Recession vs Depression help

[Debau2005]

Please forgive my ignorance, economics was not my crowning achievement in college.

Does anyone have some good links on what a recession and/or a depression is and what the differences are?

For those of us that are economics challenged, what does a recession mean!? :shrug: Other then things getting expensive and jobs becoming harder to find.

Thanks!!!

[ayeshahaqqiqa]

1. I think you sort of have it

The main thing that happens in a depression is that it becomes very hard to get loans. Money stops flowing. Sometimes you can have inflation to go along with a recession, but, if memory serves, during the Great Depression you had deflation--factories couldn't sell products, and lowered prices. Trouble was that people still didn't have the money to buy the goods because they were out of work or had their hours/wages cut. I believe that during the Great Depression fully 1/4 to nearly 1/3 of the labor force was out of work.

As I understand it(and I'm no expert), a depression lasts longer than a recession and cuts deeper into the economy.

[sharesunited]

2. Recession = negative GDP.

Depression = ROUS = recession of unusual size (or duration).

[uppityperson]

8. Rous's? I don't think they exist.

funny, but a good way of thinking of them.

[suston96]

3. Google is your friend......

http://economics.about.com/cs/businesscycles/a/depressions.htm

[nxylas]

4. Try this link

http://economics.about.com/cs/businesscycles/a/depressions.htm

It explains it pretty well.

[flamin lib]

5. Recession is

when someone you know lost their job.

Depressioin is when you lose yours.

[Debau2005]

6. Thanks all!

[ProfessorGAC]

7. There Are A Couple Things To Know

Edit for a bad typo.

First, the traditionalists refer to recession as two consecutive quarters of negative GDP growth.

However, the analytic school uses a more statistically based approach. A recessionary period is characterized, per the analytic approach, is one in which growth is that is in the bottom quintile of the growth rates of the previous 40 years, when the median per capita income is statistically stagnant or falling, when governmental and personal debt is growing (as a percent of GDP) by more than one sigma above the mean of the prior 40 years, and inflation is more than 70% of nominal GDP growth.

So, we've been recessionary for 7 years.

Depression is characterized by a simultaneous contraction of GDP, rapid monetary inflation caused by deflation of the currency, and massive shifts (of at least 6 sigma) of employment levels, and subsequent reduction in both overall and per worker productivity. It's a recession on steoids, IOW.

The combination of these effects create a business climate in which the system cannot self-recover, because with employment down, per worker productivity down, monetary value down, and wages restricted, there is no demand for the fewer products. So, there is no self-correction mechanism for depression.

Recessions, if left alone, can in many cases, self-correct. Yes, there will be painful times, but we have those anyway, even when the fed overcontrols the system, or when the fiscal policy involves over-manipulation of taxation levels. Depression will not self-correct, and if nothing is done, may just gradually get worse and worse.

A depression is a recession that is completely out of control. It exhibits all the behavior of recession, in greater degree, and cannot be counted on to self-correct without significant intervention.
The Professor

[GreenPartyVoter]

9. So in your opinion, is another depression a real possibility at some point in the near future?

[ProfessorGAC]

11. I Think It Very Unlikely

Remember the sudden tumble has to involve no brakes before the fact, and with the interconnection of macroeconomies into the global "supermacro", full depression would require nearly all major economies to sink into deep sympathetic recessions as well.

Since other countries have even more braking mechanisms on their currencies, on their markets, and on their banking systems, their braking effect will, by synergism, slow our devolution.

So, i seriously doubt that any full blown depression is in the offing, but the recession could be fairly severe. Short, but severe. Remember that consumer confidence is heavily influenced by political factors. We're getting rid of silverspoon in November. So, consumer confidence could rise and people will spend again (even if they have little), due to pent up demand and that renewed optimism. That keeps the cycle short. And, if a dem wins, and we have both a dem prez and dem congress, there are things that can be done to stimulate productivity and employment to pull out of recession.

The Professor

[GreenPartyVoter]

12. That's reassuring, thanks. :^) (Fuel and food prices will still suck, but

hopefully that will be the worst of it.)

[Zynx]

10. Recessions are defined by two or more consecutive quarters of contraction in GDP

traditionally, however they can be defined without that prerequisite. A depression is generally a protracted and deeper recession accompanied by systemic deflation, rather than inflation, in wages and prices.