It Is Not So Bleak Afterall...

Look what popped up in the Wall Street Journal yesterday (12/26/2008):

“The Economic News Isn't All Bleak

…there are also reasons to think the economy could rebound quickly.”

 

The journal reports “it's now almost universally assumed things will get worse before they get better.”  The article goes on to show however, that similar assertions by those with "current conventional wisdom” were proved dramatically incorrect.  Remember the quote, “the majority is wrong?”

Predictions of recessions and depressions are all based on past dips, monetary policy action, and the ensuing recovery.  But the events and world government responses in the past few months have had no precedent at all.  None.

If economic activity did indeed come to almost a screeching halt in October and early November because of a credit crunch between banks, why is it beyond our wisdom to suggest that that activity could rebound even more quickly?

Further we haven’t seen wars, revolutions, or other disturbances anywhere as a result of this financial "turmoil."  Add to that, the scores of companies outside the financial sector with clean, strong balance sheets ready to invest.   And a new US administration ready to spend on infrastructure at a rate not seen for decades...

As for the US consumer, homeowner net worth might be down, but – at today’s valuations we still have $45 trillion in equity.   (By my quick calculations, that equates to about $150K for every man, woman and child in the US.  Or about $600K for a family of four!)

It is heartning to see the WSJ publish such questioning of the gloomy current conventional wisdom.  It is a breath of fresh air to see scrutinizing of the unjustified faith in past patterns that do not remotely match any of the events of the past few months.

It is very appropriate to suggest that if  indeed the economy turned down quickly in Sept, Oct, and Nov, that we all should be quite open to the possibility of a quick reversal in Dec, Jan, and Feb.