The economy is growing.. we have now seen two quarters of positive GDP growth of a revised 2.2% in the 3rd Quarter and a 5.7% in the fourth.

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 5.7 percent in the fourth quarter of 2009, (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis.  In the third quarter, real GDP increased 2.2 percent.

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

That by definition is the end of the recession.. the Great Recession ended last summer.

I understand and read and hear that most people do not believe this.. but these are the facts.  DaveNWIL linked a good article on the Housing situation.

http://talk.newagtalk.com/forums/thread-view.asp?tid=148193&mid=1055362#M1055362

Within the article it talks about quarterly changes in Consumer spending noting that since the peak of growth Consumer spending has declined..

The question that still remains is when, or if, US consumers will return to pre-recession spending levels. Below are the quarterly consumer spending changes since the recession began:

2008 Q1) -0.7, Q2) 1.5,  Q3) -2.7, Q4) -5.4 2009 Q1) -6.4, Q2) -0.7 Q3) 2.2, Q4) 2.0

These numbers confirm that the worst of the recession occurred in the last half of 2008 and the first half of 2009. They also confirm that even though consumer spending has risen over the last two quarters, it has not recovered to pre-recession levels.

(from the article: http://www.investorsinsight.com/blogs/forecasts_trends/archive/2010/02/02/the-quot-catch-22-quot-housing-slump-is-not-over.aspx )

So Consumer spending is running at about a 90% level of what it was before the Recession occured which was above the long term sustainable growth.. aka a bubble.  We expect continued gradual improvement from these levels as the economy continues to recover back to the long term growth uptrend.. which isn't that far away considering we were above it before the recession.

Consequently businesses have adjusted to these events and shrunk payrolls to remain profitable which have caused unemployment to rise.  So we have added to the burden on government as less people are now paying taxes.  This is not unexpected.. and many economist look at employment as a lagging indicator of the economy.. things should improve (at some point) from here...  The article questions the viability of continued growth.. going forward.. but the facts remain that the economy is growing as of now... granted from a lower level then before..

The article does a good job of explaining how bad things are when the economy is contracting.. However, going forward we can expect the economy to grow.. Look at the incredible amount of government spending that has occured already as well as the low interest rate environment.. as well as most positive company earnings in this reporting season.  The economy is growing but from a lower level.. say 90% of where we were two years ago.

There is a very good chart in the article that shows since about 1963 New Home sales which contract of course during a recession.. the recession is over and we can now expect home sales to rebound.. the long term trend would be upward sloping.. there is no doubt that we were on the high side of that trend before the contraction and now coming out of the recession we are on the low side...  Granted sales may not "snap back" to pre-recession levels.. but they will improve from the depressed levels seen during the recession.

Given that 1.8 Million construction jobs have been shed in the housing sector we can understand that before New jobs are created in that area the pool of existing housing from Construction and foreclosure will need to be drawn down first.  Certainly areas (such as Vegas) will take longer to recover than areas such as Dallas which is already seeing Housing prices improve... up 1.4% from a year ago.  Many parts of the Country did not participate in the wild speculation that Vegas did so they do not have as far to recover to regain the long term uptrend in prices.. Denver, San Diego as well as San Francisco are ALSO seeing home prices already above year ago levels (read that statement again.. and look at the facts... home prices are moving higher in many parts of the country right now..)

http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us

The article talks about a big plunge in existing home sales but this is winter the "off season" for home sales during a "turbulant period" in the economy.. as interest rates stay low and spring comes.. we should expect home sales to improve.

In Ag we have witnessed a similar situation with the bankruptcy and forced sale of many ethanol plants.. During the building boom it would cost upwards and even in excess of $2.00 per gallon of capacity to build new facilities.. then after that bubble popped prices of existing facilities fell to as low as $.25 per gallon.. but have since recovered to about $1.00 per gallon or higher.. with many forclosed properties already sold and restarted.. as the existing pool of shuttered facilities continues to decline the cost per gallon to obtain capacity will continue to increase until we get back to the costs to build new... as will happen in the housing market.

Also as the article notes 75% of homeowners today have equity in their homes.. and this percentage should improve over time.

I had another conversation with my friend.. I got to talk a little longer than 5 minutes but again the biggest impediment to growth is Government.  The president proposed government spending $3.8 trillion dollars in a $14.2 something Trillion dollar economy..

That is over a quarter of all economic activity is centrally planned... and we call ourselves capitalists?  Does a Centrally planned economy perform as well as one where the economic decisions are made at the local level? 

Exhibit A: Collapse of the Soviet Union.

Any questions about that?

So we need to GROW THE PRIVATE SECTOR and LIMIT THE GROWTH OF GOVERNMENT... Again Government can help all the rest of us by FIXING ITSELF and limiting it's growth.  We need to radically shrink the budget deficit so that government borrowing does NOT crowd out the ability of the private sector to grow and return the unemployed to employment.

Government needs to get out of the way.  Many of Obama's "stimulus plans" include a massive redirection of the US economy through a Cap and Tax growth model and the generation of "green jobs"... however some are coming to the realization that green jobs.. are a net job loser..

Every “green job” created with government money in Spain over the last eight years came at the cost of 2.2 regular jobs, and only one in 10 of the newly created green jobs became a permanent job, says a new study released this month. The study draws parallels with the green jobs programs of the Obama administration.

http://michellemalkin.com/2009/04/13/spains-green-jobs-boondoggle/

The dollar has rallied recently by default as some currencies in Europe recognize structural problems to growth.. to much debt.. borrowed in pursuit of an economic nirvana based on a false reality of fixing climate change or... something...???  Basically BAD Policy.

We must not follow down that path.

ehoff noted in Dave NWIL's post that many banks are classified.. it must be noted that historical averages show that 85% of banks classified resume normal operations after a period of adjustment.  Margins have been good in this low interest rate environment and given enough time to see the stabilization in asset values.. and the steps to strengthen balance sheets.. most will recovery.. the peak of the storm has passed imho.  Just like the Ag Crisis in the 1980's growth resumed and land values eventually overtook even their pre-bust inflated values...  Someone who had the money to buy depressed Ag land in 1986 has more than likely made out like gang busters today..with values almost tripling here from those levels..  It is 1986 in the US Housing market right now... or at least pretty close to it.

However we need to redirect government to be responsible...  we can not continue to borrow up to 100% of GDP!!!  That is NOT sustainable.. job growth will come from the Private sector.. NOT government.

Are the politicians who lead us into the bubble the ones we want to listen to for solutions to lead us out?