Periods of Uncertainty

“We’ll make it through this period just like we made it through other periods of uncertainty during my presidency,” Bush said, when explaining that he did not believe the US is headed for recession.    I had to laugh.. I’m sorry.   Did he say that out loud?   I guess if I were the president, I would have ended my sentence at “uncertainty” and called it a day.

According to Wikipedia (sorry), “a recession is a slowdown in a country’s gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year. A recession may involve simultaneous declines in coincident measures of overall economic activity such as employment, investment, and corporate profits. ”

My guess would be that (from a spending standpoint) the failure of people to spend as much as desired for a healthy economy may have a little to do with rising prices, overextended credit and the sucking dry of wallets due to ridiculously funded (subprime) mortgage loans (thanks to low teaser interest rates, which are now ballooning to 11% and more).   People are losing their houses right and left.  

People who, for whatever reason, are voluntarily selling their houses, will take losses, due to taking out second mortgages to fund home repairs (eliminating equity) and lower home values (possibly 10% lower than today’s prices in 2009).  Banks trying to sell foreclosed homes will take losses, as well.    There could be a bank crisis as a result.  

8 million households are already upside-down on their mortgages and …we could see that number go to between 16 million and 24 million by the end of 2009.”

No recession?  Really?


6 thoughts on “Periods of Uncertainty

  1. Brennig

    Venerable source though Wikipedia might be, the correct definition of Recessions is: A period of economic decline as evidenced by two successive quarters of negative growth.

    Well, it was when I did my MBA.

  2. Lisa

    Brennig – Ok, I keep reading what you’ve written, and I’m not seeing the difference. What am I missing?

    Mahala – Well, he doesn’t have to buy gas, to be fair. 🙂 lol

    Chris – Are you a spammer? 🙂

  3. Brennig

    They’re not the same on two levels.

    Negative real economic growth isn’t quite the same as negative growth; the use of the word ‘real’ in that context introduces semantics as an argument when the true definition is unarguable – it either is or it isn’t.

    A ‘slowdown’ is not necessarily a period of negative growth – it might be a period of less growth (hence slowdown) but that isn’t the same thing as negative.


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