Explaining recession

ManAtHome

Yes, know what you mean FC, I'm glad I'm an old git so I can get some dosh back from burglar broon (money into pensions rather than salary)- certainly not a good a time to be a small (non-mp-hiring/backhanding) business.

Generali

Guy_Montag wrote: »

So can I invest in THF? If so how? It'd only be money I can afford to lose, so not that much (in your terms).

We're Cayman Islands based so $100k minimum investment (CI rules) and you have to be classed as a 'sophisticated investor' by the FSA (I think that means £100k liquid assets min.).

poppy10_2

Too much attention is paid to the R-word. In this country, by common agreement among economists (a rare thing) a recession means two consecutive quarters of falling output (i.e. negative economic growth). Quite why it is two quarters and not three, or indeed one, I am not sure. On this definition, the UK had a recession in 1990-92 and 1979-81. But since the war, in most developed countries, recessions have been rare.

Yet this definition may not be very helpful. An economy might experience exactly two consecutive quarters of slightly falling output and then recover sharply, such that once you look back you wonder what all the fuss was about. By contrast, an economy which normally grows at 2pc-3pc may stagnate for years, although never actually experiencing falling output. In this case the loss of output, and the real human suffering from unemployment and financial anxiety would be much greater, even though it would not technically qualify as a recession.

What matters is the extent to which the level of actual output falls below potential and the length of time the economy spends in this state. Looked at in this way, the issue is not binary - it is not a matter of whether or not the economy is in recession, but rather of how much output is lost. This is a continuum.

In this regard, the recent experience of Japan is interesting. People talk of a lost decade. In fact, between 1993 and 2002, the Japanese growth rate was not negative. It averaged about 1%. But this represented an enormous loss of output compared with potential.
Telegraph

Phirefly

fc123 wrote: »

My own label is made in Leicester by a tiny (though once big, a chain took him to the floor some yrs back) family run outfit but he is counting down to retirement now.

Gosh thats all a bit too close to home! Its all very incestuous round this way, your supplier is probably the brother's mother's monkey's uncle of my director... reminding me I really should keep closer council! Interestingly, and relevant to the thread, last year I was looking into setting up my own label too, but my sense that this is not the best time to be taking such a risk has had me going down a safer route for the time being.

Generali

poppy10 wrote: »

Too much attention is paid to the R-word. In this country, by common agreement among economists (a rare thing) a recession means two consecutive quarters of falling output (i.e. negative economic growth). Quite why it is two quarters and not three, or indeed one, I am not sure. On this definition, the UK had a recession in 1990-92 and 1979-81. But since the war, in most developed countries, recessions have been rare.

Yet this definition may not be very helpful. An economy might experience exactly two consecutive quarters of slightly falling output and then recover sharply, such that once you look back you wonder what all the fuss was about. By contrast, an economy which normally grows at 2pc-3pc may stagnate for years, although never actually experiencing falling output. In this case the loss of output, and the real human suffering from unemployment and financial anxiety would be much greater, even though it would not technically qualify as a recession.

What matters is the extent to which the level of actual output falls below potential and the length of time the economy spends in this state. Looked at in this way, the issue is not binary - it is not a matter of whether or not the economy is in recession, but rather of how much output is lost. This is a continuum.

In this regard, the recent experience of Japan is interesting. People talk of a lost decade. In fact, between 1993 and 2002, the Japanese growth rate was not negative. It averaged about 1%. But this represented an enormous loss of output compared with potential.
Telegraph

When I was studying economics, I was told that growth of 2% was needed to keep unemployment stable so anything below that was pretty bad. The long term trend growth rate is about 2.4% IIRC so that level is the UK economy bowling along pretty merrily. More than that and upward pressure on inflation is likely as labour markets get tighter. That's probably less of a problem right now due to high levels of immigration - most banks in The City these days are like the United Nations or at least the Arsenal changing room.

Guy_Montag

I presume, for a happy, clappy populace, it has to be something like:

(GDP - Inflatiion) / Population Change > 0

Are GDP figures routinely adjusted for inflation?

Edited to add - regrettably your little game is too expensive for my pocket.

budget_counsellor_shaz

Are we really at risk of a recession?


I found this

http://news.bbc.co.uk/1/hi/business/7212545.stm


Quote 'The UK economy grew by 3.1% in 2007, its fastest rate in three years, but growth slowed in the last three months as the credit squeeze took hold.'

What do they mean by the UK economy? How do they calculate this 3.1%?

sniperpenguin

fc123 wrote:

We still have slack to MSE on and the gym membership (my last luxury) just got culled and only 7 and half terms of school fees left.

May I be the first person to point out that there is another luxury left in that sentence.... the school fees

Generali

Guy_Montag- usually in the UK, GDP is in nominal terms but growth is in real terms. The RPI is often called the GDP deflator for this reason - by how much do we need to reduce this year's GDP to make it comparable to last year's?

budget_counsellor_shaz wrote: »

Are we really at risk of a recession?


I found this

http://news.bbc.co.uk/1/hi/business/7212545.stm


Quote 'The UK economy grew by 3.1% in 2007, its fastest rate in three years, but growth slowed in the last three months as the credit squeeze took hold.'

What do they mean by the UK economy? How do they calculate this 3.1%?

GDP is defined by economists as being the total value of economic activity over the course of a year. GDP growth is adjusted for inflation so it would be reasonable to say that the UK's economy is 3.1% bigger than this time last year.

It's not quite that simple of course (where would be the fun in that). If I do my washing up, that's not economic activity as I don't get paid for it. If you pay me to do your washing up then it is economic activity and so is a part of GDP. So if, as many women do, you go to work but only earn enough to pay for childcare you increase GDP whereas if you look after them yourself you don't!

Guy_Montag

Just a thought. If I get together with 10 of my rich GHPC cyber-buddies. Can we tell the FSA we have £100k in soluble assets & join your game?