Abe Gulkowitz has released the latest edition of his always delightful and informative newsletter (for lack of a better word) "The Punch Line": the best aggregation of ad hoc charts, factoids, and data points available anywhere. While by now even Deutsche Bank realizes that the US economy has entered a recession, here is the blow by blow of how we got there, where we may be headed next and 1001 other facts about the US economy and the world that you probably did not know...
Endless political bickering regarding the fiscal nightmare in the U.S. have combined with weakening economic signals and the lack of any easy solutions in the EU morass to trigger an unprecedented credit rating challenge to the U.S. and a market plunge that quickly spread around the globe. Two years into a so?called recovery and the contours of expansion remain far from obvious. Punishing losses in financial markets, culminating in widespread setbacks in risky assets, suggest that investor sentiment has soured ?? and decisively. The massive realignment in perspective is the worst since the Great Recession. The stock markets aren't alone in this reassessment. The Federal Reserve has joined them.What can be done about will be the pressing issue for some time. It underscores our worst fears that massive liquidity and stimulus did much to save the financial system at the time but little to generate sustainable job creation in any significant way; but created enormous distortions in its wake. And all the fiscal pressures can lead to only one result. Policymakers are hemmed in. Many are beginning to realize that we may be at only the first step in a long term spending pullback that may hit many industries including health care, defense, technology, and education sectors. Despite all the noise about the rating action by S&P, significant weight should be given to the series of large negative surprises in the economic data stream. While such data can turn around just as easily, there is now sufficient suspicion that job data will continue to disappoint , requiring a further downward adjustment to business outlooks. Whatever the policy response – the latest shock to household and investor confidence and the likelihood of a slower and more risky growth trajectory seem likely to prove more lasting.