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To: Tailgunner Joe
Once upon a time, such a crisis was known as a "depression" before Americans became squeamish about such stark language.

Well, we've been told that the term "depression" originated as a euphemism for the more severe "recession". This makes some kind of sense. If something is "depressed", we imagine it having resistance to this depression, like a spring, so that it ought to rebound. However if something is receding, like a hairline, we feel the change is open ended and permanent.

Neverthless, I've always wondered whether this little linguistic factoid is really true.

13 posted on 02/06/2009 9:15:11 PM PST by dr_lew
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To: dr_lew

Actually, you have it backwards.

The economists who founded the NBER started using the term “recession” to denote those downturns in economic activity that are NORMAL consequences of the NORMAL business cycle. That is, business expansion ebbs and grows over a recurring cycle (of about 10 years) and the downturns in economic activity that coincide with a normal downturn in lending to businesses for expansion (which usually follow the Fed raising target short-term interest rates) are “recessions” in the lexicon of the NBER.

Before the foundation of the NBER in the 1920’s, all downturns were called “depressions” by the popular and even business press. Then again, we had several really nasty depressions - 1873, 1837, 1807, etc. They were all precipitated by big failures in what we now call “the finance sector” or (back then) by large banking failures that resulted in banks failing in waves and the surviving banks becoming very tight in their lending practices.


15 posted on 02/06/2009 9:29:25 PM PST by NVDave
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