Tuesday, July 28, 2009

Faux optimism in the air?

Consider the upcoming August 3rd newsweek cover:

The recession is over! * Good luck surviving the recovery

Please note the graphics. It's a balloon, as in a test balloon for proclaiming that the recession is over, and a nice prick pin to pop that balloon. I think it's brilliant.

Relevant newsweek.com article: here
Blogosphere coverage: Ace of Spades, Huffington Post

Now consider one tiny bit of info from today:
Case Shiller Index Has First Monthly Increase Since 2006

How likely is this to be a short term false upwards move, after which we will see house prices continue to sink?

All bad things eventually bottom, but the question is - at the bottom and from that point forward - how bad can an economy be and still be considered recovery? How long can the ills linger?

IMHO, the non-economist, not a financial professional - the economy has bottomed. The recession is over. The extreme moves taken by governments around the world have kept banks alive and in turn, banks allow the regular businesses to continue working. The credit spreads are stabilizing and while political negativity is abundant, and unemployment is an unavoidable reality - the business cycle has restarted.

So no - it's not false. There's plenty of reason to be more optimistic than pessimistic. Just keep in mind - what we might see as a "recovery" might not resemble prior such recoveries. We might be in a stable mode of unemployment and slow growth. European economies have been in that mode for decades.

Cheers!

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