Oh, Those Pesky Economists
This Isn’t the First Recession, Nor the Worst… So Far
It's important to look at the data.
By Robert Struckman, 1-09-09
This painful economic cycle may end a 30-year stretch of moderate ups and downs, but it’s about average compared to the worst 10 recessions since World War II.
That’s one lesson immediately apparent after checking out the graphs and statistics on a new Web page on the site of the Minneapolis Federal Reserve Bank.
“Our main reason wasn’t to push any line,” explained senior economist Terry Fitzgerald. “But it’s important to look at the data and keep things in perspective.”
Accurate comparisons are hard, because the current data can seem like a constantly moving target. Employment numbers and other data get released and then revised. Some offers glimpses of good news. Others seem to dash those hopes. Fitzgerald said he’ll do the only thing possible, which is to constantly revise and extend the numbers, as new information comes in.
Still, while the economy could always get dramatically worse, the numbers so far seem roughly comparable to a number of recessions, not the Great Depression.
In the midst of some of those recessions, employment numbers took a serious dive. Considering the dire employment figures over the past four months, it’s easy to imagine how people must have felt in 1973, when employment crept up almost 1 percent and then dropped 3 percent.
“It can feel like Doomsday,” Fitzgerald said. “This is a pretty substantial recession, but it might feel worse because we really haven’t seen a large recession for 30 years.”
So far this recession looks a lot like the downturns in 1981, 1973 and in the 1950s, he said. There is no data yet to suggest it’s worse than a typical medium-to-strong recession.
And the economy needs downs as well as ups, Fitzgerald said. The economic term for it is “reallocation of resources.”
“We’re in a big creative-destruction process. It’s important that it happens. It’s painful, and we want to help people through the process, but there was too much money in housing and the financial markets, and this keeps us on a long-term path growing,” he said.
At the end of our interview, I asked Fitzgerald why he didn’t put economic numbers from the 1920s and 1930s on the graphs.
“People would have thought I was cheating,” he said, “It’s an order of magnitude larger than anything you see here. The line would have immediately shot off the bottom of the chart.”
[End of article]
due to privatization reforms started by reagan, the government's employment data cannot be trusted as a bellweather anymore. there are magnitudes of order more freelance contractors now and they do not really show up in the statistics therefore the federal reserve is as wrong about this as bernake has been wrong about everything so far. going to these guys for accurate information is like consulting cheney on the best way to aim a shotgun. or just go to wall street to find out where to invest your money.
you won't find the truth by copying down the lies of bank regulators who use bureauspeak to cover their asses. the truth is in the street, off the beaten path- and away from these guys. but that might entail actually talking to real people- something that journalists have forgotten how to do. easier to just copy down some econospin from the prepared statements of the ones who got us here in the first place.
This recession will deepen. Soon the bond market will collapse followed by a run on the US dollar and a currency crisis in the United States in 2010-2011. 2009 will be remembered as the year the housing market fell another 15% and the stock market fell an additional 30%. We will see a DOW 5000 an S&P;600 and a NASDAQ of 900. Unemployment in December of 2009 will be 15-18%. By spring you will see 1,000,000 jobs a month being lost in the United States.
The government cannot create jobs. The government itself has no wealth nor capital, only debt. The interventions the government and federal reserve have performed against the wished of the people for the past year have done nothing. Since the bailouts the markets have lost over 25% more. As those in the Austrian School of economics have told us and taught us, the bubbles created by the Federal Reserve will burst eventually, and with furious anger! The interventions of the Fed and treasury dept. will only prolong and worsen the situation. Our recession may soon be GDII (Great Depression Two).
Please do not take my word for any of this. Do your own research and reading. Listen to Peter Schiff, Professor Antal E. Fekete, Ron Paul, Paul Craig Roberts, Darryl Schoon, Catharine Austin Fitts, Lew Rockwell, Jacob Hornberger and those like them. Have a good year. Buy some gold.
Argentum et aurum comparenda sunt.
Those first two comments are a tough act to follow. There's no question that government is both less than it used to be, and more bloated as well. For most of the past 30 years, we've had a strong contingency for the theory that "government can't solve problems, it is the problem," and when such people get to high places, they can make and have made that prophesy self-fulfilling.
The truth is, there are some problems that can only be solved by government. Which is not to say that government will (ever) succeed in the attempt.
For my part, I will predict that buying gold now is every bit as stupid a move as it has been for 90+% of the time. If you go with whiskey, at least you'll be able to forget about how stupidly you threw your money away.
Looking at the page you pointed to on minneapolisfed.org, I will say that while the LEVEL of "percent change of employment from start of recession" is just at the median of 10 post-WW2 recessions. the SLOPE of that thick red line is looking like it could blow through "HARSHEST" by the middle of this year.
That's an indicator, of course. The slope can change quickly.
But rather than looking in the rear-view mirror to see how many tire tracks point off the road and into ditches, it is important to look where we are, and where we're pointed. For tax avoidance and mining cheap labor, we've shipped our manufacturing capability off-shore. (Fortunately, the Germans and Japanese have done some of that too, and invested in some of our cheap labor down south.) To increase productivity, we've built an economy dependent on very cheap energy.
Substantial dislocations as the repurcussions of the those decisions, as well as the chickens from the spent bubbles of internet connectivity and make-money-fast housing come home to roost.
Imagine "are likely" as the 3rd and 4th words in that last sentence I wrote.
Comment By problembear, 1-11-09when the stock market closes on the friday after the inauguration the obama treasury team should fire up a fleet of semis and load them with all the servers related to our economy- US treasury, federal reserve, wall street etc. and deliver them to an underground bunker near Omaha nebraska and install them where warren buffet can create a new board from all who have successfully survived the bush-crash to run the country's financial system. create a new system far apart from all the corruption and fire all the losers. that is the only way to solve this quickly. the rats still run the ship back east no matter who is in the oval office...
Comment By Mickey Garcia, 1-11-09However imperfect data is, it is still better than assertions based solely on ideology. Government can and does create wealth and jobs if it isn't borrowing the money it is spending. But it is a topsy turvy world out there right now. What ever happened to U.S. anti trust law against monopolies? Suddenly business monopolies and cartels are claiming that they are too big to fail and need to be bailed out for the common good. So the tax payer bails out the banking industry to the tune of 350 Billion bucks and the banking industry uses some of the money to buy up other banks reducing the number of banks and then tells the taxpayer to go fly a kite when asked how the money was spent. I'd say bleep the motherbleepers. If they've become too big to fail and too big to be accountable then they are corporate monopolies that ought to be dissolved or nationalized.
Comment By Milton, 1-12-09There is only one way to get around waste with a bailout. Give the money to the tax payer. Faster the better. I would get a national voters list and give 50% more to those that actually voted and showed some interest in how the country is run. Non partisan. People say their vote doesn't matter. Let it matter. Contrary to the belief in the trickle down theory the trickle up theory works. All of the money will get into the economy. Whether it goes to paying off credit cards or savings accounts or groceries it will help all areas of the economy. None of it will be siphoned off for CEO bonuses. The real measure of the economy is the GPI General progress index. Not the GNP. The GPI has been going down since the 70s. The average Americans wealth has been going down since then. Now it is going to go down much faster. Mostly it will stay down. Even with the end of the recession. If we can perfect electric cars and get more efficient with electricity and get national health care we will have a chance raising the GPI a bit. We need to cut energy use by 50% and getting there will be a great help in ending the recession. We can't build Nuclear plants. They are a drain on the economy and there is a 5 country uranium cartel. In the 70s uranium prices were rising faster than oil prices. Efficiency is the only answer.
Comment By RMDCL, 1-13-09I would tend to believe most commerce orientated people believe less government oversight would have averted this whole mess.
That being said, most commerce oriented people would also say this is really not such bad times!
what part of neptune has your antennae been picking up those signals RMDCL? you might want to adjust your oblivious beam back to earth....
Comment By RMDCL, 1-13-09Problembear, America's love affair with business (Commerce) is but a small part of the problem we face. Long ago before Commerce there was the Law of the Land and now we have the Law of Commerce.
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