Okay, we've borne the brunt of an economic Katrina, but we're all being assured and reassured from Washington, the media and Wall Street that the current recession is on its last leg and we're on the verge of a lively and protracted rebound.
Says who? Such notable figures as Federal Reserve chief Ben Bernanke, Treasury boss Timothy Geithner and General Electric skipper Jeffrey Immelt, as well as most Wall Street economists and some talking heads at the business networks.
Obviously, many investors are swallowing this line of sunshine. Indicative, hordes have gone on a buying binge, in the process bidding up the Dow Industrials more than 2,500 points from their March lows.
Whoa there! Before falling hook, line and sinker for this economic guarantee from the happy-days-are-here-again crowd, you may want to weigh what seems to be some legitimate skepticism from a number of doubting Thomases. They're suggesting that after a brief reprieve, we're in for more hurricane weather, or specifically, Recession, Part 11.
Reflecting this thinking, several prominent economic voices are now calling for a double-dip recession--an end to the current one, a recovery of sorts and then a slide back into another recession. The latest big name to endorse this scenario is Harvard University's economic professor Martin Feldstein, who thinks a new downturn could kick off as early as this year's fourth quarter after the effects of the stimulus package wear thin.
A similar roller-coaster ride is also suggested by George Soros's former sidekick, global money manager Jim Rogers of Singapore-based Rogers Holdings. Rogers often predicts the economy and the stock market will go to hell in a handbasket. For now, though, he sees a temporary reprieve for the battered U.S, economy, but then a possible resumption of even stormier economic weather in 2010 and 2011.
Huge amounts of money have been poured into the system, so the people getting all that money will feel good for a while, Rogers observes. But in the end, he says, someone has to come up with all the money which people are now receiving. It must come from taxes, borrowing or printing, none of which will be good down the road. We will feel the effects and things are likely to get worse, he says, spurred by a resumption of the recession.
Why another economic hurricane? Because of gigantic debt, currency problems, taxes and inflation, Rogers says. In other words, the financial markets face new problems that will affect the market.
Interestingly, this is the first time in Rogers' life he's not short any stocks (a bet their prices will fall) because, as explains it, he doesn't see many areas of excess in the market. Likewise, we're having a powerful rally, which means, he believes, the market should be okay for a while.
New York University's economics professor Nouriel Roubini, who called the current financial crisis and recession and was widely ridiculed for being such an economic sourpuss, is a member of the Yogi Berra school which argues "it ain't over till it's over." And that's how he views the economy. Roubini, who had been saying he expects the recession to wind up by year end, now suggests any recovery will be temporary in nature.
Why so? Because this economic grizzly, who's been making the editorial rounds, is now proclaiming that we could tumble back into a recession in late 2010 or early 2011 because of shoddy or little job growth, ballooning government debt and rising oil prices. Roubini reckons we'll see puny economic growth of about 1% a year over next few years and he looks for the jobless rate (now at 9.5%) to peak at around 11%, leading to another 13% to 18% decline in home prices.
His projected low GDP numbers are particularly worrisome because GDP growth of at least 2.5% is generally required to produce a meaningful pickup in jobs.
British economist J.C. Spender, a professor of economics at the Open University Business School in Milton Keynes and a noted academic, thinks a double-digit recession is the most likely course from here. At this moment, he says, the downside economic risk is significantly greater than the upside potential. Spender figures if he's right about the double dip, it could well precipitate another financial panic, meaning, of course, more people will lose their homes and jobs and stock prices will head lower.
As he sees it, at this juncture there is no prospect of a sharp pickup in economic growth stemming from the consumer or consumption. Nor does he envision any action being taken to generate long term infrastructure spending as a means of invigorating the economy.
Given the stimulus package and more money being pumped into the system, Spender says it's now clear the financial system has been saved. But at what cost, who knows?
Ominously, he expects considerably more pressure on the middle class. The kind of economy sustained from 1950 to 2006, primarily driven by middle class consumption (such as clothes, travel, bigger cars, housing and massive spending on electronics) is basically history.
"We're never going to see the old days again," Spender says. "We'll have to find new days. We're looking at a new world, which may well be a frugal world with a higher savings rate."
Given the rising Dow and the bonuses, life may be okay for the Wall Street and Hamptons crowd, but in the real world, Spender says, the quality of life and the standard of living we've had in the past will fade and become a distant memory.
If he's right, how does he explain the huge stock market rally? Plagiarizing a well-publicized phrase from former Fed chief Alan Greenspan, Spender ascribes it to "irrational exuberance."
Call it, he says, "a desperation to want things to be better. But as I just mentioned, we're never going to see the old days again."
Dandordan@aol.com
http://www.huffingtonpost.com/stephen-c-rose/fear-of-a-double-dip-rece_b_246902.html
In sum -- the problem remains pattern language and the failure to understand it. Translation: Ending driving everywhere, creating communities of sufficient density to enable a recalibration of commerce in pedestrian communities.
Once investors at the stock-markets will realise, that their investments don't produce real growth but are only pinned as yet-another Ponzi-scheme against each other by the usual suspects on Wall Street (Goldman Sachs' microtrading, anyone?), they will withdraw their money from the stock-markets like hell again to preserve what's left of it.
And as soon as this happens, this actual, rosy-tinted bubble will burst and will leave only devastated land behind it for the watchful eye.
Will this depression get worse? You BET!
(And that's the only way to make a profit out of it!)
90 percent tax rate for everyone making 250 grand or more!
More taxation and or cutting programs will never get us any where near solvent. We have to have debt free currency
Yes, we have some bad times ahead. Also, we have some good times ahead. Exactly when? No one knows.
He is a liberal seeking massive spending on subsidized health insurance, higher prices for energy to stem global warming, and will not dare to reign in defense spending.
The problem is we are broke. Deficits of 1.8 trillion, IN A YEAR!
Right man, wrong time.
As for the above article, I read that for the past 30 years our wages have not gone up even one penny, yet our consumption has doubled. HOW? Because the stock markets have doubled, and more. Because housing prices have doubled, and more. Because our savings have gone down, allowing us to spend more. Because women have entered the workforce in greater numbers increasing family incomes.
Now we have borrowed ourselves into a decade of poor growth and stagnant wages.
Blame both the Democrats for the subprime mess as they WANTED more subprime loans to aid their working poor consitituents. Blame the Republicans who wanted Fannie and Freddie to profit and prosper.
Congress members here in Florida keep running ads on the tv telling us about all the jobs that have been saved or created due to the stimulas. There were tweleve teachers in Eustis and at least 22 firemen's jobs that were saved. Just look at the real estate market and foreclosures as getting better, oh, oh wait a minute...........there were teachers jobs and fireman's jobs that were saved.......the stimulas has brought us back from the brink................the stimulas is working and under budget......don't look at the man behind the curtain.