Tuesday, December 6, 2011

"Great Recession" Defined

What is "the Great Recession?" It is yet another new term added to our modern day lexicon courtesy of the general economic downturn which began in 2008 and which is continuing through 2011. By some accounts the phrase was coined by Paul Volker.

I remember first seeing the term used in mid-2009, and I noticed it quickly became popular in the media. The phrase invites comparison of the current recession with the Great Depression of the 1930's.

I was initially doubtful this newly minted phrase would prove accurate for two reasons: I thought it was too early to tell if we were in a recession or a depression; and if it were a recession, would it last long enough to compare with the Great Depression?

Unfortunately, as time has gone on the phrase has not only entered our everyday vocabulary, but has proved accurate. First, the financial system was stressed in 2008 and 2009, but it did not break, meaning we did not have a depression.  Second, the recession has intractably dragged on. While stock and bond markets have recovered to some degree, the recession is all too apparent in the high unemployment rate and depressed real estate market. Here's hoping before long we'll be coining another new phrase, "the Great Recovery."