Alphabet of the recovery

Add another letter to the alphabet economists have created to try and predict the economic recovery. I was familiar with the “V-shaped” pattern historically followed during most downturns – a sharp decline followed by a quick rebound – as well as alternatives that more closely resembled “U” or “L” – the latter being a period of sustained stagnation. But some experts are beginning to believe “W” is the route our economy is most likely to follow on its way to recovery. (And no, that’s not some sort of slam on the guy who typically gets the blame for putting us in this mess…).

Their thinking goes something like this: As nations around the world attempt to spend their way out of the recession and central banks are printing more money, inflation once again becomes a concern. And, if or when the Federal Reserve decides to step in, economic growth in the United States may be due for another drop. Higher interest rates could slow recovery in the housing market and discourage people from buying boats, cars or anything else that requires financing.

Personally, I have about as much faith in these “forecasts” as I do when searching for an umbrella while listening to the local weatherman promise there won’t be a cloud in the sky.

But the Wall Street Journal ran an informative article earlier this week that outlines three near-term scenarios (Just Right, Too Hot, Too Cold) the markets and economy could follow during the second half of 2009. Ultimately, your guess is as good as theirs, but if you’re interested and are a subscriber the WSJ Web site, please click the link above. If you’re not a subscriber, do an Internet search for the term “Land mines pockmark” and you should be able to read the article in its entirety.

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