I always get nervous when three or more people who don't study the economy or financial markets say exactly the same thing. This past weekend, it was a teacher, a lawyer and a doctor, all of whom proclaimed: "we're definitely headed for a double-dip recession!"
Every time someone says "double dip" I can't help think of a soft serve ice cream cone plunging into that delicious chocolate coating not once, but twice. That said, are fears of a double dip warranted?
One would have to be brain-dead to not consider the possibility of something bad--really bad, derailing the progress that has occurred since the beginning of this fiasco. Here's a just a few ideas to get you started: a commercial real estate collapse could make the residential market look like a walk in the park; unemployment could get much worse; a large multi-national bank bites the bullet; the Fed blows it; and the weekend favorite, this whole recovery is in your head.
Still, when lots of different kinds of people are talking about double-dips, or bubbles for that matter, those events don't usually occur. It's actually the opposite--when these same people are saying "it's different this time," or "we now understand how to better manage risk," or my favorite, "Jill, you're just too much of a bear to see the opportunity," that's when I start to really worry.
There are lots of reasons to expect that we're entering a slow growth economic phase, but I'm waiting for my three pals to tell me that the risk of double dip is nowhere on the horizon before I fully buy into the concept.
Image by Flickr User avlxyz, CC 2.0
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Les Leopold: Stimulus versus Deficit Reduction? Wrong Debate
You want deficit reduction? Then how about a wealth tax of 5 percent a year until the unemployment rate drops below 5 percent? That small tax on just 400 souls would reduce the deficit by about $75 billion a year.
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