End Of Recession Still A Mirage
A lot of experts have been claiming that the recession is about to end, maybe it is and maybe it isn’t. We’ve seen both the stock and commodities markets both stage mini-rallies only to come quickly back down to earth.
Investor have been trying to figure out what these little glimmers of positive data really mean but so far it hasn’t meant much. The banking system is still in a precarious position and credit remains scarce.
Consumer demand has remained depressed and the slight boost it received from stimulus payments will soon end. Coupled with rising unemployment that is expected to climb until at least the end of the year, we can see why any outcries of a recovery are meaningless at this point.
Some companies have reported some surprising earning which helped buoy the stock market for a little while but that too should be taken as a grain of salt. Much of the climb in net income for many companies had to do with revaluing assets that were at depressed prices.
Even if we do hit the bottom fairly soon, the road to recovery appears to be long and arduous. The housing market remains in shambles and eventually the debt the government added to save the banking system will have a negative impact on economic growth.
The government’s fiscal and monetary policy actions likely averted another Great Depression but it also served to extend the timeframe of the decline, albeit at a much slower pace. Until the financial system is on much firmer ground, the credit just won’t be available to fuel a recovery.
