Credit Writedowns » fake recovery

Predicting the future of policy making

Edward Harrison — Tue, 22 Nov 2011 02:47:39 +0000

Predicting the future of policy making has been and will continue to be key to understanding where this economy is headed – and by extension what your investment portfolio will do

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The End of the Fake Recovery

Edward Harrison — Wed, 05 Oct 2011 13:25:50 +0000

This is going to be a relatively long post. But I think it’s important. I have been meaning to update my thinking about the “Fake Recovery” which I heralded in early 2009 as the economy in the US began to turn. My view is that without policy support this recovery is now on its last legs. Here, I want to review how we got here in the context of the banking system and what that means about the banking crisis right now

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Mervyn King: “Systemic Insolvency Is Now The Problem”

Edward Harrison — Sat, 18 Dec 2010 01:27:15 +0000

I want to take you through how we got from the financial system’s "systemic insolvency" to bailouts to record profits and bonuses again in the span of two years. From the WikiLeaks cables as published in the Guardian today regarding a meeting with the US Ambassador to the United Kingdom and the Bank of England

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Cecchini: U.S. Consumers in `Dire’ Credit Situation

Edward Harrison — Sun, 04 Jul 2010 21:00:00 +0000

Peter Cecchini, chief strategist at BGC Financial, talks to Pimm Fox about the U.S. economy and consumer credit on Bloomberg Television’s "Taking Stock." He says that the 122% percent household debt to GDP ratio is well above the pre-1980 average of 60-80%. Just to get back to a 100% to GDP ratio, we need an

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Recovery Triumphalism and the Committee to Save Wall Street

Edward Harrison — Tue, 13 Apr 2010 12:40:00 +0000

I am starting a new list of articles on my reading list which point to the success of what Marshall Auerback calls "The Committee to Save Wall Street," with this Newsweek cover as a contrarian indicator. The point is that the propaganda machine is out in full force. We are likely to see some serious

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The next crisis is already under way

Edward Harrison — Mon, 19 Oct 2009 21:52:06 +0000

Wolfgang Munchau of the Financial Times wrote a very important comment piece in today’s Financial Times. In it he said that central banks are targeting asset prices to avoid the brunt of cyclical downturns. This policy is inducing asset bubbles and creating a more volatile real economy with unpredictable negative consequences. I want to expand

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The recession is over but the depression has just begun

Edward Harrison — Thu, 01 Oct 2009 17:49:18 +0000

For the last few months I have been casting around looking for bullish data points as counterfactuals to my more bearish long-term outlook. I have found some, but not enough. If you recall, early this year, I stated that we are in depression, making the case for the ongoing downturn as a depression with a

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The mother of all inventory corrections is not the same as re-stocking

Edward Harrison — Fri, 18 Sep 2009 14:36:56 +0000

Back in April I told you I anticipated an uptick in GDP in part because of changes in inventories – massive change in the inventories. At the time, I thought I was going out on a limb by suggesting we could see positive GDP numbers in Q3 and Q4. However, this is now the consensus.

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Is economic boom around the corner?

Edward Harrison — Fri, 11 Sep 2009 15:07:13 +0000

This September 2009 post still describes my general view on the U.S. economy. If I wrote it today, I would be more bearish medium-term because it is obvious that in 2010 fiscal and monetary policy will become less supportive of recovery. Political pressures to remove fiscal and monetary stimulus are too much to bear. As a result, I give a double dip recession slightly better odds than a multi-year recovery now. But the analysis framing my thinking is largely the same

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Discerning a real from a fake, technical, statistical, or partial recovery

Edward Harrison — Tue, 18 Aug 2009 01:42:00 +0000

Right now many economists believe the US economy is poised for recovery. Even I believe the economy will recover by year’s end. But for the man in the street, things hardly look like a recovery right now. Harried by falling house prices, foreclosure and lost employment, the US consumer is over-indebted and has run out

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Weak consumer spending will last for years

Edward Harrison — Sun, 16 Aug 2009 23:56:08 +0000

It has been my thesis for some time that we are seeing a secular change in consumption patterns in the United States. This will have grave implications for a world economy used to seeing the American consumer as an economic growth engine and consumer of first choice. Retail sales in the United States have fallen

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Looking beyond the fake recovery

Edward Harrison — Thu, 13 Aug 2009 11:10:05 +0000

I have been taking a bit of a break as my trip to the Ontario’s Lake Country winds down. It’s a beautiful place. But, as Marshall Auerback and I were lamenting, it has become the Hamptons of Canada as everyone from Toronto is up here for the summer holidays. But, it has been relaxing. Since

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More thoughts on the fake recovery

Edward Harrison — Sat, 23 May 2009 09:21:17 +0000

A recent post I published on both Credit Writedowns and Naked Capitalism, “Both initial claims and continuing claims now pointing to recovery,” has left the impression that I am a wild-eyed bull – for which I have been duly smacked about the head. This is far from the case. A recent post by Nouriel Roubini

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Both initial claims and continuing claims now pointing to recovery

Edward Harrison — Thu, 21 May 2009 17:51:36 +0000

I’m back after a brief hiatus. I would like to present you with some data on jobless claims, an economic data series that will become increasingly important in the weeks and months ahead. The data suggest that a recovery is imminent. This should come as no surprise as everyone is jumping on the recovery bandwagon

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Meredith Whitney seems onboard with the fake recovery

Edward Harrison — Mon, 11 May 2009 21:37:35 +0000

Below is a video of Meredith Whitney talking to Maria Bartiromo earlier today on CNBC (hat tip Calculated Risk). In the video she suggests that banks might be able to beat earnings estimates for another one or two quarters before the lack of earnings power from deleveraging and the lack of the securitized business model

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Through a glass darkly: the economy and confirmation bias in the econoblogosphere

Edward Harrison — Mon, 04 May 2009 03:34:47 +0000

For most of the last few years, I have been labeled a perma-bear, that is someone who looks at the situation from a reflexively skeptical glass half-empty bias. One only need peruse our archives to get that impression. In fact, that is hardly the case. Over the past few months, as the evidence of a

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Jobless claims may signal the end is near

Edward Harrison — Thu, 30 Apr 2009 14:21:13 +0000

I have done my part over the past few weeks to write that I thought jobless claims signaled the potential for recovery. I started the drumbeat in late March. Here are the posts

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Turning Japanese and understanding the consequence of policy half-measures

Edward Harrison — Wed, 15 Apr 2009 13:00:21 +0000

This is another post I originally ran on Naked Capitalism last month. As you know, I have turned more positive about the potential for a cyclical economic recovery. However, I am unchanged regarding much of the sentiment expressed in this post – that any upturn must be considered with suspicion because the underlying fundamentals of

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The Fake Recovery

Edward Harrison — Mon, 13 Apr 2009 15:12:36 +0000

This April 2009 post is holding up well and still describes my view on the economic situation in the United States. I am much more confident that the cyclical forces I described here are leading to a recovery. The question now has to do with sustainability and all of the systemic issues still at play. Because the Obama administration has moved into deficit hawk mode so quickly, I see a double-dip (i.e. a second downturn in late 2010 or 2011) as more likely than not. Even if we avoid a double-dip, the U.S. economy will still be at stall speed for some time to come and that means that any recovery is likely to be a short one (three-four years tops)

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Wells profit forecast is a clear bullish sign

Edward Harrison — Thu, 09 Apr 2009 15:46:17 +0000

I am still away on Holiday in Mexico but have been checking the news and was not surprised to learn about the recent Wells Fargo announcement. I am coming off the fence here and looking for a bullish outcome on financial services. The bank said profit will be $3bn in the first quarter, thanks to

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Chris Whalen critiques Obama stimulus speech

Edward Harrison — Tue, 17 Feb 2009 22:09:58 +0000

Chris Whalen is a well-respected banking sector analyst who often appears on CNBC and Bloomberg. Below he gives his view on Barack Obama’s stimulus package speech and the need for banking sector restructuring. Below that is a video of President Obama’s speech (he does a lot of thank yous before getting to the substance). You

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