"JUST BEGUN"

(Via Atrios)

Hannity's Mahvelous Economy is only going to get "better" in the coming months. One reason Hannity wants to deny the bad news about the economy is that it is VERY bad news for the GOP.

Big hit to economy from credit crunch, study says
By Greg Robb, MarketWatch
Last Update: 1:55 PM ET Feb 29, 2008

NEW YORK (MarketWatch) - The economic impact of the mortgage crisis and credit crunch will be huge, and it has barely begun, a new study prepared by several prominent economists and released Friday has concluded.

"Feedback from the financial market turmoil to the real economy could be substantial," it said. Unless they can quickly recapitalize, banks are likely to cut back their lending to consumers and businesses by more than $1 trillion, cutting economic growth by more than a percentage point over the next 12 months.

The findings were presented at a forum organized by the University of Chicago Graduate School of Business. Presenters included Jan Hatzius of Goldman Sachs, Anil Kashyap of the Federal Reserve Bank of Chicago and Hyun Song Shin of Princeton University.

At the forum, two top Fed officials -- Boston Fed President Eric Rosengren and Fed Governor Frederic Mishkin -- were asked to respond to the paper. Both said they agreed with the basic story.

"I agree ... that relatively small losses in one sector of the credit market can have outsized impact on aggregate economic activity if they case a disruption to the financial system that leads to an amplified impact on lending," Mishkin said.

FULL REPORT HERE

In fact, Rosengren said the authors may have underestimated the economic impact because of the risk of rising unemployment and a sharper drop in home prices.