Do you think the economic crisis is over?

Not by a long shot, recovery is still years away, and at the rate Obamination is spending, more likely decades.

If it’s over, my bank account sure doesn’t show the proof.

The recession is technically over, and the latest conclave of economists just yesterday agreed that the stimulus package was definitely ameliorative, but the housing sector still stinks, as does employment, and since employment is a lagging indicator, people are likely to feel things in the pocket for a couple of more years. We dodged a bullet, however. Thankfully we had Obamination to save us from a world-wide intractable depression, which is where we were heading.

Do I have a real job again? No.

We’re not out of recession yet.

That is correct. The recession is technically over, and many people will be out of work for a couple of years to come.

@pdworkin I’m gonna go with the myopic view and say no, my own personal recession is still here.

Yep, I can see why. I have no job, no prospects for a job, and I am terrified.

@pdworkin The NBER not declared the recession over. While they usually wait 6–8 months after the fact to do so and it may have ended, stating that it technically ended would be inaccurate.

What is more disturbing to me is the apparent hubris of people who like to make such future predictions of the economy. I didn’t know the world had so many macroeconomic forecasters. People get their talking points from the economically illiterate media, or worse, politicians, and walk around confidently like they understand such a complex subject.

And yet they don’t do this with Physics, Biology or other subjects (excluding creationists of course, but we recognize their incompetence.)

I’m guessin’ that the next shoe to drop will be either 1) people defaulting on credit cards (because they just don’t have the money), and/or 2) commercial properties defaulting and getting foreclosed (because no one is shopping anymore). The two, just like all the other cogs in the economic meltdown, are related – it’s a cycle.

Of course, this is all hubris. ;)

“I define a recession as when your neighbor loses his job, but a depression is when you lose your own.” -Harry S. Truman

I would say the worst part is over. GDP was up 3.5% last quarter and as pdworkin pointed out employment is a lagging indicator.

An aside. Remember that the big bank bailout was done under Bush. It was passed before the election even happened. Remember McCain suspending his campaign to run to Washington to work on the bill? Obama, McCain, and Palin all supported the bill. Don’t confuse TARP with the stimulus package that Obama passed.

@johnpowell This is the reason why I wrote my previous post. Q3 numbers are only advanced numbers, and get revised. Making your statement misrepresents the facts. Care to tell us what model you are using for your forecasts? Or is it just “it improved last quarter, and it will keep going”

@arpinum You’re the economist, we are lay people. Instead of hectoring @johnpowell, why don’t you post something instructive?

@johnpowell Lurve for quoting Harry Truman.
I don’t think our economic problems are over. We have begun to recover, but we need jobs and housing prices to go up before we know we have beaten this thing.
By definition, a recession is self correcting. A depression requires assertive action to correct. Doesn’t this mean we are in a depression? Why does everyone still say recession? Are they afraid we will be destablized?

@pdworkin Because this is what academic papers are written on. This isn’t the place.

I want more people to accept that they just don’t know. I can understand the aversion to this, since it affects their lives, but it doesn’t justify ignoring the truth.

But to answer if the “Crisis” is over, in the short run it appears to be. LIBOR is relatively normal, suggesting there is enough confidence in the credit market. Of course it can spike particularly quickly. Just ask Lehman and Bear Sterns.

Bigger worries are sectoral shifts causing long periods of high unemployment. As labor becomes more skilled it is harder for workers to move out of falling industries and into growing ones. Expect this to be a long term trend that we already saw part of in the dot-com recession.

Of course a crisis could reappear at any time. What makes a crises so is that people do not anticipate it.

@filmfann No. your definitions of recession and depression are off. Good job on recognizing a recession as part of a normal business cycle and depressions as aberrations. But depressions don’t actually have a concrete definition. The best I can offer: A 10% reduction in GDP, or a depression lasting a particularly long time.

And the economic consensus on the New Deal is that it was a wash. Sorry, history textbooks in school like to provide a simple narrative, but reality is complicated.

But do you agree that if credit had remained frozen, and AIG had gone down along with Citi and others, we could have had a world wide depression?That as flawed as TARP was, it was ameliorative? Do you believe that government spending is the classic means of fending off continued shrinkage, and that it’s a good thing we didn’t stop spending and cut taxes?

NOOOOO

@arpinum You say a depression is: A 10% reduction in GDP, or a depression lasting a particularly long time.
So, a depression lasting a short time is not a depression. That’s cute.

@sorry, I meant recession lasting a long time.

I don’t know.

@pdworkin

We could have a serious problem, yes.

TARP could be considered a good idea if you don’t mind the price tag. Its a value call. It also diminished the rule of law and briefly turned us into a banana republic, but thats another issue.

Here are my problems with it. The main purpose of TARP was
1. Stop panic
2. Prevent widespread “domino” bankruptcy.

In reality, the push to enact TARP caused much more panic than previous issues. By far the largest spike in LIBOR came from the President and Co. yelling that the world was going to end. Geitner admits (sorry no source) that they tried to scare the S out of Congress to get TARP to pass. Here is the only chart I could find online at the moment.

TARP may have been effective in the 2nd case if FDIC just stood stiff. But my guess is that they would adapt to a faster process to take over banks, and would cost the taxpayers a lot less money. TARP turned into a slush fund and went into many bad bets at companies who went bankrupt anyways. Debt for equity swaps would have been much more cost effective, but the people with political clout wouldn’t have liked that.

Your second question on government spending I assume is in regards to the Stimulus, since you compare it to tax cuts. The lastest paper I have seen on the topic suggests that tax cuts are more effective than spending. I also remember papers from Romer and Romer showing tax cuts to be more effective, though this was before Romer joined Team Obama.

My favorite form of tax cuts you might like: eliminate the payroll tax (employer paid portion of Social Security [although with tax incidence you should know that you actually pay this part as well, but I digress]). This would lower the cost of labor across the board by 7% without any need to renegotiate any contracts. If you are suddenly 7% cheaper to hire or keep on, it can prevent a lot of the unemployment and keep money flowing. The classic Keynesian argument for fiscal stimulus is that wages can move downward, which is what their models require. Eliminating the payroll tax can accomplish this.

Unfortunately in economics we don’t get to go back and repeat things like this, so its hard to put a number on how things would have gone under a different plan. While we can estimate that the multiplier is 1.42 for spending increases, they are based on previous events which may have a much different shape to them. I am generally weary of what politicians eventually do, since their first job is getting re-elected, not designing beneficial policy. Politicians will want to control the narrative to justify their actions but the facts are murky. Politicians don’t like the payroll tax cuts for a number of reasons, but mostly due to the fact they they need to be seen as doing something, and it is a great tool to win votes from interest groups.

Again, was the stimulus good? Its a value call. I can only point out the effects.

Is there something to the claim that the Stimulus was too small. Yes.
Very little Stimulus money has actually been spent. In this way we can’t expect it to have had too many effects. I would ask:where else would you throw money at and have it be a wise investment? Do you trust politicians to throw it in the right directions? How do politicians know what is a good or bad investment? Do they care?

Obama has talked about building a green economy, which may be a fine thing to do, but its not going to provide short term or medium term stimulus. Those project will take 10 or 20 years. They may be valid, but not as an effective stimulus.

Sorry, but the question was very open ended and forced me to briefly address a number of issues.

Thanks, I appreciate your having taken the time. I like to keep on top of things that are happening to me, but Journals are too dense for me to understand, and reading The Economist doesn’t seem to be enough.

@arpinum that was a very nice answer. I may not agree with all of it but it was very informative- thank you!

There is something about this recession that has a peculiar feel to it. The U.S. is the world’s biggest debtor nation and there are some who are saying that this can’t go on much longer. Countries are starting to cut back on their dollar reserves. People are talking about the Chinese GDP overtaking that of the U.S. Some economists are saying that things are never going to be the same and that we are all going to have to tighten our belts. The latest copy of Newsweek has an article titled Has The U.S. Lost Its Mojo?

I am a depressive and I pick up on stuff like this all too easily. There seems to be a national psychological depression, something like Jimmy Carter’s talk of a national “malaise.” Talk about global warming and oil depletion does not help. I am hoping that this feeling is just temporary, that if the U.S. is facing a loss of relative influence that we will be able to adjust and still be a major player and that we will be able to use renewable energy sources to reach an economic equilibrium.

@LostInParadise I sometimes worry as well, but in a far different way.

If I can offer a morsel of comfort, look at the interest rates on government bonds. They are extremely low. Lots of people still want to buy our govt debt. Even the 10 and 20 year are very low, suggesting that those who have put their money where their mouth is dont expect problems for a long time.

Not yet. But the worst is behind us. Patience. We’ll make it.