The recession has been confirmed – semi-officially
Robert Hall, the head of the National Bureau of Economic Research (NBER), which is the official arbiter of recession in the United States, has said the evidence is now “conclusive” that the U.S. is in recession. For me, that’s pretty much all she wrote — the recession has been confirmed. I have held that we have been in recession for all of 2008 and the statistics bear this out except for the stimulus-induced, GDP deflator-made blip in Q2.
However, along the way, we always have to bring most prognosticators kicking and screaming to the conclusion that recession has come. Caroline Baum has written a missive in an ode to these individuals, always late to the party. Below is a snippet of her article.
Every recession has its own set of drivers, its own unique circumstances, all put in motion by the central bank’s eternal quest to find the appropriate overnight interest rate to deliver economic Nirvana.
The 2001 recession witnessed the bursting of the dot-com bubble and pullback in business investment. This time it was the implosion in housing that infected banks, impairing their capital and prompting them to constrict the supply of credit to businesses and consumers.
What’s constant from one cycle to the next, however, is the elaborate web of excuses folks weave to deny reality and convince themselves that this time is different.
Now that Robert Hall, the chairman of the group entrusted with dating the business cycle’s peaks and troughs, has said he sees “conclusive” evidence of a recession, it’s a good time to look back and see where the herd went wrong.
Baum goes on to recount the five major ways prognosticators have got it wrong:
- The crisis is “contained.”
- The rest of the world is “decoupled” from the U.S.
- The inverted yield doesn’t matter.
- Banks have no exposure to mortgages.
- Derivatives spread the risk.
Obviously, this looks silly in retrospect, but this is what we have been told ever since the subprime crisis started back in February 2007.
Take a look at Baum’s article for her witty commentaries on each of these five mistakes.
Recession Deniers Peddled the Same Lame Excuses: Caroline Baum – Bloomberg