The "Great Recession"

By: Katie Pfefferle

Recent news on the global economy indicates that things are looking up. The GDP contraction in the U.S. in the first quarter of 2009 was less than it has been. Japanese factory output rose by 5.2%, the largest percentage monthly increase in half a century. Even Europe’s numbers are less gloomy. Consumer confidence in the U.K. has grown and as have retail sales in Germany. For some hopeful economists these are all signs that the global recession is coming to an end.

However, as an article in The Economist argues, these encouraging signs really aren’t very indicative of the real sitatuion. Instead, a more sober analysis is needed. For example, “when a particular figure outdoes predictions it may be because those expectations were overly pessimistic, rather than a sign that something fundamental has changed for the better.” The increased retail sales and consumer confidence in German and the U.K. respectively could be temporary results of retailer incentives. The fundamental causes of the recession still haven’t been adequately addressed. Not enough has been done for the credit and financial problems at the root of the recession. Yes, consumption has been historically able to end recessions but consumers now are strapped with more debt than ever and are much less willing to open their wallets.

Until the financial institutions are better strengthened we shouldn’t expect to see an end to the global recession in the near future.