Goodbye ‘recession,’ hello new normalcy

KEY DATA: The U.S. Department of Commerce reported U.S. Gross Domestic Product (GDP) plunged at an annual rate of 6.1%, after shrinking by 6.3% in the last three months of last year.
 
TAKE AWAY: We’re witnessing a revolutionary shift in our economic system and recession could very well soon be a Jurassic term.
 
Governments, economists and pundits have been closely monitoring the financial indicators to let a skeptical public know when the economy might rebound, but one scenario they aren’t preparing consumers for is that we may never go back to the same traditional economic cycles of yore. 
 
Labeling this global mess a recession—an extended decline in general business activity, typically two consecutive quarters of falling real gross national product—may be a bit reckless when such a cycle may no longer exist. 
 
We cannot assume that, once the economy is on the uptick, we will resume the five-to-seven year up-cycle, followed by the average 10-month recession pattern that we’ve known since World War II. 
 
The reality is the financial cycle the world has plunged into is much more dynamic and perhaps a bit scarier than history has yet recorded.  The troughs, the spikes, and peaks move so quickly in this global economy, “recession” is inadequate to describe what our economy is experiencing.
 
The “Rise of the Rest” and the interconnectivity of the world has sparked an economic evolution.  This evolution has in turn created a new gene pool that includes powerhouse sovereign wealth funds; technology that moves at the speed of light; disruptive technologies and hyper-competition—all of which will influence this new financial era.
 
The speed at which this financial tsunami and its aftershocks are hitting industries and markets, countries and consumers is making it increasingly difficult to measure the variables, let alone even begin to predict them.
 
Consider that a November 17, 2008 report from the Federal Reserve Bank of Philadelphia suggested that the recession started in April 2008 and would last 14 months.  In this same report, these fortunetellers predicted that the real GDP—our output of goods and services—would decline at an annual rate of 2.9% in the fourth quarter and 1.1% in the first quarter of 2009.
 
But the numbers are proving to be far greater.  The U.S. Department of Commerce reported the GDP plunged at an annual rate of 6.1%, after shrinking by 6.3% in the last three months of last year.
 
Even the European Union had to revise its forecast for the 16 countries comprising the euro-area economy to 4%—a contraction more than twice as deep as was predicted in January when the EU commission believed it would only contract 1.9%.
 
Such incredible disparity between predictions and actual numbers place historical rules like “the steeper the decline in GDP, the greater the rebound” into question.
 
The bottom line is we’re witnessing a revolutionary shift in our economic system.  The new economic reality—the new normality—for the foreseeable future could very well be one that is forever punctuated by periodic and intermittent spurts of prosperity and downturn.
 
This environment of continuous economic fluctuations where turbulence, chaos, risk and uncertainty reign is now the more normal condition of industries, markets and companies and it is a scenario that government and business leaders in the U.S. and around the world must be prepared to confront and even embrace. 
 
 John A. Caslione is CEO of GCS Business Capital LLC.