The business press is worried about a double dip recession. Are you? There may be better questions to ask. For instance, what is a double dip recession? By the way, what exactly is a recession? Details. Details.
A recession happens when growth of GDP (gross domestic product) goes negative. This usually happens after a period of sustained growth of GDP. A double dip recession is when GDP goes negative after a short-lived recovery. Let’s say we have a few quarters of recovery like we have witnessed recently. A double dip recession is backsliding on growth just when we thought things were looking good; essentially, you are back in the recession.
The causes for a double-dip recession are many, but a double-dip recession will always include a slowdown in the demand for consumer goods and services. This slowdown is generally caused by job loss due to layoffs and cuts in spending because of consumer pessimism.
This pessimism explains all the “happy-clappy” talk that comes out of Washington —- they hope to quell this pessimism with inspirational words about the future. Historically, the consumer, due to renewed optimism about the future, spends more and drives the economy toward recovery. Some might want to credit the government’s wise economic policies for recovery or those inspirational speeches, but the truth is that the government has a modest impact on the recovery.
The true hero in an economic recovery is you and me when we go ahead and do the Costco run and stock up on stuff that we don’t really need. Recovery at last.
John Bradley Jackson
© Copyright 2010
All rights reserved.