The Recession that wasn't

A high school senior can tell you that a recession is two consecutive quarters of negative GDP growth. That would be a shrinking economy for six months as measured by a single indicator, Gross Domestic Product.  So six-tenths of one percent growth in GDP means that you can not use the first quarter of 2008 as the starting point of a recession.  Other non-news is that 7 1/2 million seems to be a pretty durable average for the number of Americans unemployed in the last year.  There were 650,000 homes in foreclosure in the first quarter of 2008.  Forty-seven million Americans are without health insurance and 40% of them are in households that earn $50,000 a year or more.  Former Fed Chairman Alan Greenspan says, "This is an awfully pale recession at the moment."
        The Business Cycle can be a marvelously complicated econometric model.  A simpler idea is that we have good times and bad times and graphing GDP over time gives an illustration of these recurring cycles of good and bad times.  The apex of the good times is the peak.  The bottom of the cycle is the trough because of the shape of the U.  If the duration from peak to trough is at least six months, then that is a recession.  That downhill slide can also be called a contraction.  The uphill climb from trough to peak is an expansion.  If the trough was unpleasant enough, it can also be called a recovery.
        Depression is no longer a useful descriptive term and currently has no technical meaning.  That jersey number was figuratively retired after The Depression with a capital D.  No policy maker will ever admit that new bad times are a Depression until the unemployment rate exceeds the 26% nadir that was seen in 1933.  Even the word 'recession' causes a great deal of fidgeting.
        Does it matter when and where the "R" threshold is definitively crossed?  Probably not.  Close is good enough when you're in the woods without a flashlight.  The fiscal policy guys and the monetary policy guys don't wait for an engraved invitation.  Whatever this regime is, whether it's a "bumpy stretch", a "rolling readjustment" or a "recession", it is not the sort of climate that gets people re-elected.  When an election rolls around and skies are cloudy, the best advice is to look busy.  Activist fiscal policy would be to pass a fiscal stimulus bill and send out tax rebate checks.  Increased spending authorization by congress and the president is also classic Keynesian medicine to counter a ... whatever you call it.
        Monetary policy is directed by the Fed and Mr Fed, Ben Bernanke, is looking very busy indeed.  The current Fed Chairman is not elected.   He's appointed to a four-year term by the president.  Ben is doing his best but he has reason to be anxious.  Blaming him for the sorta-recession may be like blaming Hoover for the Depression - not quite fair.  But the common denominator for both of them is that the unfortunate accidents happened on their respective watches. The body has their fingerprints on it.  The buzz is, a new presumptive Democratic president will not re-appoint Bernanke in 2010 and he will compare poorly to Alan Greenspan and his 18 year bi-partisan reign under four presidents.
        In stormy weather Bernanke is an easy target.  The Chairman of the Fed is the nexus and focal point for monetary policy.  Structurally he is first among equals on the Fed Board of Governors.  But traditionally and in fact he is 'more equal than others'. The Fed Chairman is often called the second most powerful person in the nation. 
        We've learned a lot since 1929.  We will not deliberately limit credit.  We will not allow the money supply to shrink.  The Fed has been lowering interest rates with alacrity. The Fed has only stopped short of shooting money onto the sidewalk through a fire hose to inject liquidity into our world.
        The monetary and fiscal remedies are credible, tried and true.  They will have an effect.  They may even have an effect on GDP and forestall the tell-tale dip into a technical recession.  There is a lot of misery and dysfunction that is immune to the trickle-down magic of a rising – or non-falling – GDP.  That is the cruel blowback of the power of names.  As the fear of recession recedes, so may the political will to help the many mired little boats that do not rise with the tide.