Greenspan just announced that we will finally get our recession later this year! See my shared items for the details. But it does not look like this is going to be “the one”. Asia and Europe have reacted by pulling back and the US is already in recession, we are just waiting for the media to admit it. Since everyone saw this one coming, and adjusted accordingly it does not appear that we are going to get a good solid crash.
At some point in the next twenty years we are going to have a real crash. It, “the one”, happens every seventy to ninety years. Sometimes it hurts really bad, but the growth afterwards is definitely worth it. The current recession may be big enough to move us on to Web 3.0, but it will not be big enough to get things back to where they should be. We still have a long way down from here.
The economy is on a pretty shaky foundation and the support beams are rusty. An engineer looking at this structure would be surprised that it is still standing. I suggest we all get out and demolish the thing. The problem is that people are part of the infrastructure. As we start pulling people out this thing is going to fall and not everyone is going to make it out. Somebody is going to get hurt. But it needs to happen. Living in a shaky building is just asking for trouble.
But that is the future. Back to the present. For right now, Greenspan has called a recession, probably on request from Bernanke. Bernanke has been trying to cool things down but the market was bullying him so my guess is that he went whining to his older brother.
Barry the Bear thinks that with Greenspan’s record on forecasting, we are certain to have a good year. I would agree with Barry, except that when Greenspan speaks he changes the future. He has to know that. If you know that what you say will change peoples behavior, you must first consider the results you want and the responses that different statements will have. Then you choose the best statements based that analysis, even if you do not necessarily believe what you are saying. Sounds Machiavellian? Sorry that is reality, and Greenspan was very good at achieving his goals. You may not agree with his goals in every case (I don’t), but you have to admit he was very effective at steering the economy.
In this case, Greenspan is probably trying to scare the economy out of the hubris that lead up to 1929. It is apparent that no one is afraid of our friend Ben. He has promised to bring helicopters full of money to our rescue. We can do whatever we want. But Greenspan… we know he can pop a bubble! Although, if we do not get something we can call a recession into the media by September there is not going to be anything or anyone that will stop this bull until it is so far off the cliff you will not be able to reach its tail without falling over the edge yourself. If Greenspan is bluffing and the economy keeps going up, his statement will go down in history as the worst mistake of the century.
The good news for Greenspan is that the World’s Greatest Economist (my opinion not his) agrees we are due for a recession. Speaking of which, John Mauldin is a must read. Here is a link to his recent articles. John says that we will see a series of small recessions that will slowly bring us back to normal. He is probably right. I just want to get it over with.