Fodder for conversation at the holiday dinner table

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Next week is supposed to be a slow one here at Time, so I won’t be popping up on the Curious Capitalist super-often. Let me leave you with something to toss into the conversation when your family starts talking about the economy. No matter which winter solstice celebration you observe, I’m guessing it’s going to come up at dinner.

Since WWII, recessions have lasted 10 months on average. We hear that a lot. Our current recession started in December 2007. Even though this go-around seems worse that usual, that’s still a little cause for optimism.

Or maybe not. This week Merrill Lynch economist David Rosenberg put out a report—thanks for the tip, John!—questioning why we’d only look at recessions over the past 60 years. Yes, the economy is fundamentally different now than it was in the 1880s. Just like stock valuations were fundamentally different in the late 1990s (ahem). Rosenberg is a little less snarky about it:

This recession has more in common with the pre-WWII era. However, most of the data we have and most of the analysis still being conducted is done within the context of post-World War II cycles. That will not work, as this is a balance sheet recession and not just within the confines of the financial sector, but within the broad US household sector. This involves debt repayment and asset liquidation, and for the first time in recorded history, the entire $70 trillion household balance sheet is in the process of shrinking.

He then goes back to 1855 (a better timeframe for true historical context, he figures), and finds that recessions last an average 18 months. If his logic is right, then we’re not due for sunnier skies until mid-2009. Oh, and that would be assuming this is an average recession. Show of hands on how many people think that’s true?

The chart that goes with the argument is pretty neat:


As Rosenberg writes, since WWII, we’ve been spoiled. Maybe no longer.

To end on a cheerier note, I’d like to thank Justin, Mrs. Curious Capitalist and Curious Capitalist Jr. for my holiday present: personalized “Barbara!” stationary. That exclamation point looks even better outside of cyberspace.

Happy holiday!