Recession Over?

As September, 2010 comes to a close, the US Dollar continues falling to new all-time lows, now below 24 mg for the first time in history. At the same time, the National Bureau of Economic Research (NBER), whose Business Cycle Dating Committee is charged with defining when recessions begin and end, has announced that the recession that began in December 2007 ended in June of 2009.

Although they used many metrics to make this determination, the key was that US GDP peaked at the end of 2007, and made it's low in mid-2009.

"The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date."

I think a lot of people are confused by this report, to put it mildly. More accurately, I'd say that their BS detectors are on full alert! Unemployment, which was under 5% at the end of 2008, is now at 9.6%, about where it was in mid 2009. According to RealtyTrac, in August of 2010 lenders repossessed a record 95,000 homes, up from 76,000 a year earlier, two months into the "recovery".

Sure, stock prices have been rising, when measured in dollars. They peaked a few months before the "recession" began, and bottomed a few months before it "ended". But when priced in gold, they have been in a bear market since mid-1999, hit bottom in 1Q2009, and have been pretty much flat since then.
Dow Jones Industrials ETF in USD and Gold

But what about the key number used by the NBER, the US GDP? It shows "expansion" since June of 2009, as measured in dollars. But to get that expansion, a huge number of new dollars have been created and released into the US economy in the form of quantitative easing, targeted porkbarrel stimulus, cash for clunkers, bailouts, etc. And this shows up as a declining value of the dollar. If the effects of this stimulus on the economy are powerful enough to outweigh the drop in the dollar's value, all is well and good. Unfortunately, this is not the case:
US GDP in USD and Gold

A couple of Yogi-isms come to mind… "Slump? I ain't in no slump… I just ain't hitting!" And one of my favorites, "It ain't over 'til it's over".

'Nuff said.

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