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Interesting Ezra Klein post - also, look at the Charts of 2012. Also interesting.

There are days when I hit "send" on Wonkbook and feel a little guilty. It can be a lot of bad news early in the morning. "Good morning. We're doomed!" But not today. Today, Wonkbook is optimistic. Sort of. A little.
David Wessel puts it nicely in today's Wall Street Journal. "For the past year and half," he writes, "the U.S. has been caught in a tug of war. On one side is the economy's natural resilience. On the other are the long-lasting effects of a burst credit bubble and some bad luck—the oil-price spike provoked by the Arab Spring, the supply-chain disruption following Japan's earthquake. At the end of 2010, the economy's resilience was winning. In 2011, it gave ground."

But 2012 is a new year. And, as he notes, the early data is encouraging. Unemployment claims are down to their lowest level in more than three years. Housing starts are up. The stock market is bouncing back. Europe's latest round of bond sales wasn't a complete disaster.

"This could be the start of the much-hoped-for virtuous circle," Wessel writes. "The job market improves. Consumers have more income. Spirits and, more important, spending perk up. Meanwhile, weakening economies abroad keep commodity prices down and limit inflation in the U.S. With mortgage rates low and consumer finances improving, home prices turn up at last. Businesses, flush with cash, expand and hire more readily, offsetting the retrenchment by governments."

Of course, having spent about 130 words telling us what could go right, Wessel goes on to spend 350 words on what could go wrong. But I'm trying to be optimistic here. So I'll direct your attention elsewhere in the Wall Street Journal, where Gregory Zuckerman reports that "big money is starting to wager on housing. Hedge funds run by Caxton Associates LP, SAC Capital Advisors LP, Avenue Capital and Blackstone Group LP have been buying housing-related investments, betting on a rebound. And formerly bearish research firm Zelman & Associates now predicts a housing pickup, as does Goldman Sachs Group Inc. Other investors seem to be making the same bet. Shares of home builders are up 30% since the end of the third quarter, as measured by the Dow Jones index tracking those shares, topping a nearly 10.5% gain for the Standard & Poor's 500."

If housing really picks up, that could be a significant driver of recovery.

That said -- and you knew this was coming, right? -- I'm not making the case for optimism. There are too many storm clouds for that. But just as 2010 and 2011 were worse than forecasters expected, there are plausible scenarios in which 2012 is better than forecasters now expect. Let's hope.

In case you missed it: Wonkblog presents 2011 in 11 charts. Highlights include a popularity contest between Congress, Paris HIlton, and Huge Chavez, and Iowa in one chart.


Eric D. Schwerin
eschwerin@rosemontseneca.com

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