A Billionaire, Big Bank CEO, and the Federal Reserve: Can all three be wrong about the economy?
Well, let's see what they've had to say recently:
- "Billionaire Warren Buffett said...the U.S. economy continues to improve and doesn't need as much government help as it is currently getting." (AP, March 2)
- "The US central bank has said the US economy is moderately improving, according to minutes of its latest policy committee meeting." (BBC, May 18)
- CEO of one of the country's biggest banks "...Sees 'Good Core Fundamentals' in U.S. Economy." (Bloomberg, June 17)
Now there's talk of a Great Recession 2.0 -- a "double-dip." That's a mighty fast reversal regarding the health of our economy.
What happened?
The stock market offers a big clue. Falling prices coincide with an increase in negative collective psychology. In turn, people increasingly focus on negative economic news.
The August Financial Forecast explains how mass psychology is reflected in the news during periods of optimism as well as pessimism:
"The countertrend rally in stocks that started in March 2009 produced a revival of optimism and thus a temporary reprieve of the great credit squeeze, but economic activity is once again flagging...as stocks turn and headline warnings start to swirl. Once again, the process is ready to feed on pessimism. If anything, the latest barrage of “Debt Crisis” admonitions is even more pronounced than it was in the summer of 2007."
The Financial Forecast goes on to list examples of those "admonitions" -- in stark contrast with the "economic news" and opinions mentioned at the top of this article.
Will pessimism continue to grow? Is "recession" too mild a word to describe what's ahead for the economy?
We've already seen how fast financial and economic conditions can change.