Saturday, January 19, 2008

Definition of Recession

Some Readers have been asking me what exactly is a Recession, and the simple Definition is that it is a drop in level of actual production of Gross Domestic Product. Simple, isn’t it? No!!! The GDP cannot be evaluated in actual Product, because there are always variations in the levels of Product production, while there is the impossibility of comparison of the value of one product to another, except through equating a third value to them–i.e., Money. The later is a poor evaluative tool, because not only does the tool tend to inflate and deflate, but it does so because of the alternating value of the various Products in comparison to one another. An Example is Food: A highly rated Product value in comparison to other Products, but one which loses value rapidly after Supply equals about 1.8 lb. per day per person (seems like it should be higher, doesn’t it?). What this means is individual Products inflate and deflate at individually-dictated rates, and this really screws up Evaluations made upon the data translated into Dollar values. Economists are always trying to find alternative formulas to evaluate Recessionary conditions, this article is a Case in Point.

I have always thought to concentrate on Households myself, or more specifically, on the resiliency of those Households; a concept which becomes as confusing as the original monetary evaluations. The major elements of such an evaluation as I undertake consists of the increase or decrease of Household debt by Income class, the Food Costs of the Households–due to the fact that Food is a mandatory staple, as is Utility Costs and organized Rent Costs. These taken in total, is compared to the average monthly Income of Households, and when these Costs rise over 8% of the monthly Income of Households (measure of resiliency); I deem the Economy to have entered Recession. Economists will insist there is much wrong with this evaluative process, but what process is perfect? I only know Households are contracting their Expenditure patterns under such an evaluation.

Most Economists would access Recessionary conditions from the position of Business enterprise, but such proclivity ignores the actual interaction of all Participants in the Economy. It does not account for the viability of labor or the impact on Stable Income dependency. My system is complex, and brings forth a degree of false Readings, but gives a rendition of the impact of the Economy on the entirety of Participants. It foreshadows actual declines in economic participation, including the all-important Consumption cycle. lgl

1 comment: said...

Someone needs to say something about this! IS THIS LEGAL? No wonder why we have the subprime mess we have when lenders USE FAKE DOCUMENTATION to help PUSH the loan through Quickly SO THAT EVERYONE DOWN THE FOOD CHAIN (from loan processor to the loan officer to the actual lender) can make the commissions they "WERE" making during the booming 90's!!! Now we are BAILING OUT THESE CROOKS....SOUNDS LIKE the good ol' 1980's Savings and Loan BAILOUT DAYS to me! see it with YOUR OWN EYES!