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Double Dip Recession? Feds Think So!

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  • MikeSar
    Bank of San Francisco Thinks So Double Dip Recession – Federal Reserve Bank of San Francisco Thinks So August 9, 2010 By Chuck
    Message 1 of 1 , Aug 12 2:59 PM
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      Bank of San Francisco Thinks So

      Double Dip Recession – Federal Reserve Bank of San Francisco Thinks So

      August 9, 2010 By Chuck 2 Comments 

      The macroeconomic outlook is likely to deteriorate progressively starting sometime next summer.           That according to a research paper released today by the Federal Reserve Bank of San Francisco.

      By now, there is little disagreement that the Great Recession, as the last recession is often called, ended sometime in the summer of 2009 (see Jordà 2010), even though the National Bureau of Economic Research (NBER) has yet to formally announce the date of the trough in economic activity that marks the beginning of the current expansion phase.

      Little disagreement? You guys don't get out much do you.

      Intriguingly, just as we seemed to be leaving the recession behind, talk of a double dip became increasingly loud. This recession talk is not confined to the United States. It has crossed the Atlantic to Europe, where the recovery has been even slower, especially among countries on the periphery of the euro area. A quick look at the number of Google searches and news items for the term "double-dip recession" reveals no activity prior to August 29, 2009, but a dramatic increase in search volume since then, especially in the past two months. Such concern is likely motivated by a string of poor economic news. The spring of 2010 saw considerable declines in U.S. stock market indexes, the contagion of the Greek fiscal crisis across much of southern Europe, and a stagnant U.S. labor market stuck near a 10% unemployment rate. It is understandable that the NBER has hesitated to call the end of the recession.

      This spate of bad news has prompted a heated policy debate pitting those eager to mop up the gush of public debt generated by the recession and the fiscal stimulus package designed to counter it against those who would prefer to douse the glowing recession embers with another round of stimulus. Domestic and international commentators have engaged in a lively debate on this subject in the press and blogosphere. The New York Times, Washington Post, Wall Street Journal, Financial Times, and Economist have all featured one or more stories about a possible recessionary relapse in the past few months alone. In this Economic Letter, we calculate the likelihood that the economy will fall back into recession during the next two years.{…}

      The researchers who wrote the report base their recession call on some rather twisted odds ratios, which I don't agree with. Albeit the method utilized I agree that economic activity will be contracting in another two years time.

      Moreover, the debate over a double dip recession is an oxymoron. Is it still a double dip if one never takes their tortilla chip out of the dip in the first place? I believe the NBER will declare the current recession over before the mid term elections. I am sure there is considerable pressure being put upon the NBER by the White House to make the call.

      Actually if the NBER were to declare the current recession has ended, it only adds to the probabilities of another recession just around the corner for the NBER will be making the call too soon and they will be caught in an embarrassing situation of having to make the "R" call once again.

      --------------------------BayPointMike wrote:

      Psychologists say that to repeat the same actions and expect different results is crazy! Has anything changed?

      Yes, the city fathers in Bell, a poor community in California, got paid Millons, that's right: Millions, and none has been accused of anything, would you believe that? Unbelievable, but true!

      It was the headline but did that change the national infrastructure, efficiency of productions or improve sales? Of course not!

      So, what has changed? How are we going to compete in global markets with the highest average salaries in the world (I think)?

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