Dismissing the double dip

July 16, 2010

With all the talk of double-dip recession and how many commentators are dismissing the chances as insignificant, here are a few nuggets from the Reuters polls we ran this week.

double dip 5.jpgRight now, the median probability of a double-dip is running at just 15 percent in the U.S., despite the fact nearly every single data point has turned decisively south in recent weeks. Financial markets are instead ogling financial firms still partly on life support or just off it raking in big profits.

For Britain and the euro zone, that double-dip probability is 20 percent.

But keep this in mind. The median probability of a U.S. recession we polled from economists in May 2008 was just a 50-50 chance. That probability fell from 60 percent in the March poll, around when JP Morgan swallowed up ailing Bear Stearns, as economists got more optimistic everything would be alright.

We all know what happened just a few months later. Lehman Brothers collapsed and the Great Recession set in.

So if economists are saying the probability of a double-dip recession right now in the U.S. is 15 percent, that’s not insignificant. You should assume it’s a lot higher.

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