Mr. Big, aka Barry Ritholtz, is right to support NBER’s call on a statistical recovery and right to have lingering doubts. I especially like reason #6 (of 10) that makes him nervous: “Recession Porn” at ZH & RGE.
Well brace for a bit of depression porn, because coming out of this situation is going to take about a generation. Long time Doomers will recognize that I subscribe to The Scott Reynolds Nelson Hypothesis: this W&M historian, a specialist in the legend of John Henry (Steel Drivin’ Man — update: note the critical typo in this quote from a key interview: “Railroads in the 1970s [should be 1870s] were kind of like the NASA of recent decades” — further update: WM’s webmaster has now adjusted the text), was the first (Richard Florida of all people was about the 11th) to recognize that the Panic of 2008 was following the same script as Ye Olde Panicke of 1873, and that therefore we will also be replaying the long depression that engulfed the West in the last quarter of the 19th Century.
Indeed the torpedo exploded under the aircraft carrier on the evening of 9/18 ’08 when Hank and Ben went to Pelosi’s office and panicked the Congressional leaders into accepting the principles of what later became TARP. The resulting cavitation bubble (represented by the stock of legacy US mortgages from the bubble years — the close analogy of inflated home values to cavitation is downright spooky) has not yet worked it’s way up to the hull, but the signs are becoming apparent to the observant.
Both the Fed and conservatorshipped Fannie / Freddie are hiding levels of toxic assets on their opaque balance sheets that they can’t possibly deal with. Over the weekend we saw from hints in what numbers they do make public that they’re clearly tossing the hot potato back and forth between them, in the style of the trucker with an overweight trailer who periodically bangs on the side of his rig to keep the canaries in the air. The cavitation will have reached the hull of the carrier once that little farce completes and the assets consolidate onto Treasury.
But meanwhile, let’s just enjoy President Obama’s latest Chester Arthur moment …
Reuters (9/21 ’10): “Analysis: Summers exit lets Obama retool team and message”