[ExI] "recession is going to end in about 6 weeks"

[Dan]

--- On Sun, 5/3/09, BillK <pharos at gmail.com> wrote:
> On 5/3/09, Damien Broderick wrote:
>> At 01:59 PM 5/3/2009 -0400, Rafal wrote:
>>> ### According to many economic indicators, the
>>> recession is going to
>>> end in about 6 weeks
>>
>>  Could you elaborate on these economic
>> indicators? (Not being snarky here,
>> I'll really like to know.)
> 
> As a general rule, the bust takes about the same amount of
> time as the boom.

I'd like to see some evidence for this.  Prima facie, I think the relationship would be accidental.  In fact, my guess would be the duration of the bust or recession -- where the markets attempt to get to a more realistic price and production structure -- would depend not only on how deep the boom was -- that is, how much it messed up relative prices and the structure of production -- but what remedies are attempted.

I'd also guess that busts can be over relatively quickly if there's little interference -- i.e., prices are allowed to adjust because, say, there are no attempts to prop up prices, bail out firms, or other further interfere in the market.  The 1920-1 recession seems a good example of how quick a bust can be over -- and, if one judges the boom to have been from 1917 to 1920, then the recession was around three years, while the recession was about half that.
 
> So. you get a quick boom, followed by a quick bust and then
> recovery.
> 
> Unfortunately, this last boom was the biggest bubble ever,
> and in all
> the world economies at the same time, so we are now in
> unknown
> territory. As trillions of free  money, in all
> currencies, has been
> produced out of thin air, I would expect this to have some
> effect.

And a lot of this new money was created after the recession started -- in an attempt to "reflate."

> (Exactly what effect, nobody knows). But as I see it, a
> quite likely
> scenario is a mini-recovery accompanied by shouts of 'Free
> money!',
> then an absolutely horrendous crash. Mainly because none of
> the
> underlying problems have yet been fixed.

I agree here, though my powers of economic forecasting leave a lot to be desired.  :/
 
> I shall be most surprised if the solution to debt problems
> caused by
> spending money that you don't have is to spend trillions
> more money
> that you don't have.

Well, if that worked (rhetorical question), why the original recession?  If merely creating new money to pay off real debts worked, then one would never expect to see the business cycle.

Regards,

Dan