Look--if you want to bury your head in the sand--so be it. The economy has literally gone off a cliff since late September and continues to accelerate to the downside. Show me ONE economic statistic indicating a turn around in sight. Just one. Bump this thread in one year and let's see who is close to right.
I get it. Yes, the weaker dollar increased exports. Yes, our exports are likely to be weaker in the next quarter because foreign economies are weakening even faster than we are, and the dollar has been going up due to lower oil prices. But we don’t have an economy that relies entirely on exports. Additionally, lower oil prices are not a negative, even if they cause the dollar to appreciate.
Like I said, I expect a weaker economy. Driving off a cliff is not just a weaker economy, though. Driving off a cliff is a depression, and we ain’t got that, nor will we have a depression unless Obama makes some pretty big mistakes down the road, which I would not expect even from him, and in any event, you can’t simply assume those mistakes are inevitable just because we are in a recession. Our weak economic statistics tell you nothing about the likelihood of Obama making mistakes.
We’ve been in lots of recessions. We’ve had lots of instances when you could have pointed to similar weakness and shouted the “D” word. But so long as the machinery of industry keeps humming it’s just a matter of time before we come out of it—provided that government doesn’t keep throwing new monkey wrenches into the gears. You could even have said that about the Great Depression itself. The reason it did not work during the Great Depression is that an activist government that did not have the modern tools of economics at its disposal did all the wrong things. That is not happening now.
At this point, I would say that the government has reacted appropriately to the problem, even if somewhat clumsily. They aborted the financial industry meltdown. Bush stopped the auto meltdown, at least at GM. Obama would do well to tell the UAW that he’s not going to reverse Bush’s requirement that they reduce their compensation. The Fed has doubled the money supply almost over night. The stock market seems to have bottomed, and even gone up a bit.
Next week, the Fed is expected to increase its purchases of asset backed securities, which it should have done sometime back. That will increase liquidity dramatically.
These are positives, not negatives. In fact, it may be that we will soon be dealing with the opposite problem—too much money and growth that is too fast. Then the Fed will have to reverse course and undo some of the things it is now doing. But we can worry about that when and if it happens. For now, you address the problem you’ve got—not the problem you might have tomorrow.
Personally, I think that they have done a pretty good job of reacting to the recession—at least as good as you could have expected. The problem is that it was government that caused the recession in the first place.