Your Lying Eyes

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25 November 2009

Are We in Recovery?

Are win in a recovery right now, and how strong is it? It looks pretty anemic, at least compared to the last great recession we had back in 81/82. Then, Fed Chairman Paul Volcker was ruthless in keeping interest rates high in order to wring the poison from the system. While the recession was painful (and since there was a Republican president at the time the press was equally relentless in featuring sob stories of unemployed workers, none of whom seem to be much in the news in Obamaland), the therapy worked. When the economy recovered, it roared.

Note the chart below comparing Gross Domestic Private Investment in the two recessions. The Volcker recession began in the 3rd quarter of 1981; this recession began in the 4th quarter of '07 (see NBER list of recessions). This one does not look to have the same robust recovery - though we'll see with the 4th quarter figures. The difference? This time around, no one's willing to apply any hard therapy.

Source: B.E.A. Table 1.1.1. Percent Change From Preceding Period in Real Gross Domestic Product


Anonymous uwi said...

"While the recession was painful (and since there was a Republican president at the time the press was equally relentless in featuring sob stories of unemployed workers, none of whom seem to be much in the news in Obamaland"

Another excellent point, Ziel. No doubt it, the press are downplaying just how awful this economic crisis is in order to put a positive spin on the Obamessiah's policies. The arrogance of our corporate news media is astounding; to think Americans will believe them instead of their own eyes and ears, which is telling them loud and clear that we've entered another DEPRESSION.

November 28, 2009 10:04 AM  
Anonymous Dano said...

In 1981 we had inflation to slay. Now the concern is deflation, which is why they are keeping mortgage rates low hoping the housing collapse doesn't spread. Hard to do when the new homebuyers can't find jobs to become buyers.

November 29, 2009 12:33 PM  
Blogger ziel said...

the poison in the system in the early 80's was the wage-price spiral. High unemployment and sky-high interest rates leeched it out of the system.

Now our poison is massive debt. Deflation is a symptom - the massive debt is unserviceable, so any assets that depended on debt are now devalued. There is no escaping that fact. The debt must be retired - however painful that may be, before we can recover.

November 30, 2009 8:15 PM  
Blogger Dutch Boy said...

Unserviceable debt is a feature of a depression, not a recession. The history of the Great Depression featured many premature "the worst is over" or "recovery is just around the corner" announcements. The powers-that-be have no incentive to tell the truth - the politicians want to be re-elected, Wall St. wants you to keep buying their paper and Big Business (and their news media lapdogs) want you to keep buying, period! There might be a recovery when the debt is wrung out of the system (paid off or defaulted). The recovery is likely to be weak with continued high unemployment since many of the lost jobs are not coming back.

December 01, 2009 2:04 PM  
Anonymous Anonymous said...


December 03, 2009 3:24 AM  
Anonymous Dano said...

Jobs, jobs and jobs.

Where will they come from. if you are an unemployed auto worker you are done with more to be let go (CHrysler how many fiats can they sell?)

Even brain jobs (IT) go overseas and no brains was construction and we don't need more houses with all the kids moving back home.

Deflation will make things more affordable for those with cash, but without jobs who is that outside of Goldman Sachs

December 03, 2009 6:11 PM  
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December 07, 2009 6:41 AM  
Anonymous monica said...

Indeed. Media is downplaying everything just to try and give a "thumbs up" to Obama's policies...but you just need to have a look around yourself and you will be a witness to ever increasing employment rates

December 12, 2009 8:03 PM  

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