Paul Krugman throws cold water on the “green shoots and glimmers” everyone’s all excited about. He makes four key points:
- Things are still getting worse. “The most you can say is that there are scattered signs that things are getting worse more slowly — that the economy isn’t plunging quite as fast as it was. And I do mean scattered.”
- Some of the good news isn’t persuasive. Goldman’s “excluding December” quarter. Wells Fargo’s best quarter ever.
- There may be other shoes yet to drop. “Even in the Great Depression, things didn’t head straight down. There was, in particular, a pause in the plunge about a year and a half in — roughly where we are now.” This is the critical one. House prices are still plunging. With the possible exception of China, the rest of the world economy is headed into the tank.
- Even when it’s over, it won’t be over. Unemployment likely to keep rising right through 2010. “‘V-shaped’ recoveries, in which employment comes roaring back, take place only when there’s a lot of pent-up demand.” And that’s not our problem. We’ve got the reverse: Too much pent-up debt. It will take years to work of the bad debts.
As we noted earlier this week, there’s a strong case to be made that the same thinking applies to the stock market. See “Enjoying The Suckers’ Rally?“