Although current developments do not appear to have materially diminished the prospects for long-term growth in productivity, excess productive capacity has emerged recently. The possibility that this excess could continue for some time and the potential for weakness in global economic conditions suggest substantial risks that demand and production could remain soft. In these circumstances, when the economic situation could be evolving rapidly, the Federal Reserve will need to monitor developments closely. This last statement suggests an understanding that recession is a process. We have often likened recession to a chemistry experiment, where two chemicals are mixed, and a chemical reaction begins.
All recessions are about working off the excesses of the last expansion.