Just how far and how fast will the economy drop this quarter? There’s lately been a race to the bottom among forecasters, with the economists at Goldman Sachs leading the way. Early in the week, they put out a report saying that -3.5% annualized GDP growth was their baseline forecast for the quarter, but they also went so far as to outline a “just awful” scenario of -6.0% and a “worst case” of -7.8%. Today they updated their baseline forecast to -5%.
That puts Goldman well ahead, for the moment at least, of even Nouriel Roubini, the New York University professor known as Dr. Doom ”” whose current forecast is about -4%. Lots of Wall Street economists less renowned for their gloominess have by now moved past the -3% mark. In fact, one explanation for the stock market’s horrible week could be that the realization of just how bad the quarter will be is finally sinking in among investors.
We haven’t been through anything this bad in a while. The last time the economy shrank faster than 3% was in the first quarter of 1982, when GDP dropped at a 6.4% annual rate. It hasn’t exceeded Goldman’s worst-case forecast of -7.8% since the first quarter of 1958, when it was -10.4%.
It apears to me that the economy has had excess stimulation. And what is the wisdom of today? More stimulation?
The wrong prognosis leads to the wrong antidote which leads to even greater damage to the economy. But that is to some people’s advantage.
I am quite angry. This is the worst of some evil rich people sucking the retirements and livelyhood out of those whose can least support those rich. It is government pandering to the fears of the electorate to concentrate their own power. It is sickening (as U. S. Grant said of the human carnage aboard a shelled ship).
Don
Let’s not forget that the guys at Goldman were forecasting oil at $150 and then $200 a barrel by the end of this year. I look at their crystal ball as a lagging indicator, or coincident at best. I don’t see where their prognostications have been all that great recently.
Don – the economy does need stimulation. However, the kind of stimulation it needs is for consumer spending on technology that will reduce our energy bills and, hopefully our tax bills. What I believe we should do with the economic stimulus bailout is to offer 100% tax credits to anyone and everyone who buy or order hybrid automobiles and energy –efficient appliances even solar and wind technologies. And if the automotive companies and appliance manufacturers cannot keep up, provide them with low interest loans to build factories that will produce these technologies. That would be an economic bailout that is sustainable, and the only one that the tax payers should support.
3. aldenjr:
With government already sucking thirty percent, of the reason people produce, out of the marketplace, the last thing we need is additional load of government meddling. Instead, we need production; the making and giving of a cup of water (crude oil, electric power, lumber, hams, &tc;.) to be encouraged by the Church and by government. Most of us who do those things are right now retreating into a self-protectionist shell. I don’t suppose many will come out until 1939….eh, er,…. 2012.
Don
True Dongander. And the sad thing is it took a war in 1939 and beyond (WWII) to get us going again.
Unfortunately Don, consumers pulling into their shell until 2012 is the exact recipe for a depression. I think you know this as well. I was not calling for increase taxation. I was calling for 100% tax credits for those who come out of their shell and purchase technologies that have the ability to both lower our future energy bills while also creating new jobs for Americans. The 100% tax credits should be directed to those Americans willing to provide the necessary consumerism, while additional incentives could be directed for loans for the companies willing to build the factories to make the technologies. Future energy savings would make all of us feel wealthier and this would in turn lead to more consumerism. This is how we could turn the economy around.
So we could do it your way and continue this recession into a depression or we could advise the Federal government to return our taxes to us for helping make America energy independent.
6. aldenjr:
In a sense, we both misread the other. I was writing of production and you were refering to consumption. I do not totally dismiss the tax credit idea but it is far better for the consumer to decide what is in his best interest without the interference of government.
I was speaking of the fear of those who produce. All production requires human effort or employment. there are many indicators that the market is fearful of adding to employment. One is the stock market. I know one company whose stock has lost value and to protect itself it is opening some production in China and slowing production so that it can reduce its employment load. All this to protect itself from fearful investors.
Government can either produce fear and instability or it can protect the stability of its economy. With our president elect refusing, or unable, to produce a vision of stability the employment problem will continue to worsen. A note: this exact problem was in force in 1932 when FDR refused to reveal any plan that would encourage investing. Banks failed and my grandmother lost two generations of hard work in the resultant bank failures.
Don
If no one has money to spare to buy widgets, it makes no sense to produce more widgets. Nor does it make sense for the government to subsidize the production of widgets.
If people have money to spare to spend on widgets and greatly desire to acquire widgets, entrepeneurs will be falling all over themselves to produce widgets without any government help.
We need to address the unemployment issue. And we need to address real wages of workers, which have been falling for years now. Seems the only people making more money these days are CEOs and university presidents.