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January 17, 2008
When “the calendar flipped from 2007 to 2008,” talk of a recession “turned from if to when, how long and how deep,” says Caroline Baum in Bloomberg. Every recession has a slightly different flavor, but the 2008 one will probably look more like 1990-91 than 2001. In the early ’90s, the “villain” was “commercial, not residential, real estate,” but the patterns are otherwise very similar. The good news is that the 1990-91 recession was “short (eight months) and shallow.” But the bad news is that it took a long time for real estate to recover. The “even worse news” is that, with a current glut of retail space, commercial real estate “may be the next shoe to drop.”
If we do enter a recession, it will be the first one “in history caused by a bad mood,” says David Gitlitz in National Review Online. The U.S. is busy “talking itself into an economic downturn,” but it’s likely we’ll get through this “self-fulfilling soft spot” with our “durable economic expansion” intact. All we have to do is ignore “the media’s constant deluge of economic negativism,” fed by Wall Street bankers eager to convince the Fed to cut rates and save them from their “reckless bets on subprime mortgages.” The two-year-old housing slump hasn’t kept consumers from spending, and “the fundamentals remain sound.”
A recession wouldn’t be so bad, says Daniel Gross in Slate, if it finally convinced U.S. businesses to commit to “being aggressive players in the global economy.” Unlike past U.S. downturns, a recession here would be only “marginally bad news” for our trading partners. The U.S. doesn’t matter as much to the global economy “as we used to.” And if American companies don’t become more global, they’ll find themselves in “a zero-sum game.” So let this be a “wake up call for Americans to get passports, buy some Berlitz tapes, and start thinking of foreign markets” as more than “a place to source cheap goods or raise expensive capital.”
of The Week magazine.