What is a recession?

[elfs]

Have you ever wondered what the heck "a recession" really was? We hear all kinds of definitions, the most common of which is the official one: "two annual quarters in which the Gross Domestic Product of a region-- usually a country, but can refer to larger or smaller geographical regions-- declined."

In a 1998 article (back before he was über-shrill), Paul Krugman wrote a brilliant article called Babysitting the Economy, in which he describes how patterns of behavior in a baby-sitting co-op caused a recession, showing how the economic patterns of who owed whom babysitting time, influenced by the rise and fall of need versus availability caused by seasonal changes, resulted in a lock-up, "a recession."

Krugman explains in a few paragraphs everything you need to know about how recessions work, and how to dig your way out, and what this meant in 1998 for Japan as it dug its own way out of its decade-long slump.

Comments

[en-ki.livejournal.com]

Well, it's not entirely clear that a liquidity trap is the right issue to be talking about here; to extend Krugman's analogy, there seems to remain a significant question as to which of the 150 members of the co-op are cannibal baby-selling crackheads—the Social Register having recently opened its doors to said crackheads in exchange for promises of large future supplies of crack and babies. A market can be crammed full of money and yet still be illiquid if you have no idea which investments are any good.

[lisakit.livejournal.com]

When middle class people finally get a glimpse of what it's like for their poorer brethren?