Friday, April 11, 2008

Talking up a recession

The latest numbers about consumer sentiment are in, and they are at a 26-year low. Looking at the economic fundamentals, is there anything that warrants such low confidence? Employment, GDP, inflation, consumption show nothing out of the ordinary. While foreclosures are high, they are in absolute numbers very low. So what is going on?

My hunch is that consumers are just following the scare mongering we see everywhere, with predictions of depression and doom. Bush is trying to say things are not that bad, but nobody listens. And if consumer confidence is in the dumpsters, a recession is sure to follow. This is called self-fulfilling expectations.

How do you get out of this mess? Talk up optimism. So, nothing to worry about folks, the fundamentals are sound, the world is not going to end, Spring is here, and enjoy the good life!


T-Bone said...

What about the fact that people are going into negative savings, and are being tapped out.

People have been encouraged to spend, and apparently are, even more than they can afford. It's not unlike the government budget situation.

Seems ripe for a hangover.

Economic Logician said...

Maybe the situation is ripe. But I find it unconvincing so far that we actually are in a recession now. There is much talk about it, but little evidence.