Will The Committe Call This A Recession?

Brad DeLong posts this note from a "very well-informed correspondent":

Sorry to bug you again, but... The Business Cycle Dating Committee has a real problem. A recession has always involved a substantial decline in real economic activity. The committee has always used monthly indicated so as to designate peak and trough months, and because quarterly GDP gets revised so much so frequently. At the Stanford workshop, I asked Bob Hall if the committee would call a recession without a decline in GDP, and he said, "Of course not." This is a serious slowdown but I don't think it's a recession.

We agree. We are not currently in a recession. The problems in the economy, though severe, have been limited, for the most part, to the housing sector and the related finance sector. Despite a recent slowdown in money growth, over the last two years the Fed has pumped too much money into the system for the overall economy to go into recession.

What happens from here is another story and completely dependent on Fed monetary policy. Are Fed members, now, money inflators, as they have been over the last decade, or are they the no growth money supply operators that we have seen over the last three months?

Of course, a fast growth money supply posture will strengthen the economy's current overall distorted structure, but also bring about accelerated inflation. Slow money growth will plunge the economy o a full-fledged recession.