The definition of recession... what do mortgages have to do with it?

With all of this talk of recession, financial crises and (depression) I thought I would get some facts:

The Wikipedia definition of recession is a little looser than I would have liked, but I have found other definitions that I feel make it clear:

Recession

Definition:

A period of general economic decline; specifically, a decline in GDP for two or more consecutive quarters.

recession. InvestorWords.com. WebFinance, Inc. http://www.investorwords.com/4086/recession.html (accessed: October 04, 2008).


Generally, a down-turn in housing markets can predict recessions and it makes sense because if more people can't afford their homes than the year before it is a signal that the economy is slowing down. Rarely, however, are mortgages the cause of them. So what causes a recession? The cause of a recession occurs when too many people can't afford things. By things I mean houses, cars, general stuff. Why? Due to job loss, and lack of salary compensation to account for inflation, and a multitude of other complex economic issues that usually the Government tries to control. In general, all of the sources say something like this:

Recessions occur for various reasons. Most often, businesses build up inventories and, consequently, cut back their production and lay off workers, thus depressing earnings. The spiralling effect of lower income and low spending also dampens confidence in the economy. Large-scale natural disasters such as floods and droughts or trade wars between countries can induce recessions

I believe that for all of the above reasons, the American economy was already in Recession early last year (around Jan), but then George Bush tried to "fuel the economy" with silly efforts such as tax rebates, which have never worked.

Now tell me, does any of this sound familiar to you?

The Great Depression

I think this is much closer to what the United States is experiencing. I also think that mortgages have very little to do with what is happening. Finally, one thing that cannot be ignored is the fact that everyone will do a lot less spending in the next few months (and have been for the last few months) which will only continue the current negative economic trend. Can we feel badly about it as consumers? No. Absolutely not. We cannot put ourselves into a state of personal bankruptcy in an attempt to fuel a troubled economy. All we can do on an individual level is recognize when the economy is starting to turn and then try our best to lift it in whatever way we can by saving our dollars now and spending them later when the time is right.