Journalists and bloggers love to be the first to break a story. They love to have history validate their predictions, and be able to have the satisfaction of citing a story they wrote months ago so that they can sit back in their spinney computer chair, and with a grin, type: “I’ve been saying this all along!” or “Told you so!” So naturally, if today we are seeing beginnings of the second recession in three years, I wanted to have a blog entry writing about it.  But rather than just sounding the alarms based on one day’s slide (which nonetheless quite significant, the DOW is down 300 as I write) it’s important to separate fact from fiction.
FACTS: The market’s reaction to the debt deal recently signed by President, which was predicted to bring calm to the recent choppy waters, has been: so what? The reason for this is probably that it simply postponed the debate in a not so inconspicuous manner. The “super-congress” which must reach an agreement by December faces much of the same challenges which congressional leaders and the president faced in formulating the current deal. While the deal was no doubt necessary to prevent even more catastrophic losses on Wall Street, and to the U.S. economy in general, the deal did nothing to halt the downtrend the markets have been seeing thus far in 2011.
Over the past several weeks, market gains have generally been an exception to the rule. They have come with occasional “better than expected” (usually weekly) reports on manufacturing, consumer spending, etc… but have not been frequent enough to categorize as a trend. The fact is, the trend of the markets in the first and second quarter of 2011 has been a downward one – the NBER classifies a recession as two consecutive quarterly contractions of economic growth; while GDP growth in the second quarter was not negative, it was certainly nothing to be happy about, at 1.3%, driven mainly by increased exports as a result of a weak dollar. For those of you keeping track, with the baby-makin’ capacity of the U.S., that’s not enough to sustain job-growth. In a nutshell: we are well on our way to the dreaded “double-dip”, and when we’re not talking ice-cream, this is cause for fear.
FICTION: The market is a reliable barometer for the state of the macroeconomy.  If the macroconomy is Mayberry, the market is Barney Fife; always entertaining, but often lacking in sound judgment and prone to overreaction and silly yet sitcom-worthy antics. It’s good that he’s there to keep us on our toes, but we’d never want him at the helm of the Mayberry County Sheriff’s Department. It cannot be disputed, though, that long term market trends generally reflect GDP movements (not sure how that fits in the Mayberry metaphor, but worth noting).    
In conclusion, I’m not jumping on the “double-dip” bandwagon because I’m conservative. I’m not jumping on because the markets are sliding in similar proportions as they were when investment banks were collapsing left and right in 2008. I’m not even jumping on because I’m vain, and I want to be among the first to write about it (indeed, the ship has sailed there anyway, because many have been crying about a second recession the day we were reportedly out of the first). I am only becoming worried now because our economy has been in a state of contraction all year, and our government has proved unable to create growth, or pursue policies which give consumers confidence that there will be any growth in the future. The contraction hasn’t been as a result of unpredictable shocks, as many (myself included) believed with the disaster in Japan, and the unrest in the Middle-East; it has been the result of the fundamentals of our economy being weak, and Americans having no reason to believe a change for the better is on the way.
I’m not even writing this post to claim we are on the brink of a double dip recession, but I do believe we’re at the point where the economic data show that it’s rational to think so. At the end of the day, I don’t think it’s debatable that a huge number of Americans feel this way, and are at the very best going to stick their heads in the sand and sit on the their investments to weather this storm over the rest of the year – a scary proposition for the job market. What does this mean? Someone in the White House has some serious ‘splainin to do over the next several months, and dare-I-say, in November of 2012.

2 Responses

  1. I would say someone/something has some " 'splainin[']" to do, but not necessarily in the White House. If we're talking buildings, and I have not too much favor-to be honest it's just rather neutral-with either structure beyond the indifferent complacency of the White House and the imposed authoritarianism of the Capitol Building over a subservient people (these are not metaphoric political terms, more so my architectural critique, so don't look into it). For me, and I know you might not be too enthused about this, one of the primary factors the "government" can't find some sort of solution is do to the volatility of those tea partiers. Sadly, they represent an technique of ideology surrounding the word "no", followed by still-and still sadly-"no." We can't move forward with a faction, that let's be honest the elder faction of the GOP is getting kind of annoyed at, that refuses everything.

    So in conclusion, and most of this is just rambling, I take certain apprehension to your diagram. Coming from one who is now resident in the Bear Republic, I would say that it does not equal ice cream, but rather, sushi. Look into China all you want…sushi is just kind of popular.

    And I don't think a "huge" number of Americans have investments at all, let alone sit on them.

    But I love you.

  2. Firstly, I find your cynicism about the architecture of our nation's capital misguided. It was only natural for the designers of Washington DC to design in a way that was reminiscent of ancient Greece and Rome, given those societies' models of democracy and republican ideals were of great importance as a model for our new country. In fact, while i do admire the British colonial architecture prevalent at the time, the obvious break which was made with the designing of the Capitol, White House etc i think was a bold and symbolic move. What you refer to as "imposed authoritarianism" i would call a gesture to the British and the world that the age of monarchy was dying, and something new could be expected out of Washington DC. I think it was anything BUT authoritarian.

    As for your criticism of the tea party (and my entire view on them is in question, now that long time political pundit/commentator, and one time president of South Africa, Morgan Freeman, has opined that they are racist), i would just say that when most of what you are doing could be dangerously harmful to the country, it only makes sense that they should be saying "no". I think history will show that the national discussion about debt was largely thanks to the tea partiers… they are easy to make fun of, and easy to call racist, but have caused us all to think about an issue of real importance.

    And you're right, not many Americans have stock market investments or the like, but an economic landscape which fosters uncertainty and risk-aversion is no way to "grow jobs" or bring about recovery.

    And lastly, I do enjoy sushi. But not sushi ice cream. Have a good night.

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