3 ms·
Counter this doombaya ceremony with these (wiser) comments (pulled from a CNN economic report), below. Most salient point: This is a financial panic, not an eco
by sabat 18y ago
Counter this doombaya ceremony with these (wiser) comments (pulled from a CNN economic report), below. Most salient point: This is a financial panic, not an economic one.
QUOTE:
The weak dollar is boosting demand for our goods abroad, and lower gas prices are making Americans feel more flush. Add in the cash that the Fed has been hosing into the banking system and we are bound to see growth in 2009. "If all this stimulus has no effect on the economy, that would be a rarity indeed," says Paulsen.
Standard & Poor's chief economist David Wyss expects a mild recession that ends next spring. "Gradually we will regain confidence in the market. Lower oil prices and a falling trade deficit will help," he says. "This is a financial panic, not an economic one."
Of course, that could change if the financial panic doesn't abate soon. If banks remain too scared or broke to lend, would-be home buyers will be frozen out of the market. If that happens, home values could fall even more, crimping confidence and putting the brakes on the economy's greatest engine: the consumer.
- thomasmallen 18y agoThat's some strong Kool-Aid.
- iigs 18y agoI think that the benefit from "hosing money into the banking system" is front end loaded. That is to say: we've been living above our means for a while now and we've done the (inter-)national equivalent of kiting checks for the last 5 years. Now that there are some calls on this money (via defaults in the mortgage field) we're seeing that all of that leveraged money isn't quite as useful, real, or protected as we thought. "demand for our goods abroad" is barely a consolation prize. The effects from that are so long term and abstract that while they might help us climb back out, they certainly don't fix the immediate problem, which is businesses having to cut back because they don't have the cash to operate today. It's like saying you get to take a tax deduction because you had a big loss. Sure it might help but it's not nearly as nice as not having the loss in the first place. Same deal with oil. Financial crisis + time becomes an economic one. Financial crisis means that employers are considering layoffs (it's even in the article). Risk of job loss is the biggest thing controlling my personal confidence level, and I certainly can't be alone in that regard. Discretionary spending drops (things are already hurting in tourist towns), and the layoffs continue. I suspect the depth and breadth of this depend on the health of the remaining financial institutions. I feel unprepared to speculate on that, since I don't understand the complexity of what we're already in, but things sure aren't looking good right now. :/