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The dreaded double-dip

Grace Concelman | Tuesday, September 13, 2011

A double dip seems like such a good thing.

The first thing I think of when I hear “double dip” is ice cream. Two scoops of ice cream is always better than one.

Growing up, the ice cream store near my house used to give free second scoops if it was raining or snowing. Given that I lived in Pittsburgh, it was usually raining, snowing or threatening to rain or snow, in which case it was worth it to sit in the parking lot for fifteen minutes just to see if something wet would fall out of the sky so we’d have an excuse to eat so much ice cream that we felt a little sick.

There’s a second kind of double dip that is just as delicious but slightly more controversial ­­— the chips and salsa double dip. For those occasional times when a single dip just won’t cut it, a double dip is necessary to ensure the perfect salsa-to-chip ratio.

To be perfectly clear, I am in no way advocating the public double dip. Double dipping should never be done out of a communal salsa bowl even if the chips are huge and the opening of the salsa container too narrow for adequate salsa coverage. But, there are definitely ways to get around the double dipping problem. Breaking up the chips into more manageable pieces is probably the most hygienic alternative. Double end dipping is another good option, but one that should probably be cleared with the other dip participants, just in case there are any objections.

The list of double dips goes on.

Double dips in roller coasters are fun. Yes, there’s a great thrill factor in the newfangled roller coasters that are designed to shoot you as high as possible as fast as possible with as few restraints as the regulators will allow. But, there’s something so satisfying about the simplicity of a double dip.

So double dips are great, right?

Not always. There is one very undesirable type of double dip: the dreaded double dip recession.

Unless you’ve been living under a rock (or at the Rock) lately, I’m sure you’ve seen the headlines.

No new jobs created in August. Unemployment remains above nine percent.

GDP growth revised down. Recession deeper than first estimated.

Fed weighs options for further easing. Obama announces another plan to create jobs.

The National Bureau of Economic Research, the arbiter of the official dates of business cycles in the United States, says that the recession that started in December 2007 ended in June 2009, but these headlines certainly don’t seem to indicate that the economy has moved on.

The NBER defines a recession as a period of diminishing economic activity lasting more than a few months. Recessions start the month after a peak of economic activity (which is broadly measurable by Gross Domestic Product or GDP) and end when the activity arrives at a trough and the economy begins to grow again. Although there is no formal definition of a double dip recession, it’s usually characterized as a recession followed by a short period of growth followed again by another recession. If you picture a graph of the GDP, it looks like a W.

Hence, the question on everyone’s minds: Are we headed for a double dip?

It’s obvious that the economy is sputtering, but the recession was deep and recovery takes time. Government stimulus can only do so much to encourage consumer spending, and with unemployment so high, interest rates so low and credit so tight, consumers just aren’t willing to spend.

Large corporations have all but recovered, but now they’re hoarding cash in defensive fear. Time will repair confidence, but time requires patience, which is not something markets have.

Even if we do slip into a recession again, I would argue that it would not be a double dip, if only because the causes would be different. The recession that started in December 2007 and ended in June 2009 was caused by a housing bubble and deepened by a credit crisis. This time, the debt issues in Europe are the flavor of the week. If Greece defaults on its debt, it could drag down Portugal, Ireland, Italy, Spain and the entire European banking sector. International, not domestic, fears have been roiling markets lately.

We may still be getting two scoops of ice cream, but the first one tastes like mortgage backed securities and the second like Greek bonds with a little spaghetti sauce on top. Anyone want sprinkles?

Grace Concelman is a senior majoring in finance and philosophy. She can be reached at [email protected]

The views expressed in this column are those of the author and not necessarily that of The Observer.