Harvard’s Feldstein: Beware the ‘Double-Dip’
“There is a real danger this is going to be a double dip and that after six months or so we’ll have some more bad news. We could slide down again in the fourth quarter.”
-Martin Feldstein
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Normally, I don’t get too excited when some economist or another makes these proclamations. However, Feldstein is not your ordinary economist. He was, up until recently, the head of the National Bureau of Economic Research. And he was very forthcoming in 2007 about the housing mess. Last year, he openly discussed the likelihood of a recession. He also dissed the government’s GDP inflation and employment data. (my kinda guy).
So when Feldstein starts talking double dip, I consider his analysis very closely . . .
Here’s an excerpt:
“The U.S. recession may not be coming to an end and there is a risk the economy may experience a “double-dip” contraction, said Martin Feldstein, a professor of economics at Harvard University.
The economy could “flatten out” or “even be positive” in the third quarter, and then it’s likely to contract again in the last three months of the year as the effects of the federal stimulus program wear off and companies finish rebuilding inventories, he said.
“There isn’t going to be enough to sustain a really solid recovery,” he said, even though recent data has provided some “good news” on the economy. . . “
Ignore him at your own risk . . .
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Previously:
Martin Feldstein on the Housing/Credit/Economic Mess (September 12th, 2007)
http://www.ritholtz.com/blog/2007/09/martin-feldstein-on-the-housingcrediteconomic-mess/
Feldstein Says U.S. Economic Indicators ‘Pointing Down’
(May 31st, 2008)
http://www.ritholtz.com/blog/2008/05/feldstein-says-us-economic-indicators-pointing-down/
Feldstein: U.S. ‘Sliding’ Into Recession (May 7th, 2008)
http://www.ritholtz.com/blog/2008/05/feldstein-us-sliding-into-recession/
Source:
Harvard’s Feldstein Sees Risk of ‘Double-Dip’ Recession in U.S.
Bob Willis and Betty Liu
Bloomberg, July 21 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3IpfKeeveVM
Misleading growth statistics give false comfort
Martin Feldstein
FT, May 7 2008 18:54
http://www.ft.com/cms/s/0/4ae9ee60-1c36-11dd-8bfc-000077b07658.html
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July 21st, 2009 at 2:03 pm
This was prediction all along. No way we are out of the woods yet!
July 21st, 2009 at 2:05 pm
Sorry I meant “This was MY prediction all along”.
July 21st, 2009 at 5:05 pm
Ignore him at your own risk . . .
x2
July 21st, 2009 at 5:08 pm
It’s rude to double-dip. We need a bailout serving spoon.
July 21st, 2009 at 5:10 pm
x3
July 21st, 2009 at 5:13 pm
…then bail out package #2, already to be rumored in the works
July 21st, 2009 at 5:16 pm
I hope he’s right: I have 100 SDS champing at the bit
July 21st, 2009 at 5:20 pm
this statement:
Ignore him at your own risk . . .
should be applied to a lot of people still warning of what’s to come.
July 21st, 2009 at 5:21 pm
Double-dip indeed – here’s the prognosis:
Crash The Second (The Hunt for Red October) – Treasury and $ rally – The End of the World as We Know It, Mk.2
followed by bailout #2 (CRE – The Sequel), stimulus #2 – Treasury sell-off – Green Shoots II.
Repeat ad nauseam, Japanese-style until the rest of the world recoils in disgust and boredom.
July 21st, 2009 at 5:26 pm
lefty – you got it
July 21st, 2009 at 5:32 pm
Posted in another thread:
What a surprise Apple beats! I wonder if this takes the market to new highs or if its the same sell on the news? I’m inclined to believe we see new highs. Yahoo on the other hand….
July 21st, 2009 at 5:38 pm
Philadelphia is running out of cash. PA- 69,000 state employees are receiving 70% of their pay in June (as I understood). California- state agencies are going to court to ‘stop’ the cuts- surprise- courts can’t really do anything about that- cuts are coming like a wildfire riding a mudslide in the middle of an earthquake. Fed Res lent out 550 billion USD (See the Grayson-Bernanke video-nice).
Double-dip seems like a best case scenario.
I recommend learning Portuguese and moving to Curitiba.
July 21st, 2009 at 5:57 pm
LB – I think we’ll be taking the rest of the world down with us on this one.
July 21st, 2009 at 6:25 pm
I saw this earlier on Bloomberg and brushed it off because to be quite frank I’ve become more than jaded and disgusted with the market outcomes relative to the earnings reports coming out. I hope GS software and more green-shots from MSM doesn’t derail what seems inevitable.
July 21st, 2009 at 6:29 pm
Sounds right to me. The two biggest problems facing this country’s economy; unemployment and falling asset prices has yet to be addressed.
July 21st, 2009 at 6:30 pm
TARP is supposed to cost he US Government/Taxpayer $23 trillion, so how can we have a recovery.
Goldman’s Sachs vaunted (and probably deceptive in some way) profits of $2 billion are piddles compared to the cost. Why are we stuck with underwriting the companies that caused, and will cause again, bubbles and collapses?
July 21st, 2009 at 6:51 pm
But, will we see new lows in the S&P? It may get close but I doubt it.
July 21st, 2009 at 6:56 pm
In other words, there is no demand. There hasn’t been any demand since the dot com blowup. That is why the fed dropped rates and kept them down so long. Without artifically low rates there is no demand.
July 21st, 2009 at 8:59 pm
Washington’s Dilemma: This Isn’t a Recession, It’s a Collapse
Kunstler is spot on with this….
The US economy is now dying a slow and painful death because it had become based on activities that had nothing to do with producing real wealth. Instead, it became dependent on rackets, that is, behavior geared to getting something for nothing.
Is Obama Gorbachev?
http://kunstler.com/blog/2009/07/is-obama-gorbachev.html#more
July 21st, 2009 at 10:04 pm
For the rally to end – the majority of the TBPers need to throw in the towel on their QIDs, SRSs, SKFs and start loading up with longs :)
July 21st, 2009 at 10:17 pm
Bring it on; I’m locked and loaded for that bear.
Adversity builds character, and we haven’t had nearly enough of it yet to restore the independent and self-reliant character that made this country great, before the soft decades.
July 21st, 2009 at 10:35 pm
Is the recession over? Will there be a double-dip? Does it really matter?
Of course not.
Children, I’m afraid that your reality is that a massive debt deflation and asset markdown (er, correction) is underway. It will take years if not decades to play out. It is healthy and it is necessary. We’ve created a world that is too expensive in which to live, merely in order to keep a bogus FIRE economy going.
It may not turn into the post-katrina-like future that Kunsler predicts, but things could get rather interesting.
July 21st, 2009 at 10:58 pm
Perhaps the double-dip refers to Bernanke and Geithner?
July 21st, 2009 at 11:23 pm
I find these comments ironic, considering that IMO few of you could honestly have supported Senor Feldstein’s prescription. Back in January, Fedly called for the Economic Recovery and Reinvestment Act to be re-oriented away from an economic investment act and towards an economic stimulus act. He wanted massive tax credits and direct stimulus checks to encourage Americans to buy jet skis, HDTVs, Ipods, and other consumer goods. He also advocated using the funds to purchase arms, military hardware, and constructing larger bases. About the only thing he didn’t advocate from Ronald Reagan’s platform was the MX missile!
As a matter of fact, Marty McFeldstein ridiculed the idea that we ought to even try to reorient the economy away from consumption and towards production. His plan was a plan to build a bridge back to the Reagan-era glorification of consumption and denigration of production that created this mess. Given his inability to recognize the reality that a nation that produces nothing and consumes everything is destined for economic failure, his judgment is suspect.
http://www.washingtonpost.com/wp-dyn/content/article/2009/01/28/AR2009012802938_pf.html
July 21st, 2009 at 11:37 pm
Martin Feldstein, of AIG board of directors fame…
What more do I need to know to be circumspect about anything he says?
July 21st, 2009 at 11:50 pm
@Franklin
Franklin…
Design me a budget…
You talk about INVESTMENT (which I doubt ANYONE here is opposed to), yet what INTELLIGENT people understand needs to be PURPOSEFUL investment…After all, we don’t just want to build factories destined to become idle…or do we?
What are we going to produce? (please don’t tell me teachers or government workers)…
What are we going to produce? who are the customers? and can they actually buy without needing credit?
Now…if you come up with a good idea for that…Who are we going to SELL it to?…at what price point?
Is there a sufficient mass of market at that price point to absorb our production costs (including buy or lease on factory, taxes, payroll, sufficient profit margin, etc.)?
If NOT, why the hell bother?
Don’t you suppose that there are MANY good ideas out there that are waiting for the right time to be launched? How many do you suppose exist that basically just say “F-it”…this won’t meet any carbon emission standards, or, my healthcare costs will be too high to hire any workers, or I’m about to get taxed to smithereens to pay some dweeb schoolteachers pension…
Since you seem to be so passionate about the subject, get your ass out of academia and start putting your money where your mouth is…
…and keep drumming your fingers while you’re waiting for your customers to show up…You’ve got about 3 and a half years “grace period” where your sharp business model is most likely to get BAILED OUT by taxpayers if it fails so you better get crackin’…after that, you’re on your own…
July 21st, 2009 at 11:53 pm
I think the double-dip is plausible, but his timing seems wrong–the stimulus spending should still be increasing in the 4th quarter, and the Fed won’t be tightening. If there is a double-dip, I would think mid-2010 would be more likely.
July 22nd, 2009 at 12:27 am
@matt wilbert
no offense, but do you really think they’ll be out there reporting “double dip” type numbers in MID 2010…a couple of months before mid-term elections?
I’m just a dickhead, but if I were the one blowing smoke up the asses of Americans (instead of the present ones blowing the same smoke)…I’d blow it as follows…
Repeat 2009…
Start talking in March about “Stimulus 2″, TARP 2, foreclosure relief 2, China resurgence 2…
Convince everyone that these programs will take AT LEAST 6-9 months to bear fruit…that ought to convince the same “tools” who voted in 2008 to re-up…
So it’s not really a matter of IF there’s a double dip…Instead, it’s WHEN it’s reported…I don’t think they can kick the can past November 2010…so they’d better get it over with ASAP…this fall sounds fine…
July 22nd, 2009 at 12:38 am
Wasn’t Marty Feldstein the guy that was shopping a subprime mortgage solution that revolved around convincing mortgage holders to convert from non-recourse mortgages into lower interest, recourse loans?
July 22nd, 2009 at 1:29 am
[...] Ignore him at your own risk . . . Barry Ritholtz [...]
July 22nd, 2009 at 1:36 am
>> How many do you suppose exist that basically just say “F-it”…this won’t meet any carbon emission standards
I don’t think this is a fair objection. If certain activities yield insufficient benefits to outweigh the real costs of that activity, then they *should* be avoided. And if too many plans fail a cost-benefit test, then investment will likely end up flowing into technologies to reduce carbon emissions. (Or into health care to reduce its cost. E.g., centralizing records.)
>> or, my healthcare costs will be too high to hire any workers
We should separate healthcare from employment. That’s one big, worthless paper shuffle.
July 22nd, 2009 at 3:12 am
” If certain activities yield insufficient benefits to outweigh the real costs of that activity, then they *should* be avoided. And if too many plans fail a cost-benefit test, then investment will likely end up flowing into technologies to reduce carbon emissions. (Or into health care to reduce its cost. E.g., centralizing records.)”
***
OK great, I’m going to whip out my fat wallet & plop down a couple of tens of mil so that grandmas excema problem & history will be on a nationalized database (and probably sold to the likes of P&G for a profit), instead of sitting in a personalized manila envelope by a trusted local doctor…
I can’t wait…
as for global warming…I can’t wait to ask the 350 million US taxpayers to fork over 10 trillion, while two BILLION Chinese & Indians laugh at us and steal our productive capacity for a cyclical scientific pattern that ONE FUCKING KRAKATOA type event would cure in 3 seconds…
RUN…don’t walk… to your local VC fatcat and shower them with your ideas…Chances are, unless they have the US taxpayer as their uncle moneybags, they’re “interested”, but no thanks…
July 22nd, 2009 at 6:06 am
@cvienne:
It no longer matters who is voted in – the corporate run government will continue to trash our standard of living into the future to cover the total screw up of the economy they’ve foisted upon us. Unless GS is taken down, lobbyists are banned and corporations lose their “personhood” status – we the people are toast.
July 22nd, 2009 at 7:25 am
@mathman: It’s going to take more than that. Even if certain politically active mega corporations are dismantled, their legacy will remain with the regulatory agencies to benefit the survivors. The regulators need to be completely dismantled and rebuilt. Their rules and loopholes are so complex and buried in tens of thousands of pages that reform is hopeless. And the Congress is completely clueless about this.
You hear stories about congress critters voting on bills that they haven’t read; with agencies, they don’t even know the laws are being passed. This is oen of those less talked about dangers of big government creep – it eventually reaches the absurd point where checks and balances break down.
July 22nd, 2009 at 8:04 am
It no longer matters who is voted in – the corporate run government will continue to trash our standard of living into the future to cover the total screw up of the economy they’ve foisted upon us.
—————-
“You don’t have to pass an IQ test to be in the Senate”
http://www.youtube.com/watch?v=XTSCRoYyM-Y
Amen
July 22nd, 2009 at 8:07 am
You hear stories about congress critters voting on bills that they haven’t read; with agencies, they don’t even know the laws are being passed. This is oen of those less talked about dangers of big government creep – it eventually reaches the absurd point where checks and balances break down.
—————–
Entropy.
Ever notice how cleaning up always takes longer than making the mess?
July 22nd, 2009 at 9:05 am
So if he is right then we actually do need a second stimulus package, and with the 4-6 month delay between its passage in congress and actual effects on the economy it needs to be passed within the next month.
July 22nd, 2009 at 10:02 am
Great idea, DeDude! We should also build big stadiums in our cities and then for 100 days or more watch games and eat bread.
July 22nd, 2009 at 10:10 am
@Swampfox
LOL :-)…I love the Roman Empire reference…
July 22nd, 2009 at 10:56 am
Check this out in today’s Boston Globe:
http://www.boston.com/business/ticker/2009/07/many_locals_are.html
Massachusetts foreclosure petitions in June jumped to 2,835 – more than eight times higher than the 350 petitions in June 2008 and 21.7 percent higher than the 2,329 filings in May, said the Warren Group, which added that the number of petitions to foreclose in June was the highest it’s been in the previous 13 months.
Wow.
July 22nd, 2009 at 11:25 am
Thanks, cvienne. Every time I see stimulus in print or hear technocrats rattling on about “the fix” I think bread and circuses.
July 22nd, 2009 at 12:14 pm
Great idea Swampfox. Instead of peoples money being wasted on destructive selfindulgences like big luxury tanks and houses so big they cant find each other in them, lets spend it on something productive. Building something useful where people can actually get together with each other (and maybe find out that dem’dere different colored people are just like us). Feeding everybody something healthy may also be a great way to spend the fruits of societies combined productivity. Getting all these snotfaced little fat selfindugent Americans out of the swamps and into a civilization where you care as much about your fellow citizens and your country as about your own fat a$$ is probably about the only thing that can save the US in the long run. After all it was greed and selfindulgence at an astronomical scale that got us into this mess.
July 22nd, 2009 at 12:47 pm
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