The signal is that we are near the bottom. We are not out of the woods yet, there is a huge housekeeping work left to be done at the banks and other financial institutions. But, this time, it seems pessimism has beaten the market realities and the recession shock made us cut back so harshly that production is way below down the supplies. This has had a significant negative effect on the inventories and we shall soon be at a time when the upward cycle has to begin again.
CNBC is, of course, no God. Jon Stewart, on his Daily Show, was right - 'If only I'd listened to CNBC, I'd have $1 million today - provided I had started with $100 million'. However, it is indeed correct a stock market and commodities recovery leads a general economic recovery by 6 to 9 months, and after one year of this turmoil, we may be reaching the bottom.
I am aware this is optimistic. Because we have not seen the worst of the banking crisis yet. A combination of greed on the bankers' part and flawed policy on administrations', there is no full disclosure yet on what the banks are holding. So, any recovery or the hope of it can get torpedoed by another bank coming out now. Everyone seems to be thinking - like me - that we are near the bottom, almost there, and the gamble is if you can survive a few more months with the skeletons in your closet, you may survive. That is sort of a Fritzl syndrome - yes I am talking about the incestuous Austrian monster - who thought he would be able to pass his time with that hideous crime in his closet.
Besides, the other big risk perhaps come from the Euro zone, where a number of national economies are at risk and they can together bring the Euro down with them. Besides, the stimulus thinking in Europe was not as large or as bold as those in United States and Britain, and for all its flaws, Keynesian multiplier may have saved these economies for now and will leave Europe in the larch still.
My initial thinking, an year back, was that this is going to be a shallow recession. If we are at the bottom, and we start our upward journey now, it will indeed prove to be one. However, I also thought this one is going to be an unfinished recession, like the Great War of 1914 - 1919, and the effects of this will fully play out in a more brutal, deeper recession some years later. This will be because we shall not attempt root and branch reform if this recession was a shallow one. The thinking will move from monetarism to Keynesian policy, but we shall not acknowledge and accept the fundamental flaws of capitalism. So, we shall be back here again - don't know in how many years - and we shall have to face a much broader, deeper and more cruel recession.
That will be, I thought, capitalism's final winter.