Recession Or Depression?

I found in my Collins Dictionary definitions for:

RECESSION = A period of economic difficulty, when little is being bought or sold, and

DEPRESSION = An economic condition in which there is substantial unemployment, low output and low investment; in other words economic slump.

From a Market Pundit I got the insight that RECESSIONS should be good for the economy because they fix the mistakes investors and businesspeople made during the period of boom:
- Consumers cut back on spending and build up savings again.
- Businesses lower prices to bring consumers back into the market.
- Liquidations release money from bad investments and make it available for new production.
- Employees work harder, because they're afraid of losing their jobs.
- Companies strive to improve their products and their strategies... or they go out of business.
- And above all, people who were prudent during the boom can now pick up bargains on the Bursa (Trade Market).
- Balance restores itself, and the economy can increase production.

But when government intervenes in the market, it denies the economy all of these benefits. Waste results and the recession lasts longer.

While listening to Bloomberg TV news in Nov 2008, I got to view a live transmission of the audit of the three automotive titans -- Ford, GM, and Chrysler -- come to ask US government for some 25 billion $$ to save their companies.

If it were not so tragic, it would have been hilarious -- UAW (Union of Automotive Workers) came hat in hand to ask for the salvaging of the automotive industry, standing shoulder to shoulder with their 'archenemies' Ford, GM, and Chrysler CEOs and their underlings. We are talking about the same UAW whose strikes for increased wages and benefits have been one of the reasons the automotive industry is no more competitive.

Strikes are good, but strikes are bad! So much for the Union.

The automotive titans are like the dinosaurs -- overrated and obsolete. In a time of energy crisis, they did not present the market with fuel-efficient cars if not with fuel alternative cars. The Japanese did! (Sorry, my mistake, at least Ford did, but in Europe, not in North America. We in N. Am. don't need savings -- we have it so good!)

They (the titans) said they would have two new hybrid models TOMORROW -- too late by the writing on the wall. But they needed the liberty of reorganizing their companies (UAW, did you hear?) and needed money for this reorganizing, as well as for paying severance packages to all obsolete workers (how about the CEOs? No, I did not think so -- their severance packages were surely going to bankrupt the industry).

The senators auditing the titans asked why not let the industry go the way of the Do-Do bird. The forecast regarding the automotive industry going bankrupt showed that about 3 million workers would lose their jobs. This was already DEPRESSION, not just RECESSION! And this would not even be the end of it. Think of the suppliers who needed to be paid for parts delivered, suppliers who would go bankrupt all over the globe if not paid; and about the dealers who would lose their manufacturers' backing and go out of business and bankrupt all over North America (include in this Canada please). (They did, and they did -- go bankrupt)

Another argument of the three titans to obtain the loan was that they were "best in class" (how many years ago was this true? not today, no...) and all they needed was the money to prove it to the world. And that they were competitive with Toyota. (Is this the recall manufacturer of 2010? I might be wrong, but...)

I wondered how they could even compare themselves with the Japanese, when we all know about the samurai type of dedication the managerial elements of the Japanese industry have -- ready to sacrifice themselves on the altar of their new capitalist bushido. If they are not the best, they would give their lives to save their honour (or was I wrong? Movie education, what could I say!)

So why did our North American titans insist they are equal when they waited almost two years to even mention the possibility of hybrid cars? Were they in cahoots with the oil industry? A Stupid Question deserves Stupid Answers...

The Government did in the end approve the "loan" of which nobody would ever see a penny paid back; and the war in Iraq would continue as well, or the armament industry would go bankrupt in its turn. This is a snowball effect of the fact that "we are not even in Recession" if we are to believe what they say on TV!

I heard it with my own ears from all those pundits on TV. Or was it Depression we are not in?...

In the same dictionary I found another definition for

DEFLATION = A reduction in economic activity, resulting in lower levels of output and investment

Now, if you see much difference between Depression (in which we are not as yet, say specialists) and Deflation, then we deserve the wool covering our eyes. The sheep deserve to be fleeced.

Oh, and I heard one more truth from the mouth of a secretary of something or other -- presidential promises made during the election campaign are never made with the intention of being kept! This is the historical truth, so help us God...

All those predictions came to pass -- many workers lost their jobs, suppliers and distributors much the same...but we were never through a Depression. One of the Titans has declared bankruptcy in order to better reorganise/wash-off-debt and is now back in business... And we continue to swallow what is told to us, to believe that all will be well and lives will be spared, poverty averted, blah, blah, blah...

by Raluca Popov
18 Nov. 2008