Captain Obvious to World: America's In a Recession
Yesterday, the National Bureau of Economic Research (NBER) confirmed what analysts, the unemployed and garden slugs have known for months: America is in a recession.
And the sound you heard echoing across the globe was a billion sets of eyeballs rolling.
According to official calculations, the downturn can be traced back to the final gasp of a 73-month economic expansion in December 2007. The Cambridge Group pinpointed the recession's exact origin by combing through data on production, employment, personal income and sales.
On the heels of the news, the Dow Jones Industrial Average tanked 7.7%, closing the day down a whopping 680 points. The plunge followed a week-long upswing in the stock market that was capped by a better-than-expected Black Friday.
It's hard not to wonder what took the NBER so long? After a year full of crystal-clear indicators -- everything from a housing crisis to a credit crunch to federal bailouts to rising unemployment to decreased consumer spending -- it's akin to a referee calling a foul in the fourth quarter, when the star point guared had his nose broken before halftime.
But our collective energy is better channeled looking forward, not backward. Solutions and understanding should be the catch of the day. So, what does a recession mean for the average person?
Minyanville Executive Editor Kevin Depew noted an important connection between the NBER's economic findings and the reaction of the stock market. "Typically, the announcement of the official recession date marks a stock market bottom," he said. "It's not the their fault, it's just that this kind of economic data is backward-looking and not forward-looking."
However, he thinks the current slump will be altogether different from past slowdowns.
"I really think that unlike past recessions -- 2001 and the early 1990s -- this one's going to be much longer and deeper, and that's where it affects the average person on Main Street."
How, exactly? Even more vacant storefronts? Even fewer job opportunities? 401(k)s battered worse than in years past? The degrees of severity may change, but the effects remain the same.
But what about the length of those effects?
"This is going to be one of those situations where the average person looks back and thinks, 'Just when we thought it was over, it was really only beginning.'" Great.
But every valley has a peak: The nation is poised to emerge from this slump stronger and wiser - and the work it takes to get there may even prove rewarding.
"The good news is, America's going to be a much better place on the other side -structurally, economically and socially."
What cracked me up and made my eyes roll was the people who were MAD at the NBER who called the recession starting December 2007.
Mad? Surprised? What, are we supposed to put roses on the coffin and pretend Uncle Joe isn't dead?
Those must be the people who are WAY above the median income and have their noses in the trough full of high grade feed.
I like your optimism, but you look young. It's a good thing there are young people.
Sorry if I'm sounding grumpy; I didn't mean to paint you as one of the clueless, I like your analysis.
Optimism is good.
Well, perhaps if one is a Communist, Socialist, or Fascist.
People who work hard and save their money won't like that new place on the other side at all.
This isn't your grandfather's depression, due to massive abuses in the credit market there is absolutely no comprison to be made. Our economy is based on consumer spending and the consumers have had their legs cut out from under them. "Somehow," the corporatocracy forgot that workers are also consumers. Prices went up, wages didn't and credit bridged the gap to maintain the standard of living.
The piper always get paid: CDS spreads on US Treasuries are hitting records for a reason. Transferring the cesspool of debt into the public coffers can't prevent default. Government sanctified/propagated interventions like the Thanksgiving Week Pump & Dump only serve to delay the inevitable and incinerate the capital used to conduct such foolishness. (And if you think that they are merely restricting this meddling to index futures, I've got a bridge for sale.)
The bottom line is that you aren't doing your readers any favors by hinting that a bottom is in or ignoring the fact that the Treasury/Fed has made equity investing similar to betting on professional wrestling.
