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Find out more about Ed: Ed Duffy has been a news junkie for as long as he can remember. In 1972 he stayed up late with his transistor radio to his ear listening to the final election returns. He was 8. During his three years in the Army he worked composing responses to Congressional Inquiries. Now he has a monthly business paper of his own, several blogs on a variety of subjects and a graphic design and print shop. His passions are his family, free markets, free people and the truth. |
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The National Bureau of Economic Research (NBER) today officially declared that we are in a recession. In fact, they stated that economic activity peaked in December of 2007 and has been slowing down ever since.
It is largely, and erroneously believed that a recession is when we have two consecutive quarters of negative Gross Domestic Product (GDP) growth. Actually a recession is when the total volume of goods and services being produced contracts. The GDP does not take everything into account and is therefore not an accurate barometer. For details and breakdowns visit the NBER website.
So why is a contraction such a problem? Because growth is fueled by debt and debt is our most abundant currency. When the economy shrinks, people borrow less, they declare bankruptcy, they default on payments. Money disappears. The government is frantically trying to figure out how to get new money into the system in an orderly fashion. It's quite possible it can't be done. But don't go investing in a cabin in the woods just yet.
Our economic and monetary systems are man-made entities. There is no equivalent to them in the wild. There's nothing we can examine, study and reverse engineer, other than what we've already done ourselves. We literally are making this up as we go along and we're going to screw it up from time to time. It's not the end of the world. It was only a decade or so ago that Brazil was experiencing hyper-inflation on the order of something like 500% or more. Their economy was in a shambles. Today Brazil's inflation rate is around 6% and optimism abounds. They are the biggest come-back story in the western hemisphere and they're just getting warmed up.
We've got a mess on our hands but we will work through it, however long it takes. Despair is not a solution. Hunkering down is not a growth strategy. Failure is not an option. Don't be afraid of hard times. Pay attention and learn something. We've got a tough road ahead. So, get some good boots and just keep moving forward.
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