Guy Who Explained How We "Ended The Great Recession" A Month Ago, Now Sees 1 In 3 Chance Of Double Dip, Calls For QE2

Tyler Durden's picture

Arguably the one most definitive market top ticking activity of the past month, in addition of course to Tim Geithner's absolutely disastrous "Welcome to the Recovery Pamphlet" issued literally hours before the wave of economic downgrades of US GDP by Wall Street began in earnest, was Mark Zandi and Alan Blinder's even more laughable administrative job cover letter titled "How We Ended The Great Recession" (yes, gentlemen, we remember). Which is why we read with great fascination that not even a month after the paper was released, Alan Blinder told Bloomberg that "Things seem to be losing momentum. The lending part of the financial system doesn’t seem to be curing itself." Actually, Alan, if that is your justification for why the momentum is being lost, you are an idiot - the lending part, or the supply side, is perfectly cured: it is the demand aspect which proud Ph.D.-bearing economists such as yourself always ignore - yes, people, the medium and small businesses, and virtually everyone else, who makes the economy tick (not Wall Street), don't need the bank's steenking money - not at 20%, not at 0.002%, if they don't know whether they will have a job tomorrow, or if upon waking up their stocks and 401(k) won't be worth 50% what they were the night before. And not to be left alone, Mark Zandi, the other member of the permaclown duo, told Bloomberg TV that he now puts the chance of a double-dip recession at 1 in 3. "If you’d ask me 4-8 weeks ago, I would have said 1 in 4, 12 weeks ago, 1 in 5. So it is rising uncomfortably high." How about 15.8 weeks ago: was the chance 1 in 69? What is it with these economists who need to scientificate every bullshit concept of their worthless occupation? Why quantify the merely abstract? Do economists have such a great mathematician penis envy, that they have to cloak their infinite lack of understanding in irrelevant numbers? The fact that this man a month ago said things are all good, and never realized that America had never emerged from the recession, is all you need to know just how much credibility any and every person working for Moody's has. But we knew that already. And just because a Moody's economist sees the only hope left before the country as even more QE, it merely shows that when QE finally does strike (which it will) it will be the end game for America, and its currency. At least we now know that in the meantime Zandi has blown any chance he may have had getting a job with the administration.

More from Zandi's interview:

Zandi on his predictions re: double-dip recession:
“I put it that 1 in 3 right now. If you’d ask me 4-8 weeks ago, I would have said 1 in 4, 12 weeks ago, 1 and 5. So it is rising uncomfortably high. I am assuming that tax rates on upper income households will in fact occur on January 1st. If that doesn’t happen, it could reduce the odds back closer to 1 in 4. But 1 in 3, that is uncomfortably high. Particularly we’re at a 9.5% unemployment rate. If we go back into recession, it’s going to be very difficult to get out of it in any king graceful way.”

On QE:
“The economy will, at best, be very weak, so weak that unemployment will begin to rise again. I think that’ll be the signal for the Fed to resume quantitative easing.”

On whether the economy will backtrack into a recession:
“I do think that the Federal Reserve will restart quantitative easing over the next few months. I think the economy is going to be, at best, very weak, so weak that unemployment will begin to rise again and I think that will be a signal for the fed to resume quantitative easing.”

On whether he expects job growth in the current market:
“I do expect some job growth, yes, but not enough to forestall further increase in unemployment. Just to give you a number, we need approximately 150,000 jobs per month just for a stable rate of unemployment. Since the beginning of the year, we’ve been getting closer to 100K, subtracting the ups and downs of census hiring. Over the next few months, I would expect no more than 50K given the recent weakening in economic growth. And so that’s not enough to forestall further increases in unemployment.”

Zandi on expectations for Bernanke’s speech tomorrow at the Kansas City Fed:
 “The first thing he needs to do is put the string of economic data we’ve been getting into some context. How weak does he think the recovery really is? Then I think he needs to explain more clearly the FOMC’s actions a few weeks ago. Why hold the balance sheet constant? What was the logic behind that? It would be helpful if he could then give as benchmarks for understanding when they possibly could resume quantitative easing, start buying more treasuries, securities and growing the balance sheet.”

On news today that U.S. mortgages with overdue payments have risen in Q2:
“That is a bit disconcerting. It is clear the foreclosure crisis continues on, by my data, we have 4.3 million first mortgage loans are in default or 90 days delinquent and thus headed to default. That is a lot of loans to work through and many will go into foreclosure sale. One more reason to believe that house prices will decline. One encouraging thing was the decline in early stage delinquency. The recent bump up is a bit disconcerting. I do not think it is the beginning of a trend. I am hopeful, that in the next few quarters, we’ll see that come back down again given the tightening in the underwriting and the view that we’ll get some job growth.”

On whether Congress should raise the tax rate for the top 2% in 2011:

“I think if we raise those tax rates, in all likelihood the recovery will still remain intact but I think that is a gamble that would be unnecessary. I do think it would prudent given how fragile the recovery is not to raise any more taxes in 2011. Now in 2012, 13, 14 when the economy is up and running, raising those tax rates in upper income households, I don’t think we’ll have any meaningful impact on their spending and saving on the broader economy and would help with respect to fiscal problems. But I just wouldn’t do it at 2011. It is one more thing for the economy to overcome when the economy has a lot to overcome.”

On what he thinks will tip us towards a second recession:

“It could be, for example, if angst about the European debt situation were to flare up again and we’d see the equity market, stock prices fall another 5% or 10%. I think that would certainly qualify and that could push us back into recession.”

On the European debt situation:
“We’re watching very carefully. The coast isn’t clear. The European economy is holding up better than I would have thought to this point. But it has a lot of headwinds, the fiscal austerity, the financial constraints given the problems in their own banking system, so there is a lot more work to be done. I don’t think they will work to the problem quite yet.”

On tomorrow’s GDP figure and whether he agrees with the consensus is 1.4%:
“I think that is about right. That would be reduction of about a percentage point in estimated growth. Most of that because of a wider trade deficit, some of it related to less inventory. But it clearly highlights the economy lost momentum in the Q2.

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Village Idiot's picture

I listened to this on Bloomberg.  Reminded of the newsletters I used to get from my money manager. Every "perspective" on the market started with - "Our Analysis suggests..."  What the fuck does that mean?  How about a little conviction over here?!  They lost a lot of my money, btw.

HardwoodAg's picture

Some where there is a village missing its economist

johngaltfla's picture

Freaking hilarious. Outstanding. No other comment necessary.-:)

Cursive's picture

"Zandiculous"

OR

The Great Zandini - able to make economic recoveries disappear in less than a month! 

septicshock's picture

Funny! I bet they are also glad the village idiot is gone.

Cursive's picture

@VI

Thanks for all the help today on the new loan!  Would you believe that half of my Adsense ads are Amerisave?

Village Idiot's picture

@Cursive

Who says an idiot can't help a village.  Best to you, buddy.

Azannoth's picture

When the wolves or the bears come he can feed them so the others don't have to sure

Cognitive Dissonance's picture

Yes, but it takes a village to raise an idiot.

TwelfthVulture's picture

He's only vacationing at the Vineyard. Don't worry, he'll be back.

dcb's picture

I didn't bother with the whole post. But on reading the header on the front page I hope tyler really doesn't believe the the supply side is fixed. I can provide am0ple data about this.

banks not making small business loans and forcing people to use credit cards so they pay a much higher interest rate. The longer the banks screw the economy the longer interst rates stay low, the longer banks make easy money via the spread (the big oligarchy banks).

These economist morons (who maintain that people are rational in their economic decisions) can't even run through what behaviors are likley among bankers.

The big problem is that most of what they think they know is based on faulty assumptions. It is as if they think the world is flat and make decisions based on that. so they can't come up with the right answer because the logic that went into it is faulty. There is no place worse than the federal reserve for this.

At the federal reserve they don't appear to understand they have the job (given to them by bankers) because they believe all solutions involve conditions which benefit bankers. If I am limited in my thought process to the conditions which benefit bankers, then I can't find the solution.  Much of modern economics is limited by this way of thinking. The bankers are smart they have managed to get it accepted and taught at schools.

The federal reserve is limited to an intellectual paradigm which doesn't work. you must have this limited paradigm to work at the federal reserve. the paradigm is really nothing more than an excuse for bankers to always win. In effect the federal reserves function is to rig the system for bankers. They just don't see themselves that way. So they don't have the ability to find a solution, because they don't even understand the problem

thislittlepiggy's picture

We can begin to fix the problem whenever we like - http://www.bankofenglandact.co.uk/

Quantum Noise's picture

Fucking Bagdad Bob.

DarkMath's picture

Mark Zandi was hit in the head with a baseball when he played Little League.

(Apologies to all Closed Head Wounds out there).

bono's picture

Is this guy being paid for such comments?

E pluribus unum's picture

Of course he is! This is all part of the concerted effort to keep the Bush tax cuts for another few years. He's a well-paid mercenary. And that douchebag Obama will lap it all up and give Wall Street every dime they want plus a few trillion more.

knukles's picture

Well, Moody's is after all beholden to the Federalies as a NRSRO.  
And come to think of it, he might be an excellent addition to Washington.  He's worked in the private sector.

Pillage's picture

He done went Christina Romer on Obama...........next thing you know he'll tell us higher taxes are bad for the economy.

kengland's picture

Zandi comes off like a GENIUS though when compared to Scott Wapner of CNBC. I have almost thrown something through the TV listening to that idiot

Madhouse's picture

He even has his own WIKI....  Oh and he is from Moodys... and loves to appear on CNBC... any econ that has time to get on CNBC a lot is indeed a clown...

Mark Zandi is an American economist and co-founder of Moody's Economy.com, a widely-cited source of economic analysis.[1]

He was born in Atlanta, Georgia of Iranian descent [2] and grew up in Radnor, Pennsylvania. He attended Upper Merion High School. Zandi received B.S. and Ph.D. degrees in economics from the University of Pennsylvania.[3] His surname of "Zandi" comes from the Zand dynasty (formally known as the Zandieh dynasty), which ruled southern and central Iran (1750–1794) in the eighteenth century.

Zandi's analysis of the impact of an economic stimulus package on the US economy was cited by Christina Romer and Jared Bernstein in their report on President Barack Obama's proposed American Recovery and Reinvestment Plan.[4] Zandi uses Keynesian models in the spirit of Nobel Prize winner Lawrence Klein. The utility of such models to gauge the impact of fiscal stimulus has been questioned by Harvard economist Robert J. Barro.

nmewn's picture

Thank you.

Fifty pounds of arrogance. Twenty five pounds of incompetence. Twelve and half pounds of lies. Two packages of yeast naivete . One zest of corruption. Stir ingredients until blended. Bring to a boil of 170. Set aside and let ferment for a year & a half and voila...captain kickass sour mash koolaid...LOL.

Don't forget to save some for the next batch..hiccup ;-)

jeff montanye's picture

i don't know how much a zest is but i believe the corruption involved lots of seeds, pulp and juice as well.  especially juice.

cornedmutton's picture

You can bring your soups to a boil at 170? For some reason I need to go all the way to about 212.

nmewn's picture

Yes I should not have said "boil" and soup or anything else won't be very good after fermenting for a year and a half either...LOL.

The thought was analagous to something other than what you would crumble saltines into ;-)

trillion_dollar_deficit's picture

Wait until insurers are no longer permitted to model for pre-existing conditions and have to spend 80% of their expenses on medical care. These 15-20% rate hikes will look tame. Obamacare will eventually become 10x more politically disastrous for the Dems than the Iraq War was for the Reps.

TheMonetaryRed's picture


Of course we need more debt to get more growth.

It has to be high-quality debt, that's all.

Banks have replaced fraudulent securitizations with even-more-fraudulent credit derivatives designed to make fixed-income investors feel like they are secure. To make those fraudulent CDS promises seem credible, banks have to hold AAA assets and cash. They can't lend normally because it would deprive their business model of "collateral".

Governments will have to lend just not to banks!

Until productve investment and honest, transparent guarantees create a good flow of high-quality, fixed-income product out to the market, we're screwed. The multiplier will never recover.

knukles's picture

You mean that stuffs not the best, highest quality?

Then why do they call it securitized?  It weren't made secure?

Better sell this before anybody else figger's this out! 

Can I get a quote on this zero coupon perpetual interest only in arrears from the paid out pool equity layer piece thing-ala-ma-ging-galie-bob you sold me.  Hello?  Dave?  Dave?  Are you there, Dave?  Anybody there?

Reese Bobby's picture

Moody's has done everything so well to this point I am shocked this guy is a fuckin retard...

PC Load Letter's picture

+1

Typical economist - great at telling you what's happened but has zero foresight  

deadparrot's picture

Economists are great at telling you what will happen. They're even better at later explaining that their forecasts were wrong because of a completely unexpected event.

cougar_w's picture

because of a completely unexpected event.

The event being simply the passage of time. They are always wrong, every time, unless they get it right on accident. A chicken is as good a predictor as these economistas. They have no backing in theory, no sound mathematics, no track record, no basis for predictions, and no support from data that does not exist in any case.

The only role they play is to make it sound like someone knows WTF is going on with our money supply, so that people who need constant reassurances in order to function on a daily basis (most of them) will go forward blindly, hoping for the best (which they do.)

Economics will be measured as the most profound and deleterious failure of Western thought ever, or at least since the codification of Papal Infallibility, to which economics actually owes a debt of parentage. Economics has enriched a few at the expense of the many and reinforced so long a list of lies and propaganda that it will take 500 years to erase from our racial memory.

If you are a working economist, kindly kill yourself at your earliest convenience.

Rant off.

chindit13's picture

That was a thing of beauty.

zhandax's picture

Cougar, I always enjoy your posts, but this is one of your finer efforts.

boiow's picture

probably think growth will be revised downwards like this guy says

http://nbyslog.blogspot.com/2010/08/us-outlook-bea-about-to-revise-q2.html

Max Hunter's picture

What is it with these economists who need to scientificate every bullshit concept of their worthless occupation? Why quantify the merely abstract? Do economists have such a great mathematician penis envy, that they have to cloak their infinite lack of understanding in irrelevant numbers?

Now I have man love.. Probably one of the most profound and telling statements i've seen on here -outside of the gentleman writing the recent "hyperinflation" blogs- in recent memory.

Well said my friend.

Cathartes Aura's picture

curses, you beat me to that quote Max!

while reading the OP, I had it in mind to quote those same sentences and add:

you had me at 'scientificate'

/swoon

I'll leave you to your man love, who wouldn't respond accordingly? that was a brilliant post Tyler, just seething with righteous snark.

doggis's picture

i have now taken to calling #2 time for my dog as "'mark zandi'" time.....and #1 of course is ""JAC"" time (in honor of the not so great joseph abbey cohen)......

which reminds me its time to walk the dog!

gallowglass's picture

What?                     Tutter

Tripps's picture

called capitulation

Freebird's picture

Power to you, TD!