The “R” word. Everyone says they’re afraid to say it so as not to bring one on, but recently it seems that’s all anyone is talking about. At this point the media is not debating whether or not one is coming, but if it is already here.
What exactly is a recession? Well, the National Bureau of Economic Research comprises a committee that officially declares U.S. recessions, defines one as, “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP (Gross Domestic Product), real income, employment, industrial production and wholesale-retail sales.”
NBER, a body of economic geniuses made up of scholars from world renowned universities such as Harvard and Berkeley, has expressed to the media their unwillingness to speak of the “R” word. Clearly this group understands that by simply speaking of a recession they will effectively plunge America into one.
How does talking about a recession create one? If investors and consumers hear insinuations of a recession they will proceed to stop investing and consuming. Think about yourself. If someone you trusted were to tell you that you should expect to be strapped for cash in the near future, you would cut back on spending today. By not spending you are effectively contributing to the promotion of a recession. In other words, we assume a self-fulfilling prophecy.
Despite this potential outcome, which I believe most people clearly understand, NBER members couldn’t help themselves. Martin Feldstien, the president of the committee, said that a recession is more than likely in 2008. Robert Hall, another committee member, said that at best the economy has stopped growing. Hmm. It’s almost like these guys are trying to tell me a recession is likely.
The problem with NBER is that it doesn’t understand the impact of its own words. Or it doesn’t care. When high ranking members speak, Wall Street listens just as intently as if Ben Bernanke were to speak of interest rate levels.
The media perpetuate all of this: bad news sells and the media peddles stuff like this up and down the block. CNN concludes a recession is already here. Columnists for the Wall Street Journal have determined a 50 percent chance of a recession. Where do they come up with that number?
The New York Times ran a story that pretty much sums up the media’s mindset. In it they warned that American Express cardholder’s growth rate of spending has fallen from 13 to 10 percent. This is not a reduction in spending mind you, but a reduction in the rate of growth in spending. Next the president of the Pew Research Center explains that consumer satisfaction with the economy is at a 15-year low. The Times called December a bloodbath for retailers because sales for the month grew, but at a slower rate. A bloodbath! This, in my opinion, is an irresponsible use of language.
To me that article and others like it are utterly reckless and partial causes to any oncoming recession. It all contributes to the psychological barrier Americans are up against when it comes to consistent economic growth. Because of most media outlets we don’t believe that our economy can survive. Maybe it has something to do with the media not even understanding what a bad economy looks like, as we have not had one in decades.
George Soros recently wrote a piece in which he not only predicted an American recession, but assumes this will lead to an expansion of other global markets such as China. I wouldn’t be surprised if Soros has already bet against the U.S. dollar and is hoping to make millions on a U.S. recession. Soros demands that government intervene in the private market and shower us with regulations. Typical George Soros advice, as he has made his billions mostly due to government policy that created inefficiencies in the market. He concludes by declaring that the oncoming U.S. recession will lead to the rise of China.
One positive the recent dip in the markets afforded us is to remind the world who’s boss. Britain, France, Germany, India, Canada, and China were all dealt significant market losses due to fears of a U.S. recession. I’m not celebrating the fact that the world is losing wealth, but maybe this will remind our neighbors that we live in a globalized world and America is in the driver’s seat.
What to do, what to do. Well, first don’t listen to the media. Don’t let Fox Business News or any of the others dictate the direction our economy takes. While a tumbling housing market, inflated energy prices, and a weak dollar have the potential to slow the economy absent minded officials and the media certainly know how to promote one.
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