Will the U. S. economy enter a depression by the end of 2009?

So, to clarify, the total for four consecutive quarters must be -10% or more? So Q3 '08 to Q2 '09 would be a valid combination, as would Q1 to Q4 '09?

I'm not going to vote because you have to use the OFFICIAL GDP figures. The government will just cook up the number to make it sound like everything is fine. The US was first to be in a recession but will be the last to admit it and it'll be the same if there's a recession. They just modified the inflation data last time to get that bull sh*t 0.2% growth

The US can't even admit that they are in a recession let alone a coming depression. No offence to you bayoubear.

...nice accompanying pic btw...is it from "The Grapes of Wrath" ?

Not from Grapes of Wrath but one of the most famous pictures shot during the Depression by Dorothea Lange....she toured much of the country during the time of the Depression and the Dust Bowl photographing the people and their living conditions...If ya have a chance, take a look at some of her work...truly wonderful shots, the artistry of the camera.....

Ok thanks...I've heard of her. Didn't your Dept of Agriculture or Commerce also do the same thing? I think I saw something on PBS about that once. Remarkable photos. Guess I'm getting way off topic here...sorry folks.

Dorothea Lange one of the most extraordinary photographers of her time.... i love her work. NY Institute of Photogrpahy has some cool stuff about her.

And umm on topic... so 18 months after the fact think the USA will use the term depression? Or will they come up with a new term such as "Repression" " Viagra Recession" "Prolonged Recession" "Prozaic Economic Downturn"

International Center of Photography
1133 Avenue of the Americas, New York, NY
Sept. 19, 2008 - Jan. 4, 2009

Even when they go into a deflation they will still not omit there is a depression
at the moment they yanks are a bit of a laugh , trying to drag every country behind them .
(said with respect.)

ITS also possible Thad madoff may come into plat on this issue as well.?

opps that

heh, omg curious..u got it right we r gonna drag everyone of u down the septic tank with us......

If we have a depression I am going to demand that my hubdub $$$ Become real dollars!!!

Right... this question seems to be the source of my extreme negativity on the Business leaderboard. I'm going to continue to be optimistic here, because if we really do hit depression levels, will I really care if I lose 40k Hubbucks?

I believe that is now 45k Jen....you surely are the optimist, and I for one am glad.

"so 18 months after the fact think the USA will use the term depression? Or will they come up with a new term ...?"

Depression 2.0?

I'm long on this contract on intrade and here and it's pretty misunderstood. Intrade's definition, which is the one being referred to here, is four consecutive quarters of negative GDP totaling at least -10% adjusted seasonally. So far we have 2008 Q3 at -0.5%, 2008 Q4 preliminary at -3.8% and a forecast for 2009 Q1 at -4.2% to -4.6%. If that forecast holds true at -4.2%, then you'd need either 2009 Q2 to be -1.6%. There's also a possibility the contract could spill over into Q3, so long as Q2 was negative.

Given that the stimulus package will take until at least July or August to kick in and have any meaningful impact, I see this as a winning bet with the odds about 70/30. Over that, it's over valued until the final 08 Q4 or preliminary 09 Q1 numbers come out.

Seems like a sure bet now: http://news.yahoo.com/s/ap/20090227/ap_on_bi_go_ec_fi/economy

"so 18 months after the fact think the USA will use the term depression? Or will they come up with a new term ...?"

Decession?

put some more prozac in the water and no one will care.

Seems like a sure thing at this point, just need to wait for the data for Q1 & Q2 2009. I don't think anybody expected -6.3% in Q4 08. Combined with the Q3 08 -0.5%, just -3.0% in Q1 (right now some early forecasters are saying it might be as much as -7.0%!) and -0.3% in Q2 and it settles as a "depression".

Of course the good news on this is the faster we hit the bottom, the hope is that we will rebound with similar velocity. I'm not sure I'm that optimistic, but wall street sure seems to think we've hit the bottom already.

http://tinyurl.com/cj8j3u (Q109 estimates are in)
-6.1% in the 1st quarter preliminary estimates. So that makes it Q308 -0.5% Q409 -6.3% Q109 -6.1%. Even -0.1% in Q209 will meet the definition of depression in this market.

Hold your horses curios... we're almost there but per the background details:
For the purpose of this question a depression is defined as a as a cumulative decline in GDP of more than 10.0% over four consecutive quarters.

In agreement with frogchop's comments, any negative value for Q209 and this settles as YES.

BEA: Gross Domestic Product
http://www.bea.gov/briefrm/gdp.htm

Oops... I apologize curios... you requested settlement on the 26th of April.

I'm late to this depressing party. ;-)

@ FOF, the Q109 numbers were revised upward into the 4s since I posted (22), but we're still well over 10%, just need Q209 to be negative.

wait a minute, guys and gals. As I understand it, the quarterly numbers that we are talking about represent the ANNUAL RATE of change in GDP. So, if the GDP drops by 5% annual rate in each of the four consecutive quarters, it will have dropped a total of 5% in those four quarters = 1 year! the GDP is not dropping by 5% in each quarter, it's the annual rate! So, we are at the moment on pace to drop maybe 5-6% from q3 08 to q2 09.....

Tuff, this market is based on the intrade market, which is established on the four consecutive quarters posting a negative GDP, totaling 10% or greater cumulatively quarterly. The thread here isn't half as long as the one on the intrade forum, but it's clearly established. If it doesn't follow the intrade rules, it shouldn't have been linked to the intrade market. The intrade market, incidently, is trading at roughly 98%, and that's with real money on it.

what are you talking about froggie, what's this intrade market?? whatever it is, what I stated above is still correct.

ok, I figured out what intrade is and yes, what I pointed out above is exactly what their interpretation is. So, I don't see it adding up to a total drop of 10% over the four quarters, we are maybe half-way there and things are starting to stabilize..

For the purpose of this question a depression is defined as a as a cumulative decline in GDP of more than 10.0% over four consecutive quarters

2008 Q3: -0.5
2008 Q4: -6.3
2009 Q1: -5.5
Source: http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=1&Freq=Qtr&FirstYear=2008&LastYear=2009

Cumulative decline for the last three quarters:
(-0.5) + (-6.3) + (-5.5) = -12.3

f-o-f, that is incorrect. The intrade market is still open, because they understand that cummulative decline over 4 quarters is NOT adding up the ANNUALIZED quarterly numbers. In your example above, the decline, so far in the three quarters is about 4.1% (12.3 divided by 3). This is a bad recession, but nowhere near a depression. Wall street understands this - perhaps it escaped your vigilance, but there has been one heck of a rally going on lately....
I do not think hubdub can re-write economic theory by creating a new definition of depression. By your definition, a real 10% slump in one year that would qualify as a depression would add up to 40%!!! Have you read anywhere that we are in a Depression lately? Do you think the media would have missed an event of such importance? NO, they understand the meaning of ANNUALIZED quarterly numbers.....
I believe bayoubear will get this sorted out in due course, the market has been flagged for clarification.

Here's the contract rules from Intrade:

This contract will settle (expire) at 100 ($10.00) if the annualized quarterly Real GDP figures over four consecutive quarters sum to worse than -10% (i.e. -10.1%).

The contract will settle (expire) at 0 ($0.00) if the annualized quarterly Real GDP figures over four consecutive quarters sum to -10% or better (i.e. -10.0% or -9.9%)

This market will be expired by adding together the published (annualized) Real GDP figures, for example:

Example 1:

In Q1 the Final Real GDP figure is -3.5%
In Q2 the Final Real GDP figure is -2.5%
In Q3 the Final Real GDP figure is -2.0%
In Q4 the Final Real GDP figure is -2.3%

The sum of these figures is -10.3% so the contract will be expired at 100.

Example 2:

In Q1 the Final Real GDP figure is -1.5%
In Q2 the Final Real GDP figure is -2.5%
In Q3 the Final Real GDP figure is -1.8%
In Q4 the Final Real GDP figure is -2.0%

The sum of these figures is -7.8% so the contract will be expired at 0.

Example 3:

In Q1 the Final Real GDP figure is -3.0%
In Q2 the Final Real GDP figure is -2.5%
In Q3 the Final Real GDP figure is -2.5%
In Q4 the Final Real GDP figure is -2.0%

The sum of these figures is -10.0% so the contract will be expired at 0.


Expiry will be based on official quarterly final Real GDP figures reported by the U.S. Department of Commerce (Bureau of Economic Analysis, Table 1.1.1, "Percent Change From Preceding Period in Real Gross Domestic Product") as reported by the BEA.
http://www.intrade.com/jsp/intrade/common/c_cd.jsp?conDetailID=647817&z=1248150840079

thanks f-o-f for finally providing the direct link to the specific intrade market. I could never get to it before. Now it is clear that intrade is asking a dfferent question than this market's headline. you are right, intrade is going by sum of quarterly figures. they never say anything about a depression. The problem here is that the headline question asks: will the US enter a depression? with the definition being a 10 percent decline in GDP. the question here mixes two concepts. As I explained it above, the real numbers currently are nowhere near depression levels, because adding up the annualized numbers is not how you get the true figure. This market has a major problem.....

Just a side note that seems relevant; prior to 1933 any economic downturn which resulted in a shrinking in GDP for two consecutive quarters was called a depression. After the Great Depression, as a measure to prevent anxiety in the markets over small economic downturns the term depression was abandoned and replaced with the softer term, recession. The term depression no longer has a recognized definition of anything. Some economists have taken stabs at it, but it's not a term with an agreed upon definition. That is why intrade made one up. They did a lousy job of it. The contract was re-written at least twice that I know of trying to clarify the market because they failed to mention annualized or explain cummulative in the initial contract. As they worked to clarify and fix their mistakes, they peeved off some big money investors to the tune of about $320k.

Because there is no recognized definition for a "depression" I went purely by the definition in this question, which asks for the cummulative decline over four quarters. I agree, this market is seriously flawed at this point. If I recall, there's another question out there asking about a retraction in GDP that the author (or admin) hasn't clarified that's another ticking time bomb like this one. I'll try to track it down.

So, let's go back to the Background and I quote:
"For the purpose of this question a depression is defined as a as a cumulative decline in GDP of more than 10.0% over four consecutive quarters. This data will refer to the official quarterly GDP figures as reported by the U.S. Department of Commerce. The final quarterly GDP figures will be used for settlement. The advance or preliminary numbers will not settle this question. This calculation will include figures dating back to those released for the 3rd quarter of 2008."
(this part would be interpreted by any reasonable person to mean that over four consecutive quarters, the real GDP would drop by a total of 10% to 90% of what it was to start with)

"For more information:
http://www.intrade.com/news/mainpage.jsp?article=news_288.html"

( the hooker is the link to another website, which does not mention the word "depression" at all, but stipulates a cumulative decline in the quarterly reported numbers adding up to 10% or more.

"Settlement details:As reported by a major mainstream news source."

Major mainstream news sources will not conclude that there is a depression if we have four consecutive quarters of 6% annualized drop in GDP, because that is only a 6% annual drop, not 24%, a figure you get by adding up the annualized quarterly numbers.

So, I am OK to wait for the mainstream news sources to make the call on whether or not we are in a depression.
Of course, Froggy is right, there is no one formal definition of a depression, but 10% drop in GDP is widely used as a definition.
bb, you have a hot potato here......
the saving grace is that we are talking about play money - isn't it funny how grown men and women get worked up over a few thousand virtual dollars (I am looking in the mirror here)
we humbly await your ruling, oh mighty King Solomon.
Cheers,
tuff

Yeah! What he said. I want my half of the baby!

Hmm, home sales are up, the Dow just surged over 9k and unemployment numbers are down. Anybody see a depression in that??
Hell no, so I want the whole baby! :-) just kidding :-)
Oh, mighty Bear, we beg for your guidance....

bb, are you home?
I said we are HUMBLY waiting. I didn't say PATIENTLY! :-)
Patience is an acquired virtue, I am still working on acquiring it..

I have made my decision, but choose not to reveal it as it might set off movements within the market that could fluctuate wildly. I will suspend this market for the time being on Sunday to see how the latest figures may affect the outcome. Of course, if there is not a negative result, the question can be reopened. BUT, if there is one, it can be settled.

the result is in, the quarter was negative, but only slightly so. Sorry, bb, no easy way out. There sure as hell is no depression. I'll settle for half a baby, but I still think I am right....

froggy is right, I am also right and we each want the whole baby.
Now what will you do, mighty king Solomon???
May I suggest cloning?

If we stick to the letter of the background, we have to wait until the final numbers which will be out September 30 if I recall correctly (on the BEA website). Since it's a very close horse race, I'm all for waiting. Revised numbers often change from preliminary numbers by as much as 1%, so to be fair, I hate to say it, but we should wait.

I see your point, froggy. Why not re-open the market then, if we will wait? I guess technically we really need to wait until Q4 final numbers are in, in case the bottom falls out....
wake me up when it's over!

Anyone know whatever happened here?

SUSPENDED ANIMATION
I think bayoubear is still trying to figure out how to clone the baby that both frogchop and I deserve to have whole.....

Well, it's 2010 now...

bayoubear, aka king Solomon rocks!
thanks for that wise solution....
M