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Thread: Report: Economists Say Recession Over, Want Bernanke to Stay

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    Re: Report: Economists Say Recession Over, Want Bernanke to Stay

    Quote Originally Posted by tlmorg02 View Post
    You may a great argument, but is it not that the knowledge of the stimulus being given, enough of a mental security to investors to allow the market to stabilize and improve?

    The market improved because the market ALWAYS overshoots in the short term when responding to economic events. It was over sold. Simple as that. Stock prices were not reflective of corporate values.
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    Re: Report: Economists Say Recession Over, Want Bernanke to Stay

    Quote Originally Posted by celticlord View Post
    The tax credit, then, is not showing up at the cash register.
    I was less clear than I should have been. I am not crediting the stimulus with driving or even being the main contributor to the economic stabilization. My point is that it has had a net positive effect, albeit a small one. It did not undermine economic growth prospects as some of its critics allege.

    To date, $73.1 billion has been disbursed. That is the equivalent of about 0.6% of GDP. If one considers a high Keynesian multiplier (about 1.5), the contribution would be about 0.9% of GDP. I lean toward a smaller multiplier, somewhere between 1.0 and 1.5.

    In my view, the tax credit was probably the weakest part of the stimulus plan. As happened with the prior Bush tax rebate, the largest portion was not directed toward consumption. Instead, it was used for saving and debt reduction. In fact, with household deleveraging underway, I suspect that the final data will show that an even smaller portion of the tax credits was used to support consumption than during the Bush tax rebates.

    In my opinion, the fiscal stimulus package should not have included the tax credits. Instead, those credits were largely a function of politics, not economics. At the root of the current economic decline was a dramatic contraction in aggregate demand. Supply-side remedies, even those with indirect effects on aggregate demand, are poor tools for addressing those kind of economic shocks. This was not an early 1980s-style recession where supply side remedies coupled with tight monetary policy to curb inflation was the ideal remedy.

    The running presumption is that productivity spurs employment, and that rising productivity now will lead to job creation in the third and fourth quarter. However, if sales are not expected to rise (and they are not), companies are not going to hire. Hiring by employers is their expression of confidence in the future.
    We are both in agreement on this. I believe the unemployment rate, even with some minor fluctuations along the way, probably won't peak until sometime next year. I continue to expect a peak rate at or above 10%. Of greater concern for the longer-term will be the increase in structural unemployment that could lead to a long-term unemployment rate that is higher than the average for the 1990s and early 2000s.

    The other flaw in crediting the stimulus plan with any recent economic growth is the support it has given to real estate prices--and the pending fallout that will result. Ginnie Mae, the mortgage arm of FHA, is doing a land office business, while at the same time FHA is not holding adequate reserves, something for which the agency was roundly excoriated by an Inspector General report in June:

    The stimulus plan's housing tax credits are contributing to this mini-housing bubble--and bubble it is, because what the government is doing is propping up housing prices when they need to fall another 10%-20% to return to the historical norms in real estate.
    I have grave reservations about the targeted assistance to the housing industry ranging from Ginnie Mae's increased subprime business to tax credits offered for the purchase of new homes. I remain worried that the moral hazard involved will have more costs than benefits in the longer-run. For those reasons, I opposed targeting assistance to specific industries or specific groups e.g., homeowners. I continue to believe a broad-based expansion of fiscal expenditures would be more efficient and would avoid the dangers of moral hazard associated with bailouts where systemic risk did not exist (e.g., the auto companies) and overly targeted assistance that amounts to a de facto bailout.

    The failure of the federal government to resolve the zombie institutions and the "too big to fail" entities that it bailed out is problematic. To date, progress in winding down AIG's non-viable operations has been poor. There is a danger that the contagion from those operations could impact the stronger parts of the organization. The failure to cleanse the GSEs of their toxic assets, break them up into smaller entities and prepare to privatize those smaller entities is another issue.

    The stage is not set for recovery, but for a "W" shaped double dip recession...
    I believe the risk of a double-dip is real. Having said that, I believe a U-shaped recovery is far more likely than a V-shaped one.

    We should remember that economists are better historians than prophets. These same economists who proclaim the recession "over" are the same economists who failed to recognize the recession until it was close to bottoming out.
    While there are growing signs of stabilization and a reasonable possibility that modest growth could resume this year, it is far too soon to declare that the recession has ended. Many recessions have seen a quarter of growth and then a resumption of decline. For that reason, I believe the FOMC should--and it very likely will--maintain its current interest rate policy without any signal of future rate hikes.

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    Re: Report: Economists Say Recession Over, Want Bernanke to Stay

    Quote Originally Posted by Lerxst View Post
    Report: Economists Say Recession Over, Want Bernanke to Stay.

    Economists date the start of the recession to December 2007 -- defining much of Ben Bernanke's term as Federal Reserve chairman -- and a majority in a Wall Street Journal survey agree that the recession is coming to an end.

    FOXNews.com

    Tuesday, August 11, 2009



    Obviously I'm not an economist, so I'm curious as to what you all think of this? Do you think those interviewed by the WSJ are full of it? Do you all believe any of this can be attributed to Obama's policies/appointments?

    You always hear "it happened on his watch, it's his doing." An example that is recent would be the DOJ issues regarding the voter intimidation issue.

    So in this case, if you give any credence to these claims by economists as reported by Fox and the WSJ, do you associate this with President Obama? If not, why? If you don't lend any credence to these claims, please explain why you don't.

    Personally I'm going to have give the nod to the economists on this. I can't prove them wrong so I'll agree I think it's starting to turn around. But I have no idea if Obama's policies had anything to do with this. That said, since he gets credit for things other people do when they screw up, I'll have to wonder if his detractors give him credit for this whether or not he actually had anything to do with it. Seems only fair right?

    Thoughts?
    I find the notion that the recession is over stunning. It is almost as laughable as getting giddy over the fact that last month we ONLY shed 250K jobs.

    What is perhaps NOT being factored in is the cost of paying for a $1.8 trillion deficit which apparently is of no concern of the current Administration who wants to add trillions more to it without a single HONEST debate about how to pay for it.

    The question many must ask themselves is what is going to happen when the Democrats who have remained silent on the tax issue until after the 2010 midterms actually raise EVERYONE's taxes to pay for their largess?

    What happens when MORE houses fall into default because people have lost their jobs and many more are about to.

    What happens when the National Debt reaches and exceeds the GDP?

    I find it stunning that ANY economist can claim the worst is behind us based on the current administrations policy of spending vast sums of money they do not have, demagogue major US industries like Insurance, Finance and automobile companies and which hasn't had one honest discussion of how they plan to pay for all this for purely partisan political purposes; the midterms.

    How can we honestly believe that the worst is behind us when we know that at some point we will have to pay this bill....all of us....and then there will be another round of business closings, layoffs and job losses.

    I haven't even touched on the inflationary effects this is having and going to have on our currency which will just exacerbate the issues we confront.

    What about the state of Social Security's and Medicare's solvency?

    One thing is clear, there is NO money and the notion that this economy and our businesses can fund this criminal level of careless spending requires the willing suspension of disbelief.

    I was wrong in August when I believed the economy was sound, perhaps I am wrong now, but I just don't see how anyone can claim the recession is over, close to over or has even peaked looking at the data of where we are currently at.

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    Re: Report: Economists Say Recession Over, Want Bernanke to Stay

    Quote Originally Posted by tlmorg02 View Post
    You may a great argument, but is it not that the knowledge of the stimulus being given, enough of a mental security to investors to allow the market to stabilize and improve?
    If that were the case, the proper course for any stimulus package would be great fanfare up front followed by either total secrecy or simple deception.

    Perception and mindset are influential in economic activity, but they are not the totality of economic variables. Talking about spending sounds great, but it can't sustain confidence for any appreciable length of time the way actual spending can.

    If recovery is defined as increased spending, the data just doesn't support that claim. A bunch of economists singing the policy equivalent of the Beach Boys' "Good Vibrations" is not data. They like Helicopter Ben--that's the summation of their argument. Frankly, I would keep him on as well--he's not all that bright about dealing with contractionary economic situations, but the leading candidate to replace him is Larry Summers, the quintessential legend in his own mind. Bernanke at least has some semblance of independent thought; Summers would have the Fed officing in the West Wing--that's not just from frying pan to fire, that's from frying pan to fire while lighter fluid is being sprayed liberally.

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    Re: Report: Economists Say Recession Over, Want Bernanke to Stay

    Quote Originally Posted by donsutherland1 View Post
    I believe the risk of a double-dip is real. Having said that, I believe a U-shaped recovery is far more likely than a V-shaped one.
    A V shaped recovery is impossible for the simple reason that, even if we have reached the bottom of the recession, we've been there for at least a couple quarters now (this is assuming we're not on a plateau before the second half of a double dip). Even if there is "recovery" taking place, it's so anemic as to be damn near nonexistent; there is absolutely nothing out there showing any form of robust recovery in the next six months.

    A V shaped recovery would necessitate a significant uptick in employment, not just the 0.1% drop in unemployment that was announced last week.

    The best possible scenario now is a U shaped recovery. The more likely scenario is a W-shaped double dip.

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    Re: Report: Economists Say Recession Over, Want Bernanke to Stay

    Excellent discussion thus far. Thank you all.
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    Re: Report: Economists Say Recession Over, Want Bernanke to Stay

    Quote Originally Posted by celticlord View Post
    The best possible scenario now is a U shaped recovery. The more likely scenario is a W-shaped double dip.
    I am in agreement with the "w" concept with a very tiny uptick in the "w".

    Again, there are looming issues that have NOT been addressed; another housing bubble popping, the deficit, the future insolvency of Medicare and SS and the fact that this administration wants to spend trillions more without any HONEST debate about how they will pay for it all.

    With a National Debt figure that is soon to equal GDP will only make the US currency even weaker which can only mean more inflation and higher debt.

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    Re: Report: Economists Say Recession Over, Want Bernanke to Stay

    Quote Originally Posted by Truth Detector View Post
    I find the notion that the recession is over stunning. It is almost as laughable as getting giddy over the fact that last month we ONLY shed 250K jobs.
    One supposes we'll know soon enough.

    What is perhaps NOT being factored in is the cost of paying for a $1.8 trillion deficit which apparently is of no concern of the current Administration who wants to add trillions more to it without a single HONEST debate about how to pay for it.
    Not to get all factual here, but we started running large deficits starting with Reagan. It cooled under Clinton, but then went back full throttle again under W. They never worried about it, either. So I see little reason to call out Obama. He's just one of many. Further, a recession in 2010 has nothing to do with 2010's deficit. The economic problems with having a large national debt and running current deficits are felt way later. So any recovery right now will not be hampered by the deficit. You are confusing the short term with the long term.

    I find it stunning that ANY economist can claim the worst is behind us based on the current administrations policy of spending vast sums of money they do not have, demagogue major US industries like Insurance, Finance and automobile companies and which hasn't had one honest discussion of how they plan to pay for all this for purely partisan political purposes; the midterms.
    Short term versus long term confusion again! In terms of this recession the worst is very likely behind us. However, the worst is also in front of us. It's just decades off.
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    Re: Report: Economists Say Recession Over, Want Bernanke to Stay

    http://www.nytimes.com/2009/08/07/bu...7stimulus.html

    Apparently the stimulus package has been a mixed bag so far.

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    Re: Report: Economists Say Recession Over, Want Bernanke to Stay

    Quote Originally Posted by Morality Games View Post
    http://www.nytimes.com/2009/08/07/bu...7stimulus.html

    Apparently the stimulus package has been a mixed bag so far.
    The problem with the stimulus package is that it simply was not needed. So even if you say it worked on any level (and, no, I don't care how well it did or did not work) I can only say, "so what"? They spent $1 trillion to help an economy improve when it would have improved anyway. Sort of like going to the doctor and paying money to be treated for the flu. That's the part that's always left out when people debate its effectiveness. Who cares?
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