Friday, May 6, 2011

About That Double Dip Recession

You can spin the data any way you want, apparently. There were several articles published yesterday about the likelihood of a double dip recession. They tended to say that such an item is inevitable, and appeared to use contrarian logic to what I used yesterday. Here’s an example from Robert Stacy McCain:

Insofar as there is any really good news, it’s that the price of crude oil declined sharply – except that’s bad news, too: Investors anticipate declining demand for oil because they expect an economic downturn. Which brings us to my favorite bad-news headline of the day:

Double-dip recession is now undeniable

So, McCain is arguing that the drop in oil prices indicates a double dip recession, while my post yesterday said that increasing energy prices would indicate a recession on the horizon.

These seem to be contradictory statements, but they’re not. My post was showing how a recession may be coming soon. McCain’s post shows that it may be already here. Declining prices indicate that energy may have already reached the tipping point, and indicates a drop in demand due to slowing economic activity.

Of course, if it drops enough, the economy might pick back up. All this just shows that you can interpret the data in many different ways, but regardless of how you interpret it, our economy is not stable enough to handle any more pressure.

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