Saturday, January 31, 2009

Economic Homesick Blues

Johnny's in the basement
Mixing up the medicine
I'm on the pavement
Thinking about the government
Bob Dylan understood national turmoil better than most. I don't plan on resorting to the personal manufacture of psychotropic drugs in order to deal with our current brand of turmoil, but I can at least understand the impulse.

The Bureau of Economic Analysis released some disturbing info yesterday(note the fancy graph above). Our GDP slid 3.8% in the fourth quarter of 2008. That means our economy actually shrunk by 3.8% in a single three-month period. There hasn't been a drop that big since 1982. Yuck.

My macroeconomics professor from this past summer insisted throughout the duration of the course that our current economic downturn is merely a "garden variety" example of a slowdown. He said that there really wasn't any need for panic. He also said we could blame the media for blowing it all out of proportion.

I'm the kind of guy who tends to trust the words of an academic over another source...especially a guy who, in his prime, was a professor of economics at Stanford. Because of this, I've felt relatively at ease about our situation.

This new info has changed that a bit. Even though it looks like there might be a pattern of generally slower growth in the fourth quarter(I've been nerding out all morning on the BEA website. I even created my own Excel chart which tracks the quarterly GDP change each year since 1990. So ten out of the last eighteen years have had decreases in the fourth quarter.), this year's change was pretty dramatic. Additionally, even though there has been some dispute in the recent past, it would seem impossible to deny now that we're officially in a recession: two consecutive quarters of negative GDP growth.

What does this mean for us? How long will it take to get out of this mess? Can President Obama really help us? Are the Republicans in the House right for unanimously opposing the new stimulus package? I don't know. The only comforting part seems to be that we're all in the same boat. Even if I had an advanced degree in economics, I could still find lots of people to disagree with me about the direction I thought we should go.

(Just in case anyone was geeky GDP tracker. Clicking on it will make it bigger.)

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