MDSF: Recession

Showing posts with label Recession. Show all posts

Wednesday, December 10, 2008

Baby Bust: The Demographics of Global Depression

Image via WikipediaI haven't had time to sort this out, but I found an article that articulates my (wait for it) fears regarding the end of the Baby Boom Bubble and its relationship to the current recession.
And here it is: Baby Bust: The Demographics of Global Depression.

This is not a great article; the "Paleolithic Village" example/image is completely unhelpful. But it touches on several items I haven't really seen discussed in this particular way:

Any economy is finite. I guess this is obvious, but its implications aren't always clear.
One of the implications is that while there's always a shortage of goods (which everyone understands, because this fact is fundamental to the meaning of prices) there are sometimes shortages of consumers.
Another is that there can also be a shortage of savers and investors.
The Baby Boom is in decline, and leaving its prime working years.
This means that apart from the sub-prime-mortgage-driven housing bubble, there's an underlying fundamental shift in the meaning of the single-family home as an investment vehicle.

Now if I could just find someone who would extend this analysis to the New Deal generally.

References to other articles, apparently by the same author, are here.

Thursday, December 4, 2008

recession predictions

Graph of American Industrial Production Index ...

Image via WikipediaFirst of all let's deal with a couple of simple questions: what's a recession and what's a depression?

A recession occurs when business activity declines. A depression occurs when business activity declines a lot.

Here is the first article I've seen that tells me part of what I want to know: it compares the current climate, measured mostly by the unemployment rate, to a handful of other recessions and to the Great Depression. The problem here is that rising unemployment is a consequence of a decline in economic activity, but it isn't a measure of economic activity itself. For that you need to look at Gross Domestic Product (GDP) or Gross National Product (GNP).

Given that the average length of the ten recessions since World War II has been 10.4 months, with a range of 6 months in the 1980 recession to 16 months in the 1981-82 one, the natural "placeholder" time frame for the end of this recession would appear to be the middle of 2009.
I think that means that the current recession is "long" and "shallow," because it has gone on more than eleven months (longer than average) and the unemployment rate is 6.5%.

I'm still looking for a resource that will identify all the recessions that have occurred since 1933 and describe then in terms of GNP, GDP, and unemployment rates.

This is still a lousy analysis, though, because it just looks at three numbers and it doesn't do anything resembling a principal factor analysis: it doesn't identify and measure the significant proximate causes of these recessions.

Right now I'd have to say that the current problems have been caused by a housing bubble, bad debts, a contraction in available commercial credit, a shortage of household savings, with an undercurrent of maybe a shift in demographics: Baby Boomers are getting older and starting to change their saving and spending habits. Oh and of course the Iraq War.

The Great Depression had widespread bankruptcies, runs on banks, natural disasters, and anarchy. I'm not sure what else. Time to do some reading, I suppose.

There's just no point in talking about a decline in unemployment and an increase in GDP unless and until we can identify the underlying causes of the current contraction.

Wednesday, December 3, 2008

"Pyrrho" connects current recession and Baby Boomers

Image via WikipediaRod Dreher (CrunchyCon) over at BeliefNet promoted a comment to a post. It's commenter Pyrrho offering suggestions on how to "ride out" the current recession:

[4] The economy will be in the doldrums just as some long-term demographic problems take hold. In other words, the older boomers will be reaching retirement age during this period. I think we can anticipate a significant cut in retirement benefits, but they will not be entirely eliminated. Most people in their forties with kids (like thee and me) can probably look forward to working until they no longer can do so, followed by moving in with their adult kids. Not the worst fate in the world, that's for sure.

While I dislike economic commentary that describes trends without numbers (never mind calling the recession "deep:" how is that different from calling it "wide?") I'm glad to see someone beginning to connect the dots between the current recession, inflection points in the path of the Baby Boom generation, and entitlement programs.

MDSF