Report: Economists Say Recession Over, Want Bernanke to Stay

[Lerxst]

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

Is the recession over? Economists polled by the Wall Street Journal say yes, and they suggest that's a big reason why Federal Reserve Chairman Ben Bernanke should stay.

The Journal reports that the experts are overwhelmingly in favor of President Obama asking Bernanke to stay on for another four-year term when his current term ends Jan. 31. Bernanke has been a key figure in the government's efforts to reverse the country's economic meltdown, a role that has earned him some criticism but also praise for handling of the crisis.

Economists date the start of the recession to December 2007 -- defining much of Bernanke's term, which started in early 2006 -- and a majority agree that the recession is coming to an end.

Bernanke "deserves a lot of credit for stabilizing the financial markets," Joseph Carson of AllianceBernstein told the Journal.

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?

 

[Cold Highway]

I think its full of BS, majority of these economists have been using the Stock Market as a barometer for the economy which creates a false sense of security. They want Bernanke to stay because he is still in print money mode. If the recession is over its not going into recovery mode we are heading into depression mode.

 

[obvious Child]

Actually Lerxst, and this may pain you a bit, I'd give the credit to Dubya. The stimulus bill is not at work here. It can't, too little of it has been spent to do anything.

The first $350 bailout under Bush more or less provided the stabilization for the financial industry. Imagine if Wall Street had collapsed.

 

[Harshaw]

I'll believe it's turning around when companies across the spectrum stop offering deep, ridiculous discounts and we're not shedding a quarter-million jobs a month.

True, a goodly number of companies have been posting profits now, so that's a good sign. But we'll have to see.

As for Obama's policies, well, hardly any of the stimulus package has been disbursed, and much of that has been to shore up state budgets, so it's difficult to see how it has had any effect.

TARP helped in stabilizing the financial sector, but that was in place before Obama took office, so you can't really call it one of his policies.

But . . . who knows? The economy is such a huge, dynamic, diverse organism that no one can really tell what does what. Respected economists can and will argue tooth and nail over what's responsible for anything. Truth is, no one can really be sure.

I'd like to think that if things are improving now, it's because of the self-correcting factors of a free market, one which had to adjust to more severe than usual blow.

 

[Lerxst]

Actually Lerxst, and this may pain you a bit, I'd give the credit to Dubya. The stimulus bill is not at work here. It can't, too little of it has been spent to do anything.

The first $350 bailout under Bush more or less provided the stabilization for the financial industry. Imagine if Wall Street had collapsed.

Interesting theory. I'd like to know more about this. Where can you track that the first $350B actually stabilized the economy. I'm not saying you're wrong, I'm just asking for more information.

I have no problem giving credit where credit is due.

 

[Lerxst]

I'll believe it's turning around when companies across the spectrum stop offering deep, ridiculous discounts and we're not shedding a quarter-million jobs a month.

True, a goodly number of companies have been posting profits now, so that's a good sign. But we'll have to see.

As for Obama's policies, well, hardly any of the stimulus package has been disbursed, and much of that has been to shore up state budgets, so it's difficult to see how it has had any effect.

TARP helped in stabilizing the financial sector, but that was in place before Obama took office, so you can't really call it one of his policies.

But . . . who knows? The economy is such a huge, dynamic, diverse organism that no one can really tell what does what. Respected economists can and will argue tooth and nail over what's responsible for anything. Truth is, no one can really be sure.

I'd like to think that if things are improving now, it's because of the self-correcting factors of a free market, one which had to adjust to more severe than usual blow.

I see what you are saying with regard to TARP. I am also digging on the bolded part of your statement. I hope that you are correct as it really emphasizes the robust quality of our market system to take care of itself (to many degrees).

 

[Morality Games]

The money George Bush gave to Wall Street is untraceable because it was given quickly and unconditionally. And it couldn't have been the key mechanism in the recovery because our failing banking/credit/insurance/housing/auto industries wouldn't have had enough time to even find viable investments with which to jerry rig a profit, let alone bring it to fruition.

While only a small portion of the Obama stimulus money has been spent, it has been distributed much more selectively; to affect workers affected by lay offs for example, or to purchase or encourage purchase (through enticements or insurance) bad assets. Buying and continuing to buy the bad assets is the key to rehabilitating the private sector.

I'd like to think that if things are improving now, it's because of the self-correcting factors of a free market, one which had to adjust to more severe than usual blow.

The market is self-correcting but total freedom would be as much of an impediment as total government control to maintaining that self correction. A free market gets caught in feedback loops; investors are advised by economists not to buy the bad assets from the banks, for example. In this kind of situation, to prevent a prolonged recession, the government either has to buy the bad assets or entice people into buying them by promising reimbursement or assistance toward making the investment viable.

 

[Renae]

The bailouts were a mess, whatever "well intended" ideals pushed them, were dead the moment "billions" started getting handed out.

 

[Morality Games]

The bailouts were a mess, whatever "well intended" ideals pushed them, were dead the moment "billions" started getting handed out.

The first bail out wasn't messy, but it was probably pointless. The second one is anything but messy or pointless.

 

[celticlord]

Of course the report is BS.

Anyone living in Michigan is experiencing something close to outright economic depression, with a 15% unemployment rate.

Here in Texas, the recession has not been that severe. Unemployment was at 7.5% in June, a 2 full percentage points lower than the national rate.

Whether the economy is in depression, recession, or recovery depends mightily on where you live and whether or not you still have a job. To declare the recession across the entire nation to be "over" at this juncture simply is not realistic. It's over for some parts of the country; for others it's still getting worse.

 

[sam_w]

Actually Lerxst, and this may pain you a bit, I'd give the credit to Dubya. The stimulus bill is not at work here. It can't, too little of it has been spent to do anything.

The first $350 bailout under Bush more or less provided the stabilization for the financial industry. Imagine if Wall Street had collapsed.

Without the stimulus states would have been forced to lay off tens of thousands of state employees, that would have had a cyclical effect on the economy. Even Douglas Holtz-Eakin said "‘No One Would Argue That the Stimulus Has Done Nothing", and he was McCain's economic adviser.

 

[sam_w]

Averting the Worst - PAUL KRUGMAN

J
Published: August 9, 2009

So it seems that we aren’t going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government.

ust to be clear: the economic situation remains terrible, indeed worse than almost anyone thought possible not long ago. The nation has lost 6.7 million jobs since the recession began. Once you take into account the need to find employment for a growing working-age population, we’re probably around nine million jobs short of where we should be.

And the job market still hasn’t turned around — that slight dip in the measured unemployment rate last month was probably a statistical fluke. We haven’t yet reached the point at which things are actually improving; for now, all we have to celebrate are indications that things are getting worse more slowly.

For all that, however, the latest flurry of economic reports suggests that the economy has backed up several paces from the edge of the abyss.

A few months ago the possibility of falling into the abyss seemed all too real. The financial panic of late 2008 was as severe, in some ways, as the banking panic of the early 1930s, and for a while key economic indicators — world trade, world industrial production, even stock prices — were falling as fast as or faster than they did in 1929-30.

But in the 1930s the trend lines just kept heading down. This time, the plunge appears to be ending after just one terrible year.

So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in the very different role played by government.

Probably the most important aspect of the government’s role in this crisis isn’t what it has done, but what it hasn’t done: unlike the private sector, the federal government hasn’t slashed spending as its income has fallen. (State and local governments are a different story.) Tax receipts are way down, but Social Security checks are still going out; Medicare is still covering hospital bills; federal employees, from judges to park rangers to soldiers, are still being paid.

All of this has helped support the economy in its time of need, in a way that didn’t happen back in 1930, when federal spending was a much smaller percentage of G.D.P. And yes, this means that budget deficits — which are a bad thing in normal times — are actually a good thing right now.

In addition to having this “automatic” stabilizing effect, the government has stepped in to rescue the financial sector. You can argue (and I would) that the bailouts of financial firms could and should have been handled better, that taxpayers have paid too much and received too little. Yet it’s possible to be dissatisfied, even angry, about the way the financial bailouts have worked while acknowledging that without these bailouts things would have been much worse.

The point is that this time, unlike in the 1930s, the government didn’t take a hands-off attitude while much of the banking system collapsed. And that’s another reason we’re not living through Great Depression II.

Last and probably least, but by no means trivial, have been the deliberate efforts of the government to pump up the economy. From the beginning, I argued that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, was too small. Nonetheless, reasonable estimates suggest that around a million more Americans are working now than would have been employed without that plan — a number that will grow over time — and that the stimulus has played a significant role in pulling the economy out of its free fall.

All in all, then, the government has played a crucial stabilizing role in this economic crisis. Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the solution.

And aren’t you glad that right now the government is being run by people who don’t hate government?

We don’t know what the economic policies of a McCain-Palin administration would have been. We do know, however, what Republicans in opposition have been saying — and it boils down to demanding that the government stop standing in the way of a possible depression.

I’m not just talking about opposition to the stimulus. Leading Republicans want to do away with automatic stabilizers, too. Back in March, John Boehner, the House minority leader, declared that since families were suffering, "it’s time for government to tighten their belts and show the American people that we ‘get’ it." Fortunately, his advice was ignored.

I’m still very worried about the economy. There’s still, I fear, a substantial chance that unemployment will remain high for a very long time. But we appear to have averted the worst: utter catastrophe no longer seems likely.

And Big Government, run by people who understand its virtues, is the reason why.

Joseph Stiglitz writes in Stimulus or bust for the Guardian that we need another stimulus right now, interestingly:

At the same time, almost one-third of the stimulus was devoted to tax cuts, which Keynesian economics correctly predicted would be relatively ineffective. Households, burdened with debt while their retirement savings wither and job prospects remain dim, have spent only a fraction of the tax cuts.

 

[formerroadie]

The conservatives will never admit that we are coming out of the recession. Even when we are sitting high on the hog, if this happens this year after the stimulus did it's job, conservatives will still cry about it. HAHA. No matter what Obama or the Dem Congress do, it will never be right for the right.

 

[sam_w]

The conservatives will never admit that we are coming out of the recession. Even when we are sitting high on the hog, if this happens this year after the stimulus did it's job, conservatives will still cry about it. HAHA. No matter what Obama or the Dem Congress do, it will never be right for the right.

Why OMG, you not suggesting that the party of personal responsibility and morality could ever be honest for once?

 

[donsutherland1]

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?

IMO, the economy is showing growing signs of stabilization and modest growth should occur during the second half of 2009, even if GDP bottoms in Q3 rather than Q2. I suspect that the Fed's monetary policy statement to be released this afternoon will note growing indications of economic stabilization and reaffirm prospects for moderate growth in the second half.

With respect to the President's fiscal stimulus, I believe it has also helped contribute to the recent stabilization and possible imminent recovery. A fiscal stimulus increases aggregate demand. Risks associated with the stimulus e.g., timing of withdrawal, are farther ahead.

Today, Bloomberg.com quotes a number of economists or trade group representatives who give some credit to the stimulus. One such person is Kenneth Goldstein, an economist at the Conference Board stated, “We’ve averted the worst, and there are clear signs the stimulus is working.”

As so often happens in political battles, the reasonable case that could have been made against a stimulus (increased debt burden, poor track record of reversing the stimulus later, etc.) is discarded for apocalyptic rhetoric e.g., the economy will not revive, or superficial fallacies e.g., each dollar spent by the government is taken from the private sector and that amounts to a wash or worse (as the private sector is more efficient than the government). Of course, the fallacy is just that. When the private sector is hoarding cash out of fear, the hoarded cash is not contributing to economic growth. So, when the government borrows from the private sector, and then spends the money, that translates into an increase in growth. In addition, the federal government borrows from abroad.

In the long-term, if the deficits are not reduced, the stimulus is not adequately withdrawn, and the additional debt incurred from the stimulus is not paid off, that situation will make an adverse contribution to the economy e.g., in the form of higher long-term interest rates than might otherwise be the case. However, that's another issue that is beyond the scope of whether the President's fiscal stimulus played a role in stabilizing the economy.

 

[Goobieman]

The conservatives will never admit that we are coming out of the recession.

Maybe they're taking their cue from the liberals, 2002-2006.

 

[celticlord]

With respect to the President's fiscal stimulus, I believe it has also helped contribute to the recent stabilization and possible imminent recovery. A fiscal stimulus increases aggregate demand. Risks associated with the stimulus e.g., timing of withdrawal, are farther ahead.

Actually, these are the reasons the "stimulus" could not be responsible for any recent economic growth. Very little of the monies allocated have been spent--thus there has been little to no contribution towards aggregate demand. Where the stimulus bill did put monies into the economy was in the form of the tax credits (contrary to the rhetoric, the bill did not cut taxes, but merely applied a series of one time credits to reduce tax payments in 2009-2010).

The Stimulus Plan: The Tax Cuts - ProPublica

The largest credit, the ironically named "Making work pay" credit, is a tax credit for 2009 and 2010 that people get through a recalculation of withholding rates, or by claiming the credit on their tax returns. The value of this credit is calculated at $116 Billion. If the government-must-spend theory is valid, then this credit, which increases for 2009 and 2010 disposable income to individuals, should have little stimulative effect, because the individuals should be hoarding that cash rather than spending it. Additionally, because the tax credit is calculated against current income, that $116 Billion has not been fully received by individuals (as it is applied to current income), reducing its actual stimulative impact to date. Further, with unemployment rising, a tax credit applied to income is the least likely to be spent, because a rising fear of job and income loss will reduce discretionary spending; the hidden "gotcha" in the tax credit is that if you lose income, you lose the tax credit (or a portion thereof).

Consumer spending rises in June, incomes fall | U.S. | Reuters

While consumer spending has risen (0.4% in June and a revised 0.1% in May) recently, personal income continues to decline (real disposable incomes declined 1.8% in June). The increase in spending is largely from non-durable goods (1.7% increase in June); durable goods purchases actually fell 0.2%. As recovery goes, this is anemic at best, and may not herald recovery at all (consumer spending rose in the first quarter by 0.6% and the economy still contracted).

The tax credit, then, is not showing up at the cash register.

Report: Economists Say Recession Over, Want Bernanke to Stay - Political News - FOXNews.com

Obama said last week that the "worst may be behind us," and the Labor Department on Tuesday seemed to bolster that notion, reporting that productivity surged in the spring by the largest amount in almost six years while labor costs plunged at the fastest pace in nine years.

Productivity is a key ingredient for rising living standards because it means that companies can pay their workers more with the wage increases financed by rising output.

However, in the current recession, companies have been using the productivity gains to bolster their bottom lines in the face of declining sales. Many companies have been reporting second-quarter earnings results that have beaten expectations despite falling sales, due largely to their aggressive cost cutting.

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. With durable goods purchases continuing to decline, new jobs are not yet in the offing.

A tax credit that people spend on groceries is not a stimulative tax credit.

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:

On June 18, HUD’s Inspector General issued a scathing report on the FHA’s lax insurance practices. It found that the FHA’s default rate has grown to 7%, which is about double the level considered safe and sound for lenders, and that 13% of these loans are delinquent by more than 30 days. The FHA’s reserve fund was found to have fallen in half, to 3% from 6.4% in 2007—meaning it now has a 33 to 1 leverage ratio, which is into Bear Stearns territory. The IG says the FHA may need a “Congressional appropriation intervention to make up the shortfall.”

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.

The stage is not set for recovery, but for a "W" shaped double dip recession, as further housing declines will squelch any economic growth in the 3rd and 4th quarter. Worse, that decline will likely trigger a government bailout of a 3rd GSE, pushing the deficits further into the stratosphere. The impact of the stimulus plan in this has been neutral to bad.

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.

 

[stekim]

I used to work as an economist! But I don't anymore. The recession is certainly coming to an end, but all is not well. The recovery will be weak and slow. This was not a typical recession, this one was near total meltdown. And you don't go from near meltdown to birds singing and people dancing through meadows quickly and without pain. Should Bernanke stay on? I can't say I care. He's done a good enough job. Not perfect, but perfect is not easy in his job. There is something to be said for continuity right now. I agree with that. We've mapped a course and changing it now might not be the best idea.

 

[tlmorg02]

I think Bernake should indeed stay. He has weathered quite a storm and such experience is priceless. Many may think that the money given by Bush and Obama to attempt stabilization of the market, has been fruitless, but I will say that I think it has had some good impacts. For one, think of how many jobs were saved by keeping GM afloat. Not only were jobs preserved at GM directly, but many other related industry jobs as well.

 

[tlmorg02]

Actually, these are the reasons the "stimulus" could not be responsible for any recent economic growth. Very little of the monies allocated have been spent--thus there has been little to no contribution towards aggregate demand. Where the stimulus bill did put monies into the economy was in the form of the tax credits (contrary to the rhetoric, the bill did not cut taxes, but merely applied a series of one time credits to reduce tax payments in 2009-2010).

The Stimulus Plan: The Tax Cuts - ProPublica

The largest credit, the ironically named "Making work pay" credit, is a tax credit for 2009 and 2010 that people get through a recalculation of withholding rates, or by claiming the credit on their tax returns. The value of this credit is calculated at $116 Billion. If the government-must-spend theory is valid, then this credit, which increases for 2009 and 2010 disposable income to individuals, should have little stimulative effect, because the individuals should be hoarding that cash rather than spending it. Additionally, because the tax credit is calculated against current income, that $116 Billion has not been fully received by individuals (as it is applied to current income), reducing its actual stimulative impact to date. Further, with unemployment rising, a tax credit applied to income is the least likely to be spent, because a rising fear of job and income loss will reduce discretionary spending; the hidden "gotcha" in the tax credit is that if you lose income, you lose the tax credit (or a portion thereof).

Consumer spending rises in June, incomes fall | U.S. | Reuters

While consumer spending has risen (0.4% in June and a revised 0.1% in May) recently, personal income continues to decline (real disposable incomes declined 1.8% in June). The increase in spending is largely from non-durable goods (1.7% increase in June); durable goods purchases actually fell 0.2%. As recovery goes, this is anemic at best, and may not herald recovery at all (consumer spending rose in the first quarter by 0.6% and the economy still contracted).

The tax credit, then, is not showing up at the cash register.

Report: Economists Say Recession Over, Want Bernanke to Stay - Political News - FOXNews.com

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. With durable goods purchases continuing to decline, new jobs are not yet in the offing.

A tax credit that people spend on groceries is not a stimulative tax credit.

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.

The stage is not set for recovery, but for a "W" shaped double dip recession, as further housing declines will squelch any economic growth in the 3rd and 4th quarter. Worse, that decline will likely trigger a government bailout of a 3rd GSE, pushing the deficits further into the stratosphere. The impact of the stimulus plan in this has been neutral to bad.

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.

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?

 

[stekim]

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.

 

[donsutherland1]

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.

 

[Truth Detector]

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.

 

[celticlord]

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.

 

[celticlord]

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.