Our story so far: Economists as a group, completely missed the oncoming credit crisis, recession, and market collapse. In the beginning of 2009, they did not discern the economic revival. They sure as hell missed the March 2009 market bottom and forthcoming 78% rally.

Now, with Q2 of 2010 coming to a close, many have begun chattering about a double dip recession. A Google search for double dip recession generates 3,470 recent news items.

While I suggest you ignore those forecasters who — repeatedly — got it wrong, let’s at least look at the data to see what has the dismal crowd all hot and bothered.

Over the past year, a combination of pent up demand and Federal largesse created an initial spike in various sectors: Retail sales, housing activity, autos, and of course technology. However, the initial pop is now fading.

As the data confirms, there can be no doubt we have entered a soft patch. Indeed, the following data points confirm a general slowing:

Jobs: Private sector hiring cooled off last month, with just 41,000 hires;

GDP grew at a 3% in Q1 2010, down from 5.6% Q4 2009.

Europe: The problems in Greek Spain and Hungary are likely to lead to significant austerity measures in Europe. Expect the Continent to see anemic growth at about 1% GDP, and that can shave 0.5% off of US GDP.

Retailers showed a disappointing May, making no gains (outside of Autos).

Homebuilders sentiment and mortgage apps have plunged, following the expiration of the home buyer tax credit.

China appears to be guiding its credit and real estate sectors to slower growth.

Conference Board Leading Economic Index (LEI) fell in April by 0.1% — the first downturn since March 2009; (May data wont be out for another 2 weeks, but it also appears to have softened).

Dr. Copper looks pretty sorry, as commodity prices plunge worldwide.

Unemployment claims were declining, but that progress seems to have stalled

This is, historically speaking, normal. ECRI’s Lakshman Achuthan told Newsweek: “You always have a spurt in growth out of recession and then you throttle back. But we’d need to see a pronounced, pervasive, and persistent decline in the level of the leading indicators to start talking about recession risk.”

That “pronounced, pervasive, and persistent decline” is simply not present. Indeed, double dip recessions are actually rather rare. As Yale Professor Robert Shiller pointed out in a recent Sunday NYT article, “When inflation-adjusted G.D.P. has come out of a decline and posted three or four quarters of gains, it has never immediately begun to fall again — at least not since quarterly numbers began to be issued in 1947.

And that is what we have had — a year of improving GDP. Following the initial surge in data off of the lows, we have entered a slowing phase of the recovery.

The key factor regarding all of this slowing data is that it is suggestive of an economy that will continue to expand, albeit at a slower pace. None of this data is highly aberrational, and none of it is consistent with past double dip recessions.

Indeed, even Capex and employment plans for the upcoming year show a potential upswing. ISI reports  that their mid-year survey of CFOs shows the percentage of companies planning to boost their capex & hiring in 2010 has increased markedly. This would be heading in the opposite direction if we were on the verge of a double dip recession.

So then why all this sturm und drung? Newsweek’s Dan Gross sums up the cause of the residual bearishness of the dismal set:

“The concern about a double dip is largely a function of what I’d call residual bearishness. Stung by excessive optimism in 2007, the econo-pundit community remains in a reflexive, dour crouch. Since it began in the spring of 2009, this recovery has been widely disbelieved and dismissed. Fretting about the double dip is as much about where we’ve been as where we are.”

Ironically, it is the new breed of Deficit Hawks are the ones pushing for a double dip recession. After decades of profligacy, they now seem to want fiscal austerity in the United States — just when the economy is most vulnerable. They apparently have failed to learn the lessons of 1929-33 and 1937-38. The time for balanced budgets and fiscal prudence is during the expansion phases of the economy — and not the post recession period where after an initial spurt, growth is beginning to slow.


The Great Recession Is Over But Hold the Confetti (December 21st, 2009)

Category: Data Analysis, Economy

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.

66 Responses to “Double Dip — Or Just a Soft Patch ?”

  1. Well it is good to know we can always find a different insight that will show us a different approach of the same metrics meassuring the same market aspects. In my opinion, while this can be a relief it also makes me think that an individual has to have a lot of knowledge when it comes to understanding the metrics and getting to know which sources are the ones to be trusted. But, what happens with the average audience? who to trust?

  2. Julia Chestnut says:

    I gave up economics long ago. It can tell you where you have been, but is famously useless at predicting where you will go.

    Personally, I look at the fundamentals. Where are the companies on the stock ticker going to get those earnings? What jobs are left for those consumers who are supposed to buy buy buy? Why is housing STILL out of line with the average income of the people who are supposed to buy it? What exactly is the entire Gulf Coast going to do for income for the next 15 years? What will it cost to fill up the car by next summer? If you don’t want to buy things made in China, what are your alternatives? Why has there been not one single indictment for all the fraud, front-running, and commodities manipulation I feel like I’ve been seeing for the past five years?

    The crisis and its causes were papered over, and nothing was fixed – at great cost. None of the benefit of those expenditures has flowed to the people, aside from some government hand outs here and there in the nature of extended unemployment benefits and food stamps. Oh – right. If we bought a car, or a house, we could also get some skin. I have no idea why the economists are suddenly unhappy, but I can tell you why the people are bearish. And churlish.

  3. Sircornflakes says:

    “The time for balanced budgets and fiscal prudence is during the expansion phases of the economy — and not the post recession period where after an initial spurt, growth is beginning to slow.”

    The problem seems to be that there is just too much supply side still left in the system.

    And as in previous great dips, I’m guessing the degree of politicization was not the same over fiscal austerity.

    For me, it’s all about jobs and my look at history, albeit biased, tells me there’s a world of hurt to come.

    Hope I’m wrong.

  4. dead hobo says:

    Then there’s the bunch that conflated the stock market with the economy. This is especially common among those who proclaim economics is crap .. we don’t respect it and we don’t understand it, but we like to sound like experts anyway.

    The market goes down for a few days and, according to a growing number of experts, both economists and talking heads, it is potentially on the way to S&P850. This is a market level that is consistent with optimistic trailing average P/E levels. It could go much lower and still be consistent with trailing P/E levels, historically.

    Sales pundits like to discuss market levels levels consistent with projected futuristic, imaginary P/E levels because this hypes sales and people are gullible enough to swallow the carnival atmosphere fraud. Remember, financial advisers get paid only when people stay invested.

    Many are rightfully worried about if the current stock market is just another in a string of asset bubbles. Many also concerned that the recent economic growth is only function of explosive deficit spending and only empty calories.Talk of double dips is healthy because it promotes understanding of real economic performance. It also helps sort out the distinction between the asset bubble stock market and the real economy.

  5. [...] Get up to speed on the double dip debate.  (TBP) [...]

  6. jmitc says:

    Meanwhile, an analyst on CNBC’s website is recommending investing in ‘barbed wire and guns,’ further blurring the line between financial media and Soldier of Fortune magazine.


    I have an idea: Why don’t you take the same money you would have spent on ‘barbed wire and guns’ and stock the basement and the garage with enough bulk foodstuffs to feed the neighborhood for six months if you think it’s going to be like that…

  7. HEHEHE says:

    I posit the argument that it is neither a soft patch or a double dip; we are still in recession and have been for the past year, the government/FED simply spent $3-4T to paper over that fact. Absent another “recovery package” the true state of the economy will start showing itself once again.

    I know it sounds like I am beating a dead horse but it seems to me that “the economists” and Barry are playing around with numbers and semantics while ignoring the $3-4T elephant in the middle of the room.


    BR: Psychologically, that seems to be true — but governments all over the world ALWAYS do that following a crisis.

    Read Reinhhart and Rogoff for the historical perspective.

  8. Transor Z says:

    Julia Chestnut asked:
    Why is housing STILL out of line with the average income of the people who are supposed to buy it?

    That’s my question, too, in addition to jobs. With credit standards tightening, foreclosures and “shadow inventory,” RRE prices can only go in one direction. There are no indications that wages and job growth will support current prices. Once RRE unwinds to a sane level, my main quarrel with this economy will be resolved.

    This assumes that what Dead Hobo alludes to above isn’t the case and equities aren’t just a bubble.


    BR: See this chart
    Home Sales Collapse w/o Government Support

  9. rktbrkr says:

    This is not your average recession to paraphrase Yogi Bear. The stimbucks spent thus far haven’t made much impact on the “real economy” (the big banks and their perfect trading in 1Q aside).The mood isn’t right for more deficit spending although I’m sure we’ll get a Gulf Stimulus plan with different wording (got to get FL into the right col for the next pres election)

  10. Dead Hobo:
    It is a bubble. What do you think will happen once the Fed raises rates back to a more normal level? Heck, how long has Japan had rates at the ZIRP level? And they are still suffering deflation.

  11. Chief Tomahawk says:

    “Our story so far: Economists as a group, completely missed the oncoming credit crisis, recession, and market collapse. In the beginning of 2009, they did not discern the economic revival. They sure as hell missed the March 2009 market bottom and forthcoming 78% rally.”

    These ‘Econonistas’ sound not too good at what they do.

    As Michael Shedlock has been following, state and local governments are in cutback mode just like Europe. This will further adversely affect Main St. with increased taxes, less services (four day school weeks — in Georgia, test scores have gone up!), not to mention all of the properties for sale, vacant store fronts, etc.

    Washington’s biggest help would be to unleash a ‘game changer’, like rolling out oil from algae on a massive scale so within 5 years 90%+ of our oil is produced domestically. Instead, we got the most inefficient use of capital ever: bailing out bad check writers. I hope our currency survives.

  12. Patrick Neid says:

    “Economists as a group, completely missed the oncoming credit crisis, recession, and market collapse. In the beginning of 2009, they did not discern the economic revival. They sure as hell missed the March 2009 market bottom and forthcoming 78% rally.”

    But in the same breath we want to listen to their solutions now? I don’t think so. Keynes may have had some useful things to say if it were conjoined by an intelligent political class–an oxymoron if there ever was one. Aside from a severe depression there is nothing that will stop the growth of spending and the welfare state in today’s times. Occasionally income might spike giving the illusion that some fiscal responsibility has set in. Simply a temporary aberration.

    But no worries, intervene they will, printing trillions until the ink runs out pretending that they will reverse it all when the good times roll. LOL.


    BR: Keynes is one of the few who did not get this economy wrong (the advantages of being dead)

  13. Marcus says:

    Our Bungee Cord Economy

    We are headed down, economy and markets.

    Europe – There are 26 countries in trouble in the EU so why we are only concerned with 6 at the moment? What shape are Bulgaria, Denmark, Estonia, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia and Sweden in? That’s a lot of bad headlines.

    U.S. – Connecticut was just downgraded. We have over 40 states in trouble, states that can’t meet their health, education, roads, or payroll commitments. Reality should hit the states in July-August. More bad headlines!

    Our markets are eerily reminiscent of the 1930s, and we are on a path to have years of bad performance yet to come.

    Instead of calling this near term event a double dip, call the market what it is; a “bungee cord economy”. As if they were tied to bungee cord, our markets were dropped off a bridge, and now are bouncing ever downward to their natural bottom.

    When that bottom is found and held for an extended period, markets will slowly pull themselves upward. At the present we are just bouncing around, always dropping lower.

  14. zebov says:

    Let’s say there is no double-dip. Let’s say things return to some sort of “normal” in the next year or so. At that point of “normal” I assume the banks would start lending again instead of hoarding all their money in low-interest reserves. And now we’d have something like 2x the money floating around as in 2007. So, in our “best-case scenario” (everything is back to normal guys!), we STILL have massive inflation. I seriously don’t see how we can have a truly positive economic condition in the next 5 years.

  15. rktbrkr says:

    The next stimulus will come cloaked as Gulf Oil cleanup, initially it will be sold as 100% BP paid but then US will pick up funding on an emergency basis especially if any oil reaches the east coast beaches. MS & AL are lost to O’Bamanation but FL is key…and then if the currents aid the effort the atlantic coast states will be receiving stimulus/cleanup funds. A lobor intensive WPA type effort lasting into mid term elections. Praise the lord!

  16. The Curmudgeon says:

    ” it has never immediately begun to fall again”

    Haven’t I heard something similiar to this somewhere? Weren’t home prices in the US supposed to never fall?

    This second ride down will be a cruncher. It will finally begin to significantly affect American living standards (downward). When it does, and hopes for a better future are considered more or less dashed by a critical mass of the people, that’s when it will really get ugly.


    BR: The difference is, the idiots who told you that about home prices were a) factually incorrect; b) either ignorant jackasses or lying dickwads.

    Shiller, on the other hand, is none of the above, warned about the 2000 Stock market top and the 2005 Housing top.

    So I would tell you your comparison does not carry the day

  17. insaneclownposse says:

    Why the attack on the fiscal “austerity” crowd BR? You are the same guy who said “you can’t drink yourself sober” regarding the attempt to solve a credit crisis by piling on more debt.

    To me personally, it seems the folks who would like to reign in government spending are the people who are prisoners of common sense. All of the fiscal stimulus efforts by the government and the massive monetary intervention by the Fed have done nothing to permanently solve the structural problems confronting the U.S. economy. It was just a sugar high which is now wearing off in the form of a disastrous crash (which further destabilizes the financial system btw).

    Granted, the fiscal austerity crowd is guilty of oversimplifying the matter, but the motivations are spot on: they do not want to see the U.S. dollar destroyed in a hyperinflationary explosion. The average person is very uncomfortable when they see $1.5T deficits. That is not a stable situation. I don’t think you can ignore it. Additionally, the majority of the deficit is funded at short term rates. If those go up because the market suddenly decides the U.S. can’t pay, you have a crisis. This is not something that is years down the road, this could literally happen next month.


    BR: The Hypocrisy of those who voted for every earmark, spending cut, entitlement program and war — all unfunded — now suddenly discover the virtues of a balanced budget?

    PUHLEEZE — most of these new deficit hawks are partisans who are the worlds worst hypocrites.

    I give the Peterson institute a pass, as they have been saying this for so many years –but the rest of them? Ask how they voted on Iraq, 2003 Tax cuts, and the prescription drug bill. Unless the answer to all three votes was NAY, they are lying weasels who can go fuck themselves.

    As you can see, I am still on the fence on this . . .

  18. StatArb says:

    Rarely does anyone ever get it right , but did anyone get it right , oir it a zero across the board ?

  19. Hugh says:

    BR, I agree with you 75%. Things are looking up.

    The double dip recession will hit if, and only if, people get panicked about debt levels and interest rates start going up – and surely that must be quite a likely scenario.


  20. constantnormal says:

    What will happen to consumer enthusiasm when the census jobs evaporate in July and August? Isn’t there a Very Real Threat of Bananamerica following the EU (assuming it is still in existence by then) into severe austerity at that point?

    [BR: If that happens, and they data supports it, we can change our economic expectations. Until then, I will stick with what the data says today]

    The consumer does seem to be turning back toward mining their remaining credit to buy Still More Stuff, but that can’t last long either, because between declining real wages and the costs and difficulty of maintaining debt-based spending, Joe and Jane Consumer are going to reach the end of their tether pretty quickly.

    Now we can, of course, have the uppermost 1% (those who have all the wealth) try to hold the line, by purchasing an ever-increasing amount of new Ferraris and the like, but that leaves a gaping chasm between the producers of luxury goods and the companies that produce Everything Else.

    I’m sure that the automated traders will keep kicking stocks farther and farther above underlying fundamentals, at least until the ground they are standing on is washed from under them (possibly by a currency crisis or yet another credit crisis), and TA traders will eke out a living on the crumbs left behind, but as the underlying economy dies off, this becomes harder and harder to sustain. Does the notion of a booming Haitian stock exchange strike anyone as ludicrous?

    So for a while at least, we’ll see BR’s manic-bull side win out, and he will be able to maintain his net-long stance, but as summer turns to fall, and the ashes of the economy become apparent, that game will run out of momentum, and his depressive-bear side will emerge. In this, at least, he mimics Mr Market very nicely.

    And we still have yet to address any of the causes of the decline that began in 2008. Housing remains in gratuitous surplus, fraud runs rampant on Wall Street with corruption in government following suit (indeed, the two are welded together at the hip), and employment — despite an all-out effort (?) to bolster things with census hiring and endless extensions of unemployment payouts — remains historically weak, riding at levels associated with the nadirs of past recessions. Any sign of a significant upturn in the work week? Not so’s one would notice, any movement there remains well within the overall statistical noise level. And I have yet to notice a wave of Help Wanted signs, instead I see and endless wave of strip mall storefronts sporting “For Lease” signs.

    And then we come to the question of how long states can tread water without income tax revenue. Certainly by 2011, some of the basket cases will be gasping for federal bailouts. And at that point, we will be in the same position that the EU finds itself in today.

    Yes, it’s a great day for optimism and “buying at the bottom”.

  21. Mannwich says:

    Right on, Julia. Ditto dead hobo. Not much more to add on this point.

  22. wunsacon says:

    “The Recovery” will not be televised. It’s being cancelled, along with “Heroes”, “Ghost Whisperer”, and other such works of fiction.

  23. constantnormal says:

    I do agree with BR that we need to be pouring on the deficit spending at this point — but only in concert with serious repairing of the flaws that brought us to this point, and there is no sign whatsoever of any of that happening.

    We simply have not been hurt badly enough to provoke the kind of politician anxiety to force them to be responsive to the voters and nation, and turn away from the lobbyists.

    Perhaps after the November elections we will see Change We Can Believe In, but I’m not holding my breath. I think we need (and will likely get) a few more turns of the screws before things begin to change.


    BR: I never said we need to be pouring on deficit spending, Sir Straw Man. I said the time to worry about deficits wasn’t 1937 and it isn’t 2010.

  24. tenaciousd says:

    It’s the politics that will not so much create a second dip–since whatever growth we’ve seen so far is completely (and I challenge anyone to prove otherwise) the result of federal deficit spending. The deficit hawks will win because the stimulus will soom be deemed to have failed. FDR’s reform packages were far more ambitious and spread over a decade…


    …and still it took WWII–with forced savings and having our economic competitors destroy each other’s industrial capacity–to get our economy back in order. If nothing else, the New Deal did create the infrastructure to win that war and the Cold War in the age of centralized planning.

    So, here’s the score. (You can say you heard it here first.)

    1. Deficit hawks (remaining Blue Dog dems plus the GOP who get elected in November) will stop all new stimulus and pull the supports out from under housing, allow the economy to finish its dive to the bottom.
    2. Obama will either learn his lesson and truly shift to an ambitious reform agenda or he will swing centrist and be replaced by a Republican after his base collapses.
    3. The next Presidential term, regardless of incumbent, will be marked by protectionism and ambitious investment in infrastructure (i.e., mass hiring of unemployed construction workers), alternative energy (more construction), health care services, and biotech R&D. A Democrat will do this to “help those in need.” A Republican will do this to rebuild “national pride” a la Teddy Roosevelt. They will finally figure out that the rest of the world can suckle at out teat on our terms for once. If they don’t like it, they can send their navies over to straighten us out–if they have any, that is.
    4. Far-right Republicans (aka Tea Party) will sponsor low-grade mass violence (it’s in the DNA of Southern-style retro-populist conservatism) and–thanks to highly public trials–will see themselves become the poster children for domestic terrorism thus clearing the way for most Republicans to move back toward the center and break partisan ideological gridlock.

    What am I going to do with the rest of my day? (Just havin’ fun and stirrin’ it up.)

  25. Mannwich says:

    @constant: But it depends WHAT the powers that be choose to deficit spend ON. It’s all about priorities and Main Street isn’t a priority in Congress. Congress’ job is to make it APPEAR that way, but people today increasingly aren’t buying it, and for good reason.

    They’ve merely propped up the very bad actors and sectors that got us into this mess. Delayed the reckoning. NOTHING has been truly fixed. Not one thing. If anything, it’s worse now because there’s less trust and confidence in the system and in each other (and more fraud), which are two base requirements for a real “recovery” to take hold.

  26. Mark Down says:

    PALIN 2012: Because the world is going to end anyway!

  27. HEHEHE says:

    What’s more deficit spending going to do if the system’s not purged of the junk on the banks books? Its just kicking the can down the road.

  28. tradeking13 says:

    At least you didn’t call it a “soft landing”.

  29. constantnormal says:

    Oops! Markets appear to have had a “No Soup for You!” opening …

  30. constantnormal says:


    “But it depends WHAT the powers that be choose to deficit spend ON.”

    I couldn’t agree more.

  31. Mannwich says:

    @constant: And propping up their corrupt, incompetent, quasi-criminal (and in some cases, outright criminal) buddies (and by extension, themselves) isn’t my idea of a good use of those funds.

  32. constantnormal says:

    This seems to be an awfully one-sided discussion … Franklin411, cognos — you are needed on stage!

  33. powersjq says:

    Strange how USians are so focused on headlines. (Disclaimer: I’m a recovered USian living in Canada.) But maybe it’s appropriate in the case of the stock market, which–it seems always worth saying these days–is nothing more than an indicator of confidence in future (and since 80s dereg, very short term future) earnings. What people are trading is ownership of a stream of income that may or may not arrive, for a variety of reasons, in the future.

    I think the comments here have it exactly. Since the Industrial Revolution, the principle economic problem has been one of demand. Once you have machines that help one person do the work of 400, you rapidly run into the problem of over-capacity. Without jobs (read: with 20%-30% unemployment), people cannot buy all of the things our massively productive economy is capable of producing, leading to more unemployment, more slack capacity, etc. This is why Keynesianism in general works.

    But the comments also have it right in that the big problem here is trust. Modern finance is about the creation and management of trust. (Numbers are only tools in this regard.) Modern economies run on credit, which shares the same root as the words “credibility” and “credo.” It’s about a shared belief between lender and borrower that the debt will be repaid according to its agreed terms. We’ve got a major breakdown in trust happening now due largely to the fact that we STILL have no idea who’s solvent. Remember those “toxic assets”? They’re still poisoning the well. And we can’t seem to get a straight story from European banks or governments on their balance sheets. Watch the interbank rates here. That’s the key indicator in the crisis of trust. Keynesian stimulus in itself can’t help unless the underlying problem of trust is resolved while the stimulus keeps things afloat.

  34. Deborah says:

    I couldn’t disagree with this post more.

  35. franklin411 says:

    Sorry, but I can’t give it away for free right now. They’re paying me to give it to a few dozen lucky undergrads! =)

    BR is absolutely right in this post. The only real threat I see to the recovery is the political threat that the politicians will follow the “common wisdom” that we should cut spending to the bone to “restore confidence” in the market.

    There were only three years during the 1930s when the Federal budget was essentially balanced.
    FY 1930: 0.8% surplus (Calvin Coolidge’s last budget)
    FY 1931: 0.1% deficit (Herbert Hoover’s first budget)

    FY 1938: 0.1% deficit

    Guess what? FY 1930/1931 is when the Crash turned into the Depression. The Depression was not inevitable, even after the Crash…it was caused by idiotic policymakers like Hoover who listened to the “common wisdom.”

    And guess what? FY 1938 is when Roosevelt’s balanced budget essentially returned the economy to the worst of the Depression.

    However, let’s not forget that history is a worthless field. It’s much more fun if we keep repeating the same mistakes over and over and over and over and over again!

  36. constantnormal says:

    @F411 — so as a practitioner of the Historical Dark Arts, do you believe that the reforms enacted in the 1933-34 time frame had anything to do with a restoration of trust (but not money, we needed deficit spending for that, I think we can agree)?

    And if we restore the money, but not the trust, that a certain skittishness will prevail among the “little people” (not that the “little people” have much to do with the stock markets these days)?

    Finally, do you believe that we are destined to repeat the past and erase a goodly amount of the “stuff” out in the world at large via WWIII? That would set the stage for another great manufacturing boom to replace all that “stuff” — only, alas, it is not likely to come from the Bananamericans, as they have shipped most of their manufacturing to other places. We are certainly geared up to do exactly that, from a military standing.

  37. The Curmudgeon says:

    My best F411/Cognos imitation:

    You naysayers are the same ones that were calling for the DOW to hit Armaggedon territory, just when it was poised to scream up 78%. Profits are up. Forward-looking PE’s are higher than ever on the SPX.

    Obama’s weathering this unfortunate oil spill fine politically. In fact, he’s showing just how effective government can be at resolving all of life’s little problems and inconveniences. It was thirty years of the Republicans claiming that government didn’t work and then setting about to prove it, that got us here, but now that we have an intellectual president like Obama who listens to his intellectually-superior advisors, unlike Bush and his advisors, the future is secure.

    We just need more stimulus to get past the Keynesian demand collapse caused by the nefarious, free-traders in the Republican administrations that offshored all of our jobs. Even GM is making money now, and the rest of our investments in the good old unionized American automobile workforce is paying fat dividends.

    All we need is a better educational infrastructure so we can better compete for jobs. Never mind that it doesn’t take much education to operate plastic-forming machinery that the onshoring of jobs again will require. If everyone is provided access to at least four years of good, post-prepatory education, we’ll be able to compete with the likes of Foxxcon. Our workers won’t commit suicide nearly as frequently because we’ll have better mental health care.

    There are green shoots everywhere. Just look at the iPad’s sales. Like Jobs says, nobody needs pickup trucks anymore since we don’t work on the farm, and nobody’s gonna need PC’s anymore because their usefulness in accomplishing tasks is so yesterday. A meaningful life is a life fully connected to the bounty of formless information and entertainment that can be so tastefully accessed with a device that looks like a writing tablet.

    Indeed, banks had their best two quarters in history. Nevermind that there are a lot fewer now than just a few years ago, and none are being truthful about the real state of their balance sheets. Imagine the synergies when a bank can write you a mortgage loan to buy your house at the same time they’re setting up a retirement plan and loaning money on your business while also streamlining the bill-paying transactions, that you can now do on your new iPad.

    Life is really, really good. Better than ever, of course that’s partially because this happens to be age in which I live. But still.

  38. franklin411 says:

    Yes, it was all a package deal. However, revolutions don’t start because some piece of financial reform was or was not tough/effective enough. Revolutions start because people have no confidence in their own present or future well being. So while reform is necessary to prevent a crisis tomorrow, relief is crucial to ensure that there even is a tomorrow.

    No, we don’t need a war. Everyone agrees that we need a massive investment in several fields just to keep the world turning: energy, health, education. Just look at the 1920s–a huge amount of the legitimate growth during the decade was due to automobiles, radio, appliances, and a general revolution in living standards, which rippled far beyond the simple act of manufacturing the goods.

  39. Cdale_dog says:

    Here is Barry showing his true politial colors again. Are you telling me that you really believe there are strong areas in this economy? Talk to any “normal” person and they will tell you the economy sucks. While GWB was in the White House, everyone was bitching about the deficit and how he spent money like a drunken sailor. Now, when BHO is making him look like a “deficit hawk”, all the liberals are clapping their hands at how far our deficit has shot up over the last 18 months. Barry, you claim to be non-partisan, but we all see right through you with the types of posts you have made time and time again.

    Like someone else pointed out, it is one thing for the gubment to prop up the economy when the private sector has taken a pass. The problem is, none of our fundamental problems are being address by the politicians. Things are actually getting worse (if you can believe it). The amount of “handouts” that the administration and congress has given since Obama became president is just unreal. It sure seems to me that Atlas is going to just drop the damn planet soon.


    BR: What does one thing have to do with another?

    I present a data based, historical analysis, and you scream partisan. Me think the lady doth protest too much!

    Its called Massive projection. (Look it up).

  40. beaufou says:

    I still think no historical data can live up to this crisis, not even the great depression.
    38 million people are living on food stamps, unemployment is riding high (u6 that is), small businesses are still not doing any pre-crisis numbers, for some it’s even worse than last year.
    (you know the story about employment numbers and small private businesses BR, you posted the thing)
    Spend-credit then some more spending and more credit, it is absolutely retarded to think for even a second that the whole thing will bounce back.
    It is even more retarded to accept that notion of “jobless recovery”, there’s your fate suckers! now live with it.
    I don’t think so.
    We live in a time when some are making extraordinary amounts of money, out of thin air, and we can’t figure out how to give a man a job?
    This is complete bullshit, those fucking geniuses can work it out when it comes to move to China, don’t they?
    The idea of having an economy in the first place is to have a common structure we can all live with, not some kind of bubble machine a few can feed upon.
    Here’s an idea, why not have an international system favoring local (as in nation) production.
    If you produce too much and not consume enough, your money goes down and vice-versa.

    If we look at the financiers and Wall Street to get us out of this funk, we’re doomed, because they put us in this shit to start with, now is not the time they want to give it up and they’ll keep drowning us.
    So no, we’re going nowhere because some are still too fucking stupid to give up on their grand old dream of being ridiculously rich while millions of others are too poor to even buy food.

  41. insaneclownposse says:

    I think it’s pretty obvious that if equities continue to get pounded (which is very likely given the ferocity of the secular bear market) the U.S. economy is going to go back into recession. There is nothing else to prop up consumer spending. MEW is gone! If MEW returns, perhaps we can have a sustained “recovery” without job and income growth.

    I see darkness ahead personally.

  42. insaneclownposse says:


    you are absolutely correct in your diagnosis. And you even offer a solution. That puts you MILES ahead of the world’s governing elite, who can’t face the fact that the world economy is so fundamentally out of whack that it cannot function in any normal fashion.

    Most of our problems do stem from crappy leadership. That is because the political system is thoroughly rotten to the core.

  43. James says:

    Ironically, it is the new breed of Deficit Hawks are the ones pushing for a double dip recession. After decades of profligacy, they now seem to want fiscal austerity in the United States — just when the economy is most vulnerable. They apparently have failed to learn the lessons of 1929-33 and 1937-38.


    Just as a reminder, the $787 billion American Recovery and Reinvestment Act of 2009 has only paid out $402 billion of its funds thus far – barely half – and more curious minds may ask what about the spending impact of the rest? That’s hardly chump change, BR, and before anyone makes an argument for short-term deficit spending they should at least address the issue of those yet unspent funds. BR?

    Regarding this:

    > The time for balanced budgets and fiscal prudence is during the expansion phases of the economy

    there are a good many voices out there who recognize the need for short-term fiscal stimulus – though as I point out above: don’t we still have a bunch of powder left? – but are asking hard questions NOW about our long-term debt problems which keep getting kicked down the road. David Walker certainly falls into this camp, as does David Einhorn, who made just this point in a recent NYTimes opinion piece.

  44. tradeking13 says:

    Indeed, double dip recessions are actually rather rare.

    So are multi-trillion dollar bailout/stimulus packages and ZIRP. We are in uncharted waters.

  45. If it turns out that you are in fact wrong, will you post a prominent apology and offer to send a free signed copy of your book to everyone who called you out on being utterly and hilariously wrong?

  46. R. Cain says:

    many excellent comments above

    including @beaufou
    where i would simply expand your accurate description of “too fucking stupid” to include “too fucking shortsighted”, that these looters fail to consider the country that their grandchildren and great-grandchildren will inhabit

  47. Bokolis says:

    Historical comparisons help to a point, but don’t make for good roadmaps. Professor Shiller knows damn well that we can’t compare this Great Strath to anything since 1947 (because, for all those dips, the system had stops).

    Indicators are for people who couldn’t stand to scuff their shoes. I can only go by what I see on the street with real people…and it’s still just about Death Valley out here.

    Sure there was a snap back, but it’s hard to see this economy continually improving in any way that helps the masses. As the seemingly ubiquitous radio ad states, the difference between you and the credit card companies is that they can get a bailout and you can’t. Even my friends that got back their jobs are as broke as ever.

    All I’ll say about my own experience is that, when Bokolis is not fcuking off on here (actually, this is hardly “fcuking off”), I’m pretty damned good at saving mefirm money (keeping people- including myself- from getting clipped)…but the ladder doesn’t reach the fruit and it’s time for a new trampoline.

    Capex, the part that isn’t pent-up, is going up because companies can’t sit on their hands forever and stay relevant. Moreover, a large amount of that Capex (can’t say how much) is surely going towards permanently eliminating positions (while they have the chance). I still get the sense that companies are managing for runoff rather than growth.

  48. Dennis the menace says:

    The perma-bears are out in full force!
    We missed a 75% rally !
    Buy gold — its going to $2000
    You aren’t a raging bear — it must be political!
    What a bunch a maroons . . .

    Please keep writing what you believe to be the truth, and ignore the naysayers and fools

  49. seneca says:

    Today’s post by John Hussman offers a chart titled “GDP Growth Excluding Federal Deficit Spending.” If I understand it, it supports Hussman’s bearish view that, thanks to trillion dollar federal deficits, the economy walked briefly on crutches, but is once again headed down. What I don’t understand (and I hope a reader will explain) is why Hussman appears to have used year-over-year changes in nominal GDP instead of real GDP. That odd choice makes the low-inflation present look much worse in terms of year-over-year GDP growth than the high-inflation late-1970s.

    Hussman: “Extraordinarily Large Band-Aids”

  50. Um, we are 75% cash — or doesn’t that mean anything to you guys?

  51. Lugnut says:

    “The time for balanced budgets and fiscal prudence is during the expansion phases of the economy — and not the post recession period where after an initial spurt, growth is beginning to slow.”

    Question is, will our debt and budget deficit issue prevent us from being able to blindly write checks for the next few years till we are some type of expansion phase.

    Ah who am I kidding, even if by some miracle we started growing at a 7% clip, do you think Washington would ever have the discipline to start reducing the budgets and pay down the debt? Bwahahah! Fiscal prudence in DC. Thats amusing.

  52. [...] The pop in the economy is now fading.  (Big Picture) [...]

  53. Kralizec says:

    It seems the United States third-quarter GDP, annualized, will be approximately -2.00%. Credit: The Consumer Metrics Institute, at http://www.consumerindexes.com/index.html .

  54. EAR says:


    “It sure seems to me that Atlas is going to just drop the damn planet soon.”


    It’s amusing when someone says the world may not be coming to an end and people get upset about it.

    If it’s all gonna come crashing down and we’re all gonna suffer, why not jump out of a window to avoid the misery? Oh that’s right, you wanna be around when it WWIII starts and get your “I told you so!” on.

    You shoulda done this/They coulda done that/I woulda done this. “Even though I acknowledge we are in unprecedented territory, I know my ‘remedies’ and ‘policies’ would have been better. How? Because they weren’t applied and no one can prove that they wouldn’t have worked because they weren’t applied.”

    It’s all part of the Armchair (insert job you never have to do here) Era.

  55. WolfStreet says:

    Ditto previous comments. Let’s consider even the “power-that-be” lineage. What are they thinking?

    Don’t even they give a fuck about their OWN grand-grand-grand-(who knows when it crashes?)-children?.. Then they’re not wise. Intelligent maybe. Wise, no.

  56. Thor says:

    EAR – X2. Don’t forget the group of folks who think they’re going to short their way to riches.

    We’ve got some scary times ahead of us, but the hyper doom and gloom crowd (I think) are projecting their own fatalistic personality than anything else.

  57. WolfStreet says:

    BTW (for I’m not joking here:p) : not trying to favor whatever downtrend side because of my investment positions. Regardless of the markets, I honestly believe we (Europe for me, and US, and Asia) can deleverage this whole nonsense together.

    I know we’re often cynical out here, but despite those biases, I hope we can solve this whole stuff without too much blood being spread. Without a war.

  58. Mannwich says:

    If the bottom falls out of this market again, I gotta believe this will be the final straw for the average investor. Sooner or later, there’s going to be mass exodus from equity mutual funds, even 401k’s and IRA’s. Maybe f411 buying will pick up the slack?

  59. SCTTD says:

    I believe this speaks for itself.


    Also, while we may “never” have had a double dip after 3-4 quarters of gains, we’ve also never had a recvoery bought with $2 trillion government dollars. So “Prior comparisons are no hrabinger of future performance” to borrow from the past performance quote so oft used.

    Finally, Rosenberg points out today that the ECRI index ROC is in it’s steepest decline EVER.

    Regardless, I sure hope there is no double dip cause if there is it may be a lights out scenario for commerce given the waste of ammo fighting the last round. But “hope” is not a viable strategy so keep the data coming BR!!

  60. river says:

    Franklin411 wrote:
    Guess what? FY 1930/1931 is when the Crash turned into the Depression. The Depression was not inevitable, even after the Crash…it was caused by idiotic policymakers like Hoover who listened to the “common wisdom.”

    I have heard this a lot, and something just doesn’t add up. On one side, you have what actually happened . . . A stock market bubble pops in 1929, and then cascades down over the next four years. End of the gold standard. We have bread lines, parents forced to leave their kids to find work, the grapes of wrath, shanty towns . . . basically, human misery everywhere you look. Then Adolf Hitler comes to power (no doubt easier due to the human misery that was occuring in that country), and you end up with WWII, 33 million people dead, the holocaust, invention of the nuclear bomb, the start of the Israel-Palestinian conflict, the cold war and threat of a nuclear winter, Vietnam, Afghanistan (russia’s war), Osama Bin Laden. Basically, the last seventy years of history was all set in motion by the Great Depression.

    On the other side of the coin, you have what could of been, as explained by a bunch of genius noble-prize winning economists . . . All the Federal Reserve should have done was print more money and not let the community banks fail, and everything would have been hunky dory.

    Something just doesn’t seem right when you think about it this way. It could be that the Great Depression was basically the consequence of an economic system that was severely out of balance (end of the gold standard, the US was basically the China of the 1930′s, war reparations in Germany, etc). And it sure as heck seems like the economy that we are in right now is severely out of balance, and nothing has been done to put it back in balance.

  61. WolfStreet says:

    Also, to BR, who replies to HEHEHE@7:49:”psychologically, that seems to be true — but governments all over the world ALWAYS do that following a crisis.”

    So what?.. do you HONESTLY believe the show can run forever? When it comes to money, debt that is, I believe there’s an end to the show somewhere. However I don’t like the idea either.

  62. garrisongold says:

    How can the fiscal tools used to manage the economic crisis of the 1930′s be used to manage today’s crisis?

    When the government bought 1000 trucks from GM in the 1930′s, it created new jobs which had a knock on effect of employment and resulting consumer purchases in the home appliance industry, textiles, electronics (radios), motion pictures, shoes, furniture, and so on and so forth, down the line, etc. etc, which in turn created jobs, etc. etc.

    I can’t recall from my undergraduate economic classes exactly what they called this “multiplier effect”, but am sure there are many professionals on this site that can supply the correct term.

    It seems to me the difference today, is much of the purchasing power (second tier) derived by our government spending at the first tier (automakers in the example) is directed to imported goods from S.E. Asia, S. America and other foreign markets. I’m sure there is a knock on effect, but how could it possibly be as effective as it was in the 1930′s? Agreed, trading with global partners can be a win-win situation, but it can also be a win-lose situation and looking at he the emergence of the “communist” Chinese (excuse me, the “centrally planned command economy” of the Chinese) economy and the submergence of the U.S. and European economies, guess who’s winning?

    It seems to me, these stimulus programs are going to have to be refined to include more targeted goals and benefits if they are going to provide a benefit to the American people greater than their costs. And we can only begin to formulate intelligent long term policy when we begin to be honest with ourselves about our problems and the hard realities of the solutions.

  63. Andy T says:

    “Um, we are 75% cash — or doesn’t that mean anything to you guys?”

    So, what are you saying with this? That you’ll be the tallest midget if the market stumbles hard? Congratulations….you may outperform Ken Fisher and Bob Doll if things go to real shit.

    You portray yourself as this “data driven” and “analytical” type investor. And, that’s cool. But where’s the data and analysis here?
    “As Yale Professor Robert Shiller pointed out in a recent Sunday NYT article, “When inflation-adjusted G.D.P. has come out of a decline and posted three or four quarters of gains, it has never immediately begun to fall again — at least not since quarterly numbers began to be issued in 1947.”

    Is that the data point which supports this thesis? What’s the sample size there? Is it statistically significant? Good luck with that….

    Indeed, even Capex and employment plans for the upcoming year show a potential upswing. ISI reports that their mid-year survey of CFOs shows the percentage of companies planning to boost their capex & hiring in 2010 has increased markedly. This would be heading in the opposite direction if we were on the verge of a double dip recession.

    A forward looking survey of CFOs? What the hell man? From what I can gather of this post, those are the two main ideas upon which you are hanging your argument: a) Just because it hasn’t happened since 1947; and b) a survey of CFOs.

    I know there’s probably more rigor in there somewhere and this is only just a blog entry. The technicals suggest that the 1200+ ticks on the S&P were the top for “some time” to come. I don’t think we’ll see a “crash” or take out the lows of 666, but a deep correction (think 800′s) is “in the cards” over the next couple of years, if not within the next several months.

    Good Luck.


  64. Notice how nearly every comment decrying your post as utter BS has nearly unanimous thumbs-up approval?


    That basically never happens on that site. So congratulations for that?

  65. alex west says:

    what if all data you mentioned ( GDP, labor ,sales ) is BS… pure simple..

    lets have a look at real data, from real world..

    CBO said,, ‘ through MAY’, against horrible 209

    individual income down -8.4% ..
    SS taxes dwn – %3.5
    corp taxes up 18%,,, (well we know how its gettig done )

    what do you think ? what’s double dip ?? what if THERE’s NO RECOVERY AT ALL ?

    good luck