Economists and analysts have said that fear is building as the possibility of another recession looms. We certainly wouldn’t disagree with the fear factor, but we maintain our position that the recession, which began in 2008, never really ended. Mainstream economists will argue, fruitlessly, that positive GDP growth over the last two years proves the recession ended, but as was pointed out in Global GDP Growth Numbers are Fictitious, the official statistics fail to account for the real rate of inflation. When you count the rise in prices across the board, we’re in recession – and we’ve been there since at least 2008.
But, for the sake of argument, we’ll humor the mainstream, and give them the “official” position, which says that fields of green shoots spread across the country in the summer of 2009, and continued to bloom throughout 2010 as the stock market came roaring back. (We won’t mention falling real estate prices, record foreclosures, rising unemployment, an expanding food stamp participation rate, destruction of personal credit and overwhelming national debt – no, we won’t mention those – just focus on stock markets and GDP, please, because we need to think like the experts.)
As experts, we would then be looking at the one and only factor that really means anything – and that’s consumption. And, according to the Washington Post, it’s this particular aspect of our economy that is now putting us on the brink of the oft feared double dip:
More than two years after the recession’s official end, people are driving their cars a year longer, holding back on jewelry and furniture, and swapping brand names for cheaper store brands at the supermarket.
More ominously, the once sturdy optimism of Americans appears to have crumbled, according to one key measure. Breaking from precedent, Americans no longer believe they will make more money next year than this year, according to the University of Michigan’s Surveys of Consumers. These expectations used to rebound after recessions; this time they didn’t.
This crisis of confidence, a departure from long-standing expectations of rising American prosperity, is spurring millions of small consumer decisions that collectively determine whether businesses should expand, and in turn whether the recovery will continue to falter.
Confidence. The whole system is built on it. And, based on recent consumer sentiment surveys, the confidence is dissipating. People are scared, they’re uncertain, and they’re responding by holding on to what little money they have left, as opposed to spending it on $10 million dollars worth of vacations like our first lady has done. This, says Moody’s chief economist Mark Zandi, is a self-fulfilling prophecy. The likely result is lower sales for businesses, more layoffs, and even less spending – a vicious economic cycle that no amount of stimulus and propaganda can reverse:
That could begin a cycle of dismal expectations and set off another downturn.
“It could be the only recession that we actually will ourselves into,” said Mark Zandi, chief economist for Moody’s Analytics.
“The trouble is people are so shellshocked and haven’t really gotten over the recession,” he said. “They’re extraordinarily nervous, and when anything goes off script even a little bit they freeze, and that’s where we are right now and why we are so close to recession.”
If recent indicators are a guide, the green shoots have now withered, and recession is already here. Economists, just as they failed to do in early 2008, simply don’t see the writing on the wall. Even Mr. Zandi doesn’t seem to get it. This has nothing to do with willing our way into recession, and everything to do with the fact that working Americans simply don’t have the means to do it. The money is gone, and many are now down to the paychecks of last resort – unemployment, social security benefits, welfare, and anything else they can scrounge up – just to survive.
We are at the breaking point.
The experts completely dropped the ball (again) and have yet to identify what is really going on here, and will not do so until they write about it in hindsight ten or twenty years from now.
That is, we are in the midst of the next Great American Depression.