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Scrutiny
  
Where the hell?
Tell us please, where is recession?
05/02/2009

On the eve of February 2009, we can’t help but wonder where the hell [or, ‘in heavens’, for those light listeners] is the damn recession we were told to watch out for like crazy by the US, in specific, by the National Bureau of Economic Research [NBER]! The NBER is, according to their own words, “the nation’s leading nonprofit economic research organization; sixteen of the 31 American Nobel Prize winners in Economics and six of the past Chairmen of the President’s Council of Economic Advisers have been researchers at the NBER.” The NBER claims they are “dedicated to promoting a greater understanding of how the economy works.” Allow us to exemplify how well they’ve worked towards the same in the past few quarters.

Before you decide we’re insensible, allow us to clarify. Is the world under a slowdown? Yes. But a recession? Umm... We stuck to the standard seat-of-the-pants thumb rule used by economists for defining recession, which states that a recession ‘happens’ when there persists two quarters running of negative growth [in real GDP] from the previous quarterly figure. So while NBER struck panic buttons and started calling some economic activity a “recession” somewhere in the middle of 2007, data was strangely not supporting their claims circumstantially.

From Q2 of 2006 till Q3 of 2008, we provide you the running figures of US real GDP growth finally available: 2.6%, 2.2%, 2.5%, 0.1%, 3.8%, 4.9%, 0.6%, 1%, 2.8%, and 0.5% respectively. Technically, the US has still not entered recession. It’s a similar case with Europe. And India and China are another story altogether. It leaves us stumped to the reasons why NBER might have played the soothsayer’s flute when none was required. Mark Mobius, MD, Templeton Asset Management, EuroFinance and some others have confirmed that recession, technically, has never happened. And NBER? They claim that they consider “a wide range of indicators of economic activity [other than GDP].” And how are these ‘wide range of indicators’ weighted against the GDP? Here’s the clincher: “There’s no fixed rule for how the different indicators are weighted.” Ah Shylock, beauty is in the eye of the beholder, and the devil lies in the detail.

By:- B&E
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