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A Letter From a Small Business Owner


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I realize that a technical definition of what constitutes a recession means little to someone who recently lost a job or a house, but here goes anyway:

 

Recession - a decline in GDP for two or more consecutive quarters.

 

The second quarter of 2008 saw real GDP increase over the first quarter at an annualized rate of 2.8%.

 

The third quarter of 2008 saw real GDP decrease from the second quarter at an annualized rate of 0.3%. If the fourth quarter sees another decline in real GDP, then we will technically be in a recession that began during the Bush administration. I hope that doesn't happen, not to protect the current president, but for what it would do to ordinary men and women.

 

Source: Bureau of Economic Analysis.

Global ZIRP And The "Impossible Contraction"

The widely used definition of a recession is "Two consecutive quarters of negative growth". However, that definition is wrong. Contraction for two quarters is indeed a sufficient condition, however it is not a necessary condition.

 

National Bureau of Economic Research describes the Recession Dating Procedure.

 

A recession is 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.

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