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Silly Idea Of The Day Grocession

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by Felix Salmon
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Dec 27 2007 12:00am EDT

Silly Idea of the Day: Grocession

Are you tired yet of the debate about whether or not we are in, or might even already have entered, a recession? Given that nobody knows and nobody can know, the whole thing seems a little bit pointless to me. But at least we've moved on from the point at which economists were talking about the oxymoronic entity known as a "growth recession". Or have we?

David Gaffen has found some research from Wachovia which takes the dreadful "growth recession" concept and makes it even worse, by smushing it down into a "grocession". The original paper can be found here, and it's gruesome stuff, defining a grocession as a "new and unprecedented economic phase" of low growth which continues for some years, and then saying that "we assign grocession a 50% probability". Yeah, despite the fact that such a thing is "unprecedented" and therefore has never happened in economic history.

Underneath the sillliness, however, there is an interesting idea straining to escape: that we might be moving from a relatively high-growth Great Moderation into a relatively low-growth Great Moderation. Up until now, credit has been hit much more severely than equities; if this thesis holds water, that might be exactly the wrong way around. But still, as the immortal David St Hubbins once said, "it's such a fine line between stupid and clever".

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