Wednesday, September 1, 2010

The Recession is Dead!

The Recession is Dead. Deceased. Finished. Kaput. Terminated. Over.

For six months or so a variety of interests have tried to revive the Recession. They have, purposefully or not, driven bonds up, stocks down, and generally scared a lot of people. They, using the broadcast media, have urged people to not buy homes. They have urged employers to not hire more employees. They have been responsible for a lot of human misery.

Certainly selected facts were woven into the Double Dip recession scenario. The thing about recessions, especially the bigger, gnarlier recessions, is that they are complex. There are cycles within cycles. There are healthy economic sectors and geographic areas, and unhealthy ones. There are leading indicators and lagging indicators.

As much as pundits tried to scare everyone this summer, apparently in August there was enough demand for manufacturing to expand in the United States, and at a good clip. According to the Institute for Supply Management August 2010 report, we just had the 13th consecutive month of growth in manufacturing. It isn't all gung ho: 11 industrial sectors expanded in August, 5 shrank, and two were flat. That just means there is still room for improvement.

Put that in your cup of tea. Yes, there are a lot of people who want to sell their homes. Yes, people in general are more frugal than a few years ago, as they ought to be. Sure, the banks are still scalawags. On the other hand, global demand for U.S. goods is booming. The agriculture sector is strong. Retail is recovering. Hotels are starting to fill up again. Many companies actually are hiring. Of course some businesses continue to fail and to lay off workers; that happens even during booms.

The recession is dead. We are now in an up cycle. So buy what you need, and hire who you need to hire. Borrow what you need to borrow. After all, interest rates probably won't stay this low all that much longer.

There will always be business cycles, but hopefully individuals and businesses have learned a lesson from the causes of the latest recession that will stick in their minds. Hopefully most of us will borrow less and produce more. We will look for long term gains, not quick steals. We will think about investments carefully and avoid a herd mentality. And we will not be conned by banks, bureaucrats, or politicians.

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