A possibly stupid question

Posted By Blake Hounshell Tuesday, December 2, 2008 - 12:00 AM Share

How could investors possibly be surprised that the U.S. economy is in recession? This is animal spirits in action, folks:

Investors were in full retreat yesterday, sending stocks tumbling after a panel of economists confirmed that the country has been in a recession for about a year.

The markets traded in negative territory all day as investors sold off shares to lock in profits after last week's rally. But the losses accelerated after the National Bureau of Economic Research, a nonprofit group, said a recession began in December 2007.

EXPLORE:FINANCE
 

KIDZIB

10:59 AM ET

December 2, 2008

Because...

...there's no agreed definition of what a recession is. Even American business and government heads can't agree. If it's simply a sustained decrease in growth then sure, we've been in recession for a while now. But if it's GDP actually going negative, then we might not be there quite yet.

It's also political. Democrats are fond of saying "Look! We've slowly dwindled from 4 percent growth to 1 percent growth! That's sustained loss! Only an idiot would say we're not in recession!" whereas Republicans say "1 percent growth is still growth, damnit! Call me when we've dipped below 0 and I'll officially admit we're in recession!"

 

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