Recession or Depression – Which is it?

Recessions and depressions have been a fact of life since before statistics were kept. And, unfortunately, the United States is currently in one or the other.

A recession is defined by the National Bureau of Economic Research as a "A significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

If a recession continues long enough, it becomes a depression.

Either term is bad news for everyone: individuals, businesses, and government at all levels. The U.S. and many of the industrialized nations of the world are suffering. Unemployment is high, food prices are high, oil prices are high (though lower than a few weeks ago), and inflation is high. Retail sales are at such low levels they have caused another severe drop in the stock market. All this means pessimism and worry are high.

All told, stock markets have suffered unthinkable losses. The misery is widespread - U.S. to Europe and Iceland to Australia.

Our economy is largely based on the availability of easily obtained credit – and access to credit is practically non-existent at the present time. Manufacturers are suffering major problems in financing purchases and payrolls. Sales of homes are stagnant because individuals are finding it difficult to get mortgages. Automobile and retail sales have fallen flat because it’s tough to get a loan.

Now the federal government has stepped in to actually take partial ownership in several of the nation’s largest banks. The initial investment is $125 billion and it is supposed to stimulate interbank lending and revive the stagnant credit markets. If and how the plan will work remains to be seen.

We are in uncertain times. Some of the brightest and most experienced minds are working on all aspects of the mess we’re in. Let’s hope they find a way out soon.

But, history shows we will get through this and once again see the economy on an upward swing.

You might find it interesting to read a Wikipedia article I came across that includes a concise list of past U.S. recessions, their causes and duration:

http://en.wikipedia.org:80/wiki/List_of_recessions_in_the_United_States