The Great Recession: What Does It All Mean

Wherever you are  these days, everyone’s chatting about cash. For those not familiar with the lexicon of finance, many concepts can seem baffling. While the era of The Big Swinging Dick is long gone, it’s still useful to know how to talk to Wall Street Man, if for nothing else than to know who to blame. To stay fully engaged and avoid a faux pas, here are a few terms that are often bandied about.

Short or Long Position: When he starts talking about his “long” and “short” positions, don’t cast a questioning gaze at his trousers. A long position is what we’re all familiar with when buying a stock. An investor expects it to rise in value. A short position is a technique in which investors bet that a stock is going to lose value by borrowing shares, then selling them immediately. If the share price falls, they re-buy the stock, repay the lender and pocket the difference.

Greenspan Put: This is not what the former Federal Reserve Chairman, Alan Greenspan, did to his wife, the NBC news correspondent Andrea Mitchell, on their wedding night. The Greenspan Put refers to the belief among investment bankers and their ilk that no matter how badly they screwed themselves or the economy, the Fed Chair would step in, lower interest rates and save the day. A “put” is a type of security that mitigates the effects of a declining market.

Standard & Poor’s: There is a story of a young woman, new to The Big Apple, who wished to find herself a husband, preferably of some means. She was heard to say, “I want to find myself a Standard Man.” When asked why, she replied, “Because there are two types of men in New York City: standard and poor, and I’m certainly not going to marry a poor one.” Our ingénue would be woefully misinformed. What she refers to is Standard and Poor’s, a company, along with Moody’s and Fitch, which rates the creditworthiness (the likelihood of default) of bonds.

Deflation: If your love interest confesses that her biggest worry is the risk of deflation, don’t get nasty and say, “Oh yeah, I hear it happens to all men from time to time.” The term “deflation” is the economic situation where prices are falling, not rising. While this sounds like a good thing, it’s not. No one spends any money. Companies won’t invest in new equipment; individuals won’t buy a home or car if it’s likely to be cheaper later.

Liquidity Crisis: When you’re hanging out at the local tavern imbibing copious quantities of The Suds, don’t whisper in your friend’s ear, “Which way is the restroom? I seem to be experiencing a liquidity crisis.” While technically correct—especially in the case of beer—this term instead indicates that a company is facing a situation where it can no longer borrow money or, if it can, at favorable terms.