Economics

The Great Decession? The Great Repression?

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Is our long international nightmare over? Has the recession ended already? Yes, says Bank of America Merrill Lynch. (Now there's a company that combines the two names everybody thinks of when they think of sound financial planning and long-term economic vision.) According to a report by Michael Hartnett, head of the bank's research investment committee, "Our global economists believe the recession ended in Q2 2009 and a fragile recovery has begun." Tom Petruno, the token non-idiot on the L.A. Times' business desk, has some details on the report.

Hartnett is not alone in his view. Treasury Secretary Geithner says the "force of the global recession is receding," which raises the question: When something recedes, is that a recession? CNBC Squawk Box co-host Joe "Big Kahuna" Kernen hollered yesterday that the recession was over, while the financial network's walking quality of life violation Dennis Kneale screams at "nay sayers" and "bloggers" in this recession-is-over peroration:

And the Dow is rallying today.

So is the recession over, dammit? Calculated Risk describes how difficult it is to mark the exact point of any market bottom.

Beyond that, I'd note that much of the above is based on earnings reporting from companies, which is a poor yardstick because a company can always improve its earnings through cutbacks. That's the case in almost all reports coming out now. Consider the rail company CSX, which managed to score good earnings, but only by massively cutting down its capacity, a practice CSX expects to continue at least through the third quarter.

I single out CSX because Warren Buffett's attentiveness to freight transportation makes sense: It's an actual measure of how much stuff is getting moved around and sold. And the Freight Transportation Services Index has been dropping off the River Kwai bridge lately, with no end in sight.

So, some questions: When industrial production continues to fall, is the recession over? When you more than double the monetary base and still can't create any inflation, is the recession over? And yes, I know it's all bleeding-heartish and non-economical to take unemployment into consideration in this great era of the jobless recovery, but when you're still losing half a million jobs a week, is the recession over?

I don't know, and neither do the self-interested actors spouting off about the end of the recession. History may decide that mid-July 2009 was in fact the end of the recession. We'll have to wait and see. But one thing you can be sure of right now: The supporting evidence for all this end-of-recession talk is a bunch of baloney.

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  1. Over! Did you say it’s over? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor?

  2. isn’t CSX a canadian company?

  3. …but when you’re still losing half a million jobs a week…

    The article lined to is confusing, but I’m fair certain we aren’t losing half a million jobs every week. At that rate, there’d be thirty million unemployed since the beginning of the year.

  4. isn’t CSX a canadian company?

    No.

    It’s the result of the merger of the Seaboard Coastline RR and The Chessie System. Its headquarters are in Jacksonville, Florida.

  5. Bank of America Merrill Lynch

    It’s easier to say Bank Of Amerillynch.

    And more accurate.

  6. Our global economists believe…

    It’s bad enough that economics is the dismal science. But at least we’re getting the truth: economics is actually the dismal religion.

  7. And the Freight Transportation Services Index has been dropping off the River Kwai bridge lately, with no end in sight.

    That’s because people are eating local nowadays. Therefore no need to use much transportation. I’m no longer eating beef moved from Texas and Iowa, instead I’m eating squirrels from my own yard.

  8. Warren, those are new claims. Net unemployment growth is much lower, obviously, because the government is saving or creating so many jobs.

  9. If by ended they mean the economy is no longer being shot at by a firing squad, I say maybe. If by over they mean the economy has stopped bleeding and is in stable condition, I say no.

  10. it’s positive reinforcement. if we say it’s true it’ll become true!

  11. Is our long international nightmare over?

    Is Barbara Streisand still making records?

  12. Tom Petruno, the token non-idiot on the L.A. Times’ business desk, has some details on the report.

    You’re a bad, bad man, Mr. Cavanaugh. But I still love ya.

  13. But seriously… how can the recession be over when Obama hasn’t even started to create any Green Jobs, yet?

  14. Paul wins the thread.

  15. while the financial network’s walking quality of life violation Dennis Kneale screams

    I’ve been at my desk, laughing out loud at this for almost a minute and a half now… and I don’t even know what it means. That’s quality blogging.

  16. “Tom Petruno, the token non-idiot on the L.A. Times’ business desk, has some details on the report.”

    Bitter much, Timmy?

    “Beyond that, I’d note that much of the above is based on earnings reporting from companies, which is a poor yardstick because a company can always improve its earnings through cutbacks.” [citation neede]

  17. “Beyond that, I’d note that much of the above is based on earnings reporting from companies, which is a poor yardstick because a company can always improve its earnings through cutbacks.” [citation neede]

    Vantagemed Corporation.

  18. single out CSX because Warren Buffett’s attentiveness to freight transportation makes sense: It’s an actual measure of how much stuff is getting moved around and sold.

    Years ago someone suggested watching the paper industry as an early warning indicator. The more goods being shipped or sold, the more cardboard boxes and containers would be needed. If the paper industry took a sudden dip, recession was in the air.

  19. Years ago someone suggested watching the paper industry as an early warning indicator.

    1,000 page health care bills ruined that indicator.

  20. According to a report by Michael Hartnett, head of the bank’s research investment committee, “Our global economists believe the recession ended in Q2 2009 and a fragile recovery has begun.”

    Is it possible to short Bank of Amerrilynch?

  21. Today’s industrial prodcution report also showed that the capacity utilization rate fell to a record low of 68.0 percent in June from a revised 68.2 percent in May.

    Maybe not?

  22. Dow Chemical plans a $700M charge to eliminate 3 plants and 2500 jobs? $280,000/job lost or eliminated. Does this make the stimulus look good?

  23. Bitter much, Timmy?

    Just a concerned Californian who wants my local paper to be the best it can be.

    “Beyond that, I’d note that much of the above is based on earnings reporting from companies, which is a poor yardstick because a company can always improve its earnings through cutbacks.” [citation neede]

    Does “basic addition and subtraction” count as a citation?

  24. A recession is defined by at least two quarters of shrinking GDP.

    How should the end of a recession be defined?

  25. nice post..
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