Newswire:

Recession 101: A Cheat Sheet For The Financially Challenged

If headlines about Bear Stearns’ collapse this weekend made you think “football team” instead of “investment bank,” don’t panic.

Here are the answers to some basic questions on the recession that can help clear the fog on the economic forecast:

What’s a recession, anyway? The official definition is when GDP growth is negative for at least 6 months. In the last quarter, GDP growth was a sad 0.6 percent. [FOX News]

Clues that you’re in one: Sluggish GDP growth, a halt in businesses expansion, fewer job opportunities, higher gasoline prices and heating costs – all problems we can see today, thanks to the subprime mortgage crisis, sinking home prices, and a destabilized credit market. [USA TODAY]

Why is it bad? If we’re really in a recession, then the next thing to fear would be a depression, which is a deeper, broader, and longer recession. Think Herbert Hoover, 1929, Grapes of Wrath, and unemployment lines around the block.

How does it affect you? Fewer jobs, longer work hours, a free-falling U.S. dollar, even more expensive mortgages, diminished retirement savings, reduced home equity and wealth, harder-to-get loans, and steeper prices for everyday goods and that European honeymoon you’ve always dreamed of. [USA TODAY]

Are we in one now? Although we’ll have to wait a few more months to get the official GDP results, the forecast isn’t good. According to a national poll, more than 3 in 4 Americans think we’re in a recession. [CNN]

Should we try to cheer up? Well, maybe—pessimism creates more problems, as a recession can become a self-fulfilling prophesy. Says Economic Policy Institute economist Jared Bernstein,“If folks don’t feel confident enough to make that purchase … that reverberates negatively throughout the economy.”

How does the collapse of Bear Stearns relate to all this? The Federal Reserve’s selective bailout of the nation’s fifth-largest investment bank is a flare signal of today’s deeper economic problems. It’s also a prime example of the Bush administration’s hypocrisy: they’re gung-ho when it comes to bailing out one of Wall Street’s central players, but they’re all “tough love” with average homeowners devastated by the foreclosure crisis. [Center for American Progress]

Typical Bush behavior: giving get-out-of-jail cards to business bros over average Joe Shmoes.

--------

Comments
Leave a comment about this article below. For more discussion, visit our community page and sign up for your own Campus Progress blog!