Did you all hear a collective "DUH" across the country Monday when the National Bureau of Economic Research announced that yes, Virginia, we are officially in a recession and have been since December of 2007.
Nice of them to finally notice.
A recession is defined as two or more quarters of sustained negative GDP growth. We passed two or more negative quarters quite some time ago, so why did it take them a full 12 months to call it a recession?
Talk about your slow learners. While the rest of us were feeling recession-like since last Christmas due to continued high prices and flat wages, Wall Street continued to rage and the administration used words like "economic downturn," "slump" and the "R" word as if it was somebody illegal to marry.
Apparently the White House and the GOP Congress thought that by not saying the word "recession" they could keep it at bay. Wrong. Just like in the Harry Potter books everyone called the villain "He Who Shall Not Be Named," hoping that by not saying his real name, Voltimort, he would not show up again. But of course he eventually reared his ugly head and was angrier than ever because he had been ignored for so long.
While the WH tried to ignore the situation, the rest of the country rolled its eyes, furrowed its brow and shook its collective head and called it what it really was – a recession. When the stock market collapsed in October, Wall Street was shocked but not Main Street. The rest of America saw it all unfolding slowly throughout the year with more and more empty storefronts, fewer shoppers and full car lots and warehouses.
We have a long history of recessions, starting before we were even the United States, all the way back to 1763.
Ronald W. Michener, an economics professor at the University of Virginia along with his collaborator, Robert W. Wright, a financial historian at New York University have developed a theory over the last several years that the American Revolution was a "direct result of the economic malaise that followed the French and Indian War." (NY Times)
Tim Arango of the New York Times laid out their argument recently in an interesting article.
"When Benjamin Franklin returned to America in 1762, after almost five years in London, he was shocked at housing prices. 'The expence of living advanc'd in my absence,' he commented. 'Rent of old houses, and the value of lands....are trebled in the past six years.'
"Franklin it seems, had come home to a real estate bubble. It eventually popped – bringing on a credit crunch and deep recession that was the macroeconomic backdrop to the American Revolution.
"For the colonists, as for us, first came the boom. During the height of the French and Indian War, which lasted from 1754 until 1763, money flooded into the colonies, especially New York, where the British Army was headquartered. At the same time, the New York Legislature issued large numbers of bills of credit.
"All that cash sloshing around resulted in lavish displays of wealth – notably by British officers, whose opulent living was emulated by the locals, especially in New York.- Advertisement -
"Housing prices soared during the war. But when credit tightened afterward – thanks in no small part to a prohibition on the issuance of paper money by the colonies under the Currency Act of 1764 – real estate owners who could not pay their debts lost their land."
Does all of this have a familiar ring?
According to Wright-Michener, who plan to publish a book this fall with their theory, the nasty economic circumstances followed by the Stamp Act and other British taxes set the stage for the American Revolution.