Larry Summers: Recession Is Over Because Everybody Agrees

Regular readers know that I am madly in love with the Great Recession. At first it was just a casual thing. Before I knew it I was feeling the kind of goofy, exhilarating crush I hadn't felt since I was a teenager. Now it's a full-blown amour fou.

Leave it to Larry Summers to insert his carcass between me and the object of my desire. Here is the director of President Obama's National Economic Council declaring the end of the affair to George Stephanopolous:

During my "This Week" interview, Summers said that "everybody agrees that the recession is over," but he did not say when the unemployment rate could be expected to drop further.

Can the greatest genius of all time be wrong? Revised third-quarter GDP growth is said to be 2.8 percent. That's within the margin of GDP-boost that Council of Economic Advisors chairwoman Christina Romer claims has been created by government stimulus, but it's still growth. We have also seen two consecutive quarters of growth in net worth. Inflation may finally have been achieved, as the Consumer Price Index increased 0.3 percent in October and is expected to rise again for November. November retail sales were up slightly over last year. (Though I have yet to see a more-than-half-full parking lot at a shopping center this Festivus season.)

Meanwhile I'm down to "you can't leave; all the plants will die" pleading: The transportation services index is still tanking. (Zzzz!) Unemployment continues to exceed expectations. (Better luck next time, suckers!) Is the recession really over? Can something this magical just up and runnoft?

Love hopes all things. Over there, in that German paper, look! It's Mr. Right: former Fed chairman and current U.S. Economic Recovery Advisory Board Chair Paul Volcker, giving a non-prediction prediction that more pain is still to come:

SPIEGEL: But even though there are still more people being fired than hired, the Chairman of the Federal Reserve Ben Bernanke is saying that the recession is technically over. Do you agree with him?

Volcker: You know, people get very technical about these things. We had a quarter of increased growth but I don't think we are out of the woods.

SPIEGEL: You expect a backlash?

Volcker: The recovery is quite slow and I expect it to continue to be pretty slow and restrained for a variety of reasons and the possibility of a relapse can't be entirely discounted. I'm not predicting it but I think we have to be careful.

Comments

[The Art-P.O.G.]

How slow will the recovery be, Volcker? Please tell us!

[Tulpa]

Slower than Chad after a double dose of stupid pills.

[jester]

Things are looking good for Chad:

http://www.google.com/publicda.....q=chad+gnp

[briareus]

Employment won't return to it's traditional < 5% rate until 2018-2020.

Housing is still trending down, and to intersect the rising trend in home prices since 1956 (that is, to correct from the bubble of recent years to the traditional trendline), it appears prices will continue to fall for about another four years (perhaps to 2015), with the projection that homeowners have lost only 1$ of the 3$ they can expect to lose.

The cumulative effect of all the QE and stimulus has not even been able to push the money multiplier over 1. At the current rate (about 0.8) every new dollar pushed into the system produces less than one dollar of GDP. Unsustainable.

Where is it all going? It's sitting in banks reserves, where it will enable them to weather the massive losses they are about to incur starting 1 Jan 2010 when FAS140 amendments go into effect (forcing banks to more honestly bring all their off-balance-sheet ugliness onto the books).

If you edit the letters on the end of those urls to BOPI you will see capital flight from the US markets. If you edit the url to TOTALSL, you will see that the US consumers' credit is, for the first time since WW2, in full decline.

If you look at the yield curve (after the recent bond sale ugliness) you will see that the Big Money is piling into the short end of the curve; they are paying the USGovt to hold their money, at a loss (in some cases at NEGATIVE interest rates). The long end of the curve is being neglected. This bias toward the short end shows us a few things: Risk is perceived as very high for the near future, but the lack of long term sales (where the investor would actually make some money) conveys a distinct lack of faith in US solvency in the long term. Indeed, how can it when it's running trillion dollar deficits with a money velocity approaching zero?

This nonsense about the recession being technically over demonstrates the paucity of their definitional game; two quarters of rising GDP when that GDP includes massive deficit stimulus spending is no real rise in GDP at all.

Hang on people, we have a very long way to go.

[SIV]

Sounds positive for near to mid-term deflation anyways.

[briareus]

Absolutely. That's how I've been playing and it's working out for me.

Now is the time to stomp debt flat, if you can.

Once the inflation hits (once I believe we have reached the real point of inflection), my activity will reverse to debt assumption, for then prices will still be low and debts will only become cheaper to service as the inflation (or hyperinflation) begins to take hold.

I think that is further off than most might think. That said, I remain as nimble (and as liquid) as I can while watching for the flight of the black swan.

Risk is high.

[briareus]

I just detected an error in my main comment:

Where I pointed to bank reserves, my link is a duplicate to the money multiplier.

Correct link to bank reserves is here.

[yonemoto]

Your analysis is correct but hinges on one assumption:

Obama does not start WWIII.

[briareus]

Well quite. Hence my DEW-Line watch for the black swan.

Even if Obama (as I suppose he will be pushed) does attack $NATION (likely Iran), it will not have the reflationary effect they wish it to.

This is no longer the nation tooled or philosophically equipped to massively engage in industrial growth, nor will the looming war require it: Asymmetric warfare will conspire with a near-zero time preference of the public against heavy US casualties to undermine any widespread systemic ramp.

There is one tactic that might work. A massive strike on the interior of the US that destroys or disables large sections of infrastructure might enable a large ramp in industrial output as heavy industry and other services are required to restore or reconfigure the broken infrastructure. Insert your 911-Truther insult here_____.

Of course, such a strike may have just as much a deflationary hammer blow to the system as enable reflation.

[Michael Mann]

...everybody agrees that the recession is over

The science is settled!

[Jeffersonian]

Cut Larry a little slack - he ran Cornel West out of Hahvahd, didn't he?

[Brandybuck]

Cornel at least had class.

[Jeffersonian]

Uhh...no.

[Marc]

You're thinking of Cornel Wilde.

[SIV]

Whose movie The Naked Prey was a far better film than anything in the Stanley Kramer oeuvre.

[Tim Cavanaugh]

Hear hear. The beginning of that movie haunted me when I was a kid.

[SIV]

You know what haunted me? That brutal homo rape scene in Cornel Wilde's Shark's Treasure.I swear when I saw that movie in the theater it was rated "G".IMDB says US-PG.
FWIW that movie really sucks bad.

[tarran]

In other words Larry Summers thinks he's succeeded in preventing the capital structure of the U.S. economy form being aligned with actual demand.

Isn't that special?

Maybe we should give him a Medal of Freedom to commemorate his accomplishment.

[Episiarch]

It infuriates me to no end that these people are still walking around and haven't been arrested or assaulted. They must be very proud of themselves, having pulled off the greatest financial scam of all time.

[P Brooks]

If Larry Summers says it, you can take it to the bank.

[Tim Cavanaugh]

Yeah, you just won't be able to get it out of the bank later.

[briareus]

I believe FDIC is about 8B in the whole right now, at least as of last week, but even if FDIC were not broke, it doesn't mean you get your fund if your bank fails: You might like to know (if you don't already) that your FDIC guarantee is hardly a guarantee: Statutorily, you are in fact fourth in line for your own funds to be replaced.

[Mo]

Unemployment pretty much always peaks after the recession ends. It was the case in the 2001 recession, it was the case in the early 90s recession, same with the 80s recession, etc.

[Mo]

Should be 80s recessions.

[Orion]

However the simple fact that Unemployment has "peaked" doesn't mean the recession is over. If you accept that the 10.2% number published for October was an anomaly (it was widely expected to be 9.9% - 9.9%) then November's 10% is in line with a still rising - though slowly rising - unemployment rate. It will take 4-5 months of BLS reports to decide which case is true. Even if unemployment has peaked it doesn't mean the recession is over - we could still fall back into recession if the economic drivers aren't there to restart the economy.

[prolefeed]

One quarter of GDP growth doesn't end a recession, IIRC -- it takes two to officially end it.

[Tim Cavanaugh]

People seem pretty confident that Q4 will also show growth in GDP.

[briareus]

Of course it will. GDP includes stimulus expense (debt), most of which hasn't even been spent yet. Their contrived definition of GDP and their pace of stimulus spending enables them to talk their book, even based on the negative abundance that it is.

[SIV]

2 consecutive quarters of GDP growth doesn't end a recession unless the NBER (National Bureau of Economic Research ) says it does.*

In the United States the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating US recessions. The NBER defines an economic recession as: "a significant decline in [the] economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales."[8] Almost universally, academics, economists, policy makers, and businesses defer to the determination by the NBER for the precise dating of a recession's onset and end.

*correct link.Their website is down;-)

[SIV]

Site is back up last I checked.There's a bonus football and domestic violence paper in addition to the stuff about how they call and date recessions.

[briareus]

SIV, since you and I appear to share some thinking, you might appreciate this.

[briareus]

It's technically two quarters of improving GDP, but that hardly matters when GDP is defined/contrived to include stimulus spending.

NDP or even GNP have always been more rational measures.

[prolefeed]

And, given all the stupid stunts the government has pulled, and is trying to pull, the economy could nosedive again.

[briareus]

It will nosedive. See my post near top.

The reflation efforts have accomplished one thing only: They have moved demand forward.

This might help temporary political expediency, but it also makes the hangover far more painful.

[P Brooks]

There was a great whiny guest editorial in the Boston Globe, the other day, about how Larry's Haavuhd pyramid-building scheme has come crashing down. Tough times in Cambridge.

[Johnny Longtorso]

Yet Harvard graduates people fit to run the economy, as proven by their Harvard degrees, and you are anti-intellectual to doubt that. Did I miss anything, MNG?

[briareus]

Ha! Hilarious again, Johnny Longtorso. This is the sort of economic activity we get from Harvard graduates.

[briareus]

I should mention: That cartoon? --circa 1934.

[Tulpa]

The danger for the Obamoids is that if this recession ends, and then a "relapse" occurs, they're going to have a much harder time blaming that on Bush. At least FDR was smart enough to make sure the economy never rebounded so he could still blame Hoover nine years into his own administration.

[Brandybuck]

Don't get your hopes up. They're STILL blaming Reagan for some stuff after all.

As the old bumper sticker said: Being liberal is never having to say you're wrong.

[Mo]

Conservatives are just as guilty of this. There was the "Clinton recession" that started during the Bush administration as well as blaming Clinton for 9-11.

It's a red team / blue team thing, not anything specific to either team.

[Conservatives]

That recession did start on Clinton's lame-duck watch; as did Jamie Gorelick's incompetence as Attorney General.

Also, the economy DID rebound from after Clinton's time, though you'd never know it to hear the media leftards' whining about "tax cuts for the rich" and "jobless recovery" and all that crap. Bush managed to keep an amazingly even keel for both his terms in the face of the financial fallout from the 9/11 terrorist attack, the well-nigh catastrophic idiocy of you fools having voted in the socialist Democrats in 2006, the Democrats' disastrous CRA program, and your constant griping about everything you could possibly try to blame on him.

The real fun of this administration has been watching all the idiots who really are absolutely anti-war discover what we on the just-war right already knew: that nobody on the left really believed all that pacifist crap, they were just using it as another cudgel for bludgeoning Bush.

I think the greatest schadenfreude of all, though, comes from watching you Liberaltarian fools have a collective aneurysm upon discovering that, contrary to your idiotically optimistic predictions, people perfectly dedicated to socialism really can do a worse job running your country than people imperfectly dedicated to capitalism. I bet you're HOPING to CHANGE leaders again already, aren't you, losers?

Also, you idiots who thought just because your new Prez is a former pothead, you were finally going to get that pot legalization you always wanted? No pot for you! You might want to lay off the mushrooms too, kids. I'd tell you to get a job, but thanks to your irrational hatred of the pro-business Republicans, there aren't going to be any of those to be had for a long, long time. Besides, the big and small business owners among us sure wouldn't want to hire whiny dopeheads like you.

Go ahead and try to blame everything on Bush; if it were possible, 44% of the public would already prefer to have him back for a third term! I'd sure like to see what that poll will be saying at this time next year.

[matth]

Pro-business republicans? Oh, the ones who funnel our tax money to the businesses run by their cronies. Gotcha.

[Fixed]

Pro-business republicans? Democrats? Oh, the ones who funnel our tax money to the businesses hedge funds, investment banks, Brazilian oil companies, and enviro-churches run by their cronies. Gotcha.

[SIV]

Go ahead and try to blame everything on Bush; if it were possible, 44% of the public would already prefer to have him back for a third term!

Bush nostalgia?Who woulda thunk it?

Early November 2008 Bitches

[Ebeneezer Scrooge]

To say Republicans are even imperfectly dedicated to capitalism got to be a real stretch under Bush.

But I've argued similar to what you are, around here before.

The Bush Wars will eventually end and eventually be paid for (most likely by inflation). But ObamaCare is forever.

[prolefeed]

Liberaltarian fools have a collective aneurysm upon discovering that, contrary to your idiotically optimistic predictions, people perfectly imperfectly dedicated to socialism really can do a worse job running your country than people slightly less imperfectly dedicated to capitalism socialism.

Fixed.

[Fixed]

Liberaltarian fools have a collective aneurysm upon discovering that, contrary to your idiotically optimistic predictions, people perfectly imperfectly radically dedicated to socialism full-blown communism really can do a worse job running your country than people slightly less imperfectly more dedicated to capitalism socialism bombing the crap out of crazy guys who think they'll get 72 virgins from Allah for blowing up skyscrapers, and maybe passing a tax cut while getting some leg in the office.

Fixed.

[Zeb]

Let me guess. Next time around they will be Commie-Nazi-junky-homo-anal-rapists super extra dedicated to destroying America.

[lancemh]

Conservative:

1) Afghanistan ALWAYS was the right war - I do not recall but a handful of us Libs opposing it. Unfortunately, Bush/Cheney/Rumsfeld blew-it by emasculating Gary Berntsen's Operation Jawbreaker - bin Laden escaped because these Con bafoon's already had their eye or Iraq - the WRONG war).

2) You Cons are not "imperfectly dedicated to Capitalism". If you had ever read Adam Smith's original treatise on Capitalism, "Wealth of Nations", you would know that Capitalism was intentionally designed to elevate the "social good". Moreover, even Smith begrudgingly conceded that capitalists (then called the "merchant class") would conspire to fix prices and drive down labor costs, thus acknowledging the need for government intervention (regulation in the form of anti-monopolistic laws)and other gov't action. You all would label that Socialism. For Smith, harnessing the base greed of people like yourself, he could foresee how ALL of society woudl be elevated. Unfortunately, the rise of corporations and their unlimited power gutted Smith's imaginatively designed theory.

3) I DO NOT smoke pot. But in my profession - which is not relevant to the discussion - I have seen the widespread devastation wrought by alcohol abuse. In my 20 years working inside the justice system, I cannot recall one stoned person who killed/maimed/injured anyone while driving a car. I cannot even count the number of drunks - it's way too many.

P.S. My "hatred" of your Pro-business Republicans - of which most of my buddies profess to be - is really total utter disdain for your palpable ignorance, and utter bastardization of the fundamental principles of Capitalsim.

[yonemoto]

fdr was smart, he stayed president until a war could rehabilitate his image. Obama's constitutionally limited, so he can't wait indefinitely.

[Warty]

Happy Xmas (Recession is Over).

[Episiarch]

A working class hero is something to be, Warty.

[jester]

People...they give me all kinds of warnings to save me from ruin.

[Episiarch]

If you wanna be a hero, well, just follow me.

[jester]

Epi, you're so fucking crazy!

[briareus]

...and a very Merry Mithras to you, Warty!

[mike farmer]

Recession is the least of our problems. When will the progressive nightmare be over? I think it's safe to say that Summers is a bonafide dolt.

[briareus]

Indeed. Despite its painful effects for those in the parasitic industries and those in ancillary ones, recession is a healthy correction. Defaults and bankruptcy are the relief valves of a system correcting itself. The more the progressive interventionists view these features as bugs and try to squash them, the more fucked we will be.

[sage]

Is that glass there to catch all the drool that spills from his piehole while he's sawing logs?

[Rich]

Anybody else catch the following exchange on today's MTP? To be fair, one may argue it does make sense, but it seemed funny at the time.

DR. ROMER: Well, I'm not going to say the recession is over until the unemployment rate is down to normal levels, until...

MR. GREGORY: Which would be?

...

DR. ROMER: Well, the normal, you know, where we were before the recession ...

[prolefeed]

Well, seeing as how the rise in the minimum is contributing to unemployment, Dr. Romer could be waiting a long damn time, since no one leading Congress seems inclined to quit penalizing poor people by denying them jobs at wages employers are willing to pay.

[Cool Hand Luke Boss]

Doesn't anybody here read the Drudge Report? Matt just put the two reports right next to each other: Summers saying of course the recession is over, and Romer saying of course the recession isn't over.

See, what we got here, chil'ren, is failure to communicate!

[briareus]

'Normal', that is to say less than 5% historical unemployment, is not on track to recover before 2018.

That's not to say that obfuscated BLS statistics (already endlessly repeated by the Admin and the press) will not make it appear that things are better long before that. I'm talking about the difference between U3 and U6. One is highly favorable to the neo-Keynesian inflationistas in the Administration and the prime lenders. The difference is illustrated in comedic fashion here.

[Morris]

"Regular readers know that I am madly in love with the Great Recession."

I'll bet such cleverness makes many of your readers want to puke, idiot.

[Hugh Akston]

Edward, you handily handle the emetic duties here.

[sage]

Shut your flaming-dragon hole, special edward.

[briareus]

Morris, I could engage you in some trenchant intellectual debate, but I think I'd rather just give you something special.

[Fist of Etiquette]

Programming Note: They're replaying Stossel's show at 11:00PM. That is all.

[hmm]

Arguing about when the or a recession is over is like arguing whose shit smells better. Until it's flushed it all stinks and until we see unemployment drop and other lagging indicators start to shift its still a recession to the people that matter. Those people are not usually economist or politicians.

[Ebeneezer Scrooge]

You mean it's still going to suck that people owe 2X what their house is worth, when they can't even find a job after they got laid off, for a long long time after D.C. declares The Recession Is Over?

You gotta be kidding.

[Ebeneezer Scrooge]

Leave it to Larry Summers to insert his carcass between me and the object of my desire.

I don't know when it's going to be over, but I'm sure no one looks at it through glasses that are quite the same color as Tim's.

[briareus]

I dunno, I think I'm close.

Just hearing Larry Summers' voice makes me so hot I want to squat over a picture of his face, take a crap on his sexy mouth, then masturbate onto the shitsplat.

[Ebeneezer Scrooge]

Nah, you're way too explicit. You gotta learn to leave more to the imagination.

[briareus]

I prostrate myself before The Cavanaugh's more witty eroticism.

[Kolohe]

I'll say this again:
Talk of the recession being is on balance good thing, because it lessens the motivation to 'do something'

[briareus]

Oh, I sincerely hope you are right about that. The less intervention the better.

[Ebeneezer Scrooge]

Now, that should pretty much take the thread.

Tim, you're just going to have to suffer for the rest of our collective good.

[joshua corning]

SPIEGEL: You expect a backlash?

Volcker: The recovery is quite slow and I expect it to continue to be pretty slow and restrained for a variety of reasons and the possibility of a relapse can't be entirely discounted. I'm not predicting it but I think we have to be careful.

I get the distinct feeling that the conversation about economics has shifted to one about politics.

[DWCarkuff]

Caught the O man talking to Oprah this morning. Gives himself a "solid B+" for saving the economy. I understand that today he is going to scold the banksters for accepting the hundreds of billions he gifted them with earlier this year. Yeah, O baby. Kick some ass!!!

[Michael Ejercito]

Was not the 1991 recession over by November of 1992?

[jgreene]

Let' see now, Larry Summers says the recession is over and to make sure he checked it with Paul Samuelson, the eminent economist and publisher of Econ 101 and twenty editions of it...and well, Samuelson just died.

Never mind.. the original data has been trashed.

[Larry Summers]

The debate is over! I'm gonna take a nap.

[Chester White]

How many billions of dollars did Harvard piss away due to Summers' arrogant intransigence in about 2005?

Was it 2 or 3? I forget.

God, what an jackass.

[Jonny Fever]

I hope Obama continues to surround himself with winners like Summers. This recession won't be over until jobs are actually "created or saved" and the people telling us that this has happened is someone besides the Obama administration. But, with the way Obama is strong-arming banks, I wouldn't expect a real recovery any time soon.

[abolish the fed]

Larry Summers is the same crook who in the late 90's barbecued Brooksley Born for pushing regulation of the derivatives markets, saying if she persisted she would cause a financial crisis the likes of which hadn't been seen since pre WWII. Alan Greenspan and little Timmy Geithner were there, too, telling congress that we should let the free markets regulate themselves. Greenspan now admits it was a mistake... but stupid ass Summers is in CHARGE of our president's economic team???!!! As soon as Obama got elected he started putting crooks on his team... Wake up mainstream America, we need to start electing ACADEMICS to high office, not the slickest lawyers money can buy.

[Nemo]

Goddammit Tim, you really are the worst fucking writer. You're worse than an aging hipster.