Is That All There Is? A Green Shoots Retrospective

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I remember when I was a very little girl, our house caught on fire.
I'll never forget the look on my father's face as he gathered me up
in his arms and raced through the burning building out to the pavement.
I stood there shivering in my pajamas and watched the whole world go up in flames.
And when it was all over I said to myself, "Is that all there is to a fire?"

March 15, 2010, marks the anniversary of a special day. Can you guess what it is? Ides of March? Yes, but no. St. Patrick's Day? Too soon. Give up? It's National Green Shoots Day. That's right, March 15th marks one year to the day 60 Minutes broadcast Fed Chairman Ben Bernanke softly cooing in the ear of the market. It's been all clover and honey since then, as we all know. Unemployment up? Who cares! GDP down? Bah! CPI negative? Not to worry. Your house? Fuhgeddaboudit! Your meager, all-stock bonus? So sorry! (But that’s another story.)

You may be asking, is that all there is to a recovery? Of course not. Goldman Sachs has booked a unit every other day since then, banks in general are feeling much, much better, the threat of financial reform recedes in the rearview mirror, and the federal funds rate will remain exceptionally low for an extended period, thank you very much!

Is that all there is, is that all there is
If that's all there is my friends, then let's keep dancing
Let's break out the booze and have a ball
If that's all there is

If the anniversary slipped your mind, you can be forgiven. But last spring after the Bernanke interview, green shoots spread faster than the H1N1 virus, at least through media and finance circles. It touched the highest levels of government. Symptoms included an obsession with finding green shoots in the economy, repeating the terms "green shoots" again and again, and exhibiting a perhaps unwarranted and premature optimism in economic recovery. The bug was not self-limiting. For example, although CNBC's Erin Burnett claimed to get "nauseous" (sic) from hearing the term, she showed signs of a related illness, crocus ad nauseum. Uniquely, the infected presented these symptoms, and they made the rest of us sick. I became fascinated with this metaphor, and with finding its origins.

Robert Wachal, Professor Emeritus of Linguistics at the University of Iowa, first explained the geometric increase of its usage. “New coinages catch on quickly if they seem apt. This sort of metaphorizing is a normal thing. As speakers of a language we are often entranced by apt metaphors for characterizing something of current importance.” But was this metaphor apt?

Bernanke’s remarks had propagated green shoots en masse, but he was not this epidemic’s Typhoid Mary. A bit of forensic epidemiology/journalism was useful not merely in finding the carrier, but in understanding our circumstances one year after the outbreak.

Green shoots, in this recession, first appeared in Ireland or the U.K. I traced it at least to February 4, 2008, when Davy Research wrote of the Irish housing market, "We have seen tentative green shoots in the last month." (ISEQ to Continue to Outperform, Davy Business World) (Ha!) The disease may be endemic in the Anglo-Irish population. Antecedents for this outbreak can be found in an expression of Norman Lamont, U.K. Chancellor of the Exchequer from 1990 to 1993, who in the recession during his tenure saw "the green shoots of economic spring." Far from being a completely bullish indicator, green shoots also connotes unwarranted optimism. Lamont was perceived premature in his assessment, and when U.K. Business Minister Baroness Shriti Vadera echoed his statement this time around, she triggered an exceptionally virulent outbreak in political circles and the press, which charged the Minister with losing touch with reality. (Brown Finds Renewal in Crisis, FT, Jan. 27, 2009). Green shoots might be the equivalent of Jimmy Carter’s “malaise.” I worried: Did Bernanke know what he was saying?

Regardless, green shoots globe-trotted before finally touching down in America. Simon Johnson, former chief economist at the IMF, now of MIT, and co-founder of The Baseline Scenario, testified before the Senate Budget Committee to concern that a hypothetical mortgage subsidy program might be hard to unwind once “green shoots [appeared] throughout the economy.” (Fed. News Serv., Jan. 29, 2009). These remarks were the first usage of the terms I could find in this country.

With the anniversary of Bernanke’s interview upon us and the time for the Fed to unwind some of its extraordinary assistance in the mortgage markets close at hand, I thought a look-back in order. The Chairman declined my interview request. When I asked Dr. Johnson, he warned me against being too pessimistic. He noted that the compounding of confidence in green shoots might be a “positive network externality development.” Perhaps this self-reinforcing mechanism led to a tipping point for recovery. Peter Morici of the University of Maryland sang a similar tune when he told me that the economy “did get better.” (Honestly, that’s what he said.)

OK, Bernanke had not been whistling past the graveyard, and his interview coincided nicely with the markets’ turn. Undeniably, the roughly 70 percent rise in the equity indices on average is the Jolly Green Giant of green shoots. This is very cool, if you are among the 10 percent of Americans owning 83 percent of the nation’s financial wealth. If you should fall into the lower wealth brackets, mmm, not so much. Year-over-year home prices continue to decline, according to the most recent Case-Shiller data. This divergence is significant because if you are wealthy, your wealth tends to be comprised more of financial assets. If you are less so, as the Fed’s Survey of Consumer Finances and analyses by Edward Wolff and William Domhoff show, your home, if you own one, constitutes far more of your wealth. For the average African American and Hispanic household, home equity makes up 95 and 96 percent of household wealth. In short, the wealth gap is widening. And if you are also among the nation’s 14.9 million unemployed, chances are you’re getting DPed.

Last Friday’s jobs number was better than expected, evidence that the economy is poised to porpoise above the surface. But something just doesn’t feel right. Will it be a stratified recovery: the wealthy made whole indirectly through taxpayer largesse to financial institutions, and the literally poor suckers who bought homes in the bubble – to live in, even – set farther back? How much of the improvement or stabilization in the economy is due to extraordinary monetary and fiscal measures, and what happens as these are removed? The Great Recession, in the way it unfolded and the way it resolves, is going to have perhaps unprecedented long-term consequences for wealth distribution in America. And with the media now harping on the deficit, our burgeoning debt, and the specter of sovereign default, I’m feeling a little down. I’m asking, is that all there is?

I know what you must be saying to yourselves,
if that's the way she feels about it why doesn't she just end it all?
Oh, no, not me. I'm in no hurry for that final disappointment,
for I know just as well as I'm standing here talking to you,
when that final moment comes and I'm breathing my last breath, I'll be saying to myself

Is that all there is, is that all there is?

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