Friday :: Jan 29, 2010

Before You Start Celebrating...


by Turkana

Krugman predicted it, earlier this month. And he provided a warning:

Here’s what’s coming in economic news: The next employment report could show the economy adding jobs for the first time in two years. The next G.D.P. report is likely to show solid growth in late 2009. There will be lots of bullish commentary — and the calls we’re already hearing for an end to stimulus, for reversing the steps the government and the Federal Reserve took to prop up the economy, will grow even louder.

But if those calls are heeded, we’ll be repeating the great mistake of 1937, when the Fed and the Roosevelt administration decided that the Great Depression was over, that it was time for the economy to throw away its crutches. Spending was cut back, monetary policy was tightened — and the economy promptly plunged back into the depths....

So the odds are that any good economic news you hear in the near future will be a blip, not an indication that we’re on our way to sustained recovery. But will policy makers misinterpret the news and repeat the mistakes of 1937? Actually, they already are.

And about that warning, um...

Keep an eye on Calculated Risk:

This is very close to my expectations and shows a fairly weak economy (real PCE increase 2.0%). The question is: what happens in 2010?

I'll have some more on GDP and investment later...

Meteor Blades also weighs in.

Turkana :: 6:45 AM :: Comments (34) :: Digg It!