A casual reading of economists’ prediction in the media suggest that the United States may live through a recession that could last about a year — and maybe more — and that there will be a significant reconfiguration of the international financial structure waiting at the beginning of the recovery period.
The world, and particularly the people in the United States, have placed a lot of stock on the incoming administration and its economic plan that would allegedly motorize the heart of the economy by heating up de demand side of it while fixing up the nation’s infrastructure.
Doubts about the future are beginning to mount as the appointees to key positions are of a rather conservative ideological extraction, suggesting a perhaps tepid approach to a problem of historical proportions.
President Elect Obama insists that his view will be the prevailing one, meaning that his government will give a big push to the economy and it will work at restoring the financial system by implementing strong regulatory measures.
We are at a crossroads right now, nobody expects bold measures of the outgoing administration and we just have to sit in the waiting room.
One of the problems about waiting is that time accentuates the polarization of the socioeconomic structure because recessions tend to castigate workers with limited skills in a disproportionate fashion, think about the already precarious service sector, and by January the problem will be much greater.
The global crisis exacerbates the recessionary effect because, as our trading partners suffer, we will suffer as well via the multiple economic linkages, and the global crisis does nothing to improve consumer and producers’ sentiment about the future.
The magnitude and direction of the initial jolt of the economic rescue package to be implemented by Obama will shape the profile of the future because to a significant extent the new government will have a window of opportunity, albeit getting smaller, to improve the expectations about the future, and that would be, at this point, a much needed initial push.
Expectations are not everything, but the real economy is dramatically affected by the functioning of the financial sector and the confidence level of consumers and producers; and both feed into each other dynamically. Restore confidence and we may be able to make some inroads into the recovery period.
If China, the European Union and Japan do not fall down too deep into their own cycles and if nothing extraordinary happens in the developing world the Obama plan may have a chance to provide the initial spark, but those are big ifs. For now, sit on tight and knock on wood, there is much more water to pass under this bridge.
— Luis Brunstein
