Fed Governor Kevin Warsh gave a speech today in which he asserted that the current recession should be named. I argued the same point in July 2008 here. Warsh wants to name it "The Panic of 2008" because 1) it started in 2008 and 2) it was more than a recession according to him, but a true panic. He cites the difference in terms of the words that are used to describe what has happened. He makes the point that the words "fear," "breakdown in confidence," "market capitulation," and "financial turmoil" describe something other than a recession. He is correct there. However, I think that the way you refer to something in large measure determines the way you respond to it. By describing it as a "recession" we wil lreact to this crisis in traditional economic terms, waiting for the cycle to work through, cleanse the system and move on. If we call it a "panic" we're going to think in terms of regulations and market trading issues, debt instruments, etc.
Whereas we are in a crisis that is both a recession in traditional terms and a panic, I do not think that describes what is happening accurately. I would like to include an analysis of what gave rise to this crisis and how it is being "treated" when thinking about how to brand it.
I think cultural issues gave rise to this crisis. Hyper consumerism, immediate gratification, the willingness of people to use stupid financing plans that were based on an unrealistic assumption for continuing escalation of home prices ... all that and more were a part of this. And, of course, also a part of ther blame -- a hefty portion, but not all -- goes to the ability of the financial and investment community to figure out ways to feed the consumers' habits and cravings. But do we blame a drug user's problems exclusively on the dealer, or shouldn't the user take some of the blame?
As to how this crisis is being treated: it's hardly just in economic terms. There is a major shift in political philosophy. There appears to be a deep cultural change emerging in consumer habits. There are protests happening around the world, rising the prospect of more political upheaval (three governments have already stepped down, and more are likely). And it is all happening in the age of the Internet.
As to my own view of the actual name for this crisis, I am not certain yet. But "recession" isn't adequate and "Panic of 2008" isn't an accurate description. I'm certain I will be writing more about how to brand this crisis.
Disclosure: I am not invested in any publicly traded equity.