Overselling a Recession

By February 26, 2008Economy

Rich Karlgaard, publisher of Forbes, contends that the public’s anticipation of a recession is based on four wrong reasons, identifiable and dismissable.

  • President Bush’s unpopularity: “The 70% who say the country is on the wrong economic track are merely expressing their Bush fatigue.”
  • Presidential election year: “If you belong to the out party–this year, the Democrats–your gambit is always to say the economy is in bad shape.”
  • Business press incompetence and fear: “The thin talent pool in business journalism combines with two other forces: Journalism is populated by left-of-center people, many of whom are hostile to business; and traditional journalism itself faces threats of disruption from the Internet, leaving business journalists in a fearful mood, which gets projected into their stories.
  • Trouble with numbers: “When reading about any business problem or challenge, how often do you see the problem stated in relative terms? For example, what dampens spirits today? The subprime mortgage mess. How big a problem is this? No one really knows, but so far banks have written off about $150 billion in bad loans. Now, $150 billion sounds huge. But it is only 1% of America’s annual GDP. It is also less than 1% of the market capitalization of U.S. stocks. In any typically volatile trading day U.S. stocks gain or lose $150 billion every hour. How often does one hear that?”
  • Smartest business columnist around…Put him in the Rough Rider Hall of Fame.

    (Hat tip: Norm Heikens, Indiana Business Journal.)

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