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Debbie Downer on the Economy

by Eric S. Peterson
Posted // 2009-08-04 -

The President recently told a gathering in North Carolina that “we may be seeing the beginning of the end of the recession” a nuanced term which in the hands of some analysts has been the Obama version of a cocky “mission accomplished” banner waving proudly over a cheery Bush, glowing in pride and triumph and decked out in flight gear.

Not an exact fit, but Obama was trying to get Americans to squint to see the light at the end of the recession tunnel we still seem to be fumbling around in. Even his later jabs at the Newsweek cover about surviving the recovery, have not convinced people that he wasn’t trying to get some mileage out of recent positive indicators starting to show up. Glimmers of hope like new jumps in housing, June 2009’s being the most significant since 2004. Or recent rallies in the stock market for instance.

However, given that there are some real problems with assuming the worst is over, it’s worth taking a look at this Debbie Downer lesson in not getting your economic hopes up, from the magazine that should have some credence in such matters, given that it's called The Economist.

Quoth the downer Economist article:

“Stockmarkets usually rally before economies improve, because investors spy the promise of fatter profits before the statisticians document a turnaround. But plenty of rallies fizzle into nothing. Between 1929 and 1932, the Dow Jones Industrial Average soared by more than 20% four times, only to fall back below its previous lows. Today’s crisis has seen five separate rallies in which share prices rose more than 10% only to subside again.”

What a buzz kill. But, even as an Obama economic adviser and Great Depression historian, also notes in the Economist, there are plenty of reasons also not to assume the worst is over. Like the fact that an abrupt shift from federal support to austere waist belt tightening could perhaps fuck up the recovery before its even really taken effect.

I mean c’mon, the economy is an aircraft carrier; these things don’t exactly turn on a dime.

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