Bad news for the economy yesterday, which was a surprising change of pace from all the awful news we've been getting lately. The National Bureau of Economic Research (they're awesome guys) announced that yes Virgina, there really is a recession.
Although no-one anywhere admits to being surprised by this news, Wall Street collectively was surprised and proceeded to lose their shit, sending the Dow down 680 points.
If you're the average Cracked reader (re: Ziploc-bag-fetishist/occasional Sears catalog model) none of those above words will make a lick of sense to you. Seeing as I'm Cracked.com's official Overseas/Heroes/Olympics/Financial Canadian Correspondent, and also because I've recently been instructed to write articles that are really unpopular, I'm here to shed some light on these confusing time.
Ok, first what's a recession?
Much like breasts, economies can never be too large, which is why it's important that they're always slowly growing, and one of a few reasons why we're so disappointed that breasts don't. A recession then is simply a period when an economy stops growing and instead shrinks. Recessions are generally accompanied by rising unemployment, books by John Steinbeck, and a general lack of Good Times.
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So should I rush out and buy a big screen television then to save the economy?
Unless that television is 400 billion dollars, I'd suggest you keep your powder dry, tiger. This is a bigger problem than you. That said it's not a horrible idea, and gets right to the heart of the matter: American's are good at consuming things. In fact, it's probably the one thing you do better than anyone else in the world.* Something like 70% of the American economy is simply you guys buying stuff from each other, or increasingly often, the Chinese. When you stop buying things, the economy slows down, and indeed that's exactly what's happening now.
*Your donuts are excellent as well, I'll add.
Here's the rub though: What if you need that money to eat? You'll feel like a real ass if you go drop eight hundred bones at The Sharper Image only to lose your job in the spring. It will feel like a noose tightening around your neck every morning as you brush your teeth with your talking astrolabe toothbrush. So unless you're really sure your job is safe, it might be wisest to just sock that money away in whatever you traditionally sock things away in (bank account, coffee can, sock.)
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So is there any way out of this?
Not an easy way, no. The traditional way to get out of a recession involves the government spending a shit-ton of money on things, preferably big, expensive, durable things. Something that will take a lot of people to build and be useful in the future. Bridges for example, as opposed to hand-jobs. Not to say that 10 billion hand jobs might not take the edge off for everyone over the next few months, but there wouldn't be much to show for it in the end, aside from a country full of cramped wrists and awkward silences.
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Where would the government get that money?
Search me. Where did you get the money to invade Iraq?
A less glib answer is the government runs a deficit for awhile, spending more money than it takes in from taxes, and covering the difference by borrowing money from somewhere. The idea being that it will pay the money back in better times - a theory that is right up there with "girls will like you if you just be yourself" in terms of feasibility.
Still, the worst thing that can happen by running up a national debt is that it will place a burden on future generations - your children and children's children etc... That's certainly a concern, but the prevailing wisdom has recently taken a turn towards "yeah, well what have those little shits done for us lately?"
If you're curious, it's quirky little "fuck the children" moments like this that make the American economy so amusing.
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Where does the government borrow the money from?
From anyone who will give it to them. Even you, Mr. Money bags. The main way they do this is by issuing Treasury Securities, which you can think of as imaginary pieces of paper which say "I.O.U., Uncle Sam. P.S. thanks buddy." Like I said, you can buy these yourself if you want, and many individual investors do. Realistically though, most are sold to funds and banks and governments - people with a lot more money than you and (arguably) more sense.
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What's a Depression then? Are we going to go in to one of those? Will there be soup lines? Will the soup be tasty?"Depression" is a pretty nebulously defined word, and essentially means "really bad recession," or "oh shit." No-one's suggesting the US is in one of those yet, and few are saying it's possible. So I don't really know. If you find yourself eating more soup than normal or seriously considering jobs involving the picking of fruit, then go ahead and call it a Depression. I won't stop you.
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What about the car companies? Is this why they're struggling?
That's right. Ford, GM and Chrysler are all on the verge of bankruptcy and are maybe only a couple months away from going tits up. A prospect which could potentially cost three million people their jobs, once you consider all of the companies that supply them with parts, who would also suffer. No-one wants three million people to lose their jobs (unless they're dicks) so a bailout for the auto makers has been discussed with some seriousness over the last few weeks by men with shirts and offices.
Using government money to prop up an existing company with existing jobs is generally a better idea than spending it on bridges or handjobs as above, but there's a particular snag with the automakers: they're just horribly, horribly run companies. A full detailing of their woes would go a bit beyond the scope of a Cracked article (If you hadn't noticed, I'm already stretching my Cracked writer's mandate here just a whisker.)
Suffice to say they have huge structural problems and there's no guarantee that within the next year they wouldn't fall apart like a dildo made of shredded newspaper anyways.
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You don't have a lot of answers. Is there anything you do recommend?
I've been told that I heartily recommend any one of the fine products and services our advertisers are offering just above and to the right of this article. Also, I would like to add for the benefit of any search engines that happen to be strolling by, "tina fey nude" fellas. Come get some.
Bad news for the economy yesterday, which was a surprising change of pace from all the awful news we've been getting lately. The National Bureau of Economic Research (they're awesome guys) announced that yes Virgina, there really is a recession.
Where does the government borrow the money from?
From anyone who will give it to them. Even you, Mr. Money bags. The main way they do this is by issuing Treasury Securities, which you can think of as imaginary pieces of paper which say "I.O.U., Uncle Sam. P.S. thanks buddy." Like I said, you can buy these yourself if you want, and many individual investors do. Realistically though, most are sold to funds and banks and governments - people with a lot more money than you and (arguably) more sense.
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What's a Depression then? Are we going to go in to one of those? Will there be soup lines? Will the soup be tasty?
"Depression" is a pretty nebulously defined word, and essentially means "really bad recession," or "oh shit." No-one's suggesting the US is in one of those yet, and few are saying it's possible. So I don't really know. If you find yourself eating more soup than normal or seriously considering jobs involving the picking of fruit, then go ahead and call it a Depression. I won't stop you.
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What about the car companies? Is this why they're struggling?