Lakshman Acuthan, Economic Cycle Research Institute, says a recession could begin by the middle of 2012. “It takes six months after a recession begins for people even to recognize [it],” he tells “Squawk Box.” Here is a direct link.
This clip is a wonderful study (albeit embarrassing to watch) of how infantile the mainstream CNBC-esque understanding is of market cycles. Joe Kernan and company are representative of almost all business commentator/hosts today. They understand next to nothing and yet they are looked to as “experts” in this field. They rail against the idea that we are entering the next recession because they think of recessions as unfortunate anomalies–like a 100-year flood. In fact recessions are a normal part of a full business cycle and during secular bear periods, recessions come on average every 3 years. We are now due for the next one.
The truth is that the seeds of the incoming cyclical recession were sown in the reckless excess of the stock boom period of the 90’s, and the credit orgy to 2006 (to 2011 in Canada). The economy is not about to blow up. It already did. We are now just moving through the rationalization, deflation and clean up phase. Central banks may continue to intervene, but the weight of the downturn has a gravity born of the dizzying heights of the bubbles before it. No governments or central banks can stop the process of mean reversion. And that is a good thing. The next organic secular boom period can only start after asset prices have been fully wrung out and capital can be efficiently redeployed in productive business ventures rather than extractive financial shell games. Wise investors will get out of harm’s way and let this process unfold in its due course.