The recession may not be over, but the recession narrative seems to be recovering


Earlier this month, in a blog post about things I no longer believe in (due to the current recession), I included “economic narratives” among them. In his book, The Black Swan, economist and author Nassim Nicholas Taleb describes the process one goes through of cherry-picking events or facts that neatly fit into an economic narrative that sounds completely plausible, but can be completely wrong.

We all do the “narrative thing,” so this post isn’t an indictment of the practice. Heck, this post and this blog (like all opinion-driven media) are exercises in cherry picking things that “confirm” what I observe and believe. (Fortunately, I’m old enough to know that my narrative can be based on a premise that is completely wrong — as discovering you can be wrong is one of those things that make youth less appealing than the hype suggests.) When we believe in something — be it that social media is the answer to all marketing challenges or that newspapers are going to be dead in a matter of months — our observation of the information stream flowing by us each day is sub-conciously filtered to help those things that back up our premise jump out at us.

It’s sorta like when you are thinking of buying a car (back when people did that) and you think you’ve chosen a model that not too many people drive. But as soon as you decide on that model, you see them everywhere you look.

Again, we all do it. It’s not only natural, it’s part of our DNA — but that’s a longer post.

Collectively, the news media of the mainstream variety move through such narratives. Since September 15, the narrative has clearly been that we are in the midst of “financial crisis.” According to the narrative, the crisis is more than a cyclical recession, it’s “the worst since the Great Depression.” To those “reporting” the economy, anything that supports the narrative is news, anything that challenges it is noise. Again, I’m in no way suggesting the narrative is wrong and I’m in no way suggesting the economy is not horrible, however, the determination of the historic ranking of our current economic woes will be up to historians years from now, and not up to those of us living through it.

While there are some who feel the need to have a narrative that has us never emerging from the current economic downturn, history is clearly on the side of those who believe that at some point, there is a bottom.

I believe one way to start sensing where the bottom is occurring is to look for reporters, analysts and anyone but those appearing on CNBC (turn the damn-thing off) to begin shifting the narrative.

Here are some things to look, read and listen for:

Recession winner stories: A new narrative includes stories that suggest the country may be going to hell on a Harley (I’m updating my “handcart” usage), but there are counter-cyclical beneficiaries of the downturn that are not doing so bad. Go-to stories: alcohol, Walmart, Bibles, candy, movies and any business that provides services related to homes and condos that can’t be sold.

Statistics stories without the caveat: During the past six months, any story that included even a glimmer of something positive would be edited to include a clause that went something like: Unemployment claims were less than expected last week, despite this being the worst economic downturn in the history of mankind. When editors start leaving out the “despite” clause, the narrative has shifted.

Stories about the role of psychology in economic cycles: For months, we have heard how the stock market crash and recession were caused by things that sounded rational, but because we’re mere humans, we can’t understand — highly technical and extremely complex, global financial factors that are way beyond our comprehension, you know, like derivatives and credit swaps. Now, get ready to hear how it’s “psychology” that is responsible. The new narrative will suggest that more than “credit swaps,” the “crash” was caused by our leaders scaring the beejeezes out of us and we all responded like people who have the beejeezes scared out of them should rationally respond — we started hiding in the basement instead of shopping. As I blogged the other day, prepare to read a lot about Robert Shiller, who will be described as “one of the only economists who actually ‘called’ the current economic meltdown.” Professor Shiller has written a book called, How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism and I predict he’ll be the rock star economist of 2009. (He doesn’t use the financial term beejeezes, however.)

Stories that challenge the premise that this is the worst recession since the Great Depression: When everyone from the President on down said we’re in “the-worst-recession-since-the-Great-Depression,” it was hard to argue anything else. However, historians who study these things will tell you that “worst” is in the eye-of-the-guy getting a bat hit upon the side of his head. This is certainly the worst event to hit the world’s global financial systems since sometime in the past, but the jury will be out for a while on how bad it really is/was. But because it is a banking meltdown and banking and media both have their unofficial world headquarters in New York City, could it be that the crisis may have been amplified a bit? And the “global” nature of the recession, could that not be more about the flat world we live in today, and not the relative severity of the downturn? I read blogs written in Europe and Australia every day, but I no longer even think that what I’m reading is global. This is my first downturn of such “flatness.” Is there such a thing as “not global” anymore? In other words, it may be the worst economy since the Great Depression — it certainly feels that way — but historians will determine that in several years, not pundits or people with political agendas.

Bottomline: My new reality has me cherry picking stories that cause the neo-narrative to jump out at me. So when I saw a story early this morning that had the headline, “Data fuels hope for US economic recovery,” I couldn’t refuse believing it.

Later: Thanks for the e-mail I’m receiving that is providing me links to examples of each kind of story. I don’t have the time to follow up this post with those links, but here’s a good example of the neo-narrative indicator, “the recession is bad, but not the worst since the Great Depression.”

Even later: Required reading: Nicholas Kristof on “Learning how to think.” It examines how we are willing to accept the predictions of “experts” despite their less-than-stellar record at success at it.

Later still: This post has received an instalanche of traffic.

  • Anyone wanna tell Clay Shirky?

  • edh

    With the narrative changing, however, if the recession “double-dips” as some predict, then it’ll be hard to switch the narrative back to anything but it being Obama’s fault.

    I’m sure they’ll try anyway.

  • Blake

    Well, I wonder if people are going to be upset when it turns out the change in “narrative” turns out to have been a huge lie.

    The economy is going south in a big way. You read it here first. We’ve only seen the first wave of the storm.

    We still have several problems.They are: the Chinese are unwilling to buy any more of our debt, we’re piling on even more debt, the commercial real estate market is overbuilt and the Chinese are holding more than a trillion dollars they’re going to be getting rid of.

    I didn’t list everything, either.

    You think the recent drop below 7,000 on the DOW was bad? Wait until it drops below 6,000 and keeps going.

  • @Blake re: The economy is going south in a big way. You read it here first.

    Are you suggesting you are the first to call the economy continuing downward?

    If so, I can point you in the direction of people who have spent the past 30 years predicting it. Again, your choice of selecting data points regarding Chinese holdings of our debt, commercial real estate or whatever are all the result of filters you’ve selected that help you see things in a certain way.

    You may be correct. My point is not an attempt to correct you. My point is to suggest that it is time we all learn more about how we process information and choose to hear that which helps reinforce what we believe and ignore that which doesn’t.

  • milesfromkansas

    Since I graduated from college in 87, there have been down years circa 87, 92, 02 and 09. Of the four this is the only one where I haven’t lost my job or couldn’t find one. My perspective is that this is the *fourth* worst economy since the Great Depression. The salient feature of today’s morass is the vast destruction of wealth, rather than job losses, high inflation and interest, or a contracting GDP. And who’s crying the loudest? The baby boomers… Remember, it’s all about them. It’s always been about them. Thank you, Dr. Spock.

  • Carl Pham

    I don’t agree in the slightest that we all filter facts to fit our narrative. That’s some kind of post-modernist ha ha we’re all liars kind of shtick, the same one the Big Liars use. Well, we’re all liars, so you can’t pick and choose on the basis of honesty, or correlation with reality — so instead, pick the narrative that you like! That serves a Greater Good! Like mine!

    Feh. I think most of us, most of the time, are just looking for facts. We haven’t made up our minds yet. We’re in no hurry, because we’re not paid to write opinions — and we don’t even blog our opinions. We just want to know where to invest our retirement dough, where to send our kids for school, whether it’s a good time to buy or sell our house. We’re not invested in one answer or the other to these questions. We don’t care which the answer is — we just want to know it as accurately as we can. So we sift the data, looking for clues, and we do it as best we can.

    Just because some of us are professional full-time liars, and all of use are part-time amateur liars (when we’re trying to explain to our dumpee why we’re dumping her, for example) doesn’t in the slightest bit imply that all of us are full-time liars. That is making far too much stew from one oyster.

  • Crap! Are the deals going to be over before I have the chance to capitalize on them?!?!

  • >>>>The new narrative will suggest that more than “credit swaps,” the “crash” was caused by our leaders scaring the beejeezes out of us and we all responded like people who have the beejeezes scared out of them should rationally respond — we started hiding in the basement instead of shopping. As I blogged the other day, prepare to read a lot about Robert Shiller, who will be described as “one of the only economists who actually ‘called’ the current economic meltdown.”

    I think it was co-created by 1) the market, 2) real estate meltdown, 3) credit and 4) the populous/business confidence.

    It would be interesting to read papers from Jan 22, 2008, which is when “US recession” spikes on google.

    Geoff Colvin of CNN theorizes on Jan 22, 2008 it was a savings glut around the world by “foreigners.”

    Google Trends for Consumer Spending just as an FYI: Would be interesting to see the period from Nov 30, 2007 to Jan 22, 2008 on the market

  • No breadlines or Hoovervilles yet. Well, not those inhabited by people who weren’t already plagued by really bad habits. Wake me up when unemployment is half of what it was in the mid-thirties. In the meantime, ask yourselves why we had to give a bunch of foreign banks money because AIG couldn’t. Oh yeah! The sky was falling. Right.

  • Blake


    If I had only one data point and it was marginal, I’d ignore it. I tend to take such things with a grain of salt.

    There’s too much to ignore at this point.

    As I said, I wasn’t listing everything that points to a financial armageddon for the USA.

    I discount everyone who was financial doom and gloom over the last 30 years. To me, they’re sort of like the Jehova Witnesses who were predicting the End Times thirty years ago. The Witnesses were predicting the End Times thirty years prior to thirty years ago.

    If there were enough counter-balancing data points, we wouldn’t be having this discussion.

    To paraphrase a writer who’s name escapes me at this point “make sure you buy a bunch of booze. That way, if I’m wrong, we can sit around, have a nice toot and laugh. Because I won’t care.”

    By the way, the current narrative seems to be “look, the market is up, we’ve weathered the storm, recession will be over the end of the year.”

    I’m saying that narrative is a real “head in the sand” approach and people are in for a rude awakening.

  • — It’s sorta like when you are thinking of buying a car… But as soon as you decide on that model, you see them everywhere you look. —

    Obama has been under the “is he a socialist or not?” perception since the fall of 2008. With recent comments of taking over companies that may fail and raising taxes (while the recession and economic fallout continues), is the label becoming ‘seen’ as a fact? Under this ‘filter’ are capitalists going to invest in Geithner’s toxic assets plan? Why expose oneself to risk when the reward is perceived to be taken (taxed) anyway?

  • Rex, this is an absolutely brilliant post. It gives my reading a lot to fine tune about. I read a blog yesterday in which the blogger claimed that the economy had seen the worst. On the same page there was the announcement of a 30% slash in the Florida budget and a slash of over 1000 jobs by a company. Same as Cisco CEO announcing that the company had seen the worst and economy had bottomed out and also saying that they would be slashing 1000 jobs.
    The narrative changes independent of the economy.