Case Against a Double Dip Recession Stacks Up
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Mike Tarsala, quantitative analyst for Thompson Reuters said that its not the economic data that is causing the most problem's for the world’s economy right now, it's the constant “doom-and-gloom” from economists try to convince investors that double-dip is on the way.
He notes that there have been only three double-dip recessions in the past 160 years, including just before World War I and just after, and then again in 1981.
In all three cases, there were four key indicators present including an interest rate rise, an inverted yield curve, surging oil prices and declining profits. Right now none of these indicators are in place during the current recovery.
The Fed's interest rate is still near zero, the yield curve is flattening and nowhere near inverted, oil prices have risen since may but have not seen a spike by any means, and unit profits for nonfinancial companies are moving up.
Also, Tarsala notes that the ECRI has not ever missed a recession forecast, and it has not made a prediction for one.
Finally there is the growth anticipated by the Fed for moderate expansion for the rest of the year and the first half of 2011.
Tarsala sees plenty of data that suggest growth flattening out for a long time, possibly resulting in L-shaped stagnation instead of a V-shaped recovery, but he sees the economists calling for an M-shaped recovery misguided.
To view the entire video analysis click here
He notes that there have been only three double-dip recessions in the past 160 years, including just before World War I and just after, and then again in 1981.
In all three cases, there were four key indicators present including an interest rate rise, an inverted yield curve, surging oil prices and declining profits. Right now none of these indicators are in place during the current recovery.
The Fed's interest rate is still near zero, the yield curve is flattening and nowhere near inverted, oil prices have risen since may but have not seen a spike by any means, and unit profits for nonfinancial companies are moving up.
Also, Tarsala notes that the ECRI has not ever missed a recession forecast, and it has not made a prediction for one.
Finally there is the growth anticipated by the Fed for moderate expansion for the rest of the year and the first half of 2011.
Tarsala sees plenty of data that suggest growth flattening out for a long time, possibly resulting in L-shaped stagnation instead of a V-shaped recovery, but he sees the economists calling for an M-shaped recovery misguided.
To view the entire video analysis click here
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