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Are We In the "Great Recession"? Compared to What?

By Robert Folsom
Fri, 02 Jul 2010 17:30:00 ET
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Comparison may be the basis of all unhappiness, but sometimes it's the best way to convey the point you need to make.
 
Such as, for example, whether the economy today is in a recession... or in something worse.
 
In this case comparison is the only way to make your point. That's because "recession" and "depression" do not have precise or even broadly agreed-upon definitions. Some commentators have used the phrase "Great Recession"to describe what we're in, but that simply begs the question: "Great" compared to what?
 
Take any widely followed economic indicator -- Inflation-adjusted Net Worth, for instance. I can say that this indicator is down 20% from its most recent peak... and that sounds bad... or does it? I can say that it has moved up slightly over the past three quarters... and that sounds good... or does it?
 
In truth, you can't begin to tell how "good" or "bad," unless you compare that data with previous declines in the economy. If I say that this indicator only fell 10% in the 1973-1975 economic decline, then you can begin to answer the "good" or "bad" question. If I also say this indicator fell less than 5% in the 1981-1982 economic decline, then you've got an even better answer.
 
And if I show you a chart that includes all the information above (and more), then I wouldn't have needed to use all those words to make my point. You'd have looked at the chart and said "I get it," almost at a glance.
 
Well, this is exactly what the just-published July issue of The Elliott Wave Financial Forecast provides -- but it does so for much more than Inflation-adjusted Net Worth; that's just one of six widely followed economic measures, all displayed in six separate charts. And each chart shows you an apples-to-apples comparison of today's economy vs. 1973-1975, 1981-1982, plus the "average" economic decline.
 
You'll be far better able to decide for yourself whether the economy today is in a recession... or in something worse. Alas, you may also have an even better understanding of how comparison is the basis of all unhappiness.
 

Tags: economic depression, recession
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