Steven Hansen

2009 Economic Forecasts Ignore Demographic Shift

Thane and Dave.....

i personally believe your comments are true and i could have written them. specifically i love:

"Volatility in 2009 will be studied in ECON 101 for centuries to come. "
i am a student of the economy. i could not have luckier than to live through these times. the only regret i have is the poor will suffer needlessly because of some very bad decisions made by economists, politicians, and fat cats over the last 20 years.

"What is noticeable, is this is the first recession where it took a year to identify it"
the nber dating of this recession is suspect. if you look at the data, four different dates were possible:
1) go back and declare we never left the 2000 / 2001 recession
2) economic data is so weak beginning in 2006, call this the beginning date.
3) use the dec 2007 date ignoring recovery in 2q 2008.
4) use the 3q2008 as this is when the economy really started to go south. i would also point out the 3q2008 was supported using nber's traditional method of picking.

steven hansen

2009 Economic Forecasts Ignore Demographic Shift

tb1975..

i could not find roubini's -5% projection. if you could find the link please let me know. what i found was this from november 2008:

www.godlikeproductions...

"* The U.S. will experience its most severe recession since WWII, much worse and longer and deeper than even the 1974-75 and 1980-82 recessions. The recession will continue until at least the end of 2009 for a cumulative GDP drop of over 4%; the unemployment rate will likely reach 9%. The US consumer is shopped out saving less and debt burdened and now faltering: this will be the worst consumer recession in decades.

* The prospect of a short and shallow 6-8 months V-shaped recession is out of the window; a U-shaped 18-24 months recession is now a certainty and the probability of a worse multi-year L-shaped recession (as in Japan in the 1990s) is still small but rising. Even if the economy were to exit a recession by the end of 2009 the recovery could be so weak because of the impairment of the financial system and of the credit mechanism (i.e. a growth rate of 1-1.5% for a while well below the potential of 2.5-2.75%) that it may feel like a recession even if the economy is technically out of the recession."

also from roubini's rge monitor website i found the following:

www.rgemonitor.com/blo...

Fed: GDP growth: 0.0-0.3% (2008) and -0.2 to -1.1% (2009). Unemployment rate: 6.3-6.5% (2008) and 7.1-7.6% (2009); OECD: Growth at +0.4% in 2008 and -1.2% in 2009; IMF: Growth at 1.4% in 2008, -0.7% in 2009;
Citi: U.S. economy to grow 1.3% in 2008 and to contract 1.5% in 2009; Morgan Stanley: GDP will contract 6% in Q4 and 3.25% in Q1; 2009: -1.3%; Deutsche Bank: U.S. to grow 1.2% in 2008 and contract 2% in 2009; consistent with an 18 month recession


steven hansen

2009 Economic Forecasts Ignore Demographic Shift

I appreciate the additional points made by constructe,dan herkes,jim hawthorne,tom armistead, sayde, devil's river, longinvestor,spondooli... ithinkbig, lilguy, freddieboy, carey_jim, chrisb, Ray Metcalfe, and John Lounsbury.

strangewalk - what is left is japanese style economy.

donzelion - you are correct in that some of the wealth destruction occurred before this crisis but the participants did not realize it because they did not cash out.

axelrod - you are spot on as commercial realestate is a huge problem. loans are usually short term and must be rolled over. with weak income and balance sheets, which lender will loan. then the issue of commercial real estate value will implode. the effects of this were in my number as this was one of the bad luck items which i expected.

user 327414 - the kids of boomers actually started in the 70's. they were also given haircuts. growth is about investment. they don't have enough stroke (assets) yet, and they will soon begin carrying the boomers. i wish they were a more concentrated bubble but they are so spread out. but for sure they are a demographic force which i believe are starting serious wealth building. they will be powerful coming out of this event - but i am not sure how they can be much of a force in 2009.

yamu - spiritually you are correct about consumption, but consumption is measured in the economy and this is what this article was about. this recesssion in part was caused by the elements you mention. we will never get it right, because what is right is always changing. and it is this turmoil which is disruptive but triggers a new round of growth.

Dave Wrixon - GDP numbers are trailing indicators. so with an economy in decline, things ARE worse than the numbers show. from past recessions, i know that things are always worse than the numbers show.

Steven Hansen

The Perfect Storm: Semi-Annual Economic Review

Roman, on a scale of one to ten - this is a twelve. i hope you will begin contributing regularly.

Emerging Markets: So Much for 'Decoupling'

asia is indeed coupled but not to the extent of the last downturn. the reason gdp has not turned further south in asia is due to a major fabrication and building which is in energy areas. china is in its own special place and probably does not need the rest of the world for a few years for it to do its thing.

the level of decline in asia will be greater the longer the usa and europe are recessing. if it is a short recession, asia will see little effects.