U.S. recession could be worse than recent downturns

[UpInArms]

Source: Reuters

WASHINGTON (Reuters) - The chances of the United States avoiding a recession appear to be growing dimmer by the day, and any contraction in the economy will likely last longer and be more severe than other downturns in the past 20 years.

Recent reports have shown the housing market slump and rising defaults in the mortgage market are now taking their toll on job growth and on the manufacturing and services sector.

But heavy consumer debt, a growing federal budget gap, and rising prices could make any recession worse than Americans have experienced over the past two decades.

<snip>

But the two downturns that ended in 1975 and 1982, when economic conditions bore some similarities to today, each lasted 16 months, making them the longest recessions since the Great Depression of the 1930s, according to the National Bureau of Economic Research, the accepted arbiter of U.S. recessions.

The U.S. economy entered the recessions of 1975 and 1982 saddled with huge government budget deficits from spending on social programs and the Vietnam war, and was suffering double-digit consumer price inflation.

Read more: http://www.reuters.com/article/newsOne/idUSN0563297420080205?sp=true

---

(Mods: I am 2 hours past the 12 hour posting - but this article has lots of good data and information that should be read widely. Thanks for all you do - UIA)

[Dr.Phool]

1. They're saying nicely that we're royally screwed.

Inflation is starting to fire up. Or at least they're starting to finally acknowledge it. There's no money and no will to increase spending to buy our way out of it.

The treasury is broke. Interest rates can't go much lower. Bush wants to give the Pentagon an even larger slice of the pie. And the "opposition" doesn't have the balls to increase taxes on the wealthy.

This election cycle, we have a choice between 3 corporatists, a fundamaniac, and a lunatic. I don't see things getting much better in the long run. Maybe they'll give us free cheese again.

[UpInArms]

2. here's something that might brighten your day

http://www.cnn.com/ELECTION/2008/primaries/results/dates/#20080205

if you look at how many people are voting in the primaries - dems v pubs - you will see that no matter which candidate gets the nod - there are more dems voting than pubs in almost every state (well, don't count utah or alaska) but it's interesting and cheering nonetheless.

[paparush]

28. Will the margins be large enough to be beyond the reach of the Neocon Election Stealing Machine (tm)

[UpInArms]

29. well, it looks like a 2 for 1 by a cursory count

but here's a DU thread on it:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3170781

[paparush]

31. That might squeak by! : -)

[pokercat999]

58. That light at the end of the tunnel is the Obama/Clinton

corporate train! Our only hope at this point is that the down slate vote brings a veto proof majority in both houses of congress and they drag our corporatist president up the liberal/progressive hill and into the real sunlight.

[greyghost]

14. The free cheese is on it's way.eom

[yellerpup]

37. Mmmm, "commodity" cheese we called it.

Made great grilled cheese sandwiches. Good thing, too. That's all we had to eat.

[jwirr]

39. Some are still getting free cheese - the problem with that will be

keeping the dairy farmers and cheese makers in business.

[Hawkowl]

52. Mmmmm. I remember free cheese!

The candidate that promises me free cheese gets my vote!

[hatrack]

3. And why would the Surprised Economists say that? Is it the $9+ trillion debt? The endless war?

The $1 trillion in credit card debt? The notional value of derivatives at 20 times planetary economic output?

:eyes:

[H8fascistcons]

45. What If?

Can you imagine how much better off financially this country would be if Americans would have asked two simple questions:

1. Is this product made in the USA?
2. Can you show me the products in
your store that are made in USA?

Look in the mirror America, you fell into the criminal republican Fascists trap, hook line and sinker, buying cheap junk from China. This insured the destruction of the middle class, the financial ruin of our country and the rollback of the "new deal". Now our politicians are bought and sold by corporations, it's not the United States of America anymore rather the United States of multinational corporations of China. The last line of defense in this country was our free media which now is owned by the military industrial complex. One example of how far off the cliff we have fallen; Approximately two years ago Bill Gates was on Capitol Hill in front of Congress pleading for more foreign work visas for engineers from India which they can pay 60% less than an American engineer. That very Christmas Americans were literally mugging each other in Wall Mart parking lots to get a sold out Bill Gates Microsoft made in China X-Box. What is wrong with this picture? Bill Gates, Carl Rove and George Bush are spitting in your face, ensuring the destruction of our country and laughing all the way to the bank!!!!!!!

[Skittles]

66. you are correct

I see it on DU all the time, people just HAVING to have the latest piece of shit they market to the masses - it is disgusting

[foxer]

50. Maybe the 3 trillion budget, only 10,000 per capita

[MikeNearMcChord]

4. Folks let us call this for what it really is

a depression, which may make the 1929 Great republican depression look like a mild downturn.

[greyghost]

12. Exactly, and it WILL BE worldwide. eom

[Hydra]

16. Ya

They're afraid of it being a recession, but those wacko free traders bought us a full blown depression.

This is what happen when you let megacorps run the gov't. They kill the goose that lays the golden egg.

[mac2]

27. If it weren't for welfare and Social Security more

would be in soup lines and laying on the sidewalks. States are struggling to keep afloat. Huge immigration flows aren't helping the stressed hospitals, schools, etc.

[jwirr]

40. If we did not have a monthly pay check for the poor and the elderly

this would have been a depression long ago.

[Phred42]

5. Ravi Batra on Thom Hartmann's show about 3 weeks ago

Ended a segment with this: "recession 2008, Depression 2009"

The Reich-wing will do everything they can to prop this up - until the Dems take over - then........

[kirby]

10. Great Depression of 1990?

I remember Ravi Batra wrote a book called the Great Depression of 1990 which showed inequity between rich and poor approaching 1920's levels. Did he address how he got that prediction of the resulting Depression wrong on that show?

[Alcibiades]

19. I read that, too

Though I didn't see the show, I think Batra's analysis back then was pretty sound, at least the part that didn't involve kooky spiritual theories of historical cycles (though he did "predict" that we would be entering the era of the warrior, though, because there are always wars, this is pretty unfalsifiable.)

Our current recession is due, IMHO, to the stagnation of wages, particularly for non-college grads, in the US, a phenomenon that has been noted by many and is the root cause of growing income inequality in the US. Of course, we did see a recession under Bush, though it was not nearly so deep or so long as the one predicted by Batra. Nonetheless, I doubt Batra in 1990 was able to take account for the growth in the service sector, the productivity gains (though these are disputable) produced by technology, and, most importantly, the hyper-keynesian monetary policy of Greenspan (and now Bernanke). I doubt that anyone beck then would have thought that the Fed would be willing, and that we would have been able, to keep the economy chugging along with varying degrees of briskness by borrowing so massively from overseas. Also, though the claims made by many right-wing economists in re the increasing quality of goods at good prices have been overblown, the increasing supply of cheap imported goods sold at a discount by big box retailers have probably ameliorated the effect of stagnant wages on the standard of living of the middle class to some degree.

[kirby]

30. I found this...

After some searching I found some info on Ravi Batra's website:

http://www.ravibatra.com/forecast.htm

Scroll to the bottom of the page and under
'The US Economy: 1990-1998' he gives his rationalization of his failed prediction.

My summary is that our huge deficit spending and willing foreign holders of our dollar have delayed the inevitable.

The last line is:
"With billions of dollars in loans even a pauper can become a tycoon and gloat about his riches. But one day the loans come due with interest, something that has already bedeviled many parts of the world. The US hour of judgement is almost here, and then the great depression, postponed in 1990, could make a ferocious comeback."

My guess is that when/if foreign holders start dumping our weak dollar things will accelerate.

[jwirr]

44. Just curious: When did we start borrowing billions a day from other

countries to keep afloat? 1990s? Maybe this recession/depression has been here for longer than we acknowledge and we have covered it up by borrowing. It happens in household budgeting - why not in government.

[Phred42]

60. Clinton left us in better shape - remember?

And Clinton was the best republican president since Eisenhower.

[Xenotime]

65. Agreed.

Better shape in more ways than one.

[Donnachaidh]

56. I'm sure he didn't have access to just how much our government

has been propping up the securities problems while the neocons have been in power. So he was off a decade -- it just means what he was predicting is going to be BIGGER.

[L0oniX]

18. Yes the Dems will get the blame eventually according to the repuke spin plan.

The future is in agriculture and conservation. The bottom line is water and food and that's what it's all going to come down to when we don't have enough gas anymore. Small co-op farms are the future.

[yellerpup]

38. Amen.

Not glamorous, but oh so true.

[jwirr]

46. That actually sounds good to me. I grew up on a small farm before

the "bigger is better" culture took over and I remember that life as one of "enough to survive on and a feeling of security".

[ananda]

6. Fuck you so much, Bushinc.

nt

[swag]

7. Yesterday's ISM Services number was very bad.

There's some hurtin' to do.

[Orrex]

8. The only solutions is to make the tax cuts permanent!

Hell, while we're at it, we'd better give each of the wealthiest 5% another few million out of the Treasury, just to be on the safe side.


Quick! Before it's too late!

[Deep13]

11. Exactly! I'm sure the Chinese will float us a loan for that.

:sarcasm: (In case it is not obvious.)

[Ganja Ninja]

9. God save us from the "fiscal conservatives".

Every time they get control of the economy they run us into a ditch.

[mac2]

23. Haven't we learned that?

[Bonobo]

13. I once had a Political Science Professor who said "Never forget that the cure for poverty is money."

Does that make any sense?

We spend 1 trillion dollars on Iraq.

What would have happened if they had distributed it to the poorest and low middle class but required it to be spent in the US?

[closeupready]

20. Oh, no. The government should only give money away to people who HAVE money.

If you don't have money, then you're on your own.

[Megahurtz]

62. Yeah Fucking Dumb-Assholes

that says it perfectly

[Alcibiades]

25. It does make sense

Though the war has been five years long, and that amounts to "only" $200 billion a year, which is a lot, though it's hard to estimate the simulative effect such spending has on a $13 trillion economy. Also, though what you suggest would likely be more stimulative than the war has been (indeed, with the resulting raise in gas prices, I think the net effect of the war has been a drain on growth), all that war spending has had some effect. All those soldiers have had reenlistment bonuses, and many employees of contractors have made a bundle. Little of the money spent on salaries has been spent overseas--most is spent right here. I see very many new Mustangs and pickup trucks parked outside out local national guard armory on the weekends than I used to. Given the income of most military enlisted families, these are the very people we would be sending checks to in any attempt to stimulate the economy by sending checks to average working people (not that I think it's a good idea to force people to risk getting their genitals blown off in order to stimulate the economy).

[jwirr]

47. Or start a new REA program to promote alternative energies and

other alternative ideas. Jobs and progress!

[inMD]

15. Anybody see any similarities???

http://en.wikipedia.org/wiki/Great_Depression

Marriner S. Eccles who served as Franklin Roosevelt’s Chairman of the Federal Reserve from November, 1934 to February, 1948 detailed what he believed caused the Depression in his memoirs, Beckoning Frontiers (New York, Alfred A. Knopf, 1951):

As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation s economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

That is what happened to us in the twenties. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system. This debt was provided by the large growth of business savings as well as savings by individuals, particularly in the upper-income groups where taxes were relatively low. Private debt outside of the banking system increased about fifty per cent. This debt, which was at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer installment debt, brokers' loans, and foreign debt. The stimulation to spending by debt-creation of this sort was short-lived and could not be counted on to sustain high levels of employment for long periods of time. Had there been a better distribution of the current income from the national product -- in other words, had there been less savings by business and the higher-income groups and more income in the lower groups -- we should have had far greater stability in our economy.

[UpInArms]

17. Welcome to DU, inMD!

great post btw

:hi:

[Hydra]

26. Spooky comparison

But the idea that people have to have money to spend to keep an economy going and growing is as basic as you can get. Money only has value as it moves around, not as multibillionaires sit on it and loan it out at high interest so people can "buy" houses.

The Uber-rich have shot themselves in the foot yet again...I wonder if they'll get away with it this time?

[Hawkowl]

53. Exactly!

This is the lie of supply side economics. The lie that the wealthy will take their extra money and loan (invest it) to make more money. We are a consumer driven PLANET. Take the money out of the hands of the consumer and demand dries up. Production dries up. Jobs dry up.

[Javaman]

21. What I find really amusing is this...

over the past year and a half the rhetoric has been slowly ratcheting up over the "chance of a recession. anyone that has been paying attention knows that we have been in one since 2001, when the last one "ended". Other areas of the country have been in a down right depression.

"they" have known all along and were quickly, cashing out. The others Us and greedy mortgage lenders were left to twist in the wind. Why? you ask?

Because of morons* little political mafia run government. If it was let on that the economy was in the shitter years ago, morons* plan to take over the world would have gone up in a puff of smoke, instead we are treated to daily reports of soldiers and civilians getting killed instead.

Now his* fucktard "clap harder" campaign has come back to bite him* in the ass. And who always gets screwed in the end? we do, the poor and middle class.

just grinding the wheat as a worker bee. Have to grind more and more each day to make ends meet.

Life during the moron* era.

[mac2]

22. We have to roll back those tax cuts to corporations and elite

Corporations don't pay taxes but stash their profits off shore (British Cayman Islands, etc.). The elite do the same. Until they pay their share we can't get out of debt. "Their" wars of Empire has left us in debt.

Suck it up Congress and do what is right for once.

[Deep13]

24. Who can possible fix this Republican disaster of an economy?

:think:

:evilgrin:

[area51]

33. You mean a pro-business corporatist?

:eyes:

[Deep13]

51. Yup, we have a choice of two.

I don't like the fact that the USA is a global, corporate empire, but it is. No one we elect will change that. I knew a year ago that the Nov. election would be a choice between a pro-imperial candidate who is a social liberal vs. a pro-imperial candidate who is socially conservative. The point is not to end the system (no president can do that) but to give average people a bigger stake in it.

[joeybee12]

32. Hmm..latest breaking news? Didn't anyone with half a brain

know for years this was coming due to the inept economic policies of our idiot-in-chief and corporate overlords?

Thanks for posting--not a slam on you, but on the stupid MSM who think this is a surprise.

[Broadslidin]

34. Communist Chinese demand representation inside President's Cabinet (No, not the liquor cabinet)

Proclaiming proudly,
they have a 'vested interest' in us.

Could this be true?

[Lorien]

35. "from spending on social programs and the Vietnam war.." note the

order which they've listed those items. It was more like "from spending on the Vietnam and cold wars". America doesn't spend money on "social programs" the way any other first world nation does, and our military spending is greater than that of all the world's major powers combined.

The Military industrial complex and their corporate cronies were behind all three.

[krkaufman]

36. "heavy consumer debt ... could make any recession worse than ... experienced over past 20 years."

Really? What a frickin' news flash...!!! Just about any dumb bunny now recognizes that.

The nation's last two recessions, in 1990-1991 and 2001, each lasted for just eight months.

But the two downturns that ended in 1975 and 1982, when economic conditions bore some similarities to today, each lasted 16 months, making them the longest recessions since the Great Depression of the 1930s

But, unfortunately, a big difference between then, 1975 & 1982, and now, is that we used to actually make things back then. Hello, depression.

[Hawkowl]

54. Indeed

This is a very easy call. The economy is in far worse shape and the govt has far less resources to deal with it. So this recession will easily exceed 16 months. Which means that yes, this will be the biggest downturn since the Great Depression--if we get a Dem Pres. If we get a rethuglican, this will be the Greatest Depression ever.

[Pappy]

41. Were all screwed! Will it be the next Great Depression?

[greyghost]

48. It could very well be.

[flasoapbox]

42. My personal fear is...

...that this will be no "recession", but a total economic meltdown that will
make 1929 look like shit. I hope I'm wrong.

[Hawkowl]

55. Unlikely

It is unlikely so don't worry too much. Although our social safety net is in tatters, it still exists, i.e; social security, WIC, unemployment benefits. All which didn't exist in 1929. These payments are not only vital from a humanitarian perspective, but keep funneling govt. money into Demand for commodities, which helps the economy to produce essential goods and services.

Also, the rest of the world is financing our debt. It's a good thing--because we're broke. Too much credit card debt, defaulting mortgages, humongous car payments, and no bankruptcy relief. So what this means is that China, Japan, and Europe which buy our Treasury bonds that finance our budget deficit will continue to do so--or else risk the U.S. defaulting. We have them by their shorthairs because the U.S. economy is about half the worlds economy. The saying is, when the U.S. economy gets a cold, the rest of the world gets pneumonia. So, it is in the rest of the worlds best interest to bail us out.

Now if we get a Dem pres. he'll need to move fast. A true 100 days program. Infrastucture improvements (money for bridges, roads, mass transit etc) means more jobs. Increase unemployment benefits, and extend welfare benefits, (to prop up consumer demand in commodities), farm subsidies (to prevent farmers from going broke and driving food prices up), health care reform ( a tough one to keep the money out of the hands of insurance executives and back into the hands of consumers who will spend it), and a drastic cut in military expenditures (so there is money to put into the aforementioned domestic programs).

Long term the economy needs to be retooled away from military and into a consumer friendly, world friendly one.

On the downside, IF a rethuglican like McCain is elected, look for the Great Depression to look at the good old days.

[Orsino]

43. "The chances of the United States avoiding a recession..."

When a story begins with such deep denial, there's no point in reading further for information.

[jwirr]

49. I have been reading a book called "The Depression Years as

reported by The New York Times". It is a collection of newspapers from 1929 to 1939. I think when they start to spin this depression we need to begin a re-spin that reminds the people that Hoover was just a jr. bush. The similarities are frightening.

[Zorra]

57. THIS IS PURELY THE RESULT OF REPUBLICAN ECONOMIC POLICIES.

Hope I made myself clear - sorry about that.

Simply put, republicans are a bunch of kooks that are living a delusion and are fully incapable of governing anything.

Now we Democrats have to work like dogs, once again, to try to put this country back together again.
:mad:

Republican voters are either stupid or insane - they keep making the exact same mistake over and over and then expect a different result from their mistake.

[newspeak]

59. just last night, I was tossing and turning over this

I took a class on Corporate structures in the 90's. Anyway, we talked about the junk bond deals and the hostile takeovers of healthy American companies by greedy a**holes who didn't even have to use their own assets-another words they had nothing to lose. As they took over companies, like Simplicity (a generational company who hired generational families and was in the black)--they gutted these companies then sold them off (over and over again). The ones who suffered from these heinous transactions were the communities and the workers. The highest company bankruptcies came from the 80's and early 90's. We have been screwed by a bunch of sociopathic, greedy thugs. From the S&L scandal to the junk bond wheeling and dealing. And, where are these so-called business deadbeats now? Isn't Neil and Michael Milken in the educational field today? Screwing us again--for the harm they've caused, I believe wearing stripes behind bars should be the reward for all of that so-called entrepreneur talent. If anyone is interested, a good book to read is "Predators' Ball" --it says it all.

[sarcasmo]

61. Call it what it will be.

A Depression.


2/3's of this Country is in the service industry. It doesn't take a rocket scientist to see that the sky is falling.

[Megahurtz]

63. Agreed for sure. n/t

[guitar man]

64. Ahhh, yes

This is the "house that Reagan built" burnt down and in ashes all around us. Good thing the fireproof pillar with the luxury penthouse on the top is still intact for those important few up there...:eyes: