Forecasters Dream On About Economic Recovery

A survey of 44 professional forecasters released by the National Association of Business Economists (NABE) found that 80 percent of the respondents believed the economy was growing again after four straight quarters of declines.

“The great recession is over,” said NABE President-Elect Lynn Reaser.

Before jumping for joy you might remember that few if any of these “experts” saw the recession coming. Much like Allen Greenspan and his replacement Tim Geithner these cheerful cheerleaders never saw bubbles forming so certainly couldn’t forecast that the bubble in housing and credit markets would pop. To rely on these people to fix a problem that they never foresaw is not wise.

A much more realistic assessment of what is probably in store for the US economy can be found in the article entitled “Housing risks still lurk even as buyers return”.
A sober on the ground assessment is given by Nabil Boctor, 65, from Moreno Valley, California, who pointed to four houses on his block that have been foreclosed on and now stand empty.

“The crisis is everywhere and it’s growing,” he said. “This will take a decade to work itself out and by the time it’s over everyone is going to have to feel some pain.”

You would think that even economists could understand that when people are out of work, and their unemployment benefits have expired, it becomes very difficult for them to make mortgage payments for any length of time. As the unemployment rate climbs over 10% in the next month or two a tidal wave of foreclosures will likely soon wash away any hope of a near term recovery.

Then one should be asking the question “a recovery to what?” The old model of a consumer based, debt fueled, always growing economy has been forever shattered. It’s just that Americans, lead by their economists, are unwilling or unable to accept that fact.

Until Americans learn that a new model of lower growth and more prudence in financial affairs must be developed, and that development of a new model of scaled down growth begins, it is highly unlikely that any sense of financial order will resume in the United States.

Sure, the economy driven by massive government programs may show modest improvement for a quarter or two, only to fall back into a recession or depression funk as the scale of government spending and debt creation proves to be unsustainable and long term destructive.

In the meantime economists and politicians dream on about a recovery to the boom years of 2006-2007. Unless some new thinking soon takes place about developing a sustainable growth economic model and rebuilding the economy to fit that model those dreams will likely turn into a nightmare.

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