Tuesday, March 3, 2009

A Recession Is ...

the economy adjusting from a period of a distorted production structure, resulting from Fed money manipulations pushing the consumption/production ratio in favor of production. A recession pushes the ratio back towards immediate consumption.

Nothing underscores this point better than the performance of the movie industry during a recession.

NYT reports:

Hollywood could get used to this recession thing. While much of the economy is teetering between bust and bailout, the movie industry has been startled by a box-office surge that has little precedent in the modern era. Suddenly it seems as if everyone is going to the movies, with ticket sales this year up 17.5%, to $1.7 billion, according to Media by Numbers, a box-office tracking company.

And it is not just because ticket prices are higher. Attendance has also jumped, by nearly 16%. If that pace continues through the year, it would amount to the biggest box-office surge in at least two decades.
Now who would have expected this at the start of the year? Oh yeah, I did. On January 5, I wrote:

Of late, I have been pounding away at the fact that part of ABCT [Austrian Business Cycle Theory] states that the consumption-savings ratio readjusts during a downturn in favor of consumption. And I have put some focus on the movie industry as an example of a consumption industry doing well during an economic downturn.

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