President Obama really ought to watch what he says, particularly when he wanders from the point or purpose of his communication.

In a press briefing today with German Chancellor Angela Merkel, presumably not one intended to instill economic fear in the citizenry, Obama did just that, proclaiming that recent job figures do not mean a double-dip recession is imminent.  (But would it really be a “double-dip”?  I mean the “recovery” is getting a bit long in the tooth for a new recession to qualify as a double-dip.)  I bet most folks hadn’t much been considering that a double-dip was around the bend.  Then he advised that the key to the whole thing is to “not panic”.  What do people do when someone tells them not to panic?  Of course, their mind starts racing along with their heart and blood pressure, thinking that things must really be bad if someone that’s observing their situation is telling them not to panic.   

You could instill a panicked reaction by simply taking a hundred people off the street,–offering them money to answer some questions or something,–put them in an interview room and begin the interview by saying “Now, I don’t want you to panic”.  If you had ’em hooked up to monitor their pulse and breathing, I bet half or more would go into full panic mode just at the opening sentence.

The aggregate economy is weakening it seems.  This is to be expected.  Demand overshoots a bit the other way after it falters more than it should during a contraction.  This “recovery” was not much more than just a smoothing of the average economic activity. 

Incidentally, I use quotation marks around “recovery” because I hate the term.  There is expansion and there is contraction in aggregate economic activity.  Calling them recoveries and depressions or recessions implies the economy is a patient needing a prescription to get better.  Nothing could be further from the truth.  Aggregate economic performance is just an aggregation of the activity of all the individual economies that matter–households and individuals.  It has no pertinence nor bearing to any specific economic unit, which is where life is lived.  Economic performance in the aggregate is just an abstraction.

Indeed, there is no need to panic.  But there is also no reason for euphoria, or even for cautious optimism, that aggregate economic expansion of a vigorous and sustainable sort is around the next bend.  There can be no vigorous, sustainable aggregate economic growth when the households and individuals within it are a) already as rich as the citizens of the richest empires in history, and b) are growing, in aggregate, older and dying.  So, don’t panic and don’t fear the double-dip (why fear the inevitable?), but also don’t figure that this economic tree will grow to the sky.

Advertisements