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Todd Harrison: Grim economy suggests recession never ended



It’s been a wild week on Wall Street as an avalanche of information arrived in force — and not much of it was good.  Consumer confidence plummeted, the ISM manufacturing report missed by a mile and ADP Employment fell off a cliff.

European debt concerns continue to percolate, state finances are in disarray, Mideast tension is on the rise and Moody’s announced they will downgrade U.S Government debt if we don’t raise the debt ceiling.

These issues beg an obvious question: Are we heading for a double-dip recession?  Here are a few observations:

* For the last ten years, Central banks worldwide have printed a ton of money and encouraged the assumption of debt, hoping that a legitimate economic recovery would supplant the credit-led boom.

* The U.S dollar devalued 40 percent, and anything measured in dollars — gas, bread, gold — “benefited” from the decline of that measuring stick, which altered the collective perception of our financial reality.

* We outsourced our middle class for cheaper foreign labor, which was an unintended consequence of our push towards globalization. A chasm emerged between the “haves” and “have nots,” and the spending habits of the rich masked a more populous struggle to exist.

* In response to the first phase of the financial crisis, the government administered drugs that masked the symptoms (liquidity), rather than medicine to cure the disease (debt destruction). That’s like giving a drunk another drink with hopes he doesn’t sober up.

* They repaired the balance sheets of corporate America, but it was no panacea. While the powers-that-be synthetically shifted the DNA of the marketplace, they can’t artificially create housing demand or job growth.

* Risk has morphed from the financial to economic to social sphere, and we’re seeing that manifest through societal acrimony, social unrest and geopolitical strife. Economic hardship always has been a precursor to global conflicts.

* If government lifeguards saved corporate America in the first phase of the financial crisis — who will save the lifeguards? That is the primary concern surrounding a Greek default, as a massive derivative maze connects industrialized nations around the world.

* I believe we’re in the eye of the financial storm, although calm seas can persist a lot longer than one might expect — in fact, they already have, and we must respect that. The reaction to news is always more important than the news itself.

* Are we headed for a double dip? I would argue that we never truly “un-dipped." There’s a big difference between a stock market rally — which can continue — and an economic recovery, and until financial markets can stand on their own two feet, this question will remain unanswered.

* I will say this: Leaders coming out of a crisis are rarely the same as those who enter it, and the greatest opportunities are born from the most profound obstacles. This, too, shall pass. We simply need to go through it to get through it, and we’re going through it now.

Have a fantastic weekend. You’ve most certainly earned it.

Todd Harrison is the founder and CEO of Minyanville, an Emmy Award-winning financial media platform that educates, entertains and informs. You can read him daily at

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