As George Santayana said, “Those who cannot remember the past are condemned to repeat it.”
Okay, so what about the people the can remember the past, but choose to ignore it? There has to be a famous quotation for that, too, right?
On the front page of today’s Wall Street Journal, the headline reads: Housing, Auto Slumps May Defy Usual Role as Recession Harbingers. The authors note that home construction is “plummeting”; new car sales are “weakening”; and, long-term rates are “well below” the short-term rates — three major readings that preceded economic recessions of years past.
The authors then tell us that Wall Street is “betting that the old rules don’t apply”. A recession is possible, but not very likely. Says the head of a major economic forecasting group:
“This time will be different”.
I am not a smart man, Jenny, but I know what hubris is. The signs are all there, folks. So, keep your eyes and ears open because you’re going to hear the word “recession” quite a bit over the next six months. The more you hear it, the more chance that it will happen. It’s the self-fulfilling prophecy in action.
Anonymous says:
The signs are all there, folks. So, keep your eyes and ears open because you’re going to hear the word “recession” quite a bit over the next six months. The more you hear it, the more chance that it will happen. It’s the self-fulfilling prophecy in action.
I don’t see any way the economy rights itself without a recession. Do you?
From 2003 onward, consumer spending was fueled increasingly by home equity extraction. And that bank’s doors have been closed.
By the way, that doesn’t make a recession in 2007 a “self-fulfilling prophecy.” There is clear evidence pointing to a recession, not just an erosion of public confidence.
December 14, 2006 — 11:55 am
mike says:
Sorry for the “anon” post … the previous comment was mine.
December 14, 2006 — 11:57 am
winjr says:
“From 2003 onward, consumer spending was fueled increasingly by home equity extraction. And that bank’s doors have been closed.”
Mike, the process has certainly begun. MEW is falling off a cliff:
http://photos1.blogger.com/x/blogger/2825/754/1600/76803/GKMEWQ306.jpg
(Compiled by Alan Greenspan and James Kennedy). MEW for 3Q 2006 is the lowest since 4Q 2003, and is the lowest 3Q number since 2001. The YOY decline from 3Q 2005 is staggering – more than 50%.
“By the way, that doesn’t make a recession in 2007 a “self-fulfilling prophecy.” There is clear evidence pointing to a recession, not just an erosion of public confidence.”
The erosion of confidence is most pronounced among CEO’s and CFO’s — little consolation for the CNBC crowd counting on CAPEX spending to take up the consumer slack. Equally distressing, non-residential construction spending, a pet favorite of Fed Gov Fisher, et. al., is also beginning to slide, but this should be of no surprise.
Basically, you’re correct — an erosion of public confidence does not, in and of itself, lead to recession. This recession will follow the gradual implosion of the credit bubble – an inevitable result just now showing manifesting its onset in the subprime sector.
December 14, 2006 — 3:01 pm