Comments on: What does a double dip recession look like?

By: Brace for double dip if stimulus runs out too soon » New Deal 2.0

Brace for double dip if stimulus runs out too soon » New Deal 2.0 — Tue, 04 Aug 2009 14:50:35 +0000

[...] colleague Edward Harrison of Credit Writedowns has taken a fascinating look at how things might go following a ‘recovery’ (*we have to put that in parentheses, lest [...]

By: Terry

Terry — Mon, 03 Aug 2009 20:05:00 +0000

I’m with you on the double-dip recession. I think consumers will, in fact, increase their consumption marginally in 4Q to meet family holiday needs–maybe using a little stimulus (not much out there yet) and digging a little deeper into their savings. After that, they are likely to save at current rates or higher no matter how large the stimulus.

I think manufacturers are anticipating the more forthcoming consumer in 4Q and that’s what may push up manufacturing & inventories in Q3. Whether it’s enough to drive GDP positive, I don’t know.

If the consumer remains a tighwad (and with more of them out of work, losing hours, and/or suffering cuts in pay, that could happen), the second downward leg of the recession could be a doozy.

Thanks for your efforts on this–especially the use of the historic comparison.

By: Stevie b.

Stevie b. — Mon, 03 Aug 2009 17:47:00 +0000

@aitrader – the PTB will do anything and everything however seemingly desperate to prevent deflation from taking hold if it became a threat – i’m sure they’d come up with lots of novel ideas you and I couldn’t conceive of, never mind the oft-quoted possibility of negative interest rates.

By: aitrader

aitrader — Mon, 03 Aug 2009 08:19:00 +0000

Manufacturing statistics show a level just below 50, the demarcation between expansion and recession. Real GDP is likely to rise in Q3. Retail sales are now rising. Personal income is flat to rising. And jobless claims have come down substantially. All of this says that we are fast approaching a flatline where the economy stops falling.

Ahem – several trillion dollars in “stimulus” was dumped into the economy and we expect what…a speed bump maybe? A “recovery”…?

Ok, let’s call it a first-leg-of-the-W “recovery”.

Now absent a second multi-trillion dollar stimulus what might one expect? Well, we have continued double digit unemployment, slack consumer demand, historically sky-high consumer debt levels. This should lead to continued CRE collapse, manufacturing and service sector contraction, slack world trade, and deflation (yes, deflation, not disinflation). Mortgage and CRE institutions are still not lending thus the “money multiplier” is still below 1.0 so no matter how much the Fed prints it still is not getting out into the economy.

Now let’s add a complete lock-up of state and muni securities markets on top of multiple states in desperate straits including California, which on its own is something like the 6th or 7th largest economy in the world.

So we get a “W” sort of “recovery” how…?

What exactly is this letter of the alphabet…
_’_
……_

I don’t think folks realize just how far off the reservation we are.