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New Recession Feared

June 3rd, 2011

The economy is taking a beating lately, as fears rise that another recession is coming.

Do you think it may have anything to do with the fact that the party in control of passing the budget is repeatedly threatening to wreck the economy unless they are allowed to severely depress it? Or that this party, for the past two and a half years, has been fighting tooth and nail to beat back all attempts by the administration to stimulate the economy, instead insisting on measures that are guaranteed to (a) not create new jobs and (b) wildly inflate the deficit?

Nah. Couldn’t possibly be that.

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  1. Troy
    June 3rd, 2011 at 21:58 | #1

    well, this economy is just screwed anyway.

    people say “new recession” but that’s only because they’re buying into the economist spin that a recession stops the moment there’s a reversal.

    This is accurate at one level but if the economy utterly tanks into a Great Recession that is worse than any other postwar recession:


    any improvement doesn’t really mean much until things get at least halfway to recovered.

    Note that the 1982 recession was caused by the Fed:


    raising interest rates (red) to punitive levels to try to kill the economy (to stop wage-price inflation). Interest rates were at 15% (!) as unemployment went over 10%.

    In our case we’re at ~10% unemployment with interest rates at 0%.

    I think the current recession is entirely structural and is being driven by our trade imbalances with China, Mexico, and oil producers.

    China and Mexico are sucking $300B/yr out of the economy in trade deficits, same thing with oil producers. In the 1990s cheap stuff from China etc was a boon, as it allowed us to move up the value chain and use their output in manufacturing, and also stock our big-box retailers with affordable product.

    $4 gas is the major suck now. It is forcing people to not travel unnecessarily, and it is also pulling ~$200/mo/household out of our economy, money that may return as credit but not as paycheck money.

    The Republicans may be asses for not wanting to follow the Japan example of 20 years of recession.

    I don’t think they’re being honest about their obstructionism (which is entirely motivated by their “starve the beast” strategy), but their plan is to cater to the 80% who are surviving in this economy and writing off the 20% who are not.

    What they don’t apparently understand is that if they keep cutting it’s going to be 40% who are screwed.

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