Economists ‘Looking for a Bunker to Hide in’

I can’t get around the economy online today. NYT, WSJ, and SF Gate all have pieces relating to the state of the financial system. It’s looking bad.

NYT:

“This is unambiguously negative,” said Mark Zandi, chief economist at Moody’s Economy.com. “The economy is on the edge of recession, if we’re not already engulfed in one.”

SF Gate:

The Bush administration, faced with a deteriorating economy and a big jump in unemployment, said Friday it was considering an economic stimulus package that might include tax cuts to ward off a recession.

WSJ: Economists React: ‘Looking for a Bunker to Hide in’

Brian,
An alternative title for this post could be:
“Here we go, again. - It’s not so bad.”

The “talking down” of the economy is an honored election cycle tradition. The last / best example was during the 1988 presidential election staring Mike Dukakis. [ if you are 21 years old, this happened when you were 1 ] Through out the major media the economic sky was falling in every state but Massachusetts. Cruise through the media archives if you doubt it.

In MA the state chartered banks were given large leeway in loans to housing contractors and a mini boom was on. Sadly, (for some of my friends) the housing market collapsed in MA within months after the election leaving spec houses unsold and lots of builders bankrupted.

Today is much the same. The sad part is how easy it is for the media to talk down the economy. For example the bond market can be portrayed 180 degrees by the example of these two fictitious headlines:

“China seeks financial security by investing in US Gov Bonds”
“US Economy struggles and borrows money from China”

The notion that unsustainable meteoric growth is better than slow steady growth is wrong.

Tell Citigroup that the economy is being talked down. Certainly, most of America has not experienced economic hardship because of the subprime mortgage meltdown–but it does exist.

Major banks are in financial marshlands. Is this a contagion?, will it spread to America at large? The economists above would say, yes, it already has.