Soft Landing or Hard Takeoff?

Most economists are projecting a slow recovery lasting 3 to 5 years. Even Bernanke last week projected a 2 to 3 years uncertain recovery. To continue with my theory of a White Swan or Inverted Bubble (see previous posts), allow me to dig through comments made during the last real estate bubble.

Do you remember some years ago how the catch phrase “soft landing” suddenly picked up steam? In 2005, Ryan Ratcliff, an economist at the UCLA Anderson Forecast stated that the weakness in the real estate sectors will slow everything down a little bit, but not enough to get an actual recession. NAR's chief economist David Lereah said that the fact that the March 2005 figures were "holding close" to the numbers recorded in the strong rebound a month earlier "is additional evidence that we're experiencing a soft landing. We may see some minor slowing in home sales as interest rates rise, but the market is clearly stabilizing."

By definition, soft landing in the business cycle is the process of an economy shifting from growth to slow-growth to potentially flat, as it approaches but avoids a recession. It is usually caused by government attempts to slow down inflation.

Aren’t we hearing the same tune today, in an inverted sense? Aren’t we surprised how the irrational panic that is taking over the market keeps pushing beyond the breaking limit? Aren’t we taken aback by how intense this downturn is becoming? Well, these are all signs that when the market adjusts, it would not be a “soft landing” or in this case, “soft take-off”, but instead the market is bound to snap back.