Recession Length

[lindismith]

In another thread, someone wrote that a recession typically lasts 3-6 quarters.

I was wondering if this is true, and if anyone would like to elaborate?

I’m particularly interested in ideas on how this could be a long vs. short one, and what, if anything could be done to stimulate the economy?

[VCJIM]

With no data to support it, I think 2-3 years minimum. Does that make it a depression? I have not been able to see anything that can turn it around other then time…time for the wreckage to clear away. The only thing I can think of, but I don’t understand HOW it affects our economy positively, is war. If anyone can explain how war stimulates an economy, I would really appreciate it.

As you and I are both business owners, what do you think Lindi?

[VCJIM]

Thanks Rich, I appreciate your thoughts.

[lindismith]

Yeah, thanks for that Rich. 2 quarters seems survive-able. Why did the one in the early 90s seem so painful?

VCJim, I’m doing everything I can right now to prepare. I’ve increased marketing, I’ve put more processes in place to close sales, and I’m having the factory evaluate which products can be re-tooled to lower costs. It’s never-ending!

As for the war machine: let’s face it, it’s unethical and immoral to use war to stimulate the economy. In my mind there are so many other options. And when I learn there is a specific process whereby the government can provide stimulus and incentives to businesses to better our country’s future, I get so frustrated to think they might not choose that path. I frankly think politicians are just too out of touch with what has changed in the world, and what we want for our country and our children going forward; they just rely on the same old bs responses to the same old bs problems. I’m soooo ready for a clean sweep.

It’s pretty clear if they cut rates, we’ll have to have the ‘Sarbanes Oxley’ or some version thereof, applied to the loan biz.

Maybe I’m taking all this too seriously.

[VCJIM]

I sometimes wonder if I’m taking it too seriously too. But in another sense, we have employees and their families to be concerned with, not just ourselves. So, perhaps for us business owners, it is a bit more worrisome. Also, the more we worry, in a perfect world that will translate into action…such as your stepped-up marketing and my stepped-up product development.

Rich’s point about the necessity of a downturn to weed out inefficient companies / processess really struck a chord with me.

[lindismith]

yeah, me too. I’m almost a little excited for the downturn, because I want to see what I’m capable of. I want to prove myself (both right and wrong,) and see if I can get through it, and perhaps even grow!

The families I employ – yeah, I have some people that have been with the company 23 years! They are relying on me/us.

[BTW VCJim, do you offer health insurance to your employees? If you do, can you email me at lindismith at hotmail and let me know what you offer.]

Why did it strike a chord with you?

[anxvariety]

I think this will last a long time maybe a whole generation.. because where is the savings?

Where will the market start generating artifical wealth next? Stock market again? I don’t know that peoples memories are short enough to create a frenzy.. plus where will most people get cash to invest? They’re all maxed out, no margin cash for them!

The good times got me pretty bummed out.. because everyone was having a good time, and all the big spenders get stuff to show off with… but I’m not realy like that, my opportunity comes more from a downturn.. so I’m really excited for this downturn, because I have cash saved up.. I don’t want to see people close to me get screwed, but it’s sort of their own doing if it happens..

[sdrealtor]

Two words…..Wealth Transfer

[VCJIM]

Hi Lindi,

I don’t offer insurance but I will email you separately regarding that.

It struck a chord because I have always felt that the strong will survive during a downturn, but I hadn’t realized it was a necessary part of a capitalistic system. It makes complete sense. It’s also a kick in the pants (as if I needed more) to get going. I also look at a downturn as an OPPORTUNITY to gain marketshare, assuming some of my competitors will have difficulty or disappear altogether. I think you are seeing it the same!

[Daniel]

“Yeah, thanks for that Rich. 2 quarters seems survive-able. Why did the one in the early 90s seem so painful?”

Lindismith, a clarification: when Rich is saying that a recession is formally defined as 2 quarters of decreasing GDP, what he actually meant to say is AT LEAST 2 quarters. In other words, a single bad quarter doesn’t count as a recession. But recessions often last longer than just 2 quarters (I think the historical average is about a year, although the recent ones have been shorter).

Anyways, these are just formal definitions. Periods of less than 1% growth feel almost like recessions, too. A decade of stop-and-go growth (like Japan’s) feels pretty miserable.

[lindismith]

ok, thanks for clarifying.

[carlislematthew]

The official definition is 2 quarters of gdp decline.

I thought that was the definition that told you that you were now in a recession, not a number that told you how long you would be in the recession, which I believe is what the original question was regarding.

[lindismith]

According to the link that Rich posted:

The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, 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. For more information, see the latest announcement on how the NBER’s Business Cycle Dating Committee chooses turning points in the Economy and its latest memo, dated 07/17/03.

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