With economic output in the United States falling for the second consecutive quarter, there are still fears that the country will enter a recession. he is It has become a buzzword but what is ‘stagnation’?
In the first trimester of pregnancy Gross Domestic Product (GDP, the sum of all that is produced within a country) It is down about 0.4% compared to a quarter of a year ago. And in the second quarter, as reported Thursday, there was a 0.2 percent drop compared to the first quarter’s GDP.
“The economy does not always proceed at the same pace. Sometimes he walks fast, sometimes he runs, sometimes he walks slowly…slower…stops or retracts. Depending on the speed of the march, one hears of a “boom”, a “crunch”, a “rebound” or a “slowdown”. They are the magic words of the economic cycle. This is explained in the book Economics for Allby EL TIEMPO’s economic editor, Mauricio Galindo, published by Intermedio Editores.
With these names – as mentioned in the book – we talk about the different stages of fluctuation of economic activity in which the production of most industries grows or decreases simultaneously. s Within these words, there are some that are listened to with fear: “crisis,” “stagnation,” “stagnation,” “stagnation.”.
Economy, to the sound of the accordion
Like an accordion that expands and contracts, The economic cycle is the succession of periods of growth and general decline in economic production.so there are two main phases: expansion and contraction, which occur when a country’s total output increases or decreases.
Whereas GDP is the value of the total goods and services produced within a country during a period, say a year, The so-called GDP is the maximum output a country can achieve. If all available natural resources, technology, equipment, facilities and workers are used.
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When the total of goods and services produced and provided within a country increases, and the total amount that the country can produce or the potential GDP increases, there is an expansion of the economy. s There is deflation, when total production falls.
And – added in the text – the contraction and expansion phases do not always have the same intensity. There may be mild and very strong cramps that last for many years.The same can happen with the expansion phases.
Recession causes depression
Galindo says the first time there was talk of a recession was during the “Great Depression” of the 1930s.
The use of terms such as “recession”, “recession” or “crisis” seems random, although there are nuances in the use of these words at times. It is said, for example, that depression is a severe recession. But over time, the words crisis, depression, or stagnation generate the same panic among those who hear them.
“The first time there was talk of a recession – says Galindo – was during the ‘Great Depression’ of the 1930s. During that time, United States President Herbert Hoover did not want to talk about the crisis, because it was a term that seemed too harshPoliticians often think that things will get better if they change their name. This is how Hoover started talking about depression rather than crisis.”
But it turns out that the depression of the 1930s was not just a depression, but the “Great Depression.” Within five years, US production was down 27 percent. “At that time, following the logic of making things better by changing their names, the term stagnation was coined”.
Recession is the word most used to refer to the downturn phase of the business cycle. To know when a recession occurs, There is some kind of popular consensus that it happens when GDP has fallen for two or more consecutive quarters. However, this definition is more than just a convention..
In the United States, when a recession or expansion will begin to be accepted by public opinion and when it will end is announced by the National Bureau of Economic Research (NBER), the benchmark is not that of two consecutive quarters of contraction. NBER takes into account, among many other things, If the work, i.e. the number of people employed, is reduced for a long time; If industrial production falls in the same period, so do people’s income and trade sales.
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