Stock Market Game Week in Review

The Stock Market Game is a curriculum-based teaching tool that allows students to invest a hypothetical $100,000 online stock portfolio to learn about long-term saving and investing.

It was another week marred by bad news (and not just for Madonna and Guy Ritchie). It appears investors around the world are convinced the global economy is on the brink of a long and painful recession, if it's not already in one.

Stock markets from Japan to Germany plummeted Friday, and oil prices plunged to their lowest levels in more than a year. Here in the U.S., the Dow Jones Industrial Average dropped more than 480 points, or 5%, in early trading. Before the open of New York trading, Dow futures dropped 550 points, triggering a temporary halt to trading in an effort to slow the decline. If the Dow had dropped 1,100 points before 2:00 p.m. EDT Friday, the New York Stock Exchange's "circuit breakers" would have temporarily shut down the market -- something that hasn't happened since 1997.(Don't miss " Stocks in U.S. Can't Dig Out of the Red")

The common denominator throughout the world is the growing fear that governments, central banks and finance gurus seem powerless to stop the "bleeding" and prevent a global recession, which will slam corporate earnings and lead to deep job losses around the globe.

Governments have taken unprecedented steps to thaw frozen credit markets and avert the downturn by encouraging lending. The banking lending rate, which allows banks to borrow freely from one another,has been steadily declining since the signing of the bailout package, but many economists are warning the worst is yet to come and that even more assistance is needed to get the U.S. (and global) economy back on track.

With market analysts and commentators using the terms "recession" and "depression" so freely, your Stock Market Game students may be curious about the exact definitions of both and how they differ. While many economists joke a recession occurs when your neighbor loses his job and a depression occurs when you lose your job, differentiating the two is often difficult since both are broadlydefined as a prolonged downturn in the economy.

With daily reports of companies in the midst of massive layoffs ( Goldman Sachs ( GS), General Motors ( GE), Chrysler, and Merck ( MRK) just this week), many can't help wondering if a full-fledged depression is right around the corner. However, a good rule of thumb for determining the difference between a recession and depression is examining the changes in GDP (gross domestic product, or the total value of all goods and services produced within a country's border).

A depression is any economic downturn where GDP declines by more than 10%, and a recession is an economic downturn that is less severe. By that measure, the good news is we are not at the brink of adepression. Whether we're in a recession is a bit more uncertain. I'll keep any eye on my neighbors' job situation.

While the current economic climate is making few merry and bright, the holiday season is just around the corner and PNC's 2008 Christmas Price Index will be available on December 1. The index reviews the cost of the gifts in the song, The Twelve Days of Christmas. It's a great tool to help students learn aboutinflation and the broader economy, and the Stock Market Game (SMG) has a project in the Teacher Support Center to help you use it in the classroom. SMG will hold a Webinar on Nov. 5 at 4:00 p.m. EST to review the 2008 data and the SMG lesson. All you need to participate is Internet access and a phone. You can register for the Webinar right now. We hope you will join us.

To learn more about The Stock Market Game, visit www.stockmarketgame.org.

This article was written by a staff member of The Stock Market Game.

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