"If America’s economic landscape seems suddenly alien and hostile to many citizens, there is good reason: they have never seen anything like it. Nothing in memory has prepared consumers for such turbulent, epochal change, the sort of upheaval that happens once in 50 years. Even the economists do not have a name for the present condition, though one has described it as "suspended animation" and "never-never land."
The outward sign of the change is an economy that stubbornly refuses to recover from the recession. In a normal rebound, Americans would be witnessing a flurry of hiring, new investment and lending, and buoyant growth. But the U.S. economy remains almost comatose a full year and a half after the recession officially ended. Unemployment is still high; real wages are declining. At a TIME economic forum last week, forecasters predicted that U.S. growth would amount to only 1.8% this year and 2.6% for 1993, about half the speed of a normal recovery. The current slump already ranks as the longest period of sustained weakness since the Great Depression.
That was the last time the economy staggered under as many "structural" burdens, as opposed to the familiar "cyclical" problems that create temporary recessions once or twice a decade. The structural faults, many of them legacies of the 1980s, represent once-in-a-lifetime dislocations that will take years to work out. Among them: the job drought, the debt hangover, the defense-industry contraction, the savings and loan collapse, the real estate depression, the health-care cost explosion and the runaway federal deficit. "This is a sick economy that won't respond to traditional remedies," said Norman Robertson, chief economist at Pittsburgh's Mellon Bank. "There's going to be a lot of trauma before it's over." "
MP (Mark Perry): Sound familiar? It could easily have been written to describe the current situation, but it was actually written at the end of September 1992, a full 18 months after the 1990-1991 recession had ended in March 1991. More importantly, it was written in the early stages of the longest (120 month) and strongest economic expansion in the history of the U.S. economy that lasted until March 2001. Maybe media "gloom and doom" is a good leading indicator of future economic expansion. Hopefully it's "déjà vu" all over again.
The article was posted in The Time Magazine Monday, Sep 28, 1992. (http://www.time.com/time/magazine/article/0,9171,976602-6,00.html)
I will admit as Mark J. Perry says, that it easily could have been written to describe the current situation, but I totally disagree in his hopeful "déjà vu" all over again.
First take a look at the Dow Jones Industrial Index below. I have marked the point where Time Magazine first printed Mark's article (which to be honest is very good) and then his yesterday re-run of the article under the name of "Economic déjà vu".
First of all does these two points resemble each other at all? I my humble view I think NO WAY! Also taking into consideration that the Baby Boomer generation reached the time in their life where they spend the most in 1990's. This group is the biggest born ever and their buying power at this time was huge. Going fast forward to today many of the Baby Boomers has already retired or are headed fast towards retirement. They have more or less been financial destoryed since year 2000. First they got caught in the Dot.com bubble, then Greenspan played the housing card and they got caught in the biggest housing bubble ever, bringing the economic to the worst halt since the 1930's. Now they are just hoping to get a decent retirement. They will not and can not begin spending again like they did in the 1990's.
Bernanke, I'm sure, will do whatever, to try to get the consumers up and running again, but it can't be done and he will loose this battle no matter what. If Bernanke somehow succed in blowing yet another bubble, it will bust quicker than the housing bubble did and the result will be even more devastating.
Also being a contrarian this hope of Mark Perry, is, in my view, build on a very weak foundation, which can be destroyed at any time now. In the Elliott Wave Principle A.J. Frost and Robert Prechter brings a quote from "Robert Rhea", where he descirbes the emotional climate
... many observers took it to be a bull market signal. I can remember having shorted stocks early in December 1929, after having completed a satisfactory short position in October. When the slow but steady advance from January and Frebruary carried above the privious high, I became panicky and corvered at considerable loss... I forgot that the rally might normally be expected to retrace possibly 66 percent or more of the 1929 downswing. Nearly everyone was proclaming a new bull market. Services were extremely bullish, and the upside volume was running higher than at the peak of 1929.
Sounds familia? I think it sounds as everthing we hear today.
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