Lately we've been entertaining the idea that there is no recession coming, or if there is one, it will be pretty shallow due to the fact that so many areas of the economy are at rock bottom levels.
Tim Duy at Economist's View (via Calculated Risk) makes a good opposite argument, using both qualitative ideas and numbers.
The first obvious point is that nothing is solved in Europe. The idea of Merkel and Sarkozy actually coming up with a plan in the next three weeks that does the trick is almost laughable.
But beyond that the numbers are a bit ominous.
We've never seen this chart, but it's interesting. It shows that M2 (money stock) has an inverse correlation with industrial production, suggesting — given the sharpness of the M2 spike— that industrial production is due to trail off dramatically.
chart
Duy also cites the ugly employment index from the ISM as possibly being another warning sign.
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