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In Search of That Recession…

Prior to 2012 I said:

“I think the “muddle through” scenario is still on the table heading into 2012.  That means we’re likely to see growth, but below trend.  The economic environment will continue to feel like a recession even though we’re not technically in one.  That’s entirely due to the fact that we remain in a recession!  It just happens to be a rare phenomenon known as a balance sheet recession.  And as long as the de-leveraging is offset by government spending which allows the private sector to repair balance sheets without crashing aggregate demand, we should continue slowly growing.”

That’s been largely correct (and in the face of severe recession risks), but I’d be lying if I said I don’t still heed the calls of firms like the ECRI, who has been calling for recession for quite a while now.  Although they’ve been wrong thus far their track record remains impressive.  The following is a recent update from the ECRI’s website on their recession call from a year ago.  They’re sticking to their guns (translated via Google):

“How times change but, if the U.S. economy was the dynamic engine of the world economy once, it has now transformed into an old rusty tractor. Although the U.S. economy is still growing, with 2.0% in the first quarter and the second quarter at 1.5%, but some observers fear that the U.S. could in the second half in a mild recession glide. 

A question of criteria

Skeptical analysts fear, however, the U.S. economy was already in a recession including, for example, experts from the independent, non-profit Economic Cycle Research Institute (ECRI). They warned at the end of last year of a recession in the U.S., which should begin in the first quarter or at the latest in the summer of 2012. The Institute is a member of a minority with his opinion, but recently it defiantly repeated his warning. Lakshman Achuthan, chief operating officer of ECRI said in an interview with Bloomberg, the U.S. is already in recession. However, it is very rare, Achuthan said that they knew full well that the recession had already begun. It often need a specific major event as a trigger, as in the past, for example, the bankruptcy of U.S. investment bank Lehman Brothers, or how the 11 September 2001.”


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