The Carlisle Mosquito Online

Friday, November 6, 2009


The Great Recession is over: musing by a two-handed economist

It is over.


I think the recession is over.

You think? No more layoffs or cuts in wages?

No, I didn’t say that; fewer job cuts – by a couple hundred thousand or so, every month - better than last year, and soon there will be some growth.

Will there be more foreclosures and scary letters?

Yes, but less threatening and there will be more home sales. Prices will inch off the bottom, and you will see a 2% up-tick in housing starts, perhaps more.

And will banks lend again?

Maybe. You might get a loan if you have a job and solid collateral.

This is good news! But today, I have less money and work harder.

Yes, it’s better than the alternative. Unemployment is creeping above 10% in the U.S. and much higher in Michigan and California, where it’s over 15%. There are new jobs here and there, those famous green shoots. Besides, the bottom is not so terrible. You can have dinner out occasionally and you have money in the bank. And there is no disaster like last year, no surprise bankruptcy, no sudden collapse in the banks - not the end of free market capitalism. Besides, there is no inflation today and the markets are up again.

Okay, I can still eat, breathe, work, sleep in my bed, wake up and turn on the lights. The nightmare is fading.

Not so fast. We have a ways to go, before things get better. You should just slide along the bottom. For now, balance the books, pay the bills slowly, and find those discounts. And be thankful, you have a life.

But it’s over, you say.

Well, almost, in a couple months, maybe six, maybe a little more, maybe less. Who knows? Soon, so buy something and feel better.

You mean if I buy something I’ll feel better?

Yes, don’t you?

If I have money, or can get a loan, then I will buy something.

So, do it! Go to dinner, wear that new outfit, go to a ball game, shop online. Spend more and others will too.

You mean it’s up to me?


Why not the rich or Uncle Sam? They have lots of money.

They cannot do it alone, and they have already spent a lot. Uncle Sam, in fact, saved you last year and even today, continues with the stimulus. So, if you don’t buy, feel better and put on a good face, then no one will. Factories won’t get built, companies won’t invest, stores won’t sell, and you might not have a job. We’re counting on you.

You mean, spend, borrow, bid up the prices, just like the old days?

No, no, not so fast - spend slowly, carefully and keep money in the bank. Be prudent. Buy some things but be sensible; 2-3% more than last year is just fine. Don’t overheat things.

So, I should change my ways?

Yes, a little. Feel better, be confident and it will go around, like a hit song. Download it, share it. Then we’ll all feel better and the jobs will come and we can spend and save for those rainy days. Everyone – you, me and companies – will buy more. No more doldrums, your glass will be half full. And remember to smile and hug someone, too.

I get it. The recession is over because I say so, because I feel that way. Even if the numbers are bad, they are less bad, and I’m not falling as fast. There will be a couple of bad months, but I’ll see hiring too, especially with the holidays. Maybe Uncle Sam will take care of the unemployed through January. It’s only right; it wasn’t their fault. Maybe. Now, I feel better and my neighbor does too. Let’s celebrate, have a beer, get together.

Yes, do that, but remember the towns and states are struggling too. Expenses still climb while revenues are dropping and budgets are stretched, leaving impossible choices.

Does that mean more taxes?

No, no, we just have to wait for the growth in revenue in a year or two when everything is back on track.

Oh, I get it; it’s up to me. I’ve got to help the world economy, the state, the town, you and me. It is over, when I believe, when I act like it.

Yes, I think I really believe it is over. The Great Recession is over, because I say so.

Really? ∆

John W. Ballantine, Jr., Ph.D. is MSF Director, Senior Lecturer at International Business School, Brandeis University

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