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Politics : Mainstream Politics and Economics -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (6803)	1/12/2012 3:16:56 PM
From: puborectalis	Respond to of 85487

Remember that huge plunge in the August Philly Fed that solidified fears that the economy was heading into another recession? The panicked market plunged 4.5% on Aug. 18, the day the Philly Fed said its monthly index plunged from 3.2 to negative 30.7. The economy had never avoided a recession when the Philly Fed was so low, investors were told breathlessly. Well, that huge drop has now been revised away. Not completely, but enough to show that the panic in mid-August was overdone. Instead of falling to negative 30.7, the Philly Fed index is now estimated to have dropped to negative 22.7. That’s still pretty bad, but not nearly as frightful as earlier reported; it’s in the range that prevailed in mid-1995, when the economy slowed but avoided a recession. If the market had known then what it knows now, the drop in the markets in August would have been much milder. Looking back on the panic of August, it’s clear (with the benefit of hindsight) that the sell-off was overdone. Investors, consumers and business executives were reacting to the political breakdown in Washington and in Europe, not to an economic breakdown.