The rust belt has been in a depression for at least 15 years, and the rest of the country has been in a recession (if one uses proper deflators and unemployment numbers) for the same amount of time. Almost all the meager growth that may have have happened in the past 15 years has been in financial services which is heavily geographically concentrated and a couple of other similarly localized sectors.

You owe an apology. Yves bent over backwards to say that Uchitelle was working within NYT constraints and had to write in code. But the more important fact is that the requirement to write in code gives more weight to the mainstream, incorrect view, by virtue of placement and the dearth of opposing experts.

“I think the federal stimulus will be offset by the local cuts, but I haven’t found a tally of those cuts.”

what I can tell you is that GS has been advising their clients in Q4 08 to short 11 states they think are in or will be in a depression. I only hope for GS’s sake they aren’t also underwriting the same.

The point is that the GS data suggests one-fifth of the country is flirting with Depression. Many cities and villages throughout 2008 have been going bankrupt, saying “We’re broke.” More will follow.

Two states, one of which is Indiana lack funding for Unemployment checks and are relying on Federal aid to pay the UE benefit checks. How they came to lack sufficient reserve’s I haven’t a clue, but by the same token, it should not come as a surprise that states are lacking the funds for these sorts of funding schemes. Social Security and Medicare are other funding schemes set to blow up on us in the next ten to twenty years.

But I digress, the federal stimulus must be “more than proportionate” than the shrinkage in the business and consumer sectors if it is to have any measure of success at all “offsetting” and combating capitalism’s “inherent debt-deflationary tendencies”

See McCauley’s latest missive for an elaboration on these musings

The fundamentals are rotten for the economy. The UE rate is going up, Obama fears double digit UE rates and that he may not be able to offset it with his econ recovery package. That is realistic.

If it is production you are looking for, we exported that to China. Obama’s revival of the “Buy American” slogan rings hollow because we haven’t the capacity to produce are way out of this mess

We creatively destroyed our capitalist model in 2008 in perfect Schumpeterian fashion. Now, the U.S. government is expanding its role to hopefully protect capitalism from its own “inherent debt-deflationary tendencies”

But to answer your question, human civilization does not need banks and credit to survive. That said, you can rest assured these institutions will be surviving much longer than you or I!

“They” are absolutely basing their forecasts on models that are for the time being broken and will be for the foreseeable future. For instance, Brian Wesbury, a credible analyst, posits “stocks are dirt cheap” based on the Feds treasury yield model. Well, that model is broken and has been all throughout 2008. The cash-on-the-sideline model was also broken all throughout 2008.

If the models were valid, we’d be loving how dirt cheap stocks were when the SP500 at the Q1 08 lows in the 1250’s.

I could cite other models that would indicate stocks are quite expensive, for example the ttm p/e for the SP500 is roughly around 20 today. This is downright expensive when half the dang index is financials and energy stocks. Yoy comps in many energy stocks will suck for the 1st 3Q’s of 09. And financial stocks, hmmm let’s see….how are they going to do in 09? Well, I am optimistic that they will lose less money in 09 then they did in 08. They could even make money on the yield curve that will more than offset their rotting balance sheets. But wouldn’t it just be better to wait until they have disposed of the rot or the rot becomes fully decomposed by say when housing prices stop going down. At least then there will be a floor to their balance sheet instead of a black hole.

Best to know the strengths and weaknesses of the models before speculating and forecasting with them. AT least this way you know how to use the model as a tool.

The first paragraph: “Economics as the dismal science? Not in some quarters.” The next four paragraphs start: “In the midst of the deepest recession… “For this rosy picture to play out, they are counting on… They say that will get the economy moving again in the face of… If the dominoes fall the right way…”

This is not an article about the future of the economy. This is an article about how establishment economists are out of touch with reality.

The headline in the print edition: “Forecasters See Fast Recovery; Others Doubt Their Eyesight.” The headline writer read it the same way I did.

You owe an apology.

From what I’ve read, the same economists that never saw this coming are still on the show, proclaiming a turnaround in the second half, as if they have any credibility. For laughs, check out Barron’s roundtable when that issue comes out.

This bear market still hasn’t wrung all the pollyannnas out of the market. Games are still being played, like the end-of-month ramp jobs as the SEC looks the other way. We still need a thorough cleansing to get rid of all the rot that exists.

Well, this post and this comment describe something that is pretty common: sell side economists.

our members were rubishing our business surveys pointing to recession. They were filling in boxes indicating lower orders but then denying this in public. When they returned from the Summer break, ashen faced to a man, they said “we haven’t had an order in weeks. Why aren’t you forecasting a recession and getting the Government to do something about it?”

Well, this whole article describes sell-side economists.

It’s their job — and most economists in the USA are sell-side, for the class of providers of endowed chairs and donations, if not for specific industries.

Krugman has sort of commented on this in a piece he titled “Fifty Herbert Hoovers” – where he suggested that the States should move to deficit spending in the face of declining tax revenues — he seemed to overlook the fact that they can’t get credit and don’t have printing presses – It is know wonder he identifies so many of his articles as “wonkish” an apt description.

http://www.nytimes.com/2008/12/29/opinion/29krugman.html?em