Forget L-shaped, U-shaped and V-shaped recoveries how about a W-shaped one, in honour of our dear departed ex-President. Jonathan Miller points to a note from Northern Trust economist who sees an early rebound, followed by a new recession starting in 2011 or 2012. Of course, that’s more optimistic than some, who see a recession straight on through 2011/2012.
The current economic environment is indeed bleak and there are precious few signs of a recovery. But we believe that if the massive fiscal stimulus package being worked up in Congress is financed largely by the banking system and the Federal Reserve, there is a good chance the economy will begin to grow by the fourth quarter of this year and continue to do so throughout 2010. And if we are correct on this, we also believe there is a good chance that the consumer price index will be advancing at a fast enough pace by the second half of 2010 to induce the Federal Reserve to become more aggressive in draining credit from the financial system. This could set the stage for another recession commencing in 2012, or perhaps some time in 2011. So, the shape of the path of economic activity we see over the next few years is not a “V”, a “U”, or an “L”, but a “W” – down, up, down, up, all within four or five years.
Business Insider Emails & Alerts
Site highlights each day to your inbox.