January 13, 2008
"The recession-deniers were muzzled by a horrendous last two weeks of December, and the gloom-and-doomers are now out in force. Their key arguments:
* Plummeting housing will now drag down the rest of the economy.
*The "bad debt" problem is not just "sub-prime" folks who should never have have taken out mortgages in the first place. It includes credit card debt, "high quality" mortgages, car loans, and other leverage that have recently become a consumer way of life.
*Pressure on consumers is leading to a reduction in consumer spending (70% of economy), which, in turn, will lead to a reduction in spending by companies that sell stuff to consumers.
*The question now is not "will there be a recession?" but "how bad will it get?"
*The most optimistic forecasts in a NYT gloom-and-doom round-up are for three crappy quarters, regardless of what the Fed does. Less optimistic forecasts suggest that we are, well, screwed.
After blowing the last downturn, we've been worried this one since last summer (see below). We also suspect that, given the importance of housing to the economy and debt to consumer spending, the recession will be deeper and more prolonged than people think."
What is the price of gas now?