I’m having a Dean Baker moment.
Baker’s blog Beat the Press engages in short-form shreddings of the economic reporting of the day, with the New York Times and the Washington Post his favorite targets (for instance, Baker at least once a week criticizes the MSM for relying on forecasts from economists who failed to see the crisis coming).
Usually, I do longer form treatments, but this remark from an article by David Leonhardt, “Weak Economic Reports Raise Specter of Double Dip Recession,” jumped out at me:
But whatever you thought at the start of the year about the recovery — strong, moderate, fragile — you probably need to be more pessimistic today.
Yves here. Huh? Do we live in Soviet Russia, where all views move in tandem? The subtext is unduly flattering to mainstream opinion, and says flatly that everyone has revised his outlook downward, and denies the possibility that someone, in fact a LOT of someones, read the apparent strengthening of the economy as unlikely to be sustained. Our own Ed Harrison has been talking of a double dip recession for some time and he is far from alone.
Many commentators saw the fiscal stimulus as too weak and too attenuated to have any lasting effect. The extraordinary monetary stimulus programs are being dialed down. The big 4Q GDP figure was largely inventory driven, which is not a continuing source of growth. Despite more than occasional happy talk about improving employment outlook, surveys of small businesses, which were the engine of job growth in the last upturn, reported a sharp cutback at the end of the year in already awful hiring plans. Banks are facing further balance sheet hits, from commercial real estate loans (particularly construction loans, which can have very high loss severities) and clawbacks by the GSEs and private investors over securitization fraud (as in selling loans into securitization vehicles that did not meet the standards that the selling bank represented contractually that they would).
This is far from a complete list. Some professional investors who e-mail among themselves (I’m on the periphery of their conversations) have both seen the trend in the improvement of the reported data and have felt it was unlikely to continue (and they all played the rally last year pretty well; these are not perma bears). In fact, one of them remarked late last year that he was afraid 2010 could be really awful, in the same way that the first wave down after the Japan bubble was followed by a return to a semblance of normalcy and a recovery of a significant percentage of the initial losses. We all know what the later acts of that play looked like.
While I am using Leonhardt as the object lesson, the fact that he is so up front about it makes his orthodoxy-flattering stance easier to call out. The “whocouldanode” message, sadly, is deeply and more subtly embedded in a lot of reporting about the economy.