Recovery or Not, Macroeconomic Fundamentals Remain Tough

Tom Foremski points to encouraging “green shoots” in Silicon Valley that Om Malik also has discussed.

We’ve all had enough of this downturn, and I understand the need for hope. Without it, we’d be dispirited or a lot worse. That said, any recovery, when it does arrive, will not be V shaped, or W shaped, or shaped like any other letter of the alphabet with a steeply ascending angle.

The macroeconomic fundamentals cited in the infamous Sequoia “RIP” PowerPoint presentation haven’t gone away. American consumers, who drive nearly 70 percent of the country’s economic activity (though some dispute that percentage), remain tapped out. More of them are without jobs than was the case before this punishing recession on steroids took hold. Given that we have slowly and somewhat imperceptibly entered a “jobless recovery,” one has to wonder at just how robust any such recovery can be.

Moreover, credit remains tight, new financial regulation will materialize, and some bankers actually are going back to being prudent bankers rather than being engineers of eclectic and exotic forms of securitized debt.

For our own sake, to avoid taking a bipolar rollercoaster ride from depression to elation and back again, we might want to temper our expectations. What we are experiencing is more than a standard-issue recession. A permanent reconfiguration of the global economy is occurring, that outlines of which can be perceived, even if much of it has yet to unfold.

Like old-fashioned bankers, we’d be wise to tread a prudent course.

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