Well, 1966 was when Johnson dramatically escalated the U.S. troop presence in Vietnam. The country was divided and rancorous. But the correction took place with a very strong economy — real GDP expanded 5% during the market decline. Then in 1987 we had a huge correction that was based in part on liquidity drainage by the Fed, excessive valuation and program trading. But during that 33% slide in the market, U.S. real GDP surged at a 5.3% annual rate. The correction was not a statement about the economy. Then in August 1998, when LTCM was unwound and Russia defaulted, these were financial events. The economy grew at a 5.4% annual rate during that market decline. And also keep in mind that in 1966, the Fed cut rates 200 basis points and by 75 bps in both 1987and 1998. The Fed now has no bullets in the chamber outside of untested non-traditional policy measures. Not only that, but consider that during this latest market malaise, the U.S. economy has all but stagnated — inching along at a mere 0.8% annual rate.
Wednesday, August 17, 2011
Rosenberg Daily - Long Grind Ahead (Reprise)
Rosenberg's missive today is a tour-de-force. It is a wonderful recapitulation (appropriate word) of the overall current economic scene - housing, credit, employment, GDP and it's discontents, the market, etc. I wish I could reprint it all but as noted in our masthead, his missives are proprietary these days. The flavor of the whole is given in the last paragraph: