Its the Credit Markets Stupid

TW: That should be the message to the House Nays. Some of you have ARMs based on Libor. Libor has risen roughly 1.5% in the past week. Credit markets are basically frozen. This is not about the stock market. Some say the economy is doing okay. The stats on economic growth are slow to emerge. We are in recession, count on it. And recall the numbers below do not integrate the latest financial heart attacks we are absorbing. To be clear, this is not about avoiding tipping into a rinky dink recession with a few quarters of minimal contraction (i.e. the only type recessions we have seen since 1974). This is about a big time double digit contraction spread across several years.

From Floyd Norris at NYT:
"Consumers did spend some of their stimulus checks this summer, but the August personal spending numbers that came out today indicate that there was no carryover. August was the first month that a substantial number of stimulus checks did not go out, and the slowness in spending makes it likely that the third quarter will show a decline in gross domestic product.
If so, that would be the second decline in four quarters. Robert Barbera, the chief economist of ITG, is more bearish than most, saying the quarterly figure could be down more than 3 percent.
If it fell more than 3.4 percent, that would mean that real G.D.P. was down over a four-quarter period, something that has not happened since 1991.
That would end the arguments over recession. (I think it is clear that a recession began in late 2007, or at the latest early this year but that is not the consensus view. The official definition of recession does not require two quarterly declines in G.D.P., but instead relies on other indicators of economic activity that have been weaker.)
The first estimate of third-quarter G.D.P. growth is to be released Oct. 30, less than a week before the election.
Whatever happened to those economic fundamentals that were supposed to be so strong? Wasn’t this credit crisis supposed to be contained a long time ago?"