This might be a bit (or wildly) optimistic...but one thing no one can disagree with. Chris Cox has been a huge disappointment at the SEC. Even Forbes, conservative rag that it is, sees that..
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Mini-Depression of 2008
Rich Karlgaard, 12.18.08, 06:00 PM EST
Forbes Magazine dated January 12, 2009
"The hallmark of this economic crisis," wrote economist Robert Samuelson, "has been its capacity to surprise." One of the oddities has been its uneven shape.
Think of the fourth quarter as a depression ditch within a rather mild recession. It seems like a distant memory now, but the recession's first ten months were so mild that between December 2007 and September 2008 there was an annual growth rate of 0.8%. Outside of housing and financial services, the economy was downright healthy, growing nearly 2.5% during that period. Some U.S. states in the South, upper Midwest and Pacific Northwest were doing fine.
Then came Q4, which was so violent that it felt like a military attack. Treasury Secretary Henry Paulson indeed looked shell-shocked. His words and deeds have lacked coherence and have confused markets.
Chairman Christopher Cox of the Securities & Exchange Commission has been stunned to the point of muteness. Cox has the authority to override the Financial Accounting Standards Board's insane insistence on mark-to-market accounting rules, but he has done nothing. Had this rule been in effect during the 1990--91 recession, every major U.S. bank would have been destroyed. Throughout this crisis I don't recall that Cox--who got rid of the uptick rule on short-selling in 2007 and then sat idly by as gangs of naked short-sellers destroyed cash-flow-positive banks--has had a word to say.
It will be written that President George W. Bush wrecked his presidency with this and other such terrible appointments.
The sudden savagery of Q4 might be the best reason to have hope for 2009. As investors have run to safety, Treasury yields have plunged and could pull 30-year fixed-rate mortgages below 5%. Gas prices around $1.75 have given households an instant lift. The drop in commodity prices may raise the specter of deflation, but gold prices are holding pretty steady, so I doubt this will happen. Rather, the drop in commodity prices in 2008 will soon show up in lower manufacturing and supply-chain costs. I like what this portends for profit margins.
The 90%-plus of consumers who remain employed will have strong tailwinds in 2009. They will buoy the economy, possibly lifting it back to growth by mid-2009. The shape of the 2007--09 recession will turn out to have been ten months of muddling through, three months of depression and six more months of muddling through. Then recovery.
forbes.com |
