Is This a Recession? Wrong Question. 15 comments
an article to
-
Font Size:
-
Print
- TweetThis
Don't know about you, but I can't take it anymore.
It's a popular parlor game these days to argue over whether we're in a recession or not. By now, everybody knows the competing claims. In this corner are the quantonomists, who say it can't be a recession because we haven't had two consecutive quarters of economic contraction. And in this corner are the populonomists, who insist that people feel pain, and that makes it a recession whether the technical metrics say so or not.
Boy, do we have a national talent for missing the point.
These are tough times for a lot of people. Home values are falling, jobs are disappearing, and $4-a-gallon gas is freaking people out. That much we know. Does it matter if this is technically a recession? To pundits it does, but in real life, other factors affect Americans a lot more than whether the U.S. economy is in recession. A few factors we seem to be overlooking:
America doesn't have one economy. Most of the stats the government puts out refer to the 50 states collectively. So we tend to discuss the U.S. economy as if it's a monolithic system that affects all of us more or less the same. But America is a vast, diverse place with hundreds of microeconomies. And just as all politics is local, all economics is local. It doesn't matter how your fellow Americans are doing 1,500 miles away. It matters whether you and your neighbors feel better off or worse off than you felt yesterday.
So if you're tied to the housing sector in Southern California or South Florida, you probably want to jump off a cliff. If you work in the auto industry in Michigan or Ohio, things seem glum. But if you work for Caterpillar in Illinois, or Exxon in Texas, or for any other company benefiting from strong exports and rising global demand for key products, you might wonder what all the fuss is about.
Overseas economies affect many Americans more than events in America. The concept of a national economy is increasingly outdated. The financial sector in New York is directly affected by the housing meltdown in many states. But it's also deeply affected by investment decisions made in Dubai and Beijing. Workers at some auto plants in the South are benefiting from the weak dollar, which makes it cheaper to build cars at nonunion U.S. factories than in Europe or Japan and has led some automakers to shift more production to America. Lots of U.S. companies have more business outside the United States than inside our borders. A U.S. slowdown surely affects the whole world, but that's offset by lots of other things going on elsewhere.
Nothing special happens the moment a recession is declared. All the hype makes it seem like the moment the pooh-bahs at the National Bureau of Economic Research declare a recession, it automatically triggers some kind of emergency action plan. But nothing actually happens—except that certain commentators go wild, shouting "I TOLD YOU SO!" Besides, the experts almost always call a recession months after the fact, because it takes that long for the data to dribble in. As an academic matter, it's very helpful to study business cycles once you actually know what happened. But it doesn't change anything today.
Recession is personal, not national. To gauge what's happening to Americans, we really want to know about economic progress. Are more Americans better off these days? Are more worse off? Which group is bigger? And where are they located? As we know, many of the trends are negative. The unemployment rate, 5.7 percent, is the highest since 2004. Millions of homeowners are losing home equity, and there could be as many as 3 million foreclosures this year. Gas and food cost a lot more. I don't know if it adds up to a national recession, but for a growing number of Americans, it's a personal recession. That's what we should be talking about.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
Top
StockTalkers.-
1
David Fry
-
2
Cliff Wachtel
-
3
Mike Havrilla
-
4
David White
-
5
Hedged In
Top StockTalkers » -
1
The company results are all fairly good, could be better, but most company's do not really seem to be in trouble. This "recession" originates from the US banking sector, and it is easpecially the banking sector even globally who is doing bad. Apart from that we seem to have some sort of energy crisis, wich does hurt margins of many company'sn mainly trough the rise in oil price.
SO my conclusion is that pure technicly indeed we havn't got a recession. What we have is an banking system wich has done some really stupid thing's and wich will have to solve it's issue's, but it's not that high a concern for many company's, especially the big rich ones. The energy crisis is a fundamental problem however, and our economy's will for the next years probably concentrate on energy effeciancy, energy independancy and exploitation of new energy sources. Hence why the energy sector is doing much better than the rest, because the really important factor in what is changing our economy's is energy costs.
As to youre point of local changes, that hardly matters. many local places had shabby economic prospects even during bull years, that didn't make it a recession neither.
Robert Fitzgerald (1961) said...
"Sing in me, Muse, and through me tell the story
of that man skilled in all ways of contending,
the wanderer, harried for years on end,
after he plundered the stronghold
on the proud height of Troy. "
Hopefully after being harried for these last 7.5 years, we will finally come out of the darkness into the light.
It's perhaps strange that a man of light (skin) put us into the darkness,
and hopefully a man of the dark (skin) takes us to the brighter days.
Corporate profits (as per S&P) are down 4 quarters in a row--in the USA. Over here, we don't consider that fairly good--and that hasn't happened outside of a recession. Meredith Whitney is on, gotta go.
in vernacular terms, if, looking forward, recession means people are suffering due to the economy, one can call a recession. in technical terms one need to wait for 2 down 1/4s looking backward. in investing
i think it's always a good and profitable idea to look at the here and now and at what likely will follow.
[note: economists have a phd in lieu of millions of dollars earned by their economic acumen.]
Also, I have some resentment toward obtuse attitudes that consumers spent beyond means. Of course they did! But somewhere along the way our government confused wealth with credit. The American consumer also bought into a thought process that deficits don't matter.
Lets simply crank up the presses any mail everybody "money from Heaven"!! Do you suppose we can just do that forever???
Do you suppose big Hank would approve?? I think I'll tell him!!
An idea worthy of Bankers Row where credit makes all dreams come true.
On the more positive side, the current energy crisis may turn out to be the start of the greatest economic opportunity of the coming 100 years, just as advent of railroads created the economic stimulus for the 19th century and the internal combustion engine automobile was a centerpiece of economic growth in the 20th century.
If you are handed a lemon, make lemonade.
It is better to light a candle than to curse the darkness.
If you want to continue your problems keep doing the same thing.
The next chapter usually begins on the next page, not the last one.
Those who haven't learned from history are doomed to repeat it.
It does not matter how much is your debt to Americans or foreign nations. Until the debtors find ways to take back the money, you got no worries. After all you have the biggest gun around.
But the debts taken by Investment Bankers is the real problems. They took all the extra cash from all around the world and promised good returns on that money. This Bankers could not find enough business to make profit as promised. So they kept borrowing from the Fed to pay the difference in profit made and profit promised to their clients (private investors who were also Foreign Government Funds). That accumulated debt is the real problem. The answer to the problem is simple. Let the Investment Banks all fall. It does not matter how big they are.
The biggest business created by this Investment Banks and that is crashing today was Housing. It was a good idea. But there was over investment which obviously will lead to oversupply and price collapse. It will take years to get back to normal growth. And the Investment Banks wants the people of America to save them. People with whom the Investment Banks never shared any profits.
American Government has already started to safe them by providing further credit and guarantees.
But this is dangerous. It allows the continued paying of large profits to holders of securities from this Investment Banks which to say the least is unfair.
This additional profits indirectly allows the Foreign Governments to buy oil at high prices which they subsidize for the citizens.
While Americans citizens are left with high fuel bills.
I say, kill all the Investment Banks