One of the things I keep hearing regarding the “Slowing Economy” is how we are in danger of slipping back into a recession.

I think this is a wrongheaded view; It presupposes that the economy was in a full blown hi speed recovery, and now – suddenly! – we’ve slowed down.

This is the residual result of the torrid 3rd quarter pace of expansion, as the full weight of the stimulus was coursing through the economy.

The reality is that the 9% (annualized) GDP rate was (and is) unsustainable. Since then, we’ve had an anemic but sustainable post bubble expansion. Blame productivity or slack in the Labor market, but quite frankly, that’s not so awful, considering.

One of the issues the markets have been grappling with (amongst other issues) is the ratcheting down of unreasonable expectations.

The economy hasn’t actually been slowing that much if you are expecting a 3–4% GDP. However, if you were waiting for 5 or 6% growth, than of course you’ve been disappointed.

Think about that as we wait for the Fed . . . That’s really why an increase isn’t such a far fetched idea. Remember, they have been saying in the past that the risks appear to be balanced — that’s hardly the language of a 6% GDP . . .

Category: Finance

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

2 Responses to “Slowing Economy?”

  1. Yasser says:

    The market isn’t tanking because people foolishly believed 5, 6, or 9% growth would stretch into eternity. They were expecting, quite reasonably, that consensus earnings estimates would be achieved – and in most cases, that didn’t happen. Given that those earnings estimates were provided either implicitly or explicitly by CEOs themselves, how can you say the expectations of investors were “unreasonable”?

    Moreover, holding up Fedspeak as an authoritative take on the economy is fraught with problems, as you must know. Greenspan’s statements are purposely designed to influence the perceptions of Wall St. and Main St. – even if doing so requires a bit of duplicity on his part. With the markets heading lower and recent economic reports pointing to a slowdown, the last thing he would want to do is alarm the masses.

  2. calmo says:

    Have to agree with Yasser that Greenspan’s first mission is to placate the investors. ( None of the sub-trades I deal with have ever heard of Sir Alan, so his reknown is limited to a slightly smaller group than ‘the masses’.)
    Secondly, I get the impression that even when targets are met, stock prices don’t respond in the usual fashion by posting gains. Either the market is fickle or there are large players manipulating these prices (atleast in the short term). Volatility seems to be increasing not only with individual stocks on a day-to-day basis but there also seem to be more triple digit days on the Dow. I’d be interested in the numbers of players who have exited in the last 6 months, discontent not that they weren’t getting their 6-9% but because the stock market, unlike some real estate markets, seemed to be floundering.