Monday, May 25, 2009

From short and shallow to V-shaped - just make the medicine go down

A year ago we had a great new expression to describe the recession we were experiencing - "short and shallow". Remember that? In the US we love coined phrases and images that help us sort through this confusing world. It's a truly great image - short and shallow, conjures up a stream. Just step over it - you may get a little wet, but it will be over soon.

It felt great. Here is a forecast from David Nichols from Seeking Alpha on April 17, 2008:
"... almost by definition, a widely-anticipated recession will be short and shallow, and over soon after it starts."
He then proceeds to say (now remember, this is April of 2008) that inventories are tight and a slight increase in demand will get things moving quickly:
"So the groundwork for a short and shallow recession -- and a quicker recovery -- is actually laid down by pessimism about the future. Wednesday morning we received word that housing starts are the lowest in 17 years, and that is clearly a good thing for a speedier recovery."
OK. So things didn't turn out to be short and shallow. But as social psychologists will tell you, when the forecast we love so dearly and our actual experience are quite distinct , we often experience what's called cognitive dissonance. We then try to explain away this uncomfortable feeling with a new forecast and new images.

These days the image is the V-shaped recovery. It's a nice picture - the economy went down, and now it's going up. IMF has a wonderful V graph GDP forecast for every country - see chart below.

It will be interesting to see what images will be served up to us next year. All that matters is that they make us feel better - and are easy to swallow. Nothing depressing or complicated please. Just the V-shaped green shoots please.

No comments:

Related Posts Plugin for WordPress, Blogger...
Bookmark this post:
Share on StockTwits