Talk to the banking and brokerages types with bullish economic leanings and they'll tell you in no uncertain terms that you've got to be bonkers to pay heed to anyone forecasting a double-dip recession.
Those who rule out a double dip generally insist the economy is on the upswing and that two biggest economic worries -- the housing bust and high unemployment -- will take a decided turn for the better before year end. They also seem to share the thinking of former Federal Reserve Chief Alan Greenspan, who argues that a double dip is unlikely. "Economic momentum is building up, it's just beginning, and it has a long way to go," he has stated.
That's not what you'll hear, though, from one-dogged tracker of world currencies, Bryan Rich, editor of the World Currency Alert, a newsletter out of Jupiter, Fla., who figures the myth being perpetuated by Greenspan is surely graveyard bound. Likewise, the idea of a 2010 recovery, he suggests, may be little more than administration and Wall Street hokum.
A key reason is the worsening sovereign debt crisis in Europe -- a distinct catalyst, he says, for slowing global growth. What's more, Rich contends another worldwide recession kicking off later this year in which he includes the U.S. is a much higher probability than the market expects.
In response to those who suggest the European Union's $1 trillion rescue package will help turn things around for the financial weaklings and foster faster GDP growth, he ridicules the notion that you can assign a GDP growth number in the midst of a growing financial crisis. Saddled with bloated debt and deficits, Europe, observes Rich, is as troubled as ever and global markets will suffer.
In other words, Europe's woes could squash our economic recovery.
His thoughts on Europe's plight are particularly relevant at this juncture, since a number of economic forecasters dismiss the possibility of a double dip, contending that Europe's debt crisis is beginning to ease. As proof, some point to recent successful bond auctions in Spain and Italy and the positive impact of the EU's $1 trillion rescue package.
Rich's view of such thinking: Hogwash! That package bought time and stabilized the situation temporarily, but it doesn't change anything structurally, he says. You need fiscal unity in the EU; you can't have each Euro country deciding its own fiscal policy because that puts them, as is the case now, on a crash spending course.
Adding to Europe's woes, Rich observes, European banks are stuck with a $1.6 trillion exposure to the financially troubled PIIGS (Portugal, Italy, Ireland, Spain and Greece).
Meanwhile, he sees the debt crisis spreading. The United Kingdom is next, he says, followed by Japan and the U.S.
Further aggravating matters, Moody's recently downgraded Greece's debt to junk status. Fitch has also gotten into the act, describing the UK's fiscal challenges as formidable, which has led to speculation the rating agency might soon cut the country's triple A debt rating. Still another country, Hungary, which got a $24 billion bailout in 2008, is in hot water. A government official there observed the economy was in a very grave situation, which has raised fears the country could default on its debt.
Rich is hardly alone in his double-dip concerns. Some prominent names are also hoisting warning flags, among them Ben Bernanke (even though the Fed is officially predicting 3% to 4% GDP growth in 2010), Harvard economics professor Martin Feldstein, the World Bank and Nobel Prize-winning economist Paul Krugman.
Krugman sees a 30% to 40% shot of a double dip in the second half as fiscal and monetary stimulus peters out. His view: Growth in the second half will slow as the Fed ends purchases of securities, the government's $787 billion of stimulus winds down and corporate America stops rebuilding inventories.
Whether we get another recession before year end is anybody's guess. But the 27 million unemployed Americans, the former owners of about a million vacant homes in search of buyers and the many thousands of people butchered by the British Petroleum oil spill will tell you it's already here.
What do you think?
E-mail me at Dandordan@aol.com
The 'mortgage programs' for homeowners were a joke. The GS hearings were a show, they're now 'negotiating' a settlement (like some kid who stuck up a gas station would ever be offered that opportunity), HCR made insurers rich (and Pelosi's promise to put in legislation to 'fix' coverage gaps for sick babies, etc., were never introduced), credit card 'reform' was preceded by jacked rates and collapsed lines of credit, and financial 'reforms' were killed or had loopholes...
Did I miss a 'reform' that didn't make the rich richer? If so, I apologize.
I guess ignorance is bliss...for now. Within the next 6 months, there will be MILLIONS OF UNEMPLOYED who will have exhausted ALL FEDERAL BENEFITS! MILLIONS.....WHERE are those people, many families going to turn?
I have no doubt that the REAL RECESSION hasn't even started yet. And as for all the "growth"...what a joke...nothing but smoke and mirrors. That was simply inventories being replenished and balance sheets bloated from laying off the workforce...a workforce that has nowhere to turn.
The "Deficit Ostriches" (Repugs and Bluedogs") have set everything in motion for this to happen. Terrifying.
It's the REPULICAN CONGRESS that will be sending this country into a TRUE DEPRESSION by denying the legitimately unemployed nowhere to turn!!!!
Yes, the administration is LYING about the real jobs picture, but that doesn't make it ok for that joke of a senator, McConnell to send families into object poverty and homelessness.....BUT THAT'S EXACTLY WHAT HE'S DOING!
I do hope the Repugs get their chance at "LEADERSHIP" again....They were the ARCHITECTS of this economic disaster.....LET'S SEE HOW THEY PLAN ON REBUILDING THEIR RUINS.
An 'electable' progressive independent candidate announcing for President would really mess up Obama's day, and the parties wouldn't be happy. Given that independents now outnumber either party and are the only voter block growing, the current voter anger and some interesting 'testing of the waters' recently, I think this quite likely.
Then all bets are off. We might even get public only campaign financing, and curtail the 'influence' of Big Money in our government.
The most stunning aspect of what is touted around as "sound economic policy" is the reality that most of it consists of very craven forms of fraud and deceit. These are crimes which entrap literally hundreds of millions of common citizens, making them all Plaintiffs, but there is no way to "petition the Government for the redress of Grievances" because the aforesaid Government has been turned, by overt bribery, so that it has become the Grievance; or, at the very least, the key enabler of it.
Our economy is decaying worldwide because it is no longer "worldwide." Everyone things it's positively Tom Swifty to export jobs to far away places where people will work for pennies. But the entire center of that juicy-looking apple quickly fills with rot and putrefaction.
There is only one way to address this: nations must concentrate on being able to create for themselves, domestically and locally, what they need. There are no "sole sources." We no longer "export money." We are aggressively creating redundancy, all around the world, and we are strategically trading our surplus ... not our own lifeblood; not any nation's lifeblood.
This kind of economic activity is not "wasteful" or "inefficient." It is "resilient." It needs no Government to sustain it: it sustains the Governments.
Behind this development lurks the cast of politicians who are convinced they have to improve "the economy" for the benefit of the commonwealth (the common good). At the beginning of this spiral things look really good so more must be better. "New" economic theories convince the gullible that this time things are different and that debt does not matter, after all it is mostly created in the local currency, or sloshes around the world as $, euro or yen. And all of a sudden the next wave of buyers does not materialize and the ones awake make it to the exit. There was in recent history the dot com bubble and in the US, GB and Spain it was housing. In Japan in the late eighties it was an idiotic raise in land prices in Tokyo. One shoe to drop may soon reappear in the "City of Gold". There is unfortunately not enough stupid money around to keep most over leveraged schemes alive. Organic growth is 2.1828 percent per year, everything else is perilous.