Weed and feed

Most economists and financial pundits believe that the economy is still bad but is no longer in a "free fall." And that's probably true. For example, total financial meltdowns have fallen to an annual rate of 0.0 for 2009, a significant improvement over last year's rate of 1.0. Clearly, the recovery is just around the corner.

Or is it? Are those "green shoots" supposedly sprouting everywhere really just crab grass destined to be obliterated by the Weed-B-Gon of high yields on Treasuries? Or are they dandelions -- not terribly attractive but with deep roots and capable of spreading throughout the global economic lawn? And if so, wouldn't a rhododendron look nice over by the patio?

While economists ponder these questions, let's look at some cold, hard facts. First, housing prices seem to be at or near the bottom of their downward slope. If the real estate market really is poised for a rebound, then the rest of the economy will soon be chugging along nicely. Of course, economists disagree over whether we really have seen the bottom. In fact, many oppose the planting of a rhododendron and instead advocate a thorough dandelion-eradication program. Complicating matters even further is the emergence of a small, but vocal, pro-azalea faction.

At this point, it might be appropriate to suggest that the economists go off and discuss among themselves the merits of Belgian-block curbs.

The rest of us can get back to the serious business of determining whether the recession is near an end. To do that, we need to examine more facts. So let's look at consumer confidence, which is getting higher. And that's a good sign. Confident consumers tend to spend more money at Home Depot. The problem is, right now this greater confidence isn't translating into increased sales of weed whackers and limb loppers. Maybe we shouldn't have sent the economists away, after all.

No, no. We can figure this out for ourselves. It's actually quite simple: Consumers are confident, but there's a lot of pent-up demand out there. After not buying stuff for so long, it's hard to decide what to spend money on first. The result is a bunch of supremely confident consumers thumbing through Smith & Hawken catalogs unable to choose between a biostack composter or a new hydrangea to replace the one trampled by the Council of Economic Advisers during one of the group's notorious fact-finding trips.

But suppose housing prices are near the bottom and consumers eventually plunk down the old Visa card for an Awesome Auger. What will the recovery look like? In all likelihood, it won't be pretty. Googling "economic recovery" and "won't be pretty" produces more than 100,000 results. "Economic recovery" and "hubba-hubba" returns 478 items. Clearly, a consensus has emerged.

Will it make a difference? That's hard to tell. Most economists regard the 1994 recovery as particularly attractive. But such drop-dead gorgeous rebounds are rare. The 1983 recovery was widely regarded as kind of cute, while the most recent recovery was said to have a great personality.

Ultimately, though, a recovery is in the eye of the beholder. And that's why it's so difficult to gauge the health of the "green shoots."

Many shoots shoot up in inappropriate places -- say, between the cracks in the driveway. They don't belong there, and even if they could survive we'd want to get rid of them as quickly as possible and maybe replace the old concrete with asphalt or some nice bluestone gravel.

These issues, of course, are central to the question of whether the Federal Reserve is the appropriate agency to serve as a systemic risk regulator. Frankly, anyone who has seen the Fed's lawn recently would be reluctant to put the agency in charge anything more complex than mulching.

At the end of the day, however, facts alone will determine whether the recession is really over and a recovery has begun. Perhaps the most important fact is this: Bankruptcy filings by Big Three automakers are occurring at a rate of less than one per month.