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Is Britain heading for a full blown economic depression?

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It’s official, Gross Domestic Product (GDP – the total amount of money we make as a country) in the UK has fallen for the past two quarters, which is the technical definition of a recession. This should come as a surprise to absolutely nobody, but the big question is: where do we go from here?

A quick scan of the newspaper headlines should be enough to tell you that the good times aren’t coming back soon, most informed commentators agree that it would be over-optimistic to expect a recovery any time in 2009, but how much worse are things going to get over the next year – are we heading into a full blown depression? The problem with this question is that there’s not really a technical definition of what a depression actually is, other than a long period of severe economic downturn. In America, the words ‘recession’ and ‘depression’ can be used interchangeably.

So, really, when you see the word ‘depression’ used in headlines like this one, and the one used for this post, it really just means ‘a recession, but longer’. And judging by the general mood of extreme pessimism that seems to radiating from most politicians and businesses, it seems likely that this recession is digging in deep and won’t be going away for a long time, which is as close to any meaningful definition of a depression as you’re likely to get. So to answer our own question – yes, Britain is heading into an economic depression.

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