Since We Last Spoke . . .
AFTERSHOCK UPDATE: THEY READ OUR PLAYBOOK, THE WORLD IS PRINTING MONEY
Since the most recent update of our outlook on the economy with the release of Aftershock, Second Edition, in August 2011, much has happened. The most striking change is that the stock market has recovered somewhat, up about 10 percent since its low in October 2011 as of this writing in mid-June 2012. In fact, because of that recovery a lot of people have been asking us, “Do you still think there will be an aftershock?” As if all we needed to wipe out the fundamental problems with the bubble economy was a 1,000-point increase in the Dow.
We understand how tempting wishful thinking can be. People naturally hope that the bad dream is over and all is on the upswing. And it is good that people are optimistic. But that outlook simply is not realistic in the longer term. Even in the shorter term, there are big questions looming. Could this be like 2011, which started very optimistically with hopes of “green shoots” (new growth) in the spring, only for those green shoots to wither and turn brown in the summer of 2011, if they really even existed in the first place? Plus, the stock market had external shocks from Europe, Libya, and the Japanese tsunami.
The same could happen in 2012: dreams of green shoots at the start and a browning out as the year goes on, although it is unlikely there will be an exact repeat of the year before. There are certainly many potential external shocks ...