by Calculated Risk on 7/10/2009 02:52:00 PM

From Robert Reich: When Will The Recovery Begin? Never. (ht Bob Dobbs)

The so-called "green shoots" of recovery are turning brown in the scorching summer sun. In fact, the whole debate about when and how a recovery will begin is wrongly framed. On one side are the V-shapers who look back at prior recessions and conclude that the faster an economy drops ...

Unfortunately, V-shapers are looking back at the wrong recessions. ...

That's where the more sober U-shapers come in. They predict a more gradual recovery ...

Personally, I don't buy into either camp. In a recession this deep, recovery ... depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery ...

Eventually consumers will replace cars and appliances and other stuff that wears out, but a recovery can't be built on replacements. Don't expect businesses to invest much more without lots of consumers hankering after lots of new stuff. And don't rely on exports. The global economy is contracting.

Eventually the economy will start growing again ... but I think the "recovery" will be very sluggish.

Reich suggests the only market for cars will be replacements - but the replacement level (based on scrappage rates) is in the 12 to 13 million range. And that would be a significant increase from the current 9.7 million annual sales rate. That is still well below the peak, but recovery is from the bottom of the cliff - and is not measured from the previous peak.