It's very hard to turn on the news, or check your blog reader and not get hit my something by an Economist pontificating about the state of our current economy.
Face it, bad news sells.
What's interesting is that these people are now looking for the bottom, and they are also trying to figure out what the upcycle will bring.
Depressions are just as much about a depressed economy as they are about the collective state of mind of a given population. And, the problem with Economists is that they are very rooted in the past, so they dredge up all kinds of examples that look like what we are going through now to illustrate how things will go.
Problem is, there is no time like now. Really.
There are three or four major differences between now and any other period of history the Economists might point to. One is that the U.S. is not an agrarian-based economy, though it was during the 30s (and pretty much any time before that). Second, our ability to handle infromation is exponentially better, faster, cheaper than during the 30s. Third, we live in the Internet age, and not only do we have almost instant access to news and information, we also have instant access to our banks and firms we do business with (the Internet of the 30s was the radio). And fourth, and maybe most importantly of all, our population is just North of 300MM, whereas the U.S. was around 125MM in 1933.
These points all matter a great deal because they have a direct impact on a key financial concept, the velocity of money. This is a measure of how frequently money changes hands, or is spent over a given period of time. In a bad economy, and/or when people hoard money, this measure declines. When people are feeling good about the economy, this measure increases.
My theory is that because of these four attributes to our economy, our turnaround is going to look a lot like a light switch getting turned on, as opposed to a slow trickle that gradually swells into a river.
Now, this light that we will see is not going to be like the sun - it's going to be more like a light bulb. But, it will be a light, and it will get brighter, and much faster than is being predicted.
How much faster? Hmm, let's see here. Fast enough that it will almost guarentee that President Obama will be relected for a second term.