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recession myths

Newsweek Magazine has put out a list of myths that editors and analysts are seeing about the recession. There are five of them up there. The credit crisis is over: Globally, banks have already absorbed about $1 trillion in losses on mortgages and other bad debt holdings according to Jan Hatzius, chief U.S. economist of Goldman Sachs. That’s a startling figure, but his group’s models indicate the financial-sector meltdown hasn’t even reached the halfway point: Goldman expects another $1.1 trillion in losses. Until that bad debt is accounted for, the memory of the collapse of Lehman Brothers will stay fresh. All Industries Are Suffering: According to the story, not every company is reeling because of the downturn. Accountants at ExxonMobil, Apple and other large, thrifty firms are, for now at least, still smiling. The Dollar Will Collapse: In the first half of 2008, smiles were a rare sight among dollar holders. But rumors of the dollar’s death have been greatly exaggerated. The U.S. economy has been in free fall for more than a year now, yet the dollar has defied gravity since mid-2008. It’s climbed 25 percent against the euro and 41 percent against the pound since last year’s lows. Gold has fallen back to about $900 an ounce, and investors are pouring money into U.S. Treasuries and, by extension, putting their faith in the dollar. Credit Cards Are Killing Us: Consumer debt certainly isn’t a good investment these days; Innovest estimates that credit-card issuers ate $41 billion in losses last year, and will have to face up to nearly $100 billion in bad debt this year. But compared with the mortgage sector, which has already suffered $1 trillion in losses, credit cards aren’t nearly as scary as houses. Here Comes Protectionism: The stimulus bill’s "Buy American" clause worried free-traders, but it was ultimately watered down by the Senate. And while the World Bank says that trade will contract in 2009 for the first time in 25 years, the dip is almost completely attributable to the economic slowdown, not to any new trade restrictions. Read the article here

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