U, V, Or W?

In any capitalistic society, recessions will occur.  When one does, the question for economists is whether the recession will be in the shape of a “U” (that is, a downturn where economic activity remains depressed for an extended period before conditions improve), a “V” (where the downturn is very brief and quickly followed by a sharp upward movement), or the dreaded “W” — where a brief uptick is followed by another downturn, before conditions finally improve much later than expected.

The current recession has lingered too long for a “V,” so the choice is between a “U” and a “W.”  The fear of the “W,” and what another downturn would mean for consumer confidence, the availability of commercial credit, and job growth, is why economists are carefully studying every unemployment report, supplier confidence index result, and other economic measurement and indicator.  The most recent unemployment report was not encouraging.  If you look at the chart accompanying the linked articles, do you see the beginning of the second downward slash to the “W” — or is it just a statistical blip on the road to recovery?


A Real Clunker (III)

The Wall Street Journal takes a look back at the “Cash for Clunkers” program, and pronounces it a dismal failure.  The program clearly caused a one-month spike in new car sales, but sales dropped sharply in September, to a point below last September’s sales, and many now believe that the program simply gave people a monetary incentive — funded with tax dollars — to trade in cars and make new car purchases that they would have made in the near future in any case.  In the meantime, many functioning cars were converted to scrap, the used car market was affected as a result, and the federal treasury was depleted to the tune of billions of dollars.

Other than that, it was a roaring success!