So the preliminary real GDP numbers for the first-quarter ‘08 came in today, and guess what? As I’ve said before, we’re not in a recession. The economy grew at 0.6%, same as in fourth-quarter ‘07. The traditional rule-of-thumb definition is two consecutive quarters of negative real GDP growth, and we haven’t even had one yet. Given the Fed’s exceedingly accommodative monetary policy, we’re going to get inflation and not contraction when the fiscal stimulus package starts deploying this month. That means it’s unlikely there will be any negative growth this year. So much for the fear-mongers and the press-induced recession hysteria.

Now I do realize that NBER, the “official” arbiter of business cycles and what determines a recession and when, does not use this traditional rule-of-thumb approach, and may yet claim we are in a recession. However, the employment and income data which they claim to use in conjunction with GDP output data do not show signs of the significant or prolonged contraction that are indicative of their definition.

More to the point, if we avoid a recession because of policy, it may be worse than grinding through one. As I have expressed many times before on this page, both the fiscal and monetary policies of this country in response to recent macroeconomic symptoms are decidedly ill-advised. In tandem, they will have some stimulative effect, as the interest-rate cuts by the Fed more than offset the crowd-out of business investment from the fiscal stimulus package. Yet this Keynesian-style solution is bound to have an inflationary result: the money supply is increasing dramatically while the amount of business and (especially) consumer activity is stalled. Not only that, but the structural changes in the economy that should be occurring due to the late awareness of flaws in the mortgage market will not occur (or will be delayed) due to the forgiveness of mortgage debt and especially the continuance of easy money. Better to have a recession, one which is due to real structural problems in the economy (too much home-building, too much bad-credit-borrowing), let the economy make the necessary adjustments without coddling, and have a clean slate to build on.