Is This A Recession Or A Depression? Part 2 of 2

GDP Continued From Yesterday…..

The theory goes like this; if a country has lots of trades within its own borders AND with other nations, then it must be doing well financially. It is often used as an indicator of a country’s standard of living, though this isn’t always the case.

Standard Of Living

Why? Because of several factors; for example, the value of the country’s currency compared to others can help determine the standard of living enjoyed in a given country. The type of government in power (dictatorship etc.) will have a strong influence, and most importantly, products produced IN EXCESS of what it needs to survive must be considered.

Wealth

REAL wealth, whether it is individual wealth or national wealth, should only ever be measured in terms of what is available IN EXCESS of what is required to survive. When and individual can afford buy a new car every year whether he needs it or not is a sign of having something in excess of what he needs. Please note that I said “can AFFORD”. If a person has to take a loan out to pay for the new car, or a mortgage for the new house, then he cannot really afford it.

The Time Lag

One very important thing to remember is that severe economic downturns in a country (or indeed, worldwide) are ONLY called Depressions YEARS AFTER they happened. Because a country’s GDP has to drop by at least 10% over the previous year, or the decline lasts for three years or more, by definition it can ONLY be called a depression a minimum of one year after the fact, OR three years after (if the decline was less than 10%) .

The GreatER Depression

As I write this, the world is in a steep economic decline. In other words, there are far fewer trades going on both within any given country and between countries. While this cannot be technically referred to as a depression, there is no doubt at all that it WILL be called a depression in the years ahead.

While some people will eventually call it the GREATEST DEPRESSION, who’s to say that in another 80 years time (if humanity still exists) we won’t be led into yet ANOTHER DEPRESSION?  Historically, that’s exactly what happens.

Conclusion

In conclusion, the words used to describe a situation (economic or otherwise) are just words. What really matters is how people DEAL with that situation. They need to learn from historical events so that they can both deal with the current situation, and make sure that they teach the next generation how to prevent it from happening again. History does NOT have to “repeat itself”, BUT IT WILL!

Be Prepared!

YOU can protect yourself from this to a large degree, but you have to understand two things:

1. What to expect

2. How to prepare

Notice I didn’t say “how to REACT”.  Reaction means that it’s already TOO LATE; you would be reacting to something that has already happened.  Instead, you need to prepare yourself.  How?  Learn new skills.  Learn how to make your living INDEPENDENTLY of an employer.  Perhaps you can become a blogger and offer products that people living in a depression will want and need. Maybe you can learn to sell affiliate products on the internet.

Don’t look to the politicians to save you.  They are the ones that got us into this mess and they have no idea how to get us out.  You’ll have to protect YOURSELF!

Luke.

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