Contrary to popular belief, a “D” is not simply a more severe version of an “R”—it is an entirely different process…An “R” is a contraction in real GDP, brought on by a tight central bank policy (usually to fight inflation) that ends when the central bank eases. It is relatively well managed via interest rate changes…A “D” is an economic contraction that results from a financial deleveraging that leads assets (e.g., stocks and real estate) to be sold, causing asset prices to decline, causing equity levels to decline, causing more forced selling of assets, causing a contraction in credit and a
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