The other day somebody brought Larry Kudlow’s recent prediction of a “V-shaped boom” and his warning of problems for Republicans if they don’t recognize that’s what’s going to happen to my attention. I responded that Mr. Kudlow has predicted 15 of the last 3 booms and, consequently, I was inclined to take his predictions with a grain of salt. My correspondent then attacked me for ideological bias. Since I’m not a Republican, don’t really much care what Republican prospects are, and tend not to be ideological, I decided that our pleasant conversation had come to an unceremonious end.
I don’t know what’s going to happen. My intuition is that looking backward in five or ten years the authorities on these things will either describe what happened in spring of 2010 as a double-dip recession or that the shallow recovery of this spring proved illusory. That’s not a prediction. It’s just an intuition and I could well be wrong.
Guarded as I am about the country’s economic condition I relieved to say that I’m not as gloomy as Paul Farrell, writing at MarketWatch. After documenting the “happy talk” of the Wall Street “propaganda machine” in 2007-2008, 1999-2003, and 1929-1933, he makes the following dour prediction:
Yes, the Propaganda Machine is relentless, is growing stronger. And thanks to the Supreme Court’s incredibly stupid decision making corporations human, the Machine will feed more and more propaganda through the media, lobbyists and campaign donations, to control Washington. “The Machine” has your profile, knows you’re easily manipulated by happy talk and nonsense optimism.
There’s little you can do: Capitalism and democracy are dead. And unlike 2008, we will not be able to dodge a replay of 1929 and a Great Depression 2 after the coming crash.
A quick google of Mr. Farrell’s writing suggested to me that, just as Mr. Kudlow is something of a permabull, always seeing a boom just around the corner, so Mr. Farrell is a permabear. He’s been predicting a rerun of the Great Depression of the 1930’s for years.
Which way will the economy go over the next several years? Beats me.
Dave, they are right! I’ve been going on about your rabid right wing ways for years!
Thank you. This provided my big laugh for the day.
Wow, the SCOTUS did that? Anyway, for every Kudlow that is trying to hawk funds, there are ten left-leaning political journalists that are overstating any evidence of green shoots they can find for their own self-enforcing reasons. No doubt the economy is nowhere near as recovered as Kudlow would like, nor as decimated as the paranoid Mr. Farrell.
Whether the stock market is right or wrong in seeming to predict a recovery, it has certainly factored positively into my own feelings of well-being. My solidly private sector company is also seeing gross revenue shaping up to be 2.5 times what it was Q1 2009 and we’ve received back our 10% pay cut (11% raise woo hoo!). I’m a lot more inclined to part with my money now than this time last year (and having a lot more fun looking at my retirement accounts). No contractor I hired for some recent home improvements was idle – all were saying they are now the most busy they have ever been. If economies are feedback loops, then nonsense optimism may be exactly what drives the fundamentals, which drives more nonsense optimism and on and on.
It’s not time for the economy to rebound. Not until I sign my next deal and have a nice signing payment to invest. Until then: things look bad, very bad. Once I can buy back into the stock market things will start looking good, really good!
Oh, and no housing rebound. Not until I’m ready to buy.
The strength of the stock market has surprised me. That said, barring any shocks, I expect a slow recovery. Consumer debt remains relatively high and housing inventory still sucks. One shock could tip it over. Maybe Israel and Syria at war?
http://www.cnas.org/blogs/abumuqawama/2010/04/about-those-scuds.html
Steve
There fixed it for Farrell.
All kidding aside, this notion that a market based economy is dead is silly unless you want to ascribe that death to government (basically a parasite killing its host). Unemployed resources (i.e. unemployed people, vacant store fronts, etc.) are also opportunities. What will be the next thing to get going? I don’t know and if I did I wouldn’t share it here. But the idea of a permanent recession strikes me as silly. We may not be out of the woods here, but at the same time I don’t think we are going to just roll over and die.