Posted on 06/16/2009 9:25:35 AM PDT by SeekAndFind
We have never seen as much emotion in economic debates as we have in recent years. Part of this is driven by the Internet and the ability to post anonymously. But even that doesn't explain everything, because every week we get signed e-mails and blog posts with language that would make some grown men blush. And all we do is make economic forecasts. Imagine what our mail would look like if we wrote about sports.
Mostly, these writers question our sanity or integrity for predicting an economic recovery. The responses fall into three groups. First, there are those who think debt drove the wealth creation of recent decades, and that until this debt unwinds, nothing will be normal again. These commentators expect more shoes to drop.
Second, there are those who just can't see a recovery coming as long as people are losing their jobs. They say we missed forecasting the recession in advance and are wrong to expect a V-shaped recovery.
Third, there are those who look at all the government spending and money printing, and think this will undermine growth and boost inflation to painful levels very soon.
In response, we admit that we failed to forecast the recession. In fact, we argued strenuously last year that the economy would avoid a recession. What we missed was how badly the government would mishandle otherwise manageable problems: a combination of mark-to-market accounting and ad hoc remedies, which finally culminated in the government allowing Lehman Brothers to fail in September 2008.
This set off rare financial panic, the velocity of money plummeted, and economic activity collapsed.
Capitalism did not fail; government did. The government perhaps never better lived to Groucho Marx's maxim: "Politics is the art of looking for trouble, finding it, misdiagnosing it and then misapplying the wrong remedies."
(Excerpt) Read more at forbes.com ...
* The American economic system never shuts down. It may slow down, but as long as freedom exists, the system remains dynamic.
* in the past 26 weeks, roughly 16 million people filed initial claims for unemployment insurance. But, as of two weeks ago, there were only 6.816 million people continuing to receive claims. In other words, possibly as many as 9 million people who might still be receiving benefits are not, because they found gainful employment.
* The above figures mean job creation continues. What is needed for an end to "net" job losses is for layoffs to stop. And with the panic subsiding, this should happen relatively quickly.
* Even if the government has grown almost exponentially, and the Fed is super easy too, the problems with all of this are long term in nature and probably not as bad as the most vocal critics believe. We will pay a price for government growth, but that price is still at least a year or more away. For now, a recovery is coming, and it will be stronger than the conventional wisdom believes, partly because the Fed is so easy.
* Emotional responses against their argument is simply a sign of our high stress times and has little to do with the slowly improving economic data.
Over to you folks to rebut/refute or even agree with the authors.
I agree with Wesbury about the short-term (the next couple years). I see things starting to recover, consumer confidence is rising, people are spending and buying more—all the restaurants and stores are full here. I think the economy is starting to recover even before any of the phony stimulus pork gets spent, mostly because of low interest rates.
It’s the long-term picture that worries me—three to twenty years from now. Outrageous, irresponsible federal spending and a doubling of the deficit means rampant inflation, eventually. And universal health care along with an already existing $52 TRILLION unfunded liability to pay for all the retiring Boomer’s Social Security and Medicare means our country’s finances are doomed, unless we get fiscal conservatives elected en masse to Congress.
In other words, the Internet and the ability of people to communicate with each other is the problem.
The Internet has totally exposed government corruption at all levels. The government would like nothing better than to force people to reveal their personal IDs on line, and to be able to confirm who is actually posting.
I am in agreement with Wesbury and Stein. They have been correct more often than not throughout this recession and were the first to identify the huge issue of mark-to-market accounting.
Should also note that the article mentions the long term problems of the Fed’s easy money and government growth - they have been vocal about both things, so a summary of their thoughts might be bullish short term, with some reservations about the long term.
No one forced AIG to write billions in CDS business that they could not support. And it was government (in the form of Phil Gramm) that prevented regulation of credit default swaps.
The answer is that we need basic regulation, as well as getting rid of entities such as Fannie and Freddie - and putting the Fed on a leash.
That's the issue.....FREEDOM....and whether we keep any semblance of freedom here in the US
Um, 0% interest rates + printing money 24/7 = hyperinflation. If the fed doesn’t raise interest rates dramatically & soon, we will fall into hyperinflation within 12-18 months. It’s going to happen, as sure as the sun rises in the east & sets in the west. Give me a historical example that proves me wrong. You can’t. So we have 2 options, 20%+ interest rates to reduce the currency flooding the system, or a dollar that’s good for wiping your arse and not much else. Sorry, but neither scenario gives me the warm & fuzzies....
Wrong the march toward Carl Marx style capitalism is alive and well and growing each day. The question is in the end will we have two are four large financial companies controlling the country.
Could be. I travel a great deal, so I see it around here: Salt Lake and Provo, but I’m also in Denver and Fort Collins, Wyoming, Montana. Most places I go are pretty busy. My manufacturing clients are slow, but service companies are doing quite well.
Forbs thinks there is to much talking going on out there in flyover land. People will not let the rulers rule.
No question that there are still jobs out there, but they are harder to come by and there are less of them. There are also risks to the recovery:
1. Price of oil - over $65 / barrel, gas at $2.80 / gallon here in Seattle
2. Interest/mortgage rates - excessive borrowing by the government is driving up the cost of money - not a good thing for a recovery
3. Higher taxes - related to #2, we cannot continue to borrow $2 trillion per year and expect a healthy economy in the near and especially long term - where are the $$ coming from?
4. Health care “reform” - will create massive uncertainty in the employment market and will cost $1 trillion over 10 years - where are the $$ coming from?
5. State & local government spending - some heavily dependent on property taxes with falling property values. Many states have negative budgets now, and they cannot borrow. They are for the most part reluctant to cut expenditures so they will need to raise taxes.
6. Geopolitical events - N Korea, Iran, Pakistan.
So those that predict a “V” recovery are dreaming. We are looking at either an “L” recovery where we set a new baseline or a double dip when the pain of these issues is realized.
Hope I am wrong.
schu
IF his Health Care proposal fails...
and IF enough Blue Dog Dems start resisting him and
make it clear that he is no longer getting everything
he wants from Congress....
Then the markets might realize that Obama can’t continue with his runaway Socialism and relax a bit, which would bring on a recovery.
Sending him down in flames on Health Care is the key.
This article failed to mention the next two waves of foreclosures, and the ripple effect through the real estate market and the economy. Also, a ton of commercial real estate is in trouble and that will have a significant effect.
We’ll see, but it seems to me that the tax burden both businesses and individuals face going forward will squash any “v” shaped recover. I could easily see inflation swamping any gains in the markets.
Driving around the east side of Seattle last weekend we were amazed at the number of available commercial properties.
The problem is that we cannot believe the numbers, especially employment numbers. Who really knows the truth and is the truth being hidden from us?
Example: Google U6 and see the real employment numbers, not this fictitious 9.4%.
My friends say I am a pessimist, I prefer to think I am a realist.
schu
Employment, inflation, whatever: when the government is in charge of supplying the numbers, you can be sure they will be politically laundered.
This hasn't changed since the days of the Roman Republic. Among the things Julius Caesar is famous for, one is regularizing the calendar so that the priests couldn't manipulate the new year in order to influence elections.
Amen!
Hope I am wrong.
I agree.....
.....but you forgot a few things that will make this economic train wreck worse before it ever gets better.
First is the tax-tax-tax party going on in Washington. Even the threat of taxes will keep the economy down at least until a possible House/Senate RAT killing in 2010.
Second is the AGW anti-energy thing that is helping your #1 go upward. Energy is the blood of an economy. Obama and the RATS are trying to give the USA blood poisoning.
Third is the UN and International Law regarding personal freedoms we take for granted. Obama and the RATS love the UN and their desire to limit our freedoms in the name of the children. It could be illegal to Homeschool or spank your child. And that's not the worst of it.
Finally, we have a President that hates what the USA was and is. He is attempting to tear down the fabric of freedom and replace it with some sort of socialist dream his mother taught him. This bodes poorly for us. As CIC, he could dismantle our military before we can stop him. We will be ripe for attack and how could an economy thrive with that kind of threat?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.