For a guy so willing to chide the rest of the world for getting economics wrong, you certainly seem determined to get this particular issue wrong. Recession forecasting is, as Bill at Calculated Risk so aptly put it, a mugs game. Your pretense at knowing whether the US economy will or won't go into recession is bad enough, since you have no way of knowing. To then belittle other economists for holding a different view than your own is downright small minded. On this particular issue, all you have is your own bias. You should stop pretending otherwise.

Here at Spread the Welfare Wealth we vehemently disagree with Baker that double dipping is not for everyone and in fact is instrumental in assuring that each earns according to one's productive output on the downside as well as upside.

Further, due to scale economies, the second dip is always larger than the first so there's more to spread around the second time around, similar to how a manure spreader works after it gets up speed.

Don't do just one dip. Join the wealthy and be a hippy dippy double dipper. Lose two steps backward but gain three going forward.

Welfare for the wealthy and you too. It's the other white meat.

Stupid liberals.

Shall we begin to repatriate stolen assets from those who have stolen them legally? Perhaps we need to employ the rich at minimum wage so they can earn back these assets legally? Although to have people work at minimum wage is hardly legal since the value of the work is so much greater than those wages. Damn it, whatever we do in this system depends on theft. Perhaps we need a new system based on democracy where everyone participates with fairness to one and all.

One needs to be big to belittle so let’s be big about it

Kharris is unhappy because I am ridiculing people who are projecting a double-dip. Of course neither I nor anyone else has a crystal ball that predicts the economic future. My point is that if you listen to the people saying "double-dip," they don't have a clear analysis of how we get from here to there.

Ordinarily, recessions are caused by sharp downturns in housing and car sales, which in turn are brought about by rising interest rates. Do any of them see this scenario? If so, it is a bit hard to imagine, given that both are already so low. I'd like to see them etch this one out.

Absent a plunge in cars and housing, what component of GDP is going to turn negative? We know that government is shrinking, but this is only at a 1-2 percent annual rate. That is not likely to throw the economy into reverse.

The economists we are hearing cited talking about a double-dip mostly make 6-figure salaries. I would like to see what work has led them to the conclusion that we are likely to experience a double-dip.

I question whether there is any work, as opposed to people just saying what is fashionable, just as they said everything was fine as the housing bubble was growing to $8 trillion.

And it does matter. If we convince people that a double-dip is a real possibility, then they naturally are thankful that we get slow growth instead. This is just like people being thankful that we didn't have a second Great Depression.

I really resent when people who should know better say really silly things about policy issues that have a large influence on the debate.

Kharris,

Actually dean has a few facts on his side, not just bias. Just sayin.

Well, as a lay person, I am not the most qualified to defend Dean, but his argument is really based on the fact that the two most cyclically sensitive parts of the economoy, housing and automobiles, are still at or near their recession lows and hence don't have much room to shrink. Being on the floor, they can't go much lower and affect the economy. Since he was mentioned, this appears to Bill McDade's view as well on Calculated Risk.

Of course, if there is a dollar strengthens and their is a surge of imports and decline in exports, along with a corresponding decline in business investment, and even deeper cuts in Government spending, then we may get a double dip. A collapse of the Euro therefore might create the circumstances for a double dip.

I think Dean what Dean is getting at is again the poor coverage and explanations in the story about where the economy would shrink if a double dip was to occur. It would certainly not be like 2006-07 where the beginning of the recession was preceded by the initial collapse of housing demand from the peak in 1s quarter of '06.

So if consumption spending is growing 2%/year and consumption constitutes 70% of GDP, then consumption is adding 1.4% annually to GDP. But since government spending is now negative and we are running a large trade deficit, only business investment, which is highly variable, is still positive.

Therefore, just like 1937, we are on the brink of a new recession because the federal government, for no apparent reason, has decided to cut federal spending.

Keynes would be shocked that economists are making the same mistake today that they made nearly 75 years ago.

"If it is impracticable materially to increase investment, obviously there is no means of securing a higher level of employment except by increasing consumption. . . . I should support at the same time all sorts of policies for increasing the propensity to consume. For it is unlikely that full employment can be maintained, whatever we may do about investment, with the existing propensity to consume."

The General Theory of Employment, Interest and Money p. 325

Consumption rose by 0.5% in July. How much of that increase was due to increased petroleum prices during the previous 60 days? I suspect the answer is that gasoline price increases accounted for a significant portion of the increase.

Once again, economists are focused on GDP growth as a measure of the health of the economy. GDP growth growth gives equal weight to a dollar produced by a small cadre investment bank CDS traders and to a dollar produced by 10,000 manufacturing workers making automobiles and automobile components.

This focus on GDP obscures the health and sustainability of domestic economic activity. Dean touched on this issue in his recent post: Does America Need Manufacturing? What Does Mr. Arithmetic Tell Us?

Well I was convinced we were heading for a double dip in part because of the debt ceiling shenanigans, the austerity it yielded, the employment numbers, the bank/Euro problems in Europe, the continuing bank problems here, consumer sentiment, etc.

However a few things have happened:

- Bernanke said we'd keep "free money" going, which oddly seemed to calm the markets.
- Buffett bought in BoA, which looked to be on the brink and raised confidence.
- Krugman got his "aliens" in the form of Irene.

I'm still anything but bullish but...

I do actually agree with prior commenters though - regardless of seeming facts, with the market mob one cannot be sure of anything. This is "chaos theory" when you come down to it.

kHarris,
When people, who should know better, say really silly things about policy issues that have a real influence on the debate it hurts other people a lot more than their feelings; they lose their jobs and their life savings - not just their professional pride.
Who's small-minded?

I think you owe Dean a response to his observation that all this fretting about a double-dip is merely a political/rhetorical ploy to keep those who are really being hurt by all this deception content that it's not worse!

Consumption (disease) - definition of Consumption (disease) in the ...
medical-dictionary.thefreedictionary.com/Consumption+(disease)
High-risk populations
THE ELDERLY.

Etymology

By allusion to “How many angels can dance on the head of a pin?” — a mediaeval theological question associated with the Scholastic school of thought. It concerned the obscure theory that since angels are not spatial beings, then an infinite number thereof could occupy a single point in space simultaneously. - wiki

Dean Baker is compounding small-mindedness with dishonesty. He doesn't know that we will avoid a double-dip, and he doesn't know why I disagree with him. He pretends to though. Dean claims to know that I am taking a side in the debate over whether there will be a second recessionary dip. I doing so, he either lies to himself, or lies to you, his readers.

Dean has repeatedly belittle those who take a different view of recession risk than he does. I have repeatedly pointed out that, since economics as a profession has a bad record on recession forecasting, and Dean's training is in economics, that he really doesn't have a leg to stand on in talking down to those who believe there will be a second dip. Dean's response is to pretend that he can see into my mind and that he has discerned favoritism for the rest of the economics profession. That's crap. Dean is smart enough to know the difference, and has made it his business to point out crap when other people engage in it. Somehow, though, being held to the standard to which he holds others brings out Dean's dishonesty.

Dean also claims now to have a point that he didn't offer before. His point, he now claims, is that people who disagree with him owe him a story. Some of them have one. It doesn't sound like Dean's story, but Dean is dishonest, in this new claim of his, to pretend that they don't.

Responses from Vorpal and others miss the point. Of course Dean has a story. Every economist has a story. The punch-line to Dean's story involves the implicit claim that recessions are readily forecastable, and that he can tell you, with a reasonable certainty, that there won't be a recession. He can't. The facts that he offers are important to understanding what is going on, but they don't change the simple fact that recession forecasting is voodoo.

Dean relies on accounting. If two of the industries that tend to swing most during economic cycles are in the dumps, then where will the contraction come from. This is not a secret, and other economists are aware of it. Dean apparently (you see, I can see into Dean's mind just like Dean can see into mine - isn't dishonesty fun?) Dorry, Dean apparently wants his readers to believe that other economists have missed the situation with cars and houses. They have not.

For those who have missed it, here are a couple of stories that other economists use. These stories rely on history, rather than accounting. That doesn't make them right. I merely offer them to show that other economists have facts, too, and that Dean pretending to have a monopoly on facts is a dishonest thing to do. So here goes. Financial crises, we are told, are more prone to produce second recessions than inventory cycle recessions. We have been through a financial crisis. Real GDP growth below a certain rate over a couple of quarters has typically been followed by recession in the post-war period. Growth is below that threshold now.

My point, for Dean who seems willfully to miss it, and for the rest of you who might naturally misunderstand it, is that Dean is calling the kettle black. When he points out that economists are wrong about something, he is often right. When he claims they are wrong for disagreeing with him about an issue that cannot be known in advance, that is a very different matter. If Dean wants to be in the business of telling others to keep their nose clean, he should keep his clean, as well.

I share kharris's puzzlement over Dean's apparent certainty that the economy is on the threshold of another recession: "Your pretense at knowing whether the US economy will or won't go into recession is bad enough, since you have no way of knowing. To then belittle other economists for holding a different view than your own is downright small minded. On this particular issue, all you have is your own bias. You should stop pretending otherwise."

In his response to kharris, Dean simply informs us that two of the more cyclically sensitive sectors (housing and autos) are already prostrate and unlikely to fall further. Maybe this is right, and maybe it's wrong. I'm sure Ford, GM, and Chrysler/Fiat can envisage substantially lower sales, because as recently as three years ago they actually saw them. Consumers can defer other purchases, of entertainment, leisure activities, lodging, and food consumption outside the home. Producers can defer investment or even routine maintenance if they are sufficiently pessimistic about the prospect of future sales.

I am not arguing that the probability of a recession in the near term is high (by which I mean more than two-thirds). I am simply puzzled by Dean's apparent certainty that it is very low (by which I mean less than 20% or 30%). I am even more puzzled by his willingness to impugn the motives and intellectual competence of economists who are less optimistic than he is.

I have seen few economists claim with certainty or conviction that the economy will enter a recession in the next 6 or 12 months. One of the more pessimistic forecasts I've seen is by Nouriel Roubini who thinks the chances of a recession are now "more than 50%."

The notion that Roubini is making this forecast because he believes it will make unemployed workers glad that the situation is not even worse seems to me ludicrous. And isn't Dean the analyst constantly warning journalists not to tell readers what politicians think? All we know is what politicians say and do; we do not know what they really think. Why does he think we should relax this rule when considering economists' forecasts of the probability of a future recession? Perhaps some economists have a well-founded

Opening sentence should read: "I share kharris's puzzlement over Dean's apparent certainty that the economy is *NOT* on the threshold of another recession:"

Dean's point is that pundits are deflecting discussion from the main issue, the long-term stagnation, to the 'double-dip' pseudo-issue. This depends in part on the artificial history there was a 'recovery' from the financial crisis recession.

kharris,

just to be clear, i have no idea whatsoever what you think about a second recession. I was referring to the economists cited in the media who I have seen discuss the possibility.

Okay, so maybe Dean's wrong. So what? Time will tell. If he is, he is. And the other guys are right. Again, so what? He stands up to the plate and takes his swings. All we are entitled to expect from one another is that we offer our opinions and give a reason why. One either finds another's reasoning plausible or one doesn't. And if you don't find someone's reasoning plausible, then offer a reason why and that's it.

Many pundits (economists and journalists) that spew out economic forecasts fail to point out, for reasons known only to them, that even though the economy may enter a quarter or two of negative GDP growth that it does not necessarily indicate that the economy is in a recession. Due to the apparent lack of understanding of the definition of economic recession these same pundits will mistakenly conclude that the probability of a double-dip recession is much higher than what Mr. Baker has recently stated.

The Great Depression was not the result of a single financial crash, but a series of collapses which lasted for almost four years - there was a very serious wave of bank failures in 1933 right up to the day of Roosevelt's inauguration. At least now we have deposit insurance (part of Glass-Steagall, enacted June 1933), but other things which kept the financial world safe for so long have been rescinded (such as the part of Glass-Steagall which prohibited mixing of commercial and investment banking). We seem to be stuck in a Japan-like state of non-recovery, but there is no way to rule out more financial collapses. Most financial bubbles depend on continual growth and they are usually exposed when the relevant segment stops growing and the bills come due. Of course the media appear to be unaware of this danger - if they were aware they would presumably be calling for more regulation, not less.

A lot of us who aren't economists don't think there will be a double-dip just because there hasn't been a recovery. Spending increased in July because people had to pay for air-conditioning during the heat wave, and because some of us had to replace our beloved, but dying, Hondas.

Does it matter whether there is a double dip?

Here's what Stiglitz said from Crooks&Liars http://www.americablog.com/201...e-dip.html

But Stiglitz made an interesting point. It doesn't really matter if we "officially" enter recession territory again or not - things are bad, especially in terms of jobs, and not improving, no matter what term we use to describe the current situation. So, to some degree, by saying "thank God we've avoided a double dip" (if in fact we do avoid one) we're ignoring the fact that things are still horrible and not getting better.

Stiglitz also pointed out that the economy needs to grow by 3% to 4% to get us out of the current "jobs deficit." And that, he says, isn't going to happen any time soon - at most growth will be 1% this year.