U.S. Economy: The Worst is Yet to Come

[marmar]

from HuffPost:




Mark Weisbrot
U.S. Economy: The Worst is Yet to Come
Posted May 27, 2008 | 02:38 PM (EST)


Since the U.S. economy showed positive growth for the last quarter, some commentators in the business press are saying that we are not necessarily going to have a recession, or that if there is one it will be mild. This is a bit like the proverbial story of the man who jumped out of a window 60 floors up, and then said "so far, so good," as he passed the 30th floor.

The United States accumulated a massive, $8 trillion housing bubble during the decade from 1996-2006. Only about 40 percent of that bubble has now deflated. House prices are still falling at a 20 percent annual rate (over the last quarter). This means that the worst is yet to come, including another wave of mortgage defaults and write-downs. Even homeowners who are not in trouble will borrow increasingly less against their homes, reducing their spending.

President Bush says we are not in a recession. One commonly-used definition of a recession is two consecutive quarters of declining output (GDP). The first quarter of 2008 came in at 0.6 percent, although it would have been negative if not for inventory accumulation. So by this definition we cannot say with certainty that the recession has started, although it could well have started this quarter. Of course, for most Americans it has felt like a recession hit some time ago, with real wages flat since the end of 2002, and household income not growing for most of the six-and-a-half year economic expansion.

The National Bureau of Economic Research will eventually decide on the official onset of the recession, but even its definition is arbitrary. All the indicators of a serious recession are swirling around us. The economy has lost jobs for four months in a row, which has never happened without a recession. Consumer confidence has dropped to a 28 year low - a level not seen since Jimmy Carter was president. Home foreclosure filings are up 65 percent over last year. And now commercial real estate prices are heading south, dropping 6.2 percent in the first quarter.

With oil prices hitting record highs, and the Fed beginning to worry more about inflation, more restrictive lending practices and other fallout from the credit crunch, the near-term economic future looks even dimmer. ......(more)

The complete piece is at: http://www.huffingtonpost.com/mark-weisbrot/us-economy-the-worst-is-y_b_103733.html

[Donnachaidh]

1. the pukes and their corporate backers will do everything they can to

Make it *seem* as if it's not that bad. But the minute a Democrat wins the WH, you can expect them to drop the facade and let everything tank in a NY minute.

And then guess who will start screaming the loudest and pointing fingers at the WH?

[marmar]

3. "expect them to drop the facade and let everything tank in a NY minute."

That's my great fear.....All these public confessionals from Repugs like Tom Davis saying the Party is set up for slaughter in November make me worry that the real set-up is for the Dems, with a larger Congressional majority and a Democratic White House: A complete collapse of the country.

[bill for obama]

2. It occurs to me - if "Mark" was any good at business -

he wouldn't be writting about it - he'd be using it.

Secondly, if we are indeed in a recession - which is in fact defined as 2 quarters of negative growth - that is a fact - it is probably too late to be writting about it. Where was he 6 months ago??

The best definitions of the words I ever heard were -recession - is when your neighbor loses his job - Depression - is when you lose yours.

This is all just parsing words.

[vssmith]

4. In Michigan we ARE having a depression--so it seems

[bill for obama]

7. Yes - you are.

It is along the entire river valley.

It is beyond forgivable for the US to allow this to happen. Not just political - it is about the failure of the country to use its assets (and I mean the labor of people) wisely - and they totally failed.

This did not have to happen - it was allowed to happen. Free trade - my ass.

[many a good man]

5. I'm getting tired of these nattering nabobs

I want to see proof!

Er, ummm....

[ThoughtCriminal]

6. I wonder what the numbers would show if we calculated

GDP and inflation the same way we did in the 1970's?

The assumption that we are not yet in recession depends on whether or not inflation is correctly calculated. In reality the official inflation rate is substantially underestimated.

http://www.huffingtonpost.com/hale-stewart/are-we-or-arent-we-in-a-r_b_102598.html