Introdution :

A Recession is a business cycle contraction, a general slowdown in

economic activity. During recessions, many macroeconomic indicators vary in a similar way.
Production, as measured by gross domestic product (GDP), employment, investment
spending, capacity utilization, household incomes, business profits, and inflation all fall,
while bankruptcies and the unemployment rate rise.
Recessions generally occur when there is a widespread drop in
spending, often following an adverse supply shock or the bursting of an economic bubble.
Governments usually respond to recessions by adopting expansionary macroeconomic policies,
such as increasing money supply, increasing government

DeFination :

n a 1975 New York Times article, economic statistician Julius Shiskin
suggested several rules of thumb for defining a recession, one of which was "two down quarters
of GDP". n time, the other rules of thumb were forgotten. Some economists prefer a definition of
a 1.5% rise in unemployment within 12 months.
n the United States, the Business Cycle Dating Committee of
the National Bureau of Economic Research (NBER) is generally seen as the authority for dating
US recessions. The NBER defines an economic recession as: "a significant decIine in
economic activity spread across the economy, lasting more than a few months, normally
visible in real GDP, real income, employment, industrial production, and wholesale-retail
sales." Almost universally, academics, economists, policy makers, and businesses defer to the
determination by the NBER for the precise dating of a recession's onset and end.
A recession is a decIine in a country's gross domestic product (GDP)
growth for two or more consecutive quarters of a year. A recession is aIso
preceded by severaI quarters of sIowing down.

%e Real Reason For

America's Recession




I ope te following 14 reasons for te United States
financial "recession" disaster are Iorwarded over and over again, until
American Citizens get the message and demand better government. I ave
included te URL's for verification of all te following facts.


$11 Billion to $22 billion is spent on welIare to illegal aliens
each year.

$2.2 Billion dollars a year is spent on Iood assistance
programs such as Iood stamps, WIC, and Iree school lunches
Ior illegal aliens.

$2.5 Billion dollars a year is spent on Medicaid Ior illegal
aliens. http://www.cis.org/articles/2004/Iiscalexec.html

$12 Billion dollars a year is spent on primary and secondary
school education Ior children here illegally and they cannot
speak a word oI English!

$17 Billion dollars a year is spent Ior education Ior the
American-born children oI illegal aliens, known as anchor
babies.

$3 Million Dollars a DAY is spent to incarcerate illegal
aliens.

7. 30 percent oI all Federal Prison inmates are illegal aliens.

$90 Billion Dollars a year is spent on illegal aliens Ior
WelIare & social services by the American taxpayers.

$200 Billion Dollars a year in suppressed American wages

are caused by the illegal aliens.

%he illegal aliens in the United States have a crime rate that's
two and a halI times that oI white non-illegal aliens. In
particular, their children, are going to make a huge additional
crime problem in the US

During the year oI 2005 there were 4 to 10 MILLION illegal
aliens that crossed our Southern Border also, as many as
19,500 illegal aliens Irom %errorist Countries. Millions oI
pounds oI drugs, cocaine, meth., heroin and marijuana,
crossed into the U. S Irom the Southern border. Homeland
Security Report:

%he National Policy Institute, 'estimated that the total cost oI
mass deportation would be between $206 and $230 billion or
an average cost oI between $41 and $46 billion annually over
a Iive year period.'

In 2006 illegal aliens sent home $45 BILLION in remittances
back to their countries oI origin. 14. '%he Dark Side oI Illegal
Immigration: Nearly One Million Sex Crimes Committed by
Illegal Immigrants In %he United States '.

%e total cost is a wopping $ 338.3 BILLION DOLLARS
A YEAR!!!

131 - U5 5TATE5 RENAMED FOR COUNTRlE5

WlTH 5lMlLAR GDP5


Gross Domestic Product (GDP) is a
convenient way of measuring and comparing the size of
national economies. Annual GDP represents the market value
of all goods and services produced within a country in a year.
Put differently:
CDP consumption + investment + government spending + (exports - imports

Although the economies of countries like

China and India are growing at an incredible rate, the US
remains the nation with the highest GDP in the world - and by
far:
GDP Is projected to be trillion (or $13.220 billion) in
2007, according to this source. Thats almost as much as the
economies of the next four (Japan, Germany, China, UK)
combined.
The creator of this map has had the interesting idea
to break down that gigantic US GDP into the GDPs of individual
states, and compare those to other countries GDP. What
follows, is this slightly misleading map - misleading, because
the economies both of the US states and of the countries they
are compared with are not weighted for their respective
populations.
Pakistan for example has a GDP that's slightly higher than Israel's -
but Pakistan has a population of about million, while Israel is only 7
million people strong. The US states those economies are
compared with (Arkansas and Oregon, respectively) are much
closer to each other in population: 2,7 million and 3,4 million.

What are the causes of US recession?

An economy which grows over a period of time tends to slow
down the growth as a part of the normal economic cycle. An economy typically
expands for 6-10 years and tends to go into a recession for about six months to 2
years.
A recession normally takes place when consumers lose
confidence in the growth of the economy and spend less.
This leads to a decreased demand for goods and services,
which in turn leads to a decrease in production, lay-offs and a sharp rise in
unemployment.

nvestors spend less as they fear stocks values will fall and
thus stock markets fall on negative sentiment.


Most important point i want to mention is that
american economy got struck in recession is because the low and poor
economic fundamental of USA. A fall in effective demand will lead to a
fall in demand, thus contributing to an economic downturn. For
instance, any consumer feeling less secure about his future (jobs or
otherwise) might want to delay purchasing a car. When this happens
across the economy.
Other things being equal, above average rates of
Total Factor Productivity growth (because of technological innovation)
generate higher rates of growth in real (inflation adjusted) wages
because workers are compensated for producing more goods and
services.


urrent crisis in the US

The defaults on sub-prime mortgages (homeloan defaults)
have led to a major crisis in the US. Sub-prime is a high risk debt offered to
people with poor credit worthiness or unstable incomes. Major banks have
landed in trouble after people could not pay back loans (See: Subprime pain:
Who lost how much)


The housing market soared on the back of easy availability
of loans. The realty sector boomed but could not sustain the momentum for long,
and it collapsed under the gargantuan weight of crippling loan defaults.
Foreclosures spread like wildfire putting the US economy on shaky ground. This,
coupled with rising oil prices at $100 a barrel, slowed down the growth of the
economy.

How to fight recession

Tax cuts are the first step that a government
fighting recessionary trends or a full-fledged recession proposes to do. n the
current case, the Bush government has proposed a $150-billion bailout package
in tax cuts.
The government also hikes its spending to create
more jobs and boost the manufacturing and services sectors and to prop up the
economy. The government also takes steps to help the private sector come out
of the crisis.

Past recessions
The US economy has suffered 10 recessions
since the end of World War . The Great Depression in the United was an
economic slowdown, from 1930 to 1939. t was a decade of high unemployment,
low profits, low prices of goods, and high poverty.
The trade market was brought to a standstill,
which consequently affected the world markets in the 1930s. ndustries that
suffered the most included agriculture, mining, and logging.
n 1937, the American economy unexpectedly
fell, lasting through most of 1938. Production declined sharply, as did profits and
employment. Unemployment jumped from 14.3 per cent in 1937 to 19.0 per cent
in 1938.
The US saw a recession during 1982-83 due to a
tight monetary policy to control inflation and sharp correction to overproduction of
the previous decade. This was followed by Black Monday in October 1987, when
a stock market collapse saw the Dow Jones ndustrial Average plunge by 22.6
per cent affecting the lives of millions of Americans.
The early 1990s saw a collapse of junk bonds
and a financial crisis.
The US saw one of its biggest recessions in
2001, ending ten years of growth, the longest expansion on record.
From March to November 2001, empIoyment
dropped by aImost 1.7 miIIion. In the 1990-91 recession, the GDP feII 1.5 per

cent from its peak in the second quarter of 1990. The 2001 recession saw a
0.6 per cent decIine from the peak in the fourth quarter of 2000.
The dot-com burst hit the US economy and many
developing countries as well. The economy also suffered after the 9/11 attacks.
n 2001, investors' wealth dwindled as technology stock prices crashed.


110.9841#0.08843


|mpact of a Poss|b|e U8 Recess|on |n |nd|a

The dot-com burst hit the US economy and many

developing countries as well. The economy also suffered after the 9/11 attacks.
n 2001, investors' wealth dwindled as technology stock prices crashed.

Trougr ro ore |||es or Warls a recess|or, a|rosl everyore appears

(|oo||rg al wEF, 0avos) recorc||ed lo ore |r lre ur|led 3lales. VearWr||e, po||l|c|ars corl|rue lo
doWrp|ay ary lears ol g|ooa| repercuss|ors, c|l|rg decoup||rg ol lre ur|led 3lales ard olrer
ecoror|es as a ouller|rg laclor. 8ul Wral |s lre rea||ly lor courlr|es |||e lrd|a?
ll Wou|d oe rave lo |rag|re lral a recess|or |r lre ur|led 3lales Wou|d
rave ro |rpacl or lrd|a. Tre ur|led 3lales accourls lor ore-lourlr ol lre Wor|d 00P ard ary
s|gr|l|carl s|oWdoWr |s oourd lo rave reveroeral|ors e|seWrere. 0r lre olrer rard,
|rlerdeperderc|es oelWeer lre u3 ecorory ard ererg|rg ecoror|es |||e lrd|a ard Cr|ra ras
reduced cors|derao|y over lre |asl lWo decades. Trus, lre ellecl ray rol oe as drasl|c as Wou|d
rave oeer lre case |r lre 1980s.
Ever so, lears ol a u3 recess|or |ed lo par|c |r lre lrd|ar sloc| rar|el.
Jaruary 21 ard 22 saW a re|ldoWr W|lr a r|rd-oogg||rg u3S150 o||||or |r rar|el cap|la||zal|or
oe|rg vapor|zed. Ar urprecederled |rleresl cul oy lre Fed |ed lo a oource-oac| or Jaruary 23
ard al lre l|re ol lr|s Wr|l|rg, lre oercrrar| |rdex (83E) ras ga|red 2.5, a|rosl |r ||re W|lr
larg-3erg, N|||e|, ard Kosp|.

l|slory r|grl ro|d a c|ue rere. Tre |asl l|re lre ouoo|e oursl (2001-
2002), lre 0JlA Werl doWr oy 23, Wr||e lre lrd|ar lrdex le|| oy 15.
Vucr ras rappered oelWeer lrer ard roW. Tre lrd|ar ecorory ras
sroWr a roousl ard cors|slerl groWlr lrajeclory ard lre projecl|or lor 2008 |s 9. lrd|ar exporls
lo lre ur|led 3lales accourl lor jusl over 3 ol 00P. lrd|a ras a rea|lry lrade surp|us W|lr lre
ur|led 3lales.
lr olrer Words, lre ellecls ol lr|s recess|or or lrd|a ray oe qu|le d|sl|rcl
lror lrose ol lre pasl. lere are sore areas Worlr lo||oW|rg:
1. A cred|l cr|s|s |r lre ur|led 3lales r|grl |ead lo a 7est7:ct:7|ng of
asset a||ocat|on al pers|or lurds. ll ras oeer suggesled lral Ca|PER3 |s |||e|y lo sr|ll ar
add|l|ora| u3S21 o||||or lo |ls |rlerral|ora| porllo||o. A |arge porl|or ol lr|s |s |||e|y lo l|oW |rlo lrd|a
ard Cr|ra. ll olrer lurds lo||oW su|l, a cascad|rg ellecl car oe expecled. A|org W|lr lre a|ready
s|gr|l|carl do||ar lurds ava||ao|e, lre add|l|ora| lurds cou|d oe dep|oyed lo creale |rlraslruclure--
roads, a|rporls, ard seaporls--ard oe ready lor a rap|d la|eoll Wrer rorra|cy |s reslored.
2. lr lerrs ol spec|l|c seclors, lre |T Enab|ed 8e7;|ces secto7 may be
h|t s|rce a rajor|ly ol lrd|ar lT l|rrs der|ve Z5 or rore ol lre|r reverues lror lre ur|led 3lales--
a c|ass|c case ol rav|rg pul a|| eggs |r ore oas|el. ll Forlure 500 corpar|es s|asr lre|r lT
oudgels, lrd|ar l|rrs cou|d oe adverse|y allecled. lrslead ol |oo||rg al lre scerar|o as a lrreal,
lre seclor Wou|d do We|| lo locus or producl |rroval|or (as opposed lo rere|y prov|d|rg serv|ces).
ll lr|s |s dore, lrd|a car ererge as a rajor p|ayer |r lre lT producls calegory as We||.
3. Tre man:fact:7|ng secto7 has to 7amp :p sca|e econom|es, ard
|rprove producl|v|ly ard operal|ora| ell|c|ercy, lrus |oWer|rg pr|ces, |l |l W|sres lo ollsel lre |oss ol
reverue lror a poss|o|e u3 recess|or. Tre derard lor app||arces, corsurer e|eclror|cs, appare|,
ard a rosl ol producls |s ruge ard car oe exp|o|led lo advarlage oy adopl|rg appropr|ale pr|c|rg
slraleg|es. A|lrougr ur|||e|y, a pro|orged recess|or r|grl see lre erergerce ol reW reg|ora|
group|rgs--lrd|a, Cr|ra, ard Korea?
1. Tre lour|sr seclor cou|d oe allecled. NoW |s lre l|re lo agg7ess|;e|y
p7omote hea|th to:7|sm.0|ver lre ava||ao|||ly ol la|erled proless|ora|s, ard W|lr a d|sl|rcl cosl
advarlage, lrd|a car oe lre desl|ral|or ol cro|ce lor rea|lr lour|sr.
5. A recess|or |r lre ur|led 3lales ray see lre |oss of some jobs |r
lrd|a. Tre corcepl ol 3oc|a| 3ecur|ly, lral ras oeer aoserl url|| roW, ray ga|r rorerlur.
. Tre lrd|ar Rupee ras apprec|aled |r re|al|or lo lre u3
do||ar. Expo7te7s a7e p:sh|ng fo7 go;e7nment |nte7;ent|on ard rale culs. wral |s corver|erl|y

lorgoller |r lr|s deoale |s lral a slrorger Rupee Wou|d reduce lre |rporl o|||, ard rarroW lre
overa|| lrade del|c|l. Tre lrd|ar cerlra| oar| (Reserve 8ar| ol lrd|a) car |rlervere aryl|re ard cul
|rleresl rales, |rcreas|rg ||qu|d|ly |r lre ecorory, ard cala|yz|rg doresl|c derard. A slrorg
doresl|c derard Wou|d a|so re|p |r corpel|rg g|ooa||y Wrer lre recess|or |s over.
lr surrary, al lre racro-|eve|, a recess|or |r lre u3 ray or|rg doWr
00P groWlr, oul rol oy rucr. Al lre r|cro-|eve|, spec|l|c seclors cou|d oe allecled. lrroval|or
roW ray prove lo oe lre erg|re lor groWlr Wrer lre rexl ooor occurs.
For u3 l|rrs, Wro rave |org |oo|ed al Cr|ra as a oeller |rveslrerl
desl|ral|or, lr|s ray oe a good l|re lo |oo| al lrd|a as We||. Aller a||, 350 r||||or peop|e W|lr
purcras|rg poWer carrol oe |grored. Tr|s |s rol a sa|es p|lcr lor lrd|a, oul or|y a gerl|e
suggesl|or lo u3 corporal|ors.
US Economy Forecast 2008 - First Recession then
Recovery

18,000 Jobs? Not ReaIIy.

The Bureau of Labor Statistics put out its monthly employment
report today. The consensus forecast was for 70,000 new jobs. BLS came out
with only 18,000 jobs, promptly putting the market into a funk, with the Dow
falling 256 points. Since the economy needs to create about 150,000 jobs a
month just to account for growth of population, today's employment numbers are
quite anemic. But it's worse than the headline number would indicate.
have touched on this in earlier letters, but let's quickly revisit
something called the birth-death ratio.
The Bureau of Labor Statistics actually does two different
surveys. One is called the payroll or establishment survey, which is comprised of
calling approximately 160,000 businesses (out of 9,000,000) and seeing how
many workers they have that month. They survey enough businesses to cover
about 1/3 of non-farm employees. And that should be enough to get a good idea
of where things are going, right?
Close, but not exactly. They do not contact very many small
businesses, and of course cannot call new businesses. And since small and new
businesses are the engine of job growth in the US, it is important to include an
estimate for them. And they do this by estimating the number of new jobs in

various categories that are created or lost by means of something called the
birth-death (BD) ratio.
The BD ratio estimate is based upon past history. While
estimating the most recent month's employment picture is quite difficult, you can
do a fairly accurate job when you go back a few years, using other government
data, tax information, etc. And so you can create a trend for how many jobs you
miss due to the birth and death of jobs in the small business area. Now,
remember, that number is an average of many years of history. As an average it
is fairly accurate over long periods of time.
But there is one flaw in this methodology: it will tend to
underestimate new jobs when the economy is recovering from recession and
overestimate them when the economy is slowing down. Thus, in 2003-4, the
Democrats were beating up Bush about the jobless recovery. As it turns out,
those employment numbers were massively revised upward a few years later.
There was in fact a powerful recovery going on, just not in the statistics.
However, nobody but a few economic geeks paid attention, as it was last year's
news.
This month the BD ratio created 66,000 new jobs for the
establishment survey, or 48,000 more jobs than the headline number. Let's look
at a table directly from the BLS web site.

Does anyone seriously think that 17,000 jobs were created

in the financial services world this last month? Where did that 17,000 number
come from? Well, last year it was also 17,000. n fact, if you look at 2006, the
numbers track very closely with 2007, which track closely with 2005, and so on.
My prediction is that in a few years when the data is revised we will find that
December saw a loss of jobs.
And good friend Barry Ritholtz writes: "Consider: The B/D
generated 1,239,000 jobs from February thru November 2007. That's rather
surprising, since the total NFP jobs created since January 2007 was 1,208,000 .
n other words, the Net Birth/Death jobs created over 10 months was actually
greater than the total NFP jobs created in all of 2007. That's rather odd, don't you
think?"
Now, mentioned that the Bureau of Labor Statistics does
two surveys. The other one is the household survey, where they simply call
60,000 homes (at random) and ask how many people are in the home and who
has jobs (part-time or full-time), does anyone want a job who doesn't have one,

and so on. This survey covers people who are employed both by large and small
employers, illegal immigrants, etc.
(By the way, this is going to become increasingly suspect
as more of us simply use cell phones and do not have a home phone. t will skew
the survey.)
These surveys tend to paraIIeI each other, except at
turning points in the economy. Then there can be some Iarge
discrepancies. As an exampIe, take this month's househoId survey.
There was a loss of 436,000 jobs in the household
survey. Unemployment rose to 5%, up from 4.4% last February, and 4.7% last
month. Writes Philippa Dunne from The Liscio Report: "Rises of that magnitude
are rare; it's 1.6 standard deviations from the mean, and at the 92nd percentile of
monthly changes since 1950. They're even rarer outside recessions; of the 55
rises of 0.3 point or more, just 18 have been in expansions, and most of those
were either close to recessions or in jobless recoveries. n fact, the last time we
saw a 0.3 point rise was in January 2001, two months before the official cycle
peak. More than half the rise in unemployment came from permanent job losers."
Now we know why Christmas consumer spending was so weak. And some
segments of the economy were particularly hard hit. Unemployment rose to
17.1% for all youth, and 34.7% for black youth (up by 5%!!!). 6.9% of single
women with children are unemployed, and are losing jobs faster than the work
force at large. Part-time jobs are way up. The BLS also tracks part-time jobs of
people who are doing them out of economic necessity, and that is up even more.
All in all, this was an ugly labor report. Look at the graph below from Chart of the Day.

Housing: Going Down, Down, Down


Let's look at two charts from Gary Shilling's latest letter. They pretty much say it all:

Notice that the inventory of new homes is continuing to rise.

Also, that new home sales have not fallen to the level of 1991. There is still
significant potential downside for new home sales. Separate work by Shilling
suggests that some 2,000,000 excess homes have been built over the past
decade. These have been bought by speculators and people who we are now
discovering they cannot afford to make the payments on the homes. Low rates,
rising prices, and reckless lending standards spurred an irrational rush into
housing speculation, and sent the wrong signals to builders, who responded by
overbuilding.
New home construction is still way too high given the
inventory levels, and will fall further. t is way too early to call a bottom of the
housing market, or a recovery of home builders. Now let's look at the next chart:

One last chart from Gary to illustrate the problem. Vacant

properties are at an all-time high. Speculators who bought homes to flip are now
in a cash crunch. They can either rent at a loss, or see their homes foreclosed.
This is going to create a real oversupply of homes for at least several years.

s have made the case for over a year, the negative wealth affect from falling
home prices is going to put a damper on consumer spending. The reduced ability
to borrow money on homes is going to put a crimp in consumer spending. Higher
unemployment from fewer construction, mortgage, and housing-related industry
jobs will negatively affect spending.
This is going to be a problem until at least the middle of 2009, as it
will take that long to work through inventories and foreclosures. That is one of the reasons
why think the recovery will be slower than it normally would be. But now let's turn to the
second bubble, and a brewing problem that could mean a further round of massive bank
write-offs.