John Cassidy, who writes about economics/money for the New Yorker, catalogs how the threat of self-fulfilling prophesies can knock our economy flat. The pessimists see our immediate economic future in one way and their very pessimism has an effect on the markets. The optimists (and there are plenty) kind of hope optimism will act as a driver.
So. Will we be seeing Roubini's double-dip ("W") recession? (And oh, my! That "W" is so appropriate!) Or are we already seeing Interest Rate Observer's predicted "sharp recovery"?
Others focus on destructive alternatives -- the purely political desire that Obama go into next year with a bad economy so Dems can be blamed and swept from the scene.
Cassidy likes economist Brad De Long's attitude.
If, as seems likely, the unemployment situation doesn’t change much in the coming months, you can expect a clamor for another stimulus package. Some reputable and well-connected economists, such as Berkeley’s Brad De Long, are already calling for one. We already know how conservative economists will react to these calls: they will dismiss them. Going into an election year, it will be more interesting to see how Republicans in Congress act. Will they do what they did this year, which was to grumble about the concept of deficit spending but then seize as much pork for their constituents as they could? Or will they take the obstructionist route, reasoning that, come next November, bad economic news will be good for their party? We may soon find out.
