Naming the Recession What It Really Is

Media and government have been careful to name this extended economic downturn a recession. There is a formula by which to define recession involving gross domestic product, wholesale/retail sales and other indicators over a specified period of time. It has almost nothing to do with the misery a recession causes real people.

Since the Great Depression of the 1930s, there have been 13 official recessions including the one in which we are currently ensnared. Ten of them lasted for less than a year and the other three ended after 13 and 16 months.

The National Bureau of Economic Research (NBER) is relied upon to identify recessions and this one, they say, began in December 2007, so we are now into our 22nd month of it with no end in sight.

The ten percent unemployment figure is a sham. Because those who have despaired of finding work and given up searching are not counted, nor are those who, for lack of work, have been forced into early Social Security at age 62, nor are independent contractors who have been laid off, the percentage of unemployed is closer to 20 percent. That is, closer to 30 million people than the official 15 million count. Add in the underemployed and who knows how high the figure might be.

Home foreclosures, happening at a record pace for the past two years, set a new record with 360,149 of them in July alone.

As of last Friday, there have been 99 bank failures in 2009. According to MarketWatch:

“This year is shaping up to be the first since 1992 to see the failure of at least 100 banks, and experts suggest we could be no more than 10% of the way through this cycle of bank collapses, which is sure to be the worst run of closures since the Great Depression.” [emphasis added]

The bank bailouts which were meant, we are told, to loosen up credit to get the wheels of commerce rolling again, is not working no matter what the pretty women in realtors' television commercials tell us about available mortgages. And tight lending is terrible for small businesses that rely on credit to meet payrolls, maintain inventory and grow their companies. (Read: hire workers)

Retail prices have dropped so much (although it's hard to believe with prescription drug costs, health insurance premiums and food prices heading north), there will be no cost-of-living increase in Social Security benefits for 2010. That has never happened before in the history of Social Security.

Consumer spending is 70 percent of the U.S. economy. With great fanfare, it was announced that consumer spending was up 2.7 percent in July but according to Gallup this week, it is down 24 percent in the 12 months since October 2008.

Even with all this, Federal Reserve chairman Ben Bernanke, quoted in the Wall Street Journal and everywhere else last month, says the recession is over.

I suppose it might look that way to someone who spends his days talking with Wall Street bankers, especially the ones at Goldman Sachs whose bonus piggy bank amounts to $770,000 per employee this year for a total of $16.7 billion, made possible by hundreds of billions of your and my tax dollars without which the bank would as dead as Lehman.

In a public relations ploy that is near-perfect in its Rousseau-like incomprehension of reality, Goldman chairman and CEO Lloyd C. Blankfein announced a $200 million donation to the charitable Goldman Foundation - a figure that amounts to 1.2 percent of the bonus total and which, on a good day, might fund a few soup kitchens for the winter.

And, according to the business press, Goldman and other trading banks are back to packaging and selling those empty derivatives that brought down the economy in the first place while howling at even the mildest proposed regulation from the Obama administration. This accounts for their astronomical profits this year and puts the country on track for another crash.

In a macabre twist on excessive greed, Wall Street is now working to package "death derivatives," more politely called life settlements, in which the life insurance policies of elders and sick people are bought, bundled into bonds, and sold in the same manner as the now-infamous mortgage derivatives. They collect on the policies when the insureds die.

In the past month, the number of economists' predictions of high unemployment as the new norm have been increasing. According to an AP story, many economists believe that will remain so for long into the future.

With all this, and I don't like saying it, if there has been any acknowledgment from President Obama or Congress that Americans are suffering – terribly – I've missed it. Obama recently said, “we need to grind out this recovery step by step.” The problem is, there has been no discernible step forward on any front and with it, no sense of urgency.

Bail out the banks. Extend unemployment insurance. Give elders a quick-fix $250. None of that creates jobs which is the only thing that will rebuild the economy.

On Tuesday, Bob Herbert at The New York Times made an important point in an Op-Ed piece headlined Safety Nets For the Rich:

“Two-thirds of all the income gains from the years 2002 to 2007 — two-thirds! — went to the top 1 percent of Americans.

“We cannot continue transferring the nation’s wealth to those at the apex of the economic pyramid — which is what we have been doing for the past three decades or so — while hoping that someday, maybe, the benefits of that transfer will trickle down in the form of steady employment and improved living standards for the many millions of families struggling to make it from day to day.

“That money is never going to trickle down. It’s a fairy tale. We’re crazy to continue believing it.”

He's right. That trickle down theory started with President Reagan and Mr. Herbert's figures show how well it's worked so far. Thirty years is enough experimentation with a failed policy.

By all discernible evidence, Ben Bernanke's optimistic proclamation that the recession is over applies only to the rich - Goldman Sachs and JP Morgan employees - and I think it is time to name the predicament the rest of us are in what it really is: a depression. Here's how Wikipedia defines it:

“[A] depression is characterized by its length, and by abnormal increases in unemployment, falls in the availability of credit, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuations, mostly devaluations. Price deflation, financial crisis and bank failures are also common elements of a depression.”

That's a close-enough match to the current state of affairs for me. If a few people who matter (not me) made regular use of that terrifying word – depression – it might shock the administration and the country into taking the bold steps necessary to get the economy moving again.

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At The Elder Storytelling Place today, Suzanne: Sugar Molds and My Own Private Bamyian Budda

Comments

[Steven]

All so true. I refused to use the word 'recession' at least a year and a half ago and I have used the 'D' word in all of my own correspondence and conversations since that time. Not that it matters...but it's nice to read your take on it.

[NancyB]

I don't care what it's called, it frankly sucks. No job; no calls. I have resorted to doing online surveys for Nielen and Greenfield with most of pay a chance for a sweepstakes win. I have "earned" $12 in 2 weeks!

Most surveys eliminate me as soon as I put my age in...beasts!

My former company filed Chapter 11 this week and has a new buyer. This is good, I think. But worry about my colleagues, selfishly so because that will put even more people on the unemployment lines which is already too crowded with huge numbers of resumes for the same jobs.

The good news is that the sun will be out today in MD with a high of 70. Am thinking of sitting on my deck and drinking away my sorrows but can't afford the wine!

[Mahala]

Well done! You've said what I've been thinking all along, but you've expressed it much better than I could have.

[Rhea]

I never call it a recession. I have believed since late 2007 that we are in this for a very long time. It will be many years before things turn around. Depression sounds like an apt term for it.

[tamar]

Ronni, you are steadily belting out truths in gory detail, mincing no words, sparing no egos -- as have humankind's finest prophets... Jeremiah, Isaiah, Alinsky, among others whose works I have been studying decades... And there are many more. Would the NY Times, Huff Post, and other rags not publish this post, for example? You and TGB readers, for example, Saul Friedman, would have best ideas on venues.

[Rain]

I think it's more a depression than recession and have said so as have many of my friends. The problem with the government is they use the stock market as their gauge of success and it is a lot of what got us into this mess and keeps us there. When Obama picked his Treasury Department, I started worrying and so far it looks like my concern has been justified. The stock market does not benefit everyone and it has ruined many companies that tried to keep their numbers high there and cannibalized their companies to do it.

The government has a way of fudging figures to make things look better and not scare people. How about when they say no cost of living increase because prices have gone down. Actually try getting insurance, electricity, groceries and tell me that again. Gas goes down and back up in a month; so it would require redoing the figures monthly to even come up with realistic numbers but they add in things many people wouldn't buy nor have to buy to get their lower numbers.

The frustrating part is it's beginning to look like it's all the same seemingly no matter which party is in control.

[Francine hardaway]

This is a great post and I just sent it to my Twitter stream so everyone else can read it. I laugh when they say the recession's over, because in Arizona where I live housing has gone down 50% and the market's totally distorted by bottom fishers buying up foreclosed homes to rent them out. It's because everyone here was in real estate and construction, and those jobs won't come back for ten years. Wall Street now owns the government, and it doesn't matter if it's Obama or Bush. I feel like I live in a banana republic and I doubt I will vote again.
I do, however, wear stylish clothes (that are also comfortable because young people also wear jeans all day long).

[naomi dagen bloom]

Reading this post is a perfect complement to last night's PBS "The Warning" on Frontline--all about how "the experts" under the leadership of Greenspan allowed our descent to where we are now.

Brooksley Born, Chair, Commodity Futures Trading Commission, in the Clinton administration tried to blow the whistle by pushing for regulation but she did not have the clout of the deal-makers inside and outside of government. And right now we're watching Congress resisting bills that would regulate the same derivative monsters arising again.

Yes, Rhea, we are in a depression whose depth we deny because so many of us are buffered. For how long I wonder?

[Darlene]

The worst is yet to come. Anyone old enough to remember the last depression as I am can tell you it's not going to get better. I fear for my children and grandchildren.

The last depression followed the Roaring Twenties and this one is following the Wall Street orgy of letting the good times roll. We are in for a very bumpy ride.

[Sheila Halet]

My mind is too simple to handle all the economic woes an issues in politics. I just know that living only on Soc. Sec. is extremely difficult. I should have planned better but since I never earned "big money" - the bills came first and then health insurance used up a great "chunk" - thus my depression. Outwardly and Inwardly - when you don't have money - you are in "deep" trouble.

[Pete]

My foster daughter, a newly minted college grad as of last May, is now in her fifth month of full time job hunting--with no real prospects on the horizon. The jobs actually available to her are of the "Do you want fries with that?" variety, and there are fewer and fewer of those!

As far as I know, there is no advice to be given to her except to keep on keeping on.

[Claire Jean]

I guess I was expecting something magical to happen after this last election. Silly me! Whenever we meet with my daughter and her husband, my husband’s first question to them is “so how’s work going?”
I wish he would stop asking that question, but, unfortunately, his concern is valid. Politics right now (both sides) disgust me.

[lilalia]

What bleak facts indeed. I'm heading quickly towards the end of my work contract. Many of my friends have been unemployed off and on for the last ten years. The economy here never did quite recover from the last IT crash. So, we've been struggling for a long time, as does a few of your readers comment as well. Sobering circumstances. Yet, I am amazed that we do manage in some way.

[Tarzana]

Lucky me, I'm buffered and living in Iowa where things are less bad than elsewhere, but, like Darlene, I fear for three of my four daughters and their families: one is tiptoeing around bankruptcy while trying to run a small business on zero credit; one is the sole financial support of her family; one works at Starbucks (bless 'em) for 20 hrs./wk for the health insurance while hubby (with an MBA from U of Michigan) rehabs foreclosed low income houses. All have college degrees, children and huge debts. I wonder when I'll be housing one or the other? Recession, yeah right.

[Hattie]

Our Hawaiian economy is falling apart and people are starting to go crazy.
We do what we can for ourselves and others, but it's getting overwhelming.

[joared]

If it looks like a depression, acts like a depression, it's a depression -- and has been for some time for everyone but Wall St., apparently -- despite how the numbers are interpreted.

I've been rolling many thoughts through my mind for some time on much of what you've written here, but you say it all so concisely and so well.

Years ago I told a dear family member of opposite political views "capitalism has run amuck." I was shocked when he agreed, but after that he continued to support all those who were busily hastening our countries decline into this financial abyss. Seems there have been a lot more people out there just like him.

I saw "Capitalism - A Love Story," movie recently. Michael Moore's movies have aspects that sometimes are a bit much, but he was pretty much spot on with this one.

Meanwhile, I've been furious that TARP distributions were not set up to require recipients be accountable. Expecting basic accounting procedures has not been too much to expect from all those financial experts giving and taking our monies. We need to demand transparency and accountability.

Why isn't government doing something about re-establishing regulations for our nation's financial system?

Reagen, Clinton, Bush let us down by eliminating regulations -- and now is Obama going to betray us, too?

I'm ready to tar and feather everyone on Wall St., the financial markets along with some others -- how about including anyone who gives and those who take bonuses -- and ride them out of the country on a rail.

Is there anyone left in the House of Representatives or the Senate, other government offices with the courage and guts to stand up and be counted, to make an effort to do the right thing for this country and the American people?

Naomi is quite on target citing Brooksley Born, CFTC, on "Frontline" -- a government official whose efforts to actually protect the American people from these derivatives was ridiculed by Greenspan and cronies. I strongly recommend everyone go to PBS-TV and watch that program.

I've been concerned about Greenspan's policies for many years. After 40 years he realizes he was wrong. Having read his guru, Ayn Rand's writings many years ago and of the egotistic ideas and incestuous behaviors that prevailed within her immediate circle of followers this comes as no surprise.

Now, just who are the government individuals in charge of our money?

Do we see any indications they have learned anything from what has happened and are going to handle our monies differently?

Ever since I first wrote about what I saw happening in my community and all the bank failures, I've noted that almost every weekend, the Federal Reserve quietly announces several banks, usually carefully scattered around the country are closed -- most re-opening with new ownership, but some not. I read at that time when only a few had folded after the disastrous manner in which they closed IndyMac (eventually purchased by OneWestBank) the Fed said there were at least 140 more banks on the list. The bank closing drumbeat has gone on in such a way as to purposely draw little attention. Also, I read not long ago that the Fed was running out of money for bank ins., but haven't read recently if they've had to put more money into that FDIC guarantee fund.

The falling value of the dollar is of no little concern, either.

There are just never-ending concerns facing this nation, each of us and I wonder what kind of country we'll leave for my children, grandchildren and future generations.

[Leah Aronoff]

Ronni, you write so well!
I, too, was impressed by Bob Herbert's op ed. It deserves wide distribution.

[lynn]

Excellent post. I also think we're in a depression. Until we bring back manufacturing jobs -- which just ain't going to happen -- I don't think the economy is going to improve at all. Stocks are no indicator. I think we are all just going to have to get used to a lower standard of living.

I too wish you would write for Huffington Post. I think you would also do well on Jezebel, which addresses many feminist issues. Your posts on "letting yourself go" as well as an earlier one you wrote about seeing yourself in the mirror at your age, would fit right in there. Although it is geared toward a younger (20s and 30s) readership, Jezebel often addresses body image issues with respect to ageism and other isms.

[marge]

Ronni you're in good company. Many prominent economic/finance types, including Nobel winner Joseph Stiglitz, are starting to call it a depression as well:

http://www.washingtonsblog.com/2009/10/has-government-sowed-seeds-for-green.html