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Wednesday, August 20, 2003

No Historical Parrallels

"There’s no doubt that we are caught in a economic riddle; There are no historical parallels with which to compare this period to". This is the opinion of Barry " Big Picture " Ritholtz, and it's an opinion with which I entirely concur. There are no road maps here. It's a truism to say that every business cycle is different, but this one really is. My guess is that's because there is some long term historical structural change taking place under the ice-cap, but that's all it is, a guess. Barry also has some very clear graphics courtesy of the Cleveland Fed to back him up. This idea is further re-inforced by John from Colorado in a mail he sent me about my post earlier today where he says things may well be bottoming out, but with 'a new concept of what bottom means':

By the way the July numbers came out and they are trending the same direction as June. Interestingly, the numbers are up for INCOME tax, but way down for SALES tax. Overall things are going better, but not uniformly. Don't know if that is a general trend and something seen in other recessions, but it's very true for Colorado. That means the bottom for us in State government (we live on income tax), but the start of hard times for County and City government (who are largely funded through consumption taxes).

In Colorado, most services are actually delivered by local government. We in the state run labs for the local governement departments like health andlaw enforcement, act as a collection point and forwarding agent for sales taxes, but don't have much (on a relative basis) contact with the average citizen. If you kept your job, this last recession here in Colorado was relatively transparent, and consumption kept up. If you kept your job. With the inevitable cut-backs coming now in local government I think that transparency will stop. What the cycle will be for all of this, I can't say. But I think we may end up inventing new concepts for what 'bottom' means, and I see signs we
could be there for a long while.

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