The RBA's Nominal Recession: Australia just experienced its worst nominal recession since 1992; RBA continues to under-estimate the power of monetary policy
There is a huge difference between GDP growing at 4% and a GDP which is falling. Its like saying comparing low inflation with deflation and say there is no real difference ... The difference is huge!!
Yes, but that is not what I said.
There is no real difference between the figures (0.1, -0.1) and (-0.1, -0.1) and (0.1, 0.1) for consecutive quarters. Yet people point to the middle figure and hiss 'recession'. It's pants.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
There is no real difference between the figures (0.1, -0.1) and (-0.1, -0.1) and (0.1, 0.1) for consecutive quarters. Yet people point to the middle figure and hiss 'recession'. It's pants.
This thread is about the OP article suggesting that a recession should be defined as nominal GDP below 4% regardless of the level of inflation. If the OP article's definition is accepted, nominal GDP growth of 3.9% at a time of zero inflation would be called a recession. It's nuts to defend that.
Most of us are responding to the article which says GDP growth less than 4% should be classified a nominal recession.
I'm not defending the 4% threshold, or an inflation threshold or any threshold. All I'm pointing out is the 'classic' for want of a better word definition of a recession is a purely technical phenomenon, and as such has little significance in itself. It is possible for an economy to hit recession, bounce back, and be relatively unscathed. Whereas it is possible for an economy to avoid recession but be performing badly for years. I think we place too much emphasis on recession, and should just concentrate on the relative performance of the economy.
But it is a term the press love to jump on, and I feel it gets greater press than it deserves. The performance of Europe is a classic example. For much of the last ten years, Europe hasn't been in recession, but the economy has been very sick - regardless of whether or not it has technically been in recession. They have rolled out old terms such as depression to describe the situation. But why do we need to put these labels on things? From my point of view, I am interested if an economy is improving or getting worse. It is the direction rather than the position that interests me most.
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