Gretchen Morgenson (New York Times) is out with an interview of Ian Shepherdson of High Frequency Economics. If his name rings a bell, he was one of the few economists sounding the alarm on the economy as far back as 2005. He wasn’t loud enough and was a bit too early, but he was right.
Shepherdson is now getting bullish as a result of the credit contraction for small businesses finally having come to an end.
The interview is a good read, one portion in particular caught my eye. Shepherdson says that this recesssion/recovery hasn’t been like anything we’ve seen here in the States but it could end up looking a bit like Sweden in the 90’s. This would be a good thing if it came to pass:
But Mr. Shepherdson says he does find parallels in our experience and that of Sweden in the early 1990s. The expansion of bank credit before the peak was similar in both countries. Furthermore, Sweden’s boom, like ours, resulted in rocketing real estate prices and overleveraged consumers.
When the bubble burst, both countries experienced similarly awful contractions. Gross domestic product declined 5.1 percent in Sweden at the trough, compared with 4.1 percent in the United States.
Mr. Shepherdson hopes that the Swedish experience on the upside also repeats itself in the United States. After Sweden’s output bottomed out in early 1993, the country began an upswing that soon became supercharged. The initial growth was at an annualized rate of 2.5 percent, but by the second year of the rebound, G.D.P. growth was 5.3 percent, annualized.
A stronger year 2 than year 1 for this recovery would be just what the doctor ordered. Let’s hope we get Swedish in 2011. There’s a lot of good stuff in the article about the potential for a resumption of small businss lending. The small business rebound is probably the most important puzle piece we’ve been missing so far.
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