Business

What is the shape of the economy?
by Magdalena Rosova

Wall Street analysts play with letters. They lead debate trying to predict the shape of the charts of the economy’s downturn and recovery.

The question is whether it will have shape of “U”, slump with a sharp upturn, or “V”, vertiginous descent and quick recovery, or shape of “W” that means double dip or shape of letter “L” which is long-term declination.

Wall Street is trying to make the bad situation look rather technical by talking about letters. So far the slump has caused record bank writedowns and home foreclosures, unemployment and &1.9 trillion in shareholder wealth went bankrupt.

The charts shows rise and fall of economic indicators over time, like real income, Gross Domestic Product, employment or industrial production. The National Bureau of Economic Research declares downturn and recession.

In past, recessions also followed some scripts. Recession in 1980 was quick “V,” next recessions in 1981 and in 1982 were more like “W,” while recession in 1990-1991 proved to be “U” and recession in 2001 was another “W.”

John Mack, Morgan Stanley Chief Executive, said in April that Wall Street was in its most difficult conditions in 40 years but noted that the global crisis might be at the end. Critics say this prediction is coming true.

The Wall Street Journal David Ranson called the economy a beehive. "The future of the hive does not depend on full employment for all the worker bees," he wrote. "In fact, an accident can put many bees out of action without compromising the hive as a whole."

"Good metaphors can help maintain perspective amid chaos," he added.


related story: http://www.star-telegram.com/business/story/859974.html

by Magdalena Rosova for PocketNews (http://pocketnews.tv)

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