The Double Dip – Rosenberg vs The WSJ & Caroline Baum

Posted by Wall Street Journal - Businessweek

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As the mercury rises, most of us would prefer to hear the word “dip” only in relation to pools, lakes or beaches. Unfortunately, the doom-mongers have hijacked this word and incorporated it into their latest dark scenario: a double-dip recession.

There’s no question that chatter about a double-dip has intensified. The dippers cite several points in their favor: a still anemic housing market; a sluggish jobs picture; Europe’s sovereign-debt problems and big austerity drive; China’s slowing growth; and massive overcapacity in the U.S. economy.

Despite all that, there is still plenty of evidence that the double-dippers don’t have all the cards.

… more Why the Doomsayer’s are Wrong


NO DOUBLE DIP? – For Those Still Clinging To Hope, Here Is David Rosenberg: “This Is The Weakest Post-Recession Recovery On Record”

We have been on the receiving end of endless analysis suggesting that double-dip risks are either zero or completely trivial. And, the primary reasons given are the positively sloped yield curve, negative real short-term rates, no sign of inventory excess and no sign of a flattening in the trend in the leading indicators (aside from the ECRI, we would suppose).  We were sent one particular Street report yesterday that began with a comment on how the analysis incorporated data from the last eight recessions in the United States.

The question we have is why these other eight recessions in the post-WWII era are relevant.  This wasn’t just a blip or correction in GDP due to a manufacturing inventory-led recession.  This was a traumatic asset price deflation and credit contraction of historical proportions.  In essence, this was — or still is — a balance sheet recession that has absolutely nothing in common with the experience of the post-war business cycle when recessions were temporary dips in GDP in the context of a secular credit expansion.  And, this wasn’t just a U.S recession and debt-deleveraging cycle — it was global in nature.

And, just in case it is still unclear, Rosenberg sees much pain in the future: ” if the peak inventory contribution is behind us, and all we have left is a baseline growth trend in real final sales of 1.2%, then how does the economy not contract in the coming year — when the consensus expects to see peak earnings?

….read David Rosenberg’s full Report NO DOUBLE DIP?

Double-Dippers Are All Wet Ignoring Yield Curve: Caroline Baum

There have been whispers, or maybe it’s just wishful thinking, that the Federal Reserve might buy more long-term bonds, lowering interest rates and making housing more affordable. (You know that modified mortgage that didn’t work out so well? Have we got a deal for you!)

At 4.6 percent, 30-year mortgage rates are already at historic lows, yet housing demand cratered as soon as the government’s homebuyer tax credit expired in April. If you think lowering long-term rates and reducing the spread between short and long rates will stimulate the economy, think again. The steep yield curve is the most powerful thing the economy has going for it right now.

….read more Double-Dippers Are All Wet Ignoring Yield Curve