No Quick Recovery According To One Economist

My fixation with the speed of the economy’s decline somehow implying that an equally fast recovery might occur gets some cold water thrown on it by Marginal Revolution.

The rosy scenario is that in a highly connected, internet-intensive world, the bad news travels far more quickly and far more convincingly than before.  The early stages of the downturn are like falling off a cliff.  We bottomed out maybe two weeks ago.  That said, the rebound also comes much more quickly.  Wages are more flexible than before.  Bad inventory policies are avoided through information technology.  The Fed responds to changing conditions ever more quickly.  Overall, economic time accelerates on both the downswing and the upswing.

I do not believe the rosy scenario, as I think there are still other “shoes to drop,” most of all internationally.  I also think we will see a double-dip or triple-dip recession, as the Fed must eventually withdraw some of new money from the system.  Good news is then, in fact, simply a sign that some bad news is on the way, sooner or later.

I’m certainly not going to take on Tyler Cowen, so I’ll just continue to watch and wonder if there is anything to the thesis. Time will certainly tell.

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