[fiaz]

I agree with the fact that we are in a "D-process", but I'm skeptical about the "long" part. Something new is happening with the widespread availability of information through multiple channels, and I think because of this our economic cycles are "compressed".

My prediction is that the rate at which businesses change/modify/adapt (especially in the financial sector) will be readily reflected in the information that is spread through multiple channels, resulting in a compression of the time frames of the current "D-process".

[numair]

You are ignoring rule #1 in the financial world: "Past performance may not be indicative of future results."

Don't worry, the entire financial world ignored this rule as well (which is precisely why I think this is likely to be a long downturn - rebuilding financial infrastructure is a long process involving lots of time and social work; you can't simply legislate it into being).

[fiaz]

I'm actually saying that the rule you have stated above holds true even more so if we take into account the high availability of actionable information. Take for example that with "TARP 1" all sorts of irritating loopholes were exposed in a very short period of time (how long did it take for the general public to be informed of the tax exemption for a specific type of arrow used by child archers??).

I want to emphasize that what I'm stating is that in the past, when critical changes took place, it would be some time before all of the information/knowledge of those changes propagated to everybody and this had an impact on the economic cycle (how long or short they were). In today's "Internet Age", the time it takes for changes to propagate is going to be reduced dramatically.

I should add that a direct consequence (and this is purely hypothetical but not unreasonable to include) is that the volatility of the economic climate will increase with the availability of information.

[kingkongrevenge]

The accessibility and volume of business data have been accelerating for over 100 years. Downturns have not gotten shorter. I see no basis for your hypothesis.

[nostrademons]

It seems like everyone involved - homeowners, banks, corporate executives, the government - has an incentive to drag this out, so that this quarter's results won't be as bad as they otherwise would be. (Or in homeowners' case, so they don't end up on the street.) Why take some pain now when the rewards will likely go to your successor?

[baguasquirrel]

If I poke you once each day it would probably be annoying, but you would keep on going on with what you were doing. But if I shot you with a .18 derringer, it could get serious.

Also see "livelock".

[whacked_new]

There seems to be some kind of "all other factors held constant" clause hidden here, correct?

The idea seems valid, but I paused to think why it didn't jive with the employment recovery rate plots.

http://www.williampolley.com/blog/archives/2009/02/employmen...

It seems the most straightforward explanation is... actually, I can't think of one, but I have three factors that seemingly count against your theory. 1. increasing income and purchasing power disparity. 2. changing attitudes and/or culture; then we can expect a new kind of "equilibrium curve" due to new consumer behavior. 3. age of previous buyer's generation (unsure about this one).

Also, speed of information is unbalanced with speed of physical processes; you can make an order and track a package of food with millisecond accuracy, but you will still remain hungry for as long as the delivery truck can drive.

Someone more knowledgeable, say something if you will.

[TrevorJ]

All the talk of timeframes reminds me of Asimov's foundation trilogy. (The coming dark ages, and the attempts to shorten it, the use of math to describe the actions of large groups of people which is basically what economics is.) Anybody else read this?

[magoghm]

My son is reading Asimov's Foundation trilogy, so I decided to reread it (I read it 30 years ago), and I keep noticing similarities to the current economic crisis and all the predictions people try to make.

[habibur]

Yeah! I read it. It was one of my favourate series of all time. Things are exactly as how you have described. I hated the robot series. But Foundation trilogy was a classic!

[TrevorJ]

I'm so happy other people have read it. It's bummed me out that the series isn't as well known as his other works.

[FlorinAndrei]

Good point, but I wonder how much of that is reality, and how much is Greenspan's mistake - you know, that we're entering a brave new world where the old rules do not apply.