Economists still think that there is a good chance that the recession will end this year. Indeed, most economists, according to a survey, believe that the recession will end by the 3rd Quarter of 2009. Yahoo! reports on what economists think:
About 74 percent of the forecasters expect the recession — which
started in December 2007 and is the longest since World War II — to end
in the third quarter. Another 19 percent predict the turning point will
come in the final three months of this year, and the remaining 7
percent believe the recession will end in the first quarter of 2010.
Even those who do not believe that the recession will end by 2009 feel that by the first quarter of 2010, things should be on their way up. Indeed, many feel that the worst is over for the U.S. economy, and that what is needed now is positive growth. (I wonder, though, whether Roubini or Krugman are among those surveyed. Neither of them seem to think the end of the recession will come so conveniently.)
It is important to realize, however, that the end of the recession is not the same as recovery. The end of the recession merely means that we no longer have consecutive quarters of a contracting economy. Recovery will come later -- but I'm sure President Obama hopes it comes by 2012.
At any rate, the end of the recession would likely mean prolonged U.S. dollar weakness. Right now, volatility has been rampant, and dollar strength gets a boost when uncertainty sends investors looking for safe havens. But an end to the recession would signal forex traders to start looking at fundamentals (like debt) and to start looking to earn higher yields through riskier currencies, resulting in dollar weakness.
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