Robert J. Samuelson chimes in with a column in The Washington Post that tries to make the case that this slowdown is just business-cycle-as-usual.

There’s a disconnect between what people see around them and what they’re told is happening. The first is upsetting (rising gas prices, falling home prices, fewer jobs) but reflects the normal reverses of a $14 trillion economy. The second (“panic,” “financial meltdown”) suggests the onset of something catastrophic and totally outside the experience of ordinary people. The economy, the New York Times said last week, may be on “the brink of the worst recession in a generation” — an ominous warning.

Perhaps, but so far the concrete evidence is scant. A recession is a noticeable period of declining output. Since World War II, there have been 10. On average, they’ve lasted 10 months, involved a peak monthly unemployment rate of 7.6 percent and resulted in a decline in economic output (gross domestic product) of 1.8 percent, reports Mark Zandi of Moody’s Economy.com. If the two worst recessions (those of 1981-82 and 1973-75, with peak unemployment of 10.8 percent and 9 percent) are excluded, the average peak jobless rate is about 7 percent.

Well, la-di-dah. No biggie, folks, so pipe down. Let’s just exclude a recession or two, and, you know, it’s not so bad, especially for me, the economist. Anyway, read it for yourself, but there’s a strain of easy-for-them-sayism that passes for perspective among economics writers that we find annoying. And since when are falling home prices part of the “normal reverses” of a $14 trillion (and falling) economy? Isn’t that how we got into this mess, because people thought home prices never went down?


On dropping sick policyholders

The Los Angeles Times continues its strong beat coverage of the insurance industry in general and health insurance in particular with a story on a meeting scheduled for today between California regulators and insurers over allegations that insurers improperly cancel policies after patients pile up medical bills.

The Department of Managed Health Care has been investigating the cancellation, or rescission, policies of three California insurers for about a year.

The paper says consumer advocates are afraid today’s closed meeting will result in insurers’ proposals getting a leg up. Included among them are the requirement that patients head to arbitration before court and the elimination of punitive damages. The paper notes:

In the first reported verdict in a rescission lawsuit in California, a judge awarded more than $9 million last month to Patsy Bates, a Gardena hair salon owner dropped by Health Net while undergoing chemotherapy for breast cancer.

The largest portion of Bates’ award was punitive damages. Evidence showed that the company paid bonuses to an employee based in part on the number and value of rescissions she carried out.

The OB loves good beat coverage.


How unusual is it?


Bloomberg this morning offers good perspective on just how unusual is Ben Bernanke’s Fed-led bailout of Bear Stearns. The story quotes Tom Schlesinger, executive director of the Financial Markets Center in Howardsville, Virginia:

“I can think of nothing in recent or distant memory that remotely resembles what the Fed is doing here, certainly within the context of the central bank’s operations.”

And Joe Mason, associate professor of finance at Drexel University:

“The Fed is so far outside the traditional bounds,” said Mason, a former economist at the Office of the Comptroller of the Currency, one of five federal bank regulators. “It isn’t innovative, it is taking a step back in time to a system of direct credit” where the government decides “who gets funding and who doesn’t,” he said.

Well, all right, then.


Bad hair year


Floridians are foregoing beer, taking $200 vacations and cutting their hair shorter because of falling house prices and economic fears, according to this story from the ‘Berg.

The hair thing caught our eye, too. But here’s the deal:

To save more than $1,600 a year, Roland said she cut her 14-inch-long hair to three inches so she wouldn’t have to pay for Japanese-style thermal straightening.

Got it. Roland is Rita Roland, a single mom, who moved from Los Angeles to Melrose Cove, Fla., for a slower pace and lower cost of living. Still, she paid $350,000 for a single-family house, her first. Think about that price for a second. That’s not outlandishly high, relatively speaking, but how many people can really carry that?

Big Bucks. Not

The WSJ on A1 points out that while the stock market’s ups and downs may fool us, it’s gone exactly nowhere in the last nine years.

The paper says the S&P 500 has fallen an average 0.37 percent a year since 1999 and that “some economists and market analysts worry that the era of disappointing returns may not be over.” Since the Dow Jones Industrial Average has less technology companies in its index, it has risen about 1 percent a year.

Conventional stock-market wisdom holds that if investors buy a broad range of stocks and hold them, they will do better than they would in other investments. But that rule hasn’t held up for stocks bought in the late 1990s or 2000.

Over the past nine years, the S&P 500 is the worst-performing of nine different investment vehicles tracked by Morningstar, including commodities, real-estate investment trusts, gold and foreign stocks. Big U.S. stocks were outrun even by Treasury bonds, which historically perform much less well than stocks. Adjusted for inflation, Treasurys are up 4.7% a year over the past nine years, and up 5.8% a year since the March 2000 stock peak. An index of commodities has shown about twice the annual gains of bonds, as have real-estate investment trusts.