Dear Recession, you're not so bad
No one likes you, but you bring economic sanity.
There has been quite a bit of commentary about you recently, nearly all of it bad. Just about everyone wants to see you gone.
But I believe that where the business cycle is concerned, if you cannot be with the one you love, you should love the one you're with. I want to talk about your good qualities.
Statistical purists and incumbent politicians say you aren't real, since the GDP has yet to decline.
But it is no daydream that you are already having a welcome impact on several fronts. First is the US trade deficit. By tamping down our outsized appetite for the products of other countries, you combined with a weak dollar to erase nearly one-fourth of the trade deficit, excluding oil, since 2006.
Second, you're helping Americans save again. Imports were part of the all-consumption-no-savings behavior that helped create you in the first place.
In 1984, American households held an average debt of 60 percent of annual income. That number is now 120 percent. We can be thankful you showed up before it got even bigger, as the reckoning would be that much worse.
Nowhere was borrowing more fevered than in housing. In healthier times, one person's savings would be put in a local bank, where it might become the money needed to allow a young family to take out a loan and build a new home.
That simple picture became convoluted as financial innovation and outright greed pulled massive amounts of foreign savings into the US economy, allowing us to ignore our own lack of thrift. The resulting boom in housing construction that became one giant pyramid. When it became clear that the wealth being created on paper was out of line with the real value of the homes themselves, the pyramid fell under its own weight. You, the dreaded recession, appeared from the rubble.
But even here there is a good side. Lower prices have made a home more affordable to those who were conscientious in saving a down payment and are truly ready to purchase. You deserve some credit for that.
You also helped bring down skyrocketing oil prices by pulling back the economic growth that had them breaking records faster than Michael Phelps.
Despite all these good points, I have seen news reports trying to tie you to that economic chamber of horrors, the Great Depression. I don't believe it.
I recently read "Hard Times: An Oral History of the Great Depression" by Studs Terkel and saw how little resemblance that downturn bears to you.
In the Depression, unemployment reached a staggering 25 percent. Things were so grim that once hard-working family men joined together into angry, desperate mobs of rioters that cities were forced to deal with on the streets.
By comparison, the current US unemployment rate stands at 5.7 percent, an increase from recent values but no reason to riot.
However, this does bring up an issue about your potential dark side. The discipline you bring to the economy is good – up to a point.
More cautious spending and greater saving by consumers and more prudence by lenders is exactly what our economy needs for long-term health. Hopefully you don't give us too much of a good thing.
If people obsess over your bad points, discipline can become fear. Caution and prudence can become an unwillingness to engage in economic activity. Fear of a long, deep recession can become a self-fulfilling prophecy.
To avoid this we should remember your good points, and turn the pain you bring into strength. After all, even the Great Depression had a redeeming quality.
The hard lessons it brought to millions of Americans were not in vain. It forged an entire generation inside an economic blast furnace, giving them a sense of sacrifice and perseverance that would later serve them well. It may be no coincidence that those who lived during that time came to be called "the greatest generation."
It would be nice if that is not what you plan for us, but you do have an important job to do. Please, do not overstay the welcome.