raise productivity.

 

The important factor to remember is that economic activity is largely cyclical, and long term movement tends to be independent of short term influences. From the time we have been measuring these things, the economy has generally cycled between growth and contraction, including exremes of booms and the Great Depression.

It is reasonable to assume that after such a period of prosperity that there will be slowing or contraction, no matter what happens in the world. The hope is that we can mitigate the extremes.

 

shanna -- then you'll love GWB if he convinces the American public to spend again in the face of a recession he inherited and the fears of terrorism?? just asking!!!!

 

<B>shanna -- then you'll love GWB if he convinces the American public to spend again in the face of a recession he inherited and the fears of terrorism?? just asking!!!!</B>

If he can do it, it is definitely a plus and I'll be the first to give him credit for it. When the whole terrorism stuff first happened, one my thoughts was that Clinton would have been the best spokesman we could have had for that week after the attack (Gore would not). He just had a way to relate to your everyday person that very politicians do. I thought Bush really garbled things the first few days, but after that, he developed that ability fairly well. I think some of the calm right now definitely has to do with his personality and how he has responded since Sept 11th.

That said, one of my big problems with Bush is his inability to articulate his positions and give me any reason to believe him. I just want to know that he has some logic behind this reasoning and that he knows what he's talking about, and more often than not, I haven't felt that way (I'm talking domestic policy, not the terrorist stuff which he has done pretty well on).

I don't like some of his environmental policies or spending priorities, but really, I don't have as many problems with him as some of the more liberal posters do because I am more pro-business than my fellow liberals in many instances. For example, I had a problem with the scale of his tax-cut, but I had no problem with the way it was distributed, which Gore and others kept harping on.