Economic Recovery?

Let me start by saying that this recession has led me to believe that there are only two possibilities for viewing economists and the discipline:

a) We never had a clue what we were talking about, our assumptions were all wrong, our models were wrong, and we got away with it because we were really lucky until now.

b) The structure of the economy has completely changed and our previously correct assumptions and models are now wrong.

Either way, I guess I'm saying that economists don't really have a clue what the hell is happening with the economy right now and it seems that no one wants to admit it.

The National Bureau of Economic Research typically uses the benchmark of two consecutive declining quarters of GDP growth in determining when the United States is entering a recession. The recession beginning in December of 2007 is rare in that it represents one of the few recessions dated without the declining GDP benchmark. Unlike the 2001 recession, which was declared a recession without two successive quarters of declining GDP, the 2007 recession has proven to be long and deep.

Generally it is more common for economists to reach consensus that we are in a recession than to reach consensus that we are recovering. There are multiple reasons for this but largely it has to do with which indicators different economists find most important.

GDP Growth: Those arguing that the economy is recovering right now are staking claim to the rise in GDP the last the quarters. Unlike most economic recoveries though, this GDP growth is not being led by consumers or private domestic investment which not only makes it unusual as recoveries go but also tenuous. Contributing to GDP growth was a spike in manufacturing prompted by record low inventories that will not be sustainable moving forward unless consumer spending recovers and drives manufacturing activity.

Housing Market Recovery: Other indicators garnering a lot of attention in this recession are new housing starts and housing sales, considered to be indicators of economic health because of the decimation of the housing market entering the recession. Unfortunately, these indicators are not universally indicating recovery with tremendous volatility in the numbers from month to month and considerable differences in housing market health geographically. Foreclosures are still increasing driving down prices in many markets and the tenuous stability in our housing markets is likely to fall apart completely when the homebuyer tax credit expires this spring. Housing market equilibrium will require some stability in employment since income and employment are the leading drivers of housing demand. An additional concern about housing market stability is that the impacts of the Federal Reserve’s decision to quit buying mortgage backed securities are unknown, even to its chair, Ben Bernanke who declared on February 25th that he is unsure of what it will do to markets and mortgage rates. In order for the housing market to indicate that the economy is recovering it first will need to achieve stability, and without stabilization in employment and declines in new foreclosures, this appears to be a considerable way off.

Employment: Often employment is considered a lagging indicator, meaning that economic recovery starts to gain speed before employment losses are recouped. This has been true in many of our recessions prior to 2007, but this recession has witnessed a sharper and more sustained decline in unemployment than the others. This means that pronouncing economic recovery from this recession based strictly on GDP may mean that employment recovery could be as far off as three or four years, representing the longest lag in modern history. According to calculations by the Department of Commerce, the United States economy would have to grow at five percent for the next year to reduce unemployment by one percent. In the fourth quarter of 2009 the economy grew at almost six percent, but the forecasts for the next year are much lower than that pace, indicating that employment will not be reaching pre-recession levels anytime soon.

Consumer Spending: Consumer spending is fundamentally the best indicator that the economy is recovering but it only indicates recovery it is sustained, one quarter of growth is not enough to indicate the economy is turning around. People have to increase their spending on goods for an extended period of time before it signals the rest of the economy to pick up the pace. There is a lag between demand at the counter by the consumer and the translation through the signals of the market economy to the producers to increase production. Despite the lag it is a remarkably efficient system and the best indicator we have that economic recovery will be sustainable across manufacturing, distribution, retail, services, and all industries that make up our economy.

Using consumer spending as a barometer we know that true economic recovery is not here yet. Until employment worries decline and labor markets stabilize, consumer confidence will remain shaken and consumer spending cannot be the harbinger of economic recovery. Unlike other recessions, employment may not be as much of a lagging indicator as a vital component of economic recovery.

It is important to consider that despite claims to the contrary, the United States economy has long relied on consumer spending to drive economic growth and recovery. Not only has this been sustainable for more than fifty years (see figure at top), it will continue to drive our economy moving forward. Economic recovery is not real without the consent of the consumer.

Prisoner as Warden

I hate the Federal Reserve. I don't know if I strictly abhor the concept or if the last 10 years of ridiculous policy has tarnished my views, what I do know is that I indeed hate the Federal Reserve.

With Bernanke's confirmation yesterday, I find myself really cranky. The main argument for keeping him in, elucidated by some economists I actually respect, is that there is no better alternative and any change would risk further collapse of the economy. Metaphorically speaking, this is like a spouse staying with their cheating, incompetent and abusive spouse because they are worried they couldn't do better and their world might be worse off in the short run. We know this happens all the time but it certainly isn't desirable and we have created institutions to help people out of these situations. Yet our Senate, an institution that could have gotten us out of this abusive relationship kicked us while we were down.

Is it fair to compare Bernanke to an abusive crappy spouse? I would say its kind.

Bernanke isn't the only culprit in the economic meltdown but he played an instrumental role in the Greenspan (I don't like him either) years and has his hands all over this crisis. Perhaps it is time to recognize that no one in charge of the Federal Reserve will be desirable in the Post OPEC world because of the inherent moral hazard in the Federal Reserve System. Letting Bankers regulate banks and letting bankers regulate monetary policy is a bit like letting the prisoners run the prison. It is a recipe for disaster.

In honor of my contempt for Bernanke, I offer the opinion piece that was published in July. I stand by it:

Federal Reserve Chair Ben Bernanke is on a roll. Beginning with a July 21 opinion piece in The Wall Street Journal and following up with two days of testimony on Capitol Hill, he has both stated the obvious about the economy and chosen strange words to describe his policy.

First, there was the reassuring message of the Fed having an "exit strategy" to control inflation. Typically we think of an exit strategy in military terms -- a plan to reduce further loss of lives and well-being. In the business world, we think of it as a way to minimize financial losses. When he describes an exit strategy, is he making the tacit admission that the Fed helped cause the crisis? It seems as though the inevitable conclusion is that the Fed has been at war with the very economy it intended to help stabilize.

To be fair, Bernanke outlines a plan. But the plan and tools available to the Fed aren’t subject to question. Nothing he has proposed is truly groundbreaking.
The important question is how he plans to pull off the timing of the exit strategy. This is the same man who claimed in 2002 that, “A particularly important protective factor in the current environment is the strength of our financial system.” In 2005, he boldly stated that the housing market was not in a bubble and would at worst be a localized problem. In November 2006, based on one indicator of increased auto production, he claimed the motor vehicle industry was improving. With foresight like that, is this really who we want to trust with the responsibility of pulling the trigger on our exit strategy?

I worry that Bernanke’s fascination with deflation, about which he has written and spoken extensively, has led to an overreaction in the wrong direction. First the Fed artificially suppresses market rates of interest, promoting debt and altering the debt-equity tradeoff for far too long. This has been disastrous for both businesses and households.

Then the Fed promotes the largest increase in the money supply in the last 50 years. Bank reserves are at an all-time high, and the bottom line is, this supply of money has to be reduced soon. The only way this cannot be inflationary is if the economy recovers quickly, and I simply do not see signs that will happen.
If one quarter, or even one month of improvement for a single indicator made Bernanke think we wouldn’t enter a recession in 2006, how can we trust him to recognize what recovery is, or when inflation is imminent?

It is reminiscent of the plight of NASA and the astronauts on Apollo 13. One miscalculation and you run the risk of ricocheting into space or burning up in the atmosphere. Reign in policy too late and inflation spirals. Tighten policy too soon and you stifle growth. The recovery of our economy and our risk of inflation is going to be based on calculations with little margin for error. Unfortunately, the less tinkering option of letting the economy correct itself appears not to be an option Mr. Bernanke or the Treasury has seriously considered.

One might argue that it is the job of our Federal Reserve chair to encourage optimism and reassure markets. The problem is, someone with his responsibility and power shouldn’t be simply a cheerleader for the economy and Wall Street. They already have people to do that – lobbyists. We need the Fed’s actions, predictions and voice to be cohesive and reliable.

Trying to reassure the markets using phrases like “rate of decline is slowing” and “tentative signs of stabilization” is not the same as saying you have the situation under control. I’m just not buying it.

Take This Job and Shove It (when the recession is over...but not before then, o.k.?)

I read an article on Tuesday describing how American's job satisfaction has reached an all time low and I can't stop thinking about how important this is. Often times we ignore information that is not readily quantifiable in favor of hard statistical numbers like GDP or employment. We do so at our own peril because often times it is this qualitative information that could tell us the most about the economy and our society.

I have really had only five jobs in my life. I started out working in my family's retail stores, worked as a bartender and waitress in college and graduate school, became a fisherman for a few years, worked as a loan officer, and have finally ended up in a position that I studied and trained for. There were things I loved about each of those jobs but when I stop and think about it, the things I loved most in each job were largely non-pecuniary. I loved the freedom of being on the ocean, the camaraderie in the retail and restaurant industry, and in academia I love that I basically get paid to get smarter and in turn, use that ability to make other people smarter. The only time that my pay was the most important factor in my job satisfaction was when I was a loan officer and working on commission. I tolerated a psychotic back stabbing boss, bitchy coworkers, hideous hours, and crazy customers because I made a lot of money.

My experience has taught me that money does matter in how we look at job satisfaction but the truth is it matters more to people when the non-financial factors are not favorable. One might tolerate lower wages if they like their coworkers, feel like they are valued by management, or find their job truly interesting. What happens if someone feels underpaid in an uninteresting job with crappy managers and obnoxious coworkers? The answer is that they are less productive and innovative. The more of these unhappy workers in a firm the less competitive that business will be. The more of these unhappy workers in the economy the less competitive the economy will be.

We know that incomes and wages matter in job satisfaction and in how hard we will work at our jobs but I don't think we have paid enough attention to the fact that the structure of the economy has been dictating a fair share of people's job satisfaction for some time. Most recently, we should have been wary during the economic "growth" preceding this recession because it was not accompanied by inflation. I know we are told inflation is a bad thing and it is when there is too much and it is artificially created but true economic growth should result in some inflation. When the economy is growing wages and overall demand should rise, resulting in some inflation. During the huge consumer spending expansion and the housing market growth from about 2003 to the middle of 2007 we really didn't have inflation to speak of and wages and incomes did not rise.

In a nutshell, the U.S. emerged from the 2000-2001 recession only to enter a period of economic growth that wasn't real. A vital component of economic well being is household income which reached a peak in 1999 and has not returned to that level. No wonder people are unhappy with their jobs: It's The Economy Stupid!

So people's incomes don't rise and they get crankier at work then we enter a recession and they feel trapped because there are fewer opportunities outside of their company. Then people fear they will lose their jobs and coworkers start behaving badly, management quits talking to the workers, layoffs happen and morale plummets. That can all explain why more than half of American workers are not satisfied with their jobs.

The real question is how do we fix this? It can't be solved at the aggregate level by a Job Satisfaction Stimulus Bill but it can be solved at the firm or employer level. The firms (or state agencies, universities, etc..) that will be most successful coming out of this recession will be the those that pay attention to job satisfaction. Individual firms cannot control the success of the entire economy but they can take control of their internal economics. These are the factors I think that matter at the organizational level:

1. How a firm handles layoffs. Those that layoff based on tenure and seniority will have issues. Innovation, productivity and adaptation are the keys to future success so layoffs should be handled in a way that focuses on retaining the best and brightest not the oldest and grayest. I think identification of critical workers who are key assets is monumentally important. It may seem counterintuitive and unpopular but organizations that trim the most fat will fare the best and do the most for the economy moving forward. Temporarily layoffs do hurt the economy and the morale at the firm level but this creates the opportunity to be innovative and responsive. It allows the business to better reward its valuable assets, the employees who stay, with higher wages rather than having the best and brightest have their wages constrained by the overall labor pool.

2. Awareness of Sense of Community. When there is a sense of teamwork and community within an organization productivity and innovation grow. A friend of mine who works for a Fortune 1o0 company calls herself a "true believer", meaning she agrees with the mission statement of her company, trusts completely in management's decisions, and feels she is a part of a team and something bigger than herself. If everyone were like her this economy would be productive as hell but I digress. Not everyone has this mindset when they start with a company, it needs to be cultivated. It is cultivated through the organization's culture and through both finanical and non-financial benefits to the employees. The culture from top to bottom must reward the same behaviors and must evaluate outcomes in a systematic manner, there cannot be different rules for different people based on status or tenure. Benefits, whether vacation and sick time or health insurance, must be balanced with wages and non-financial benefits like Ping Pong in the break room to create a place people want to be. This ensures that your top talent stays after the economy recovers rather than jumping ship.

3. Healthy Competition among Employees: When there are not clear directives and communication in a firm, unhealthy competition tends to emerge. This is where those who know how to play the game and manipulate get ahead at the expense of more talented people who don't want to play games. Healthy competition on the other hand makes everyone better and no one knows this better than sales professionals. A little competition that results in more recognition, more pay, or a few extra vacation days can go along way in promoting productivity and innovation. It's all about the incentives you provide workers.

I'm going to stop now with suggestions because I just realized that what was a simple curiosity about why people are unhappy at their jobs has turned into a management lesson.

Beyond the firm level though I think the decline in job satisfaction also means we need to look at our educational system and our expectations about the economy and work in general. Workers under 25 had the highest levels of dissatisfaction. This is due in part to the impact the recession has had on recent college graduates looking for their first job but may also reflect the fact that students educations are not a good match for the job market. This might mean that business needs to be more involved in secondary education.

I think its time all organizations care about the job satisfaction of their employees, if they don't they might end up like Initech.

*For the record I do like my job but if they take away my stapler bad stuff will happen.

Budgetary Driven Brain Drain

Iowa does not have a tremendous amount going for it in terms of natural endowments. We don't have booming natural resources, cultural and economic meccas, or universally desirable recreation areas. What we do have is an abundance of space, feed corn, and lots of nice perfectly linear roadways due to our farming heritage. We also have a lot of great educational institutions and a number of families with young future taxpayers that should be future resources. Perhaps unfortunately, many of our brightest leave the state for greener pastures and we bemoan that and refer to it by the ominous euphemism of "Brain Drain". Brain Drain triggers thoughts of aliens sucking our intelligence out with needle like instruments of torture but the truth is that a lot of that sucking is coming from the aliens we call Legislator, Regent, and Governor.

It is fashionable, and expected, for good Iowans to bemoan the loss of our youngsters and longingly recall the glory days of Iowa. In an effort to combat this, we throw tax money into tax credits meant to encourage job growth and creation to keep our youngsters here that not only does not create jobs for young people but more importantly drains the resources we have to benefit those young brains. We subsidize wine production, movie production, and numerous other activities in which Iowa does not and will not ever have a competitive advantage. We try and control the economy and control the market system that tells us where certain businesses should locate. This arrogant ignorance and the culmination of idiotic decisions and spending by our Legislature have meant that our state universities are taking unprecedented cuts in funding from the great state of Iowa.

Today we were told that on top of the approximately 12.5 percent decline for this fiscal year we should prepare for an additional permanent 20 percent reduction for next fiscal year. This will result in a little under 1/3 of the university budget from state funded resources to disappear in a two year period and with tremendous implications.

In an effort to deal with the decline in revenue, the Board of Regents has proposed a 6% increase in tuition next year despite the fact that enrollment projections were already lower. Do they not have an economist to explain elasticity to them? Most likely an increase of that magnitude, in addition to the recent increases and decline in services, will actually reduce overall revenue from tuition. The majority of our students are native to the state and their parents are struggling with the same economic conditions creating hardship at the university and then some. They are facing lack of credit and financial aid to pay for college education and are probably finding it difficult to keep the kids they have in our universities, let alone pay more to enroll new ones.

If the idea was to drive students to community colleges then I would say its pure genius because that will be an unintended consequence. If the idea is to drive college students to other states for education then once again, genius. If the idea is to drive our youngsters out of the state to get jobs instead of staying here to get educations, you got it, genius.

Let it be known, I am a proud employee of Iowa State University. I never attended a public university for my undergraduate or graduate work for the very reasons that are going to be exacerbated by these budget cuts. I had no desire for huge class sizes, classes taught by teaching assistants, and a very impersonal relationship with my educators and because I valued those things I missed out on some of the amazing research and talent that are housed at public universities. Due to budget cuts, more students are going to miss out on that opportunity and there will be less capacity to deliver high quality research and meaningful outcomes.

I cannot argue that all college education is valuable in monetary terms. If I'm honest I think there are a number of majors and disciplines that not only don't increase people's lifetime earning expectancies but might actually reduce them. Sometimes community college is the better option, I get that. Sometimes people over invest in education, I am about to become the Wikipedia entry for this phenomenon. BUT, Education has economic value beyond its value to the student's lifetime earnings. Education has a public welfare benefit that cannot be measured.

I also cannot argue that perhaps if the education and research we produce at state universities is valuable that markets won't intervene, they already do in areas that the economy dictates as valuable. A number of us at the University bring in private sector dollars to fund our research and salaries. The more we are encouraged to do this the closer we are to moving toward a private university system.

What I can argue is that Iowa's university system is one of the greatest things about this state. We should be grateful to have young minds in this state for however long we can get them, particularly since we don't have very many cool jobs to offer them once they graduate. The bottom line is if you value the public university system, you cannot justify another huge tuition increase and massive cuts to our Regent's Institutions. I can honestly say I would rather lose my job than see another tuition increase on students that will not solve the problem. Particularly when the economics of a college education are getting decidedly more negative with the lack of employment opportunities and the increasing costs.

It's time to decide Iowans. Do we want the private sector to take care of education? Perhaps. If not, it is time to demand that the state is accountable for the pillaging of taxpayers when it comes to our schools. We have great brains, great schools, and great opportunities in the area of education. Unfortunately, we have myopic and idiotic legislators and decision makers to muck that up.

Going Rogue: Why Must Stupid Rule?

The Newsweek cover is out with Sarah Palin prominently displayed in runner's attire next to the ingenious headline, "How Do You Solve a Problem Like Sarah?". The cover has been called sexist by Palin and a gaggle of Republicans and Palin supporters. One of the most common arguments against the cover is that it undermines her intelligence. Seriously? It seems to me that no one has undermined Sarah's intelligence more than she.

Sarah Palin does not have a competitive advantage in the brains department. How anyone could argue otherwise is beyond me. I would argue that attending 5 schools to get a degree in journalism and repeatedly speaking about the economy, structure of government, and world geography in a fashion that demonstrates she isn't smarter than a 5th grader is irrefutable evidence in support of my statement.

In Sarah's defense, it is obvious that you don't need to be an intellectual or well read to be elected to public office. Sarah Palin's popularity leads me to ask an elitist question: Why don't voters care that idiots are being elected? Why is it that Sarah Palin is popular because she is in touch with "Real Americans"? Why do we have the euphemism "Real Americans" to describe uneducated Americans who don't understand economics, political theory, or the United States Constitution? Why, Why, Why??

Now I do understand why pro-life supporters love her, truly she is the poster child for the movement. I can also understand why Second Amendment supporters love her; where else are you going to find a female politician that shoots Moose? The problem is that guns and abortion are wedge issues, salient with a small fraction of voters, and when politicians focus on these issues they do so at the expense of the issues that really govern the economy and our collective well being. Republicans know this. That is why they don't care if she's smart, she needn't be to serve the purposes of the party.

Because I know Republicans understand what her real role is, I was baffled at first by the notion that these are sexist attacks. Why make it about her intelligence when you cannot win that fight? After some consideration, I am of the opinion that Republicans are doing this to fool people into thinking she is smarter than we think she is. If you talk about her intelligence enough and cry sexism perhaps no one will actually question her intelligence.

In the ultimate irony, its a bit like what has happened with President Obama. Republicans argue that when they criticize Obama they are called racist, even when they have legitimate reasons for their critique. Now Republicans can counter every criticism of Sarah Palin with the argument that it is sexist. Brilliant!

The problem is that criticizing Palin isn't sexist. Criticisms of her are based on fact not sexism, much like most criticisms of Obama aren't racist.

Without sex, Palin doesn't get votes. White middle aged men love her because she is attractive and will help them keep their guns. If she were ugly she would be a political non-starter. She doesn't have the intellect, temperament, or savvy to survive in politics without her looks. That is not sexist, it is fact.

Sexism is better described by a situation where a highly intelligent and competent woman doesn't get the opportunity to succeed because she is a woman. If that woman doesn't get the opportunity to succeed because she is a woman and ugly than I guess that is sexism and uglyism combined. These women do not get elected.

Sarah Palin and the Republican Party should be grateful for sex* and female stereotypes. Without em, she's got nothin, you betcha (;

*And by sex I am of course referring to intercourse between a man and woman in a loving committed marriage with the intention of making babies.

It's Liberty For All, Not Liberty For Some

In the ultimate irony those comparing Obama to Hitler and suggesting our country is becoming a model of communism and socialism are largely the same individuals fighting for the ultimate move towards totalitarianism in wanting to ban gay marriage.

In Iowa where a ban on gay marriage was ruled unconstitutional, the masses are clamoring for the people of the state to be able to vote to add a constitutional amendment banning gay marriage on the ballot. This is the ultimate perversion of liberty by the same people that claim to fear the government and embrace liberty.

To let the majority remove the rights of the minority is the most dangerous path this country could go down. Since it is in fashion these days to compare the U.S. to Nazi Germany how is it that the comparison between the rights of homosexuals is not analogous to the systematic violation of the rights of Jewish people, free thinkers, and so called “undesirables” under Hitler’s regime. In Germany’s case the majority decided that the minority was not entitled to the same rights of property and life as the majority with horrific consequences. I am not suggesting we will move toward the grievous violations carried out in Germany against the Jews, but for a country that was based on liberty the violation is ideologically egregious.

In the interest of full disclosure let me state that I am a nerd and I would appreciate if you feign shock here. I carry a copy of the Constitution in my purse and have read it thoroughly multiple times. For those of you who haven’t let me promise you that nothing in the Constitution of the United States suggests that its residents should have the right to remove rights from other citizens.

To illustrate how ridiculous of an idea it is to allow U.S. Citizens to vote to remove the rights of their fellow citizens it is helpful to take homosexuality out of the equation. What if we replace homosexuality with stupid people? Would it be just to allow intelligent people to vote to remove the rights of stupid people to vote, marry, and procreate? Now I know I have friends out there who think this is a genius idea and while they may fantasize about the desirable outcomes of such a ban this would represent a fundamental violation of what the United States is founded on.

Now imagine, shouldn’t be hard to do, that the stupid outnumber the smart and vote to remove the rights of intelligent people. Totally different set of consequences and less palatable to those who would support removing the rights of stupid people. This is a slippery slope to go down and I believe our founding fathers would be appalled to see the perversion of their intentions in allowing votes like this to exist.

As an intellectual exercise you can substitute any group you want here. Imagine Republicans ban Democrats from marriage or vice versa. Attractive people ban ugly people or vice versa. Where you stand on those issues depend on where you sit, and one day you might find yourself sitting in the minority seat and without your civil liberties.

A great solution would be to remove government from marriage altogether and simply ban the role of government in sanctioning or promoting marriage. Since marriage is a contract between two individuals why should the government dictate who can enter into it? We don’t ban homosexuals from getting drivers licenses, entering into employment contracts, or buying homes; all of which are contractual agreements.

If you don’t believe marriage is a contract between two people but rather those two people and God then the argument is even more profound. Let individual religions decide whether they will honor contracts between homosexuals rather than the government. The U.S. was based on freedom of religion not the dominance of one religion and most certainly not the hijacking of the rights and privileges of its citizens by one religion.

It is time to focus on the real issues in this country and I promise you homosexuals are not the cause of them. Homosexuals didn’t destroy our financial markets, they didn’t attack the World Trade Center, and they sure as hell didn’t send us into two highly contentious military actions abroad.

The focus on banning gay marriage in the upcoming elections will do exactly what its proponents want and that is to promote fear and ignorance in the masses. Ironically that is the same formula Hitler used in Germany to carry out an entire platform of destructive social and economic policies.

This country is based on liberty for all, not liberty for some.

We'll tell you when its over

Perhaps more economists should watch the movie Animal House. If they did they would realize it is the drunken frat boys of the world who decide when something is over, not the head honchos in charge.

I heard an economist on the radio saying that the recession is over and perhaps it is time to tell the consumer. This, in a nutshell, is what is wrong with economists and the economics discipline.

In our Wall Street bashing have we forgotten that consumers run this economy? Consumer spending is two-thirds of our GDP and has been since the 1940's with little fluctuation in its share of economic activity. Economists don't tell consumers when a recession ends, the consumers should tell economists.

Any good economist knows our current "recovery" is based on federal stimulus whether directly in the form of government spending, or indirectly where government spending props up automobile sales like through Cash for Clunkers (Hate it) or housing throught the first time homebuyer tax credit.

Long term growth will totally hinge on the private sector and only long term growth in GDP is a predictor of consumer behavior. Joe the Plumber doesn't care that GDP is rising when his own income is falling: His consumption choices are based on his perception of his wealth and the likelihood it will rise or fall. I don't know anyone who says, "Hey GDP is finally rising, now I can go splurge on a big screen TV".

This is where economists really get things wrong. Describing economic activity in macroeconomic aggregates like GDP, doesn't really tell us what is happening in the short run. And as we know, in the long run we're all the Grateful Dead.

Economists have long forgotten or ignored what the economy is at its most basic level. It is a collection of individuals acting on their own self interest making seemingly unrelated decisions and trades. When these individuals are not worried about losing their jobs or the decline in their wealth due to the housing market and their retirements, they will spurn economic activity.

So as a consumer and an economist, let me tell the others in my profession: We'll let you know when the economy has recovered, and don't hold your breath.