Subscribe: RSS Feed | Twitter | Facebook | Email
Home | Contact Us

The Recession Never Truly Ended

Posted by Larry Doyle on August 3, 2011 8:19 AM |

A wide array of supposedly smart people are now informing us that the economy is slowing and may slip back into recession. The new phrase being used to describe our economic condition is ‘stall speed’.

Well how about that? Stall speed, they say. Is the economy truly slowing? Is it really?

Or perhaps did the real economy, that is the one in which we live and operate—not the one fabricated by Wall Street pundits and Washington politicians—never truly rebound?

I ask because I firmly believe that our domestic economy never truly rebounded in a meaningful fashion over the last few years.

I cautioned people to avoid the regular smoke and mirrors emanating from our financial and political hotbeds in spring 2010, and have continued to caution since, when I first equated our economic malady as akin to “walking pneumonia“.>>>>>>>>

I wrote then, U.S. Economy = “Walking Pneumonia”,

I strongly recommend that people not get caught up in the daily, weekly, or even monthly reports. Take a step back and look at things from a quarterly, semi-annually, and annual basis. Let’s work a little harder to eliminate the noise in figures so we can grasp the fact that the economic road in front of us will remain long and hard.

We were not healthier then and we are not meaningfully healthier now. How do we know?

We received a more honest and complete economic reading a few days ago in the revisions to prior year’s GDP reports. These reports received limited attention.

How can we accurately measure our current condition if we do not appreciate and understand the depth of our ‘walking pneumonia’? We can’t although the aforementioned strategists and Washington wizards would rather you not know that.

On that note, let’s look at the report released by the Bureau of Economic Analysis last week highlighting the fact that our recession ran deeper then and, in my opinion, continues to significantly impact us now. The BEA recently released,

For 2007-2010, real GDP decreased at an average annual rate of 0.3 percent; in the previously published estimates, real GDP had increased at an average annual rate of less than 0.1 percent. From the fourth quarter of 2007 to the first quarter of 2011, real GDP decreased at an average annual rate of 0.2 percent; in the previously published estimates, real GDP had increased at an average annual rate of 0.2 percent.

Negative real GDP readings to me spell one thing. We have never officially gotten out of recession despite all the sugar highs produced by Uncle Sam and executed by his boys, Ben and Tim.

Talk of green shoots, V-shaped recovery, and assorted other tricks were designed by those who are more interested in your vote, your spending, your purchasing overpriced securities, and your daily trading than your long term economic well being.

As an eternal optimist, though, let me also share with you how I concluded my March 2010 commentary referenced above,

We’ll make it. I am fully confident. That said, much like those with ‘walking pneumonia,’ we need to take care of ourselves rather than allow the daily spin to trick us into believing we are healthier than we really are.

Navigate accordingly while embracing and spreading the ‘sense on cents‘.

Larry Doyle

Please subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

Please get your friends, family, and colleagues to do the same. Thanks!!

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

 

  • http://www.InvestorsPropertyServices.com Dieter

    Here in Tacoma WA, we don’t need to look any futher than the main drag (South Tacoma Way) or the downtown business district. Both are littered with closed and shuttered businesses.

    The only thing sprouting here are more For Lease, For Sale and Available signs.

  • Itzman

    We will not achieve anything till governments and organisations accept the fact that no overall growth is really possible ever again, and start planning for a more or less steady state global economy.

    The more we borrow against a future that can never arrive, the greater the mess those who do will find themselves in.

  • Matt Cornell

    Larry –

    I have seen two articles now in the last two days regarding big banks starting to charge depositers interest for their deposits, meaning depositers have to PAY banks interest to deposit their money at the bank, instead of the other way around. Do you see other banks following this trend? Has that ever happened before? Here are the two articles:

    Zero Hedge: Short Term Yields Going Negative; BONY Announces It Will Charge 13 BPs Fee for Deposits

    Calculated Risk: “A Run to the Bank”

    Matt

    • LD

      Matt,

      I have never seen it before BUT we have learned that these large banks can and will do almost anything they want with little pushback.

      I certainly would not keep my deposits there based purely on principle. That said, do not be surprised if more banks move in this direction as investors pull money from money market funds which can and will likely break the buck at selected points in time.

      Thanks for sharing.

  • Matt Cornell

    Now here’s a Bloomberg article I just saw on their home page Larry on how Money Market Rates have fallen below zero!! Unbelievable. What a crash in the markets today – Nasdaq & S&P both down about 5%. The S&P has fallen from 1350 to 1200 in a few weeks. Europe looks like they’re in serious trouble right now – look at the Italy stock market and most European bonds right now. European banks are in big trouble with the European bonds they hold. What is the ECB going to do? They’ve already bailed them out three or four times already in the last 18 months alone. Now what? Getting a little scary right now.

    http://www.bloomberg.com/news/2011-08-04/money-market-rates-fall-below-zero-as-treasury-bills-retain-haven-demand.html

    Matt

  • Bryn

    Larry,

    Following the fact that there’s an opposite to everything, what is out there other than gold that will have any upward movement amid all this doom and gloom?

    Best regards,

    Bryn






Recent Posts


ECONOMIC ALL-STARS


Archives