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October 02, 2012

Time: Are We Already In A Recession?

I would prefer the term "downturn" because I think we're still in the same recession -- or depression -- that started in 2008. In this depressionary economy, we will have cycles of growth and contraction, but all zeroed around the reduced, depressionary level of the New Normal.

As I keep saying, this happened in the Great Depression too. An economy never remains perfectly static-- it grows some, it contracts some. But in a Depression, its equilibrium is set several big steps below its optimum level.

Economists have mistaken this natural, inevitable "growth along the bottom" for a recovery.

That said, it could very well be that we're now in the middle of a recession within our depressionary economy.

[I]ts more than a little frightening that were seeing a spate of depressing numbers that could signal a recession on the horizon or that one is already here. On Thursday the Commerce Department revised down its estimate of second-quarter GDP growth to 1.3% from an already sluggish 1.7%. If that werent bad enough, the Department also reported that orders of durable goods long-lasting pieces of equipment like airplanes or heavy machinery fell 13.2% in August. And Friday, the Project Management Institute was out with a survey which showed that manufacturing activity in the Chicago region was contracting, surprising many analysts. While its unwise to read too much into any one of these data, the three in succession are unsettling.

These data also give ammo to bearish commentators who have long been predicting a recession in either late 2012 or early 2013. John Hussman, president of Hussman Economectrics Advisors, is one of those bears and he has recently reiterated that prediction. In his most recent note Hussman wrote:

We continue to infer that the economy has already entered a recession something that will probably take several more months to be broadly recognized. Were seeing fresh lows on the most leading economic component that we infer using unobserved components methods . . . matching weakness that emerged in late 2000 and late 2007. On a slightly positive note, we dont yet see the near free-fall in these measures that occurred later in 2001 and 2008 as economic weakness rapidly gained momentum.

(MORE: Home Sales, Prices Rise: Is Housing Finally Ready to Lead a Recovery?)

And Hussman isnt the only one. The Economic Cycle Research Institute which has good track record calling recessions has also been predicting a downturn. Now the ECRI is saying that the U.S. is in recession as we speak...


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posted by Ace at 02:44 PM

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