{"id":57010,"date":"2022-05-23T08:00:06","date_gmt":"2022-05-23T12:00:06","guid":{"rendered":"https:\/\/www.ino.com\/blog\/?p=57010"},"modified":"2022-05-23T10:23:43","modified_gmt":"2022-05-23T14:23:43","slug":"what-all-the-recession-talk-really-means","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2022\/05\/what-all-the-recession-talk-really-means\/","title":{"rendered":"What All The Recession Talk Really Means"},"content":{"rendered":"

If you\u2019ve been following along here over the past year, I won\u2019t have to remind you that I have no problem telling it just like it is. And that includes the good news, and the bad news, about Bitcoin (BTC)<\/a>, cryptocurrencies in general, stocks, and the economy. You name it, and I try to be upfront and transparent.<\/p>\n

In fact, in last week\u2019s post<\/a><\/strong>, I gave you the grisly details behind the sell-off in just about every asset class. I showed you how much every major stock index was down for the year in gory detail. I then showed you how Bitcoin was a member of that dubious club.<\/p>\n

I also got under the hood of what I consider to be the biggest factor right now, which is hammering stocks and Bitcoin: Inflation. <\/p>\n

The fact is inflation is at nosebleed levels, and it\u2019s got just about everyone in a tizzy. And with good reason: Inflation eats away at incomes and makes products and services super-expensive. And since inflation now stands at multiple decade highs, you ignore it only at your own peril.<\/p>\n

But as bad as inflation is, I have to remind you that down deep, what really makes investors nervous is not inflation itself but the tool of choice that gets used to fight it: Higher interest rates.<\/p>\n

Why don\u2019t investors like higher interest rates? While higher interest rates do tend to work, they are a blunt instrument. They make all interest-related costs higher. And that can make businesses and consumers cut back on spending that makes our economy hum. As a result, right now, investors think that could lead to a recession.<\/p>\n

That\u2019s right: Behind all this inflation hysteria is the fear that a recession will take hold and really give the economy a blow to the chin. So, is a recession in the cards? Let\u2019s see.<\/p>\n

What Is A Recession?<\/h2>\n

In a nutshell, a recession is a slowdown in economic activity. In real-life terms, that usually means that during recessions, businesses don\u2019t expand and grow as much as they were prior to the recession. And that can mean that they pull back on investing in new equipment or factories or engaging in new projects. It can also mean that they put the brakes on hiring. Recessions can also mean that consumers don\u2019t spend as much. And that can translate into lower demand for just about every kind of good and service. <\/p>\n

If you\u2019re looking for a more technical definition, here goes: In the past, a recession was defined as two consecutive quarters of negative growth or contracting output. But these days, the National Bureau of Economic Research (NBER), the arbiter of recession-related data and analysis, says that the definition of a recession is a bit more nuanced:<\/p>\n

\u201cThe NBER's traditional definition of a recession is that it is a significant decline in economic activity that is spread across the economy and that lasts more than a few months. The committee's view is that while each of the three criteria\u2014depth, diffusion, and duration\u2014needs to be met individually to some degree, extreme conditions revealed by one criterion may partially offset weaker indications from another.\u201d Source<\/a><\/em><\/small><\/em><\/p><\/blockquote>\n

Economic expansion or contraction is usually measured by Gross Domestic Product (GDP). And a good back-of-napkin definition of GDP is the sum value of all goods and services produced in the U.S. during a specified period, usually a quarter. These goods and services include those that are produced for sale in markets and those that are provided for non-markets, such as government spending for education and defense.<\/p>\n

GDP numbers are typically quoted in annual terms. So, 5% GDP during the fourth quarter means \u201cduring the fourth quarter the economy grew at a 5% annual rate.\u201d<\/p>\n

Are We in a Recession Now? Not Quite<\/h2>\n

If we take the old definition of recession, namely two consecutive quarters of contraction, are we in a recession right now?<\/p>\n

Not quite. But we\u2019re close. See for yourself:<\/p>\n

\"Recession\"<\/a>
\n

Source<\/a><\/em><\/center><\/small><\/p>\n

As you can see from this chart, the U.S. economy contracted at an annual rate of 1.4% during the first quarter of 2020. And if you dig into the report, you can see that investment, exports, and government spending all took a dive. And compared to the 6.9% annual growth booked in the fourth quarter of 2021, the first quarter was a big miss.<\/p>\n

But here\u2019s the truth behind these numbers: Recessions are a natural part of the business cycle. And that means that they provide much-needed time for the economy to take a breather and cool off. In fact, recessions can give businesses and consumers a chance to figure out what\u2019s ahead without the constant burden of growth. <\/p>\n

Plus, in general, recessions don\u2019t last that long. In fact, the last recession lasted just two months, between February and April of 2020. And when you hold up recent recession compared to their neighboring expansions, they pale in comparison: The recession of 2020 followed an expansion of over 10 years.<\/p>\n

But the fact is we\u2019ve gotten so used to constant expansion, the oppositive of a recession, that we\u2019ve forgotten that they\u2019re a part of economic life. And that has caused investors to sell just about everything in sight, including stocks and Bitcoin. But the numbers simply don\u2019t support that kind of selling. At least not yet.<\/p>\n

Wayne Burritt<\/a>
\nINO.com Contributor<\/p>\n

Disclosure: This contributor may own cryptocurrencies mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

If you\u2019ve been following along here over the past year, I won\u2019t have to remind you that I have no problem telling it just like it is. And that includes the good news, and the bad news, about Bitcoin (BTC), cryptocurrencies in general, stocks, and the economy. You name it, and I try to be […]<\/p>\n","protected":false},"author":34,"featured_media":57014,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6920],"tags":[14379,14677,31661,31656,1750,851,31660],"class_list":["post-57010","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ino-com-contributors","tag-bitcoin-bitstampusd","tag-cryptocurrency-trading","tag-global-inflation","tag-how-to-trade-crypto","tag-inflation","tag-recession","tag-u-s-inflation"],"yoast_head":"\nWhat All The Recession Talk Really Means - INO.com Trader's Blog<\/title>\n<meta name=\"description\" content=\"If we take the old definition of recession, namely two consecutive quarters of contraction, are we in a recession right now?\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ino.com\/blog\/2022\/05\/what-all-the-recession-talk-really-means\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What All The Recession Talk Really Means - 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