Searching for various opinions and predictions about the end of this recession, I came across the blog called Angry Bear, written by a number of US economists, some of them PhDs, which I found interesting hence I am going to quote heavily from it.

In this article, the author writes his prediction about the end of this recession in the US:

I think the end of the recession is coming …before the second half of next year.

The author bases his analysis on US employment to population ratios and similar trends.

However he states that a critical assumption he is making is that this recession behaves itself and develops in a similar way to past recessions, something he admits might not quite hold as the causes of this recession are different – so his prediction might not get fulfilled. The author believes that:

 the current situation is most similar to the 87 – 91 (US) mess, which came when excessive financial deregulation led to the S&L crisis, which in turn only officially became a recession in Nov 90 and lasted through March of 91. To a large extent, even if it wasn’t all a recession, that mess went on for four years or so. Things are happening more quickly here.

And another good point made:

Another issue is the difficulty in predicting the behavior of the big players, especially the Fed and the Federal Government. So far, as far as I can tell, they’ve just made things worse. Much worse. Both seem to be doing their best to ensure that the financial sector continues to be unstable by keeping the lousiest banks afloat.

Hear hear. This takes us back to considering whether a bailout is a good idea, or should we just let the failed instritutions fail. I wrote about that back in October: yes, painful as it might be, should we not just let the failed banks fail and keep the healthy ones?

Now, in the UK, we are on our second bailout now, with confidence in success of such drastic financial action and the ability of the government to make the right economic decision at an all-time low.

Only time will tell whether Angry Bear is right. To me it seems there are too many big uncertainties in the assumptions to reliably draw any conclusions. Back in September 08, we saw that we were in unchartered territory and had no frame of reference to analyse the current mess and map our way out of it with confidence. As far as I can see (yes, OK, I am not a PhD economist) this is still the case 6 months on. We are all muddling through it all as best we can – or stumbling around in the dark, it seems, for the most part.

 

Copyright 2009 by CuriouslyInspired

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