Monday, December 1, 2008

Talking up recessions

The NBER has now decided, the US is in a recession. It is, however, my impression that this recession is totally unnecessary and has been mostly talked up. Indeed, banks have all the necessary liquidity, they just look each at other and wait for the first one to move. To make things worse, now that this bailout plan has been decided, they are waiting for money to flow before doing anything. Think of it is terms of living on anticipated profits. Without the bailout, they would have given loans by now as they cannot afford to sit idle on cash.

But when I say this recession has been talked up (much like the Gulf War recession), that does mean that economist should continue telling things like they are, instead of feeding the fear mongering of the media. And if things are truly fundamentally bad, they should not hesitate to say so, as in most countries they will not face the consequences they would face in Latvia...

1 comment:

VIlfredo said...

The one who talked up the recession the most is the government. With Paulson and Bernanke in panic mode, they dragged the press and the public into this delusion.