Magical Post: making half of our collective rhetorical disagreements on the economy vanish. (poof!)

[Kurt_and_Hunter]

One person says the recession is over. Another says economic conditions are getting worse. Who's right? Maybe both.

The US economy can grow every quarter while economic conditions deteriorate every quarter because the baseline of the system is not zero.

Recognize that reality and much seemingly opposed rhetoric on the economy is revealed to be no more than different ways of spinning an agreed upon set of facts.

Is the recession over? Yes, probably so. Does that mean things are getting better? Well, it depends on what you mean by "getting better." Of course stagnation is better than decline but...

in practical terms weak growth is merely slower decline!

Say quarterly GDP is +0.1% each and every quarter. That is a growing economy. It is also a failing economy with rising unemployment, widespread defaults on all categories of loans, endlessly rising government deficits and probably even pockets of deflation.

Our actual baseline is at least 2% GDP growth and positive job growth of hundreds of thousands of jobs. That is what it takes just to stay in the same place. (Under Bush all of our GDP growth above 2% was people borrowing against real estate equity. That's why the current decline hurts so much... things had already sucked for years before it even started.)

Banks create new money by lending, but they create the principal without creating the money to pay the interest. That has to come from growth. (A simplification, but not a useless one) If the economy "grows" at 0.1% we see a lot of loan default.

Say the economy loses 300,000 jobs and adds 301,000 jobs. That is job growth. It is also a jobs disaster. Unemployment will rise if more than 1,000 new people entered the job market.

And so on...

The recession can be over while everyone continues to lose ground (albeit more slowly) and employment can turn positive while the unemployment rate rises (albeit more slowly).

[Kurt_and_Hunter]

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