How does a recession end?

[raccoon]

When a recession starts, the economy slows, people get laid off, consequently they spend less, small (and large) businesses aren't bringing in as much money as before, so they take in less money, so state and local governments take in less revenue, so maybe they have to lay off people, so those people have less money to spend....

It's a downward spiral. I know from life experience that economies do recover from recession, but how?

[FreakinDJ]

1. We need "Manufacturing in America" or we Never Recover

Take a look at Japan's economy. It went south years ago and has never fully recovered because now Japan is outsourcing to China

[Crazy Dave]

2. Once enough people's unemployment benefits have run out...

...the majority of foreclosures and evictions have run their course, most of the people once making $50k a year are now working at Wal-mart and when those that had to get on a waiting list to even work there have moved in with their parents or parents in with their kids, then the recession is considered over.

[comtec]

4. Then it'll be a DEPRESSION

I think the OP's idea is the other way around....

[Crazy Dave]

5. No because they don't count those people or use those stats

The actual number of people not working is estimated to be three times higher than the unemployment rate but it's what the government uses to cover and spin the actual numbers. Say 20,000 people's unemployment benefits expire this month. Next month the government and Rush Limbaugh will use that number to say that there were 20,000 less people on unemployment last month which is a sign of progress in the right direction and what a sound and prosperous economy this is. The same with people losing their homes and moving in with relatives. At the time they lose their home then they're a statistic. Living with a relative or not being able to buy a home ever again is not.
The point is a recession is considered over when things level out, get to their worse so to say. If a factory with 5,000 people shuts down and moves to China, it will not re-open again when times get better which nowadays only means that things aren't getting worse.

[comtec]

6. True, but what you describe IS a depression

weather the government wants to admit it or not.

[Crazy Dave]

7. In that case we've been in a depression for the last 8 years

More industry has left the country than ever before and wages are down and keep going down as costs go up at twice as fast.

[Warren Stupidity]

3. Depends.

The minor recessions are cycles, not downward spirals, and end as over-contraction of production results in demand exceeding supply and a consequent increase in business activity. The trick is to keep demand from collapsing.

The last major recession, aka The Great Depression, ended with a global war and 60,000,000 or so dead people.

We have avoided major recessions since then by using Keynesian interventionist policies to stimulate economic activity in order to avoid disaster.

There are other factors in play this time that might make this downturn a bit unprecedented.

[A HERETIC I AM]

8. Your point about the World War is well remembered....

but personally I don't think this one will come to that. Let's certainly hope not, anyway. This is a dramatically different world than the mid 1930's.

I think you accurately touched on the answer to the OP's question however. Recessions end when demand begins to rise again.

Think about this example; It was announced recently that Volvo trucks had sold something like 155 heavy trucks last quarter as opposed to the 40,000+ vehicles they would have typically sold throughout Europe.

While the miles driven for the European truck fleet is certainly going down due to overall economic contraction, trucks still have a finite life and such dramatic drops in orders are very often followed by dramatic surges in demand later on.

The recession will end when people begin to buy again. It might take months or it might take years, but it will happen, sooner or later.

[westerebus]

10. And the war on terrorism is what?

Let's see, one on going in Iraq with 140,000 US troops and another 150,000 guns for hire not in uniform but on our payroll. Then there's the other one in Afghanistan, 40,000 US and another 50,000 NATO troops. We pay for the majority of that one also. And both candidates supporting expanding the Afghan-Park Tribal intervention policy of the current nut case in charge. Nothing to worry about here.

Did I forget to mention that other bastion of medievalism, Iran. Love the people, can't have a government with a nuke though, who wrote that national policy. Who assured AI PAC of their loyalty on this issues? Again, no problem, there's an election to win.

Homeland security is a growth industry. Homeland spying is also a growth industry. Expanding the military is another growth industry. Check either candidates' web site if perhaps you missed their declaration on keeping the homeland safe.

Nope. Nothing like the 1930s. No fear mongering campaigns. No nationalism or protectionism to worry about. No contraction in trade. No one proposing tariffs to protect the workers. No decline in incomes. No deflation in land or home values. No wild swings in the stock market. No panic selling. Nope. Nothing like the 30's.

The difference between a recession and a depression is a job. The early 70's were hard times for a lot of people. It sure felt like a depression. By the way, we still had troops in Viet Nam and were bombing the hell out of the general neighborhood. And folks got really pissed off when they found out that war was run on Social Security borrowing. Plants were closing over night. The oil embargo was a real swell time too.

No similarities what so ever to what is coming down the pike.

How did it end? It was either Disco or cocaine. I'm not sure which. And then the was Saint Ray Gun, who saved us all. But that's a story for another time.

We did have exploding Pintos, platform shoes, beta max recorders, and David Bowie. Consumerism, it's what makes Americans Americans.

[A HERETIC I AM]

11. "But that's a story for another time". Quite. And I'm sure you'll start another bromidic thread

about it in which there will be 150 reply's, all of them yours. Please feel free to use this forum to write yet another of your banal screeds that masquerade as erudite wit. It amuses me to occasionally use the "hide thread" function.

Not only are you tedious, you are boring as hell.

[westerebus]

12. Always glad to make someone's day sunnier.

Why are you so afraid to answer a simple question? Does the war on terrorism count or not?

[rustydad]

16. What makes this different

Is that we are entering the age of natural resource constraints. We are at the end of the line in our ability to increase our sources of energy and food. Peak Oil is what triggered this crisis. Peak Oil is what the Middle East wars are all about. The dot com bubble followed by the much bigger housing bubble were engineered to keep us content and happy for a few years while the real economy was dieing and the wealthy were getting far wealthier by plundering the economy. There will be no recovery this time. Bob

[HamdenRice]

9. Here's a concrete answer: In the past, inventories were sold

Most minor recessions were related to what was called the inventory cycle. Companies manufactured and sold products. They tended to manufacture more goods than they sold. The excess goods were accumulated in warehouses and became part of "inventory."

Minor recessions often had to do with inventories building up. When inventories built up, and companies ran out of warehouse space, companies realized that they had to stop making stuff, which they did. They continued to sell, but not make stuff. So they laid off workers and sold off inventories from warehouses. But because so many workers were laid off in so many industries, the sell off of inventories slowed because laid off workers don't buy stuff.

In normal recession cycles, recession was when excess inventories were being sold off.

When the companies sold off all their inventories, they realized, holy crap, we have to start making stuff again, and rehired workers.

End of recession.

In a global system with "just in time" manufacturing and delivery, and global supply (ie from China), and the biggest inventory problem being an inventory of unsold houses, it's not clear how the inventory cycle plays into the current recession.

[upi402]

13. The country that makes stuff and sells it to other countries >>> wins

And we have drunk too much Kool-Aid for me to have much hope of that. Obama will not do much to correct the blind greed that Milton Freedman conned us with and Raygun Republicans promulgated.

[westerebus]

14. Pretty much. n/t

[leftofthedial]

15. with the rich getting richer