Is the Recovery likely to be stable?

Ever since the early figures started indicating that the the Great Depression II period is getting over, many have expressed concern that it is too early to confirm if the Depression is indeed getting over. Some have suggested that the the recovery if any might be short duration illusion before the World econmy, if not at least the US economy slips again to recession - kind of a relapse of the symptoms of the deep economic sickness.
It is difficult to rule out the probabilty of the ensuing recovery being a temporary one for the US economy. But the indications of economic growth, even though job-less, are very strong for a continued recovery even if the recovery takes a long time to pick up. The great depression is almost certainly over. Recovery will begin after a period of stagnation. The period of stagnating at the bottom of depression may see a month's growth in economic activities not being sustained in the subsequent month for a while. But that would not mean that the depression is continuing: it would imply that the recovery was yet to gain adequate momentum due to frictional factors of changing output mix. Still there is good chance that the US economy will make a strong rebound in 2010 even if the unemployment rate does not dip fast.
However, the Communists would find it difficult to convince themselves that the end of capitalism is still not in sight when they meet for the first time outside Greece soon for their Eleventh International Conclave, this time in India which along with China has seen only a mild growt rate recession rather than recession in the economy, to consider alternative paths to economic prosperity in the World. Despite the strong economic stimulus packages all over the world including China and India, it is private enterprise and market mechanism that are bringing about the end to global economic meltdown accentuated by a financial crises. It would be difficult not to acknowledge that capitalism, private enterprise and market mechanism still work together within a Keneysian economic policy regime to make the World economy become stronger negotiating a sharp and quick decline in output and employment for most parts in this planet.

Those who predicted about the unsustainability of growing UD budget deficit, current account deficit and housing boom were correct but but they were not sure when the bubble would burst. The pessimists of the current times who fear that the recovery could still be an illusion are also correct but they are incapable of predicting with confidence how long the Depression will still continue. The common people have to make their own assessment.
The questios they would ask are as follows: (a) Are job lossess currently as devastating as they were soon after the Lehman Brother fell and until the first quarter of 2009? Is finding new jobs even if at lower wages becoming impoosible for all who have been thrown out of employment in the last 12 months? Are prices still rising at a very past rate to throw fresh sets of large number of people into poverty? The answers are certainly No for all three questions.
The capitalist, market economies are still in dire straits, but they continue to enjoy the best of ecopnomic standard of living in the World. They are still limping with high uemployment, negative or very low economic growth. The situation is bad all the more as their energy-intensive production and consumption baskets bear the pains of high petroleum prices. Their health care and social security remains under considerable stress along with considerable resource used up in security to meet the Islamic fundamentalists threat of the Al Queda and others.Yet, they are still in the forefront of technological progress and management competencies and individaul spirit of innovation and business risk taking.
They are still the main stay of the international market in goods, services, capital and technology- a market whose access is critical to the growth of the emrging mixed and communist economies like China and India. Communist economies today cannot live without the capitalistic market for international exchange. Communist and workers' parties have now become critically dependent on the grwoth of capitalist economies to keep the flags of communism still flying.
Godd news for them if Eoropean countries are seeing signs of recovery and the US recovery is hoping to gather momentum. More and more US people are registering as job seekers in anticipation of job opportunities arising sooner than later and some are indeed finding new employment. The hourly wage rates have stopped declining and unit labor costs have started falling with large gains in productivity. Consumer prices are rising marginally reflecting largely the impact og rise in petroleum prices. In sum, the western advanced capitalist economies are poised for a slow but steady reduction in the gap between full resources utlisation output and actual output in the near future and steady increase in the full employment output potential over the long-term. The fast rate of economic growth in China, India and Brazil will only add to the resurgence of the World economic growth over the next five years.
But despite all this the imbalances in the world economy and economies of major countries will continue to remain unresolved: Chinese citizens will continue to live below their economic standard of living potential by saving through surplus trade balance to benefit richer country citizens enjoy cheap goods of China. The US will hardly be successful in reining in the budget deficit and current account deficit or restore sustainbility of her health and social security systems. The US government and the other European governments with their profligate spending in wasteful activities will continue to be heavy drags on their national economic efficiencies. That would ensure that the Communists can hope for another economic turmoil coming soon in the major capitalist economies. For the immediate future however people would be too busy participating in the benefits of economic revival rather than thinking of revolting against capitalism as the villain inflicting increasing miseries to growing numbers.

Global Great Economic Depression II: Recovery In Sight?

In December 2008, I had written something on the two-pronged Crises of Financial Sunami and Economic Meltdown created by the Governments' intervention to disrupt market systems in order to make political popularity gains. I reproduced my writing on the subject as a post in this blog earlier this year. At the end of the post, I had hoped as follows:
"Looking Ahead
Economic Crisis would be corrected by the markets; faster, if the Current Big Keynesian-ism is consistent with market corrections and slower, if that is conflicting with market corrections. But consequences of both market corrections and Keynesian-ism will not be same for all countries and all sections of people. This may in turn cause conflicts that would cause recovery to delay. Hopefully, the large Fiscal stimulus/ bailout would help recovery starting in 18 months, i.e by July 2008. Hopefully, the peak unemployment rate in the US will settle at less than 11%. "
In October the US economy clocked an unemployment rate of 10.2%. With this information available in the third week of November, economists have become optimistic about the rising trend in unemployment rate tapering off soon. This is likely an the 11% safety limit that I had predicted earlier may not be breached, though the unemployment rate may still climb by a few basis points over the next 3 to 5 months. That indeed would confirm that the seeds of economic recovery have already been sown and the harvest period is not very far off when unemployment rate may start declining. But it may take a few more months before unemployment rate starts to decline and this decline will be slow in the begining for about 5 to 6 months. So, it is unlikely that unemployment rate will dip below 9% before the tird quater of 2010 and to reach back to unemployment rate og 5% it may take a furthe period of 24 to 330 months. In other words, the happy days of demand for labor outstriping available supply may not be reached till the beginning of 2013. Thirteen may turn out to be lucky this time.
But isn't this somewhat optimistic?
Yes, it may seem so but the Kenesian stimulus packages have worked once again to breath life again into market mechanism and capitalism. The hope and optimism lie therein.

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