U.S. economy stabilizing

It is with a bit of trepidation that I present results of a “recession” forecasting model, using NBER-defined recession, in the current environment, with the tremendous debt overhang and the bite it is taking out of consumer purchasing power, not to mention the increased saving rate in America, and the collapse of debt-pyramided asset values around the world.  However, the model captures the pulse of the postwar business cycle and has forecast the last two recessions in real time a year or more in advance, so I do believe it signals an intrinsic desire of the economy to return to some sort of normality, probably in the form of an L-shaped stabilization of the cycle in the near term, with perhaps some mild acceleration as measured by small gains on a small base in the intermediate term.  The bad news is that the politicians will probably not address fundamental problems of fiscal imbalance and maldistribution of income, debt and wealth (which I believe is the cause of the current crisis—the social contract is broken).  See Paul Farrell’s recent commentary on this.  As I mentioned in the post on confidence levels, I believe the depression will hit bottom in about five years.  The recession forecasting model should give ample warning of the oncoming collapse.