Tuesday, July 21, 2009

Harvard’s Feldstein Sees Risk of ‘Double-Dip’ Recession in U.S.

Marty's on top of things.

The U.S. recession may not be coming to an end and there is a risk the economy may experience a “double-dip” contraction, said Martin Feldstein, a professor of economics at Harvard University.

“There is a real danger this is going to be a double dip and that after six months or so we’ll have some more bad news,” Feldstein, the former head of the National Bureau of Economic Research and Reagan administration adviser, said today in an interview on Bloomberg Television. “We could slide down again in the fourth quarter.”

The economy could “flatten out” or “even be positive” in the third quarter, and then it’s likely to contract again in the last three months of the year as the effects of the federal stimulus program wear off and companies finish rebuilding inventories, he said.

“There isn’t going to be enough to sustain a really solid recovery,” he said, even though recent data has provided some “good news” on the economy.

Marty sometimes comes off sounding like the Keynesian he is, but don't let that fool you. Last year, when I asked him my favorite trick question, "Do you know what money supply growth is now?" He had to stop and think for a minute, but he was one of the very few that answered correctly.

The only place I differ with Marty is in timing. Marty thinks it will take six months before we dip again, I think we are at the edge of the cliff now.

1 comment:

  1. So what's money supply growth now? Technically positive, because the Fed is buying assets? Or functionally zero, because banks aren't relending?