From the “Today Show” to the “Tonight Show,” the Situation Room to the locker room, and the cocktail party to the carpool lane, one issue has taken center stage: U.S. recession -- Are we OR Aren’t we there yet?
Yet, after countless mind-numbing hours of listening to this and that “expert” panelist Rain Man his/her way through random numbers and unintelligible business cycle jargon -- the answer is no clearer.
By and by, Wall Street has peeled off more sides to the recession story than a piece of string cheese, as the conflicting items below make clear:
· “America is in a recession, that is where the story begins.” (European Central Bank official) -- Versus -- “Surely I should admit that we’re in a recession. Sorry, but no. If you think this is a recession, then you’ve never really lived through one.” (Smartmoney.com)
· And – “I don’t quite understand why some protest the notion that the U.S. is in a recession.” (Thomson Financial) -- Versus -- “Recession is possible. There’s a chance that for the first half of 2008, there might be a slight contraction.” (Federal Reserve chairman Ben Bernanke, April 3 Congressional testimony)
To recap: Will the world’s leading economy fall into a recession?
Answer: Yes, No, Maybe so.
The common link being: By the second half of this year, the U.S. will be back to its old, booming self again. Even if there is a recession, it will be both “short-lived” and “mild.” (Reuters)
Correct me if I’m wrong but didn’t the experts use those very same adjectives in early 2007, to describe the the “correction” of the booming housing, subprime, credit, and financial markets, after which they’d soon resume a more “healthy” state?
Seeing how relentless and ruinous the actual downturn in these sectors has become, such words now come back to haunt them.
All that said, the fact remains: By the time the many-sided mainstream comes to agree on the reality of a recession, it will be too late.
For this reason, the April 2008 Elliott Wave Financial Forecast puts the great-recession debate to rest with a revolutionary chart of the three-month rate of change in US nonfarm employee payrolls from 1956 to 2008. With an excellent track record, declines below zero in the NFEP have preceded or accompanied each of the last EIGHT recessions. “In February 2001,” we write, “Elliott Wave Financial Forecast showed another notch below the zero line and said it signals recession ahead. The recession of ’01 started the next month.”
Now, our analyst’s revisit this time-honored indicator to see how likely the “R” word reality is.
The April EWFF also addresses the power of the Federal Reserve to limit the impact of recession on the U.S. economy. Standing before Congress on April 3, Ben Bernanke assured that interest rate cuts and other “emergency measures” would help growth return “later this year.”
Like they did between 1984 and 1992, when the Fed slashed rates from 11.75% to 3% -- during which time the U.S. endured the worst stock market collapse since the Great Depression in October 1987, record high unemployment, a debilitating savings and loans crisis, slow GDP, and economic recession.
Or perhaps like they did between 2000 and 2002? This time, a Fed rate-cutting campaign from 6.5% to 1.25% proved impotent against the longest stock market decline since the Great Depression, the tech bubble bursting, and brief economic recession.
Bottom line: The scope of the U.S. economy’s long-term trend comes before the mainstream “experts” know what hit them AND beyond the reach of monetary policy.