Sunday, March 16, 2008

Declaring a Recession to End a Recession

It appears that virtually every major player in politics and government are now declaring a recession. Republicans and Democrats, Members of Congress and senior Executive Branch officials, and now, senior leaders of the Federal Reserve. They are all declaring a recession.

The academic definition of a recession is economic decline over two quarters -- that's six months for those of us who don't like calendars -- of economic decline. We barely have had two months, but virtually everyone is surrendering to the "R" word.

So the question is why? Why are we so anxious to enter a recession? Charles Payne of Wall Street Strategies and a regular feature on Fox Business and Fox News as well as the Houston Business Show, has said that although it may be too soon to declare a weaker economy, there are specific strategies we can take in event of such. It seems to me that we are pursuing such policies (e.g., pumping money into the economy to encourage growth) and it actually seems to be making matters worse. Payne agrees as do most sensible economic analysts. If we keep these inflationary policies up, we will be looking at the bad old 1970s again.

There seems to be a consensus that, if we declare a recession, that we can move on to greater economic heights. So far it isn't working and, if anything, it is actually making matters worse. We will have to wait and see whether the negative rhetoric produces economic growth.
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Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

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