This downturn will be referred to as the media recession. As I stated here weeks after this all started, the sub prime thing should have been no more than a blip and was totally blown out of proportion. The question, as above, is why? My feelings then as stated above, political. Our whole financial system is based on trust and when that is in question the fundamentals, sound or not, mean nothing. The media is totally on the hook for this one.

I think it is kind of sick that the left are pinning all their hopes of a comeback on a recession. They don't have any qualms of stating just that.

One of the Leftist media / economics elites, krugman, has been predicting recession each year, Every year for at least the last three years. Each time he did so things roared higher.

Watch these jokers. The economy will be extremely bad right up to the day a dhimmicrat is sworn in as President next March. Suddenly, there will be IMPROVEMENT! And many of the issues the demoncraps have been harping on the last few years, will suddenly dry up and blow away (example: the number of homeless will drop, as will coverage of such)... to be found again, just about the time another Republican takes the White House.

As a Texan returning to live in Canader I am often asked about the recession and financial collapse in the US. Every inquirer cites things they have read or heard in the media as their source of the "truth". Truth is that the MSM is trying their darndest to set the agenda and the dire predictions are as about as accurate as Geraldo Revera's weeping tale of bodies stacked up like cordwood during Herricane Katrina.

While it is true that some have lost their homes, it is also true that most if not all of these people should have never qualified for a mortgage in the first place. It isn't a nice thing to say but it is sadly true and people should live with it.

Oh, please. I'm as right wing as they come, but we are in a recession already, and I think it's going to last some time.

First, how do the authorities define a recession? They call it "two quarters of declining growth". And how do they calculate "growth"? They subtract inflation from the nominal growth in GDP to calculate "real GDP growth". And inflation is defined by the government's CPI figures.

Well, kiddies, real 4th quarter GDP growth in the US, as announced by the Bureau of Economic Advisors (BEA) was a miniscule 0.6%. They calculated inflation at 3.9%, which suggests nominal growth was 4.5%.

Except the 3.9% CPI figure is a big, fat, bald faced lie. First off, it understates "volatile" fuel and food prices. Oil in Sept. 07 was $72/barrel; at year end, it was $100/barrel. That's a 30% rise in 3 1/2 months, but it barely affects the CPI. The many farmers that visit here know first hand what has happened to grain prices, from wheat to soybeans, and that has affected consumer prices in supermarkets, but again that barely affects the CPI.

In the US, health insurance costs are also under estimated in the CPI, and those have been rising to the point where health care is nearly 20% of GDP, but it only makes up about 6% of the CPI. How does that compute?

Finally, housing. Yes, house prices have dropped but many homeowners have faced significant rises in the monthly mortgage payment since their adjustable rate mortgages were reset at much higher rates. The US is desperately trying to forestall through a series of government programs but there are still going to be millions of people who have, and will, face, significant resets.

Why does this happen? The government has a vested interest in keeping the CPI low, since it is used to increase Social Security and government worker wages. Most independent observers suggest that the real rate of inflation is 6-10%, depending on their rabidity.

So take the bottom estimate of 6%, subtract nominal GDP of 4.5%, and voila - negative growth of 1.5%. That's one quarter of negative growth, and with the series of blow-ups on Wall Street over the first quarter of this year, I don't see how real GDP growth can be positive. So, there's your definition of recession.

I still don't think we're out of the woods in the financials, I expect to see oil hold over $100/bbl, and I don't expect food and grains to back off either. So given the weakness in growth and continued rising costs (and note that because of the continued weakness in the US dollar, they will doubtless experience higher inflation than we will - yay for us!), I expect negative growth for a few more months, until the cumulative effects of the US stimulus packages, export growth driven by the falling dollar, and just the fact that declines don't usually go on forever all kick in to create real US GDP growth.

BTW, I'm watching CNBC, and the last three speakers (including the chief economist of Goldman Sachs) all agree the US has been in recession.

The only thing I can say to such faith-based optimism in credit markets, is I hope all those who think the Fed has created a capitalist utopia by expanding the economy with unbacked credit and currency, just keep your cash and investment where it is...just don't react...we'll all see who's right in a few months ...right?

Could it be that the multi-year depression that has been going on in the print media - their sector - their backyard - has coloured their outlook?

KevinB - your definition of a recession is incorrect. The correct definition of a recession is "two consecutive quarters of "negative" growth" not as you say "declining" growth. This is an actual "shrinking" of the economy - not merely a slowing down say from 2% growth to 1%. So, technically the US is not in a recession. If they are we won't know until after June 30, 2008. So, kiddy - there is your definition of a recession. It is clear that your problem is that you are getting your information from CNBC. You should try Fox!

Ben Stein says “I think if we have a recession, if we have a serious recession, a great deal will lie at the media's feet. And I don't know why they're doing it”

Oh come on Ben. They are doing it because the US media is an appendage of the Democrats just like it is here in Canada… a propaganda arm of the Liberals.

Clinton won in 92 because the media helped create the impression the economy was still tanking when in fact it was on the mend; Reagonomics and the world’s central bankers were pulling the economy out the doldrums. The extremely high interest rate period (15% mortgages) was coming to an end as inflation had been brought under control. Clinton ended up riding the low interest rate period and looked good doing it as did Paul Martin.

Martin didn’t balance the budget , interest rates did. A 10% drop in rates on $600 billion in debt = a savings of $60 billion a year … presto the budget is balanced … the political price of high rates fighting inflation had been paid by Mike Wilson the Conservative Finance Minister … but our MSM will never explain that to the electorate.

In other news, ad revenue dropped the most it ever had in 50 years.

People know a snow job when they see one. As Otter says, people notice there are never any homeless people when a Dem is in office, only Republicans have a homeless problem.

It is true there is a credit problem. It is also true that the problem was self inflicted by the mortgage companies and financial institutions on themselves. Nobody -made- them write bad loans, nobody made them buy the paper either. Bear Sterns is sold for $2.00 a share? Looks good on the immoral, grasping, cheating sons of b1tches you ask me.

But, and this is the big deal that NOBODY ever talks about, those houses are still there! All that paper isn't worth zero, its just worth less than the face value. How much less remains to be seen. I doubt it goes to 50% less, so maybe the financial sh1t heels who caused this debacle take a 40% haircut. Poor babies. You lie, you pay.

Housing is getting to be a big bargoon in the USA. If it drops much more I may be forced to start looking at a house in Phoenix AZ. There is a price at which my nice strong Canuckistan Rasbuckniks will flow south and get me a winter home. There's LOTS of people like me out there, willing to grab a bargain on a house, factory, business or whatever.

So when I hear talk of 600 billion in potential losses, 2 trillion in potential losses, I chalk it up to DemocRat Party partisan FUD. Thank God the Clinton-Obabma war is just heating up, even the DemocRat partisans have the grace to be embarrassed by the heinous display of raw ambition and power lust we are being treated to, on both sides of this equation.

A different bob:

OK, I should have used the word "negative" as opposed to "declining", but it was early in the morning, eh?

But, as I showed, the US IS experiencing negative growth if you use accurate CPI stats instead of the manipulated government figures.

For the first quarter of the year, the Dow is down 8%, the Nasdag is down 16%, and the S&P is down 10%. (Yes, I know today is technically the last day of the quarter.) Stocks almost always turn up before the recession ends; there's been no sight of that so far. Meanwhile, oil is up nearly 10%, gold (even though it's backed off lately) is up nearly $200, from $750 to $940. If you want to live in Fox's la-la land, that's fine; you get fully invested in stocks. I'll continue to make money my way. Let's compare notes at the end of June, shall we?

This discussion is meaningless without a objective definition of recession. Kevin, if you don't approve of the current definition (using the official CPI), please suggest another definition. Of course, the data you use must ne readily available, transparently calculated, and reasonably un-disputed. And the historical data should also be available, in order to comparisons with other slowdowns/recessions.

What is your suggestion?

The CPI is calculated using the cost of a "basket of goods". The "basket" items don't normally change. There is a good reason why certain items never form part of the basket. The main reason is the price volatility associated with that item. ie "oil". Oil is not included when the cost of a barrel is stable nor should it be included when the price is volatile. I agree that there is some anecdotal evidence that the economy "might" be shrinking however the imperical evidence will come down the pipe.

Where did you get the impression that I am fully invested in stocks? There you go making assumptions again. Thats what you get when you watch Keith Obermann.

Isn’t it the point of the post that if you keep predicting a recession for 7 years you are bound to be right eventually? It’s like Global warming … which didn’t really cut it, so now the doom and gloomers call it Climate change … yes the climate changes and so does the economy. Neither the Democrats nor Liberals are going to control either the global weather or global economy.

Meanwhile the price of housing got overheated in some areas in the US and now that real estate is dropping in value and becoming affordable again … that’s a GOOD thing.

The US is not in a recession. Our economy is dynamic and strong!
The US is winning the Iraq war. Our forces are dynamic and strong!
Climate change is a hoax and is not occuring. Our climate is dynamic and strong!
John McCain is not an empty suit. Our next leader is dynamic and strong!
Dinner tonight will be turnips and stew, with corn bread on the side.
Thank you. That is all. You may all return to your hives. Next news update in 12 hours.

I tend to agree more with Kevin than anyone else who has written in. I personally believe that the "boom" of the past 7-8 years has been an artificial boom caused by the accumulation of more debt due to the "Easy Money" policy of the Federal Reserve. The Fed resorted to inflation to avoid the Tech meltdown in the 2000s, and are now resorting to inflationary measures to avoid a meltdown in the housing sector.

I recently was reading "The Constitution of Liberty" by Friedrich Hayek, and in there Hayek addresses the dangers associated with a inflationary policy. I shared the following with a friend of mine:

Hayek describes inflationary action (lowering interest rates or monetary injections) as being "immediately pleasant or relieves temporary difficulties, but involved much greater harm that will be felt only later. There is indeed, more than a mere superficial similarity between inflation and drug-taking, a comparison which is often made".

His next descriptions of the effect of inflation (businesses appear to be more profitable than ever, resulting in more risk taking and business activity, requiring ever more shots of inflation to keep things moving forward, etc.) totally describe what is happening now.

His conclusion is as follows:

"Inflation thus can never be more than a temporary fillip, and even this beneficial effect can last only as long as somebody continues to be cheated...It is particularly dangerous because the harmful aftereffects of even small doses of inflation can be only staved off by larger doses of inflation. Once it has continued for some time, even the prevention of further acceleration will create a situation in which it will be very difficult to avoid a spontaneous deflation"

"Once certain activities that have become extended can be maintained only be continued inflation, their simultaneous discontinuation may well produce that vicious and rightly feared process in which the declines of some incomes leads to the declines of other incomes, and so forth. From what we know, it still seems probable that we should be able to prevent serious depressions by preventing the inflation's that regularly precede them, but that there is little we can due to cure them once they have set in. The time to worry about depressions is unfortunately, when they are furthest from the minds of most people"

Johan:

I suggest we use an accurate version of the CPI, not one manipulated by the government to be kept artificially low. Ask your wife if her grocery bills have gone up; check your credit card statements and add up what you spent on gas this year compared to last year. And if you heat your home with natural gas, add up what you paid in 07 compared to 06. I think you'll be unpleasantly surprised.

ADB:

OK, now it's your turn to misinterpret me. Read my post again - I didn't say you were fully invested in stocks; I said if you believe there's no recession get fully invested in stocks. There will be a period towards the end of this year when I'm going to take all the money I've parked in T-bills, and, depending on the prices, maybe take some profits in oil and gold, and pile into stocks. However, as they noted on your fave channel CNBC this morning, stocks have been down 5 months in a row. A long fall in the stock market is normally considered a pretty accurate predictor of recession, just as a sudden upturn is normally considered a predictor of recovery. But with the S&P trading at 18 times earnings, and yielding less than 2%, I'll stay where I am.

And who is Keith Oberman? Never heard of him.

A million houses suddenly available at half price because a million people can not pay the mortagage anymore also means a million people will be able to afford a house and have money left to buy stuff to keep the economy running.

And then after the "crisis" is over, a year or two later a million people will be able sell those houses and make a huge profit on them, which means a million people will have plenty of money to buy stuff to keep the economy running.

I know this is a very simple way of looking at things, but simple does not mean wrong,

If I had money to spear I would buy one of those half priced houses right now in the USA, rent it to someone and then after a couple year sell it for twice the price I paid or even more.

Recessions are a fact of life - inventories overshoot demand at some point, some catalyst comes along (interest rate, sub prime issue, etc), and causes pessimism to creep in.

The media cannot be trusted in any way to tell us what is, or is not happening, to economy. There is a old saying in finance - some people are right most of the time, but right some of the time, while other are wrong most of the time, but ... well you get it. The media fit into the latter (when have you ever read headline "recession over," for instance). They feed on doom and gloom.

Imagine if media "experts" said - stop watching the market machinations day by day, just look for opportunities to pick up great, high quality investments (including real estate) "on sale." No they don't say that, because their sponsors would be really made when you realized you didn't have to watch their programs.

Recessions are inevitable slivers in time, which interrupt growth in the economy. They shake out the losers who ride the wave without a thought to the long term. At the end of a growth phase, someone always gets left holding the bag (builds a bunch of houses they can't sell, for example).

Governments, analysts, pundits, investors and speculators are just plain dumb to try and predict, time if you will, markets and where they're going.

It's a useful way to garner votes I guess. The fact that it's extremely irresponsible doesn't matter in that arena. apparently.

The US has avoided a 'real' recession so far by forcing everyone to take a big pay cut. The dollar has been devalued by some 12-15% since last summer. Americans see that in higher prices for fuel, food and other goods. But at least, no major job losses have occurred, as US exports become cheaper.

The official CPI figures are phony. Real inflation is much higher. On the account that everyone is somewhat poorer due to that factor, this is a recession.

The hardest hit sector right now is construction, but as it relied heavily on illegal labor the job losses there are not reflected in the official stats. One wonders what the illegals will do now, as Mexico is not exactly doing well either.

nomdeblogue is right,

And with an election coming in November, the
( liberal ) main stream media is bending over backwards to brain wash people into believing the republicans under Bush have done a lot of damage to the USA economy, which is a BIG LIE.

This will only get worse until next November, to scare people into voting Democrat by telling them exagerations and plain lies about what the Bush administration has accomplished.

When conservatives are in charge ( here or in the USA ) a minuscule set back of the economy is presented as a major set back by the liberal MSM, and good news are pretty much ignored ( there have been two stock exchange positive records broken while Bush was president that most people have never heard about it...Despite the events of 9#11 and Hurricane Katrina the US economy has been growing and so on and so forth but most people do not even know )

and when liberals are in charge set backs are ignored and the slightest good news is front page news and shouted from the roof tops.

Same thing with Co2 emissions; they were rising drastically under our liberal government but the Canadian liberal MSM was concealing this fact,
and the liberals who had signed Kyoto were pretty much stepping over or even spitting over the contract, but the liberal MSM was ignoring this.

and now that the conservatives are in charge, the liberal MSM will not stop talking about Canada producing too much co2s and conservatives not wanting anything to do with Kyoto.

The Liberal MSM is a sort of cameleon; the color of the news changes with who is in charge of the country.

MSM people have no same and no conscience.
or is it liberals who have no shame and no conscience?

From the second link Kate provides,

"...As housing prices fall, more buyers come into the market; sales and construction revive..."

This is what I have been saying for months!

The redistribution of wealth, and the Marxist dream of the American leftist machine.

Millions homes lost because millions people were never able to afford them in the first place, now considered for compensation packages off of the backs of the fiscally conservative.

The leftosphere is howling with indignation that the conservative right points its finger at them -

“The government of the United States, bipartisan, pressured lenders into lending to marginal borrowers as a public policy."

http://www.milforddailynews.com/homepage/x1320879589

The majority of people harmed by the current US housing market are (Latino’s and blacks as a demographic percentage) most of who never should have qualified for these mortgages. (Not because of their racial status but because of their economic situation).

The left now points its failed logic at the “predatory” lending practices and the “discriminatory” interest applied to “high risk” borrowers.

At the end of the day the left is never accountable for their pressures & policies or responsible for the outcomes. The right simply allows the underachievers to ride their coattails as America slowly slips into a communist utopia.

I turn to bit part comedians for all my economic advice.

Ben Stein is a trivia buff, not a "genius".

He can't be a genius, he believes in ID. He's gotta have an IQ of less than 100 to believe in ID.

Another feel good idea gives a town that sinking feeling.

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2008/03/30/wgreen130.xml

Who in the heck said millions of people are losing their homes? The last numbers were .0008 of home owners. As said before, to many people bought into homes they could never pay for.
Plus it's not all the banks fault. You may wish to read up on groups like ANSWER who were pushing the gov to put pressure on banks to make these loan so they would not be called racist. Not including how many people were doing flips on homes and when the market slowed down they couldn't pay for both homes.

Lee>

I’m not sure if your comment was directed at my earlier post or not?

“Who in the heck said millions of people are losing their homes?”

http://www.bloomberg.com/apps/news?pid=20601103&refer=us&sid=azx0LzcT19ao

“More than 233,000 properties were in some stage of default last month.” Jan 2008.

http://www.cbc.ca/money/story/2008/03/06/ushousingforeclosures.html

“The Mortgage Bankers Association said that 0.83 per cent of all mortgages across the United States were in foreclosure between October and December, up from the preceding high of 0.78 per cent set in the July-September quarter.”
Otherwise your statement reflects exactly the point I was making

“Plus it's not all the banks fault”…… “pushing the gov to put pressure on banks to make these loan so they would not be called racist”

Lee,

About the million people loosing their homes in the USA,

I heard it last evening on Radio-Canada television from a finance expert from Montreal newspaper
La Presse.

She also said another 2.5 million Americans were late on their mortgage...

Those numbers could very well be an exaggeration
- especially coming from Radio-Canada and LaPresse - but still if this is affecting the economy of the whole country, it has to be a relatively high number of people who are loosing their house.

But as I said and some experts have said, someone else will be able to buy a house ( now that many are selling at half price ) and then - very conveniently - just a few months after a Democrat is elected the economy will be magically fine again!

That's the trick isn't it?

Government's can NEVER fix and economy ... they can only get in the way of the world working the way it should do.

Lefty media tools try to paint every problem as being the result of GOPs ... then try to take credit when do nothing Dems take a free ride on healthy markets.

I for one will be happy to invest in undervalued equities!!

Doesn't the blood rush to your head with it stuck upside down for so long like that? Is the sand itchy when it gets in your ears and nostrils?

That is some useful bogeyman you have there in the media. Very useful for all and every conspiracy, blaming facts that don't fit a reality-challenged perception of the world.

As bad as this recession is or gets, we know for sure that with this kind of conservatives around, the aluminum and tin foil industry have nothing to worry about.

So Ted:

independent.co.uk/news/world/americas/usa-2008-the-great-depression-803095.html

As of right this minute, that's the headline at Drudge.

What was that about bogeymen again?

Phantom: "The Media" is a convenient bogeyman for all that ails the local conservative.

Don't like the facts about an economy in crisis? There is no crisis (despite the foreclosures, rising bankruptcies, collapsing credit market, etc.), it's "The Media" that has invented the scare or, if there is a real economic crisis, it's "The Media" that created the problem to get the Republicans out of the White House and Congress (yes, even the conservative media is part of this plan).

Conservatives can't grow their support above their 2006 election results? It must be "The Media" that is holding them back.

Liberals get elected in Ontario, New Brunswick, etc.? There goes "The Media" again, the free advertising arm of the Liberal Party!!

No one talking about abortion? That damn secularist, liberal mouthpiece, "The Media" of course.

Support for the war going down? Don't blame Harper's lack of any ability to lead or even bother to try to speak to Canadians about why we are there and should stay there; blame "The Media" for bringing us the news about the negatives of war.

There just isn't a problem in the world that can't be summed up by blaming "The Media". That's some fine bogeyman, that there "Media"; some fine bogeyman indeed.

Ted

Clinton did not have the events of 9/11, the Katrina hurricane, the Iraq war and many other things to hurt the economy.
But unemployment was a bit higher in the Clinton years than it is now.

Can you explain to us why the media is treating this as a crisis now but was not when Clinton was in power?

When Liberals were in charge of Canada and signed the Kyoto accord, they let co2 emissions rise by over 30 % when the promise - as signed by them - was to lower them by 6 %,
the media was awfully quiet about it.

But now that the Conservative are in power and say they are not too warm about Kyoto ( pun intended ) the media will not stop making them the bad guys who do not care about co2 emissions.

Can you tell us why the media acts this way?

That’s right, keep the southern boarder wide open because the US needs more illegal immigrants to fill the jobs that 28 million Americans on food stamps are too proud to do!

I promise this is absolutely my last post on the subject. The link below shows how a Fed economist's research has found a more reliable predictor of recession, and by his measurements, the US is already in recession.

http://bigpicture.typepad.com/comments/2008/03/was-2008-q4-gdp.html

You have to read the whole thing to get the big picture.

"Still the economic conditions in the 1930s (average unemployment 18%) were so different from today's that causal references to 'depression' amount to fear mongering." R J Samuelson - Washingtron Post.

Well at least he got that right.
Financial derivatives did not exist in the 1930s.

Even just 5 yrs ago, financial derivatives were only a $100 trillion market, today they are over a $600 trillion slice of the world economy.
Total USA economy is only about $15 trillion by comparison.

And derivatives are the new 'financial weapons of mass destruction".
I'll take Warren Buffets word on that.

Was it fear-mongering that caused Fed Chairman Bernanke to devalue Bear Sterns investment bank from a $30 billion company last Jan 2007 to a $210 million Sunday Nite Special to JP Morgan?

Did the MSM cause that?

Is it fear-mongering that central bankers of the world are in close communication with each other to prevent a world banking system collapse?

Actually 'time' is that wonderful quantity that prevents everything from happening at once.

And it also causes a time lapse where people become aware of the real economic circumstances at different times.

In fact, NOBODY is in control of the world economy right now.
The USA has become the world's largest debtor nation and is doomed to a severe national austerity program sooner than later.

So where's Kondratieff when you really need him?

Ted sticks fingers in ears, says "La la la! There is no media bias, they are objective and never bend the truth!"

Ted, there probably IS a recession. It will probably be small, and over "fairly soon", as in maybe this year, maybe next year if you're pessimistic. It will NOT however be the Great Depression.

There are many MSM outlets telling us that is exactly what's going to happen. The banking system will fail, the real estate market will drop to half its present value in a week, the end is nigh. They seem very excited about it in fact, almost gleeful.

After seven years of turning over every rock, the blind pig finally found an acorn.

If the MSM isn't a subsidiary of the Dem Party how is that in 2000 the MSM trumpeted an issue - candidate GWB talking down the economy (GWB had the temerity to note that indexes of leading indicators were falling) - that is far more prevalent in 2008? The big difference, beyond the far shriller attacks on the economy in 2008, is that the ox is a democrat instead of a repbulican.

If Obama is elected the MSM will find ways to make economic statistics sing. If the unemployment rate rises point to total employment increases. If total employment falls point to public sector employment strength. We'll get an Obama bull market that, when pricked, will match the Nasdaq meltdown.