The next bug in search of a windshield and “Is it Bacon Day?”

The general theory is that the greater the debt, the more difficult the return after a recession.  Cause and effect is seen in the graph below.  The theory is that there must be a period of deleveraging after a debt bubble.  The higher the debt, the greater the deleveraging, the long the recovery.  After a decade of steroids, the economic patient is sick.  An example is Japan, (a bug in search of a windshield, Mauldin).  The lost decade for Japan will become the lost quarter century.  The academics should shift from studying the great depressions and look to Japan.

All I know is that this is NOT the greatest generation. What a bunch of idiots.  I hope that Obama, Boehner, Pelosi, and Reid start a business.  I’d love to short that stock and make a fortune!

http://www.calculatedriskblog.com/

Where does that leave the current recovery? It remains an outlier, as one of the few cases where output did not return to the level of the previous peak after the duration of the recession. In this it resembled two very different recessions, the Great Depression and 1990. Significantly, both of those combined financial problems and (real) housing price declines, albeit of strikingly different magnitudes.

The unanswered question, of course, relates to causality–tracing out the exact shocks, and their transmission, remains key. Must housing recover for the recovery to take off, or will the economy pull the industry along? These are questions for another day.

Also of great importance is the question of whether additional monetary stimulus could speed up the current recovery. Since the end of 2009, short-term interest rates have been close to zero. The Federal Reserve has gone through two rounds of quantitative easing and a maturity extension program designed to lower long term interest rates and stimulate investment expenditure. Yet the housing sector has not recovered, and residential investment has remained flat. This raises the question of whether further quantitative easing could make the pace of recovery more consistent with the depth of the recession. It is possible that forces other than looser monetary policy may be needed to instill recovery in the housing sector.

http://www.clevelandfed.org/research/workpaper/2012/wp1214.pdf

Also see http://www.forbes.com/sites/johntharvey/2012/12/21/our-christmas-gift-recession/ 

And, at least bacon is now good for you. Everything is Better with Bacon.

(Lisa) “I’m going to become a vegetarian”

(Homer) “Does that mean you’re not going to eat any pork?”

(Lisa) “Yes”

(Homer) “Bacon?”

(Lisa)“Yes Dad

(Homer) ” Ham?”

(Lisa) “Dad all those meats come from the same animal”

(Homer) “Right Lisa, some wonderful, magical animal!"

http://www.royalbaconsociety.com/

I had rather be shut up in a very modest cottage with my books, my family and a few old friends, dining on simple bacon, and letting the world roll on as it liked, than to occupy the most splendid post, which any human power can give.

Thomas Jefferson