Tyler Cowen would have Us consider Credit as an Option, stipulating that simple loss of this Option leads to a Credit crunch. He also has a link to Felix Salmon, who makes the assessment that lines of credit will be utilized to maintain Cash flow during Recessionary conditions, especially as Credit spreads widen (this One is tricky, lines of credit gaining a real Interest increase, but also a Optional value increase as banks seek to limit liquidity). I am on Alex Tabarrok’s side, and believe a Chicken is a Chicken, whether you pull Cash out of your wallet or a Credit Card. A Recession is a Recession because Consumer Demand lessens; it does not matter whether the Consumers have an intricate Credit system or not! But who actually knows for sure!
I agree with Chris Dillow and Robert Hall that Job Destruction rates do not increase significantly under Recessions; Job Creations rates simply do not match the Job Destruction rates under lowered economic performance. I don’t agree that Recessions occur when there is less than one standard deviation of 0.96 (average GDP growth per Quarter being 0.6% averaged since 1955; do believe these are UK rates of growth, not American). I could try unsuccessfully to model GDP growth trends rates, so will skip that; I will state internal endurance factors would require about 3 standard deviations to get business managers to alter their Production schedules, the temporary Shelving Cost increase of storage of Product of about 8% being cheaper than would be a twice-altered Production schedule to meet temporary flux in Consumer Demand.
What is a poor Nebraska farm hand to think, when the Federal Reserve Bank of Cleveland will not call a Recession, not even for their own area. Personal Income, Employment, Industrial Production, and Wholesale Sales are all in negative territory, but maybe there has been an increase in Credit purchasing–Not! Could it simply be a Shot over the Bow to inform Commentators like me to potentially revise their glowing accounts on economic performance. I would go and have a Drink, but it isn’t even Noon yet! lgl
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