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August 01, 2012

CBS MarketWatch Writer: It's a Depression, Not a Recession

And therefore -- he doesn't say this; this is the implication of it, as I read it -- Barack Obama didn't "save" us from any damn thing.

The Great Depression that Federal Reserve Chairman Ben Bernanke claims to have averted has been part of the background radiation of our economy since at least 2008.

Itís just that like radiation ó itís invisible.

Weíve called it the recovery, the jobless recovery, the slogging recovery and more recently the fading recovery. Weíve measured modest growth in our nationís gross domestic product to record that our so-called Great Recession ended in June 2009. And now we are saying that if this disappointing growth suddenly disappears, as currently feared, we will be in a new recession.

There is nothing more depressing than hearing about a new recession when you havenít fully recovered from the last one. I take heart in suspecting that in a still-distant future, historians will look back with clarity and call this whole rotten period a depression.

The precise definition of a depression, of course, remains as debatable as anything else in the field of economics. By some definitions, it is a long-term slump in economic activity, often characterized by unusually high unemployment, a banking crisis, a sovereign-debt crisis, surprising bankruptcies and other horrible symptoms we can find in the headlines almost every day.

It is easy to avoid seeing all of these events as constituting a depression if you somehow have kept your livelihood intact all this time. But itís important to remember that not everyone has to stand in a bread line during a depression.

And then he lists the grim tidings that are easily seen by anyone with the eyes brave enough to look.

Some more on this: Other countries have gone through what we're going through now. Most famously Japan, with its "lost decade," a recession (or depression) severe enough to penetrate the popular imagination in far-away America and instantly end the "Red Sun Rising" fears Japan instilled in us just two or three years before.

Among the counties that have suffered a similar crisis: All of them recovered more strongly than the US is recovering now.

Now, Japan's crash and Lost Decade was an event of such magnitude that it (I hope I am not overstating) changed the trajectory of the country for the next half century, and not for the better. And we're doing worse than that.

This is the worst "recovery" by any nation since 1970, and it could be partly due to a category error: We're not recovering from a recession, we're still in the depths of a depression.

The ISM index of manufacturing activity showed a contraction for the second straight month, and the ADP jobs report shows another month of bare-bones employment.

The Fed understatedly notes that the "recovery" has "decelerated somewhat," much as a human body falling from a skyscraper's balcony might "decelerate somewhat" at street level.

Fed officials described the economy as having "decelerated somewhat,'' and reiterated their disappointment with the slow pace of progress in bringing down the nation's 8.2 percent jobless rate.

Ever notice how people flee to the clinical comfort of bloodless language when they're forced to speak of bloody things?

Here's a quote by Megan McArdle that has stuck with me since I read it soon after the beginning of the crisis (and have referred to it several times since then).

I don't want to push the Great Depression analogy too far, but what's surprising when you go back to primary sources from 1930 is the optimism. I don't mean to imply that everyone thinks things are just swell. But while you know that they are facing the worst economic decade of the twentieth century, they don't. They're expecting something more like the recession that followed World War I. People are cutting back, but they're still spending, particularly because companies are slashing prices to move inventory. It was the long grind of the years that followed, and the catastrophe of the second banking crisis, that scarred them permanently.

Depressions are so noted retroactively. Only after 8 or 10 (or more) years of persistently high unemployment, "recoveries" without recovery, false hope and new set-backs do people start to realize "This might actually be a depression."

The line of demarcation, as I understand it, between a depression and a recession is only this: You don't recover quickly from a depression, as you do from a recession. Thus, you really can't know you're in a depression until you fail, and fail, and fail some more at recovery.

And none of this, of course, excuses Barack Obama for his failures. His supporters might argue (were they honest enough to admit his failure) that given the situation, it was easy for him to miss the signs that this was a serious, possibly nearly permanent, wound to the economy.

Well, it might have been easy. But it's always easy to fail. It's harder to be successful than to fail, which is why we have -- at least previously -- rewarded success, so that people might have an incentive to attempt that which is difficult, rather than accepting the default, easy path of failure.

We didn't elect him to fail, whether it's easy to fail or not.

Every failure comes with a bodyguard of a thousand excuses or justifications. But, at least previously in our history, we have insisted on the hard success over the easy excuse for failure.

I sincerely pray we do not further reward this miserable failure for his incompetence. It would be the death of us.

And no post about the economy would be complete without something "unexpectedly" happening. Bloomberg obliges.

U.S. Manufacturing Unexpectedly Shrinks for Second Month

Yes, unexpectedly. We're all stunned.

And what does the press want to talk about?

Thanks to @johnekdahl for the MarketWatch tip and to Jammie Wearing Fool for the "unexpected" turn of events. And of course @championcapua and @rexharrisonshat for the videos (in anti-respective order).

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posted by Ace at 03:42 PM

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