MarketWatch: Double dip looks doubly certain

[marmar]

July 20, 2010, 12:54 a.m. EDT ·

Double dip looks doubly certain
Commentary: The economic recovery is just an illusion

By Robert P. Murphy


NASHVILLE, Tenn. (MarketWatch) -- Economists and financial analysts are currently arguing whether the economy will experience a "double dip," a recession followed by a short recovery, followed by another recession.

Some think the worst is behind us, and that output and employment will slowly but steadily increase during the next few years. Others believe we are headed for another crash. The lessons from the last business cycle favor the case for pessimism.

It has been said that if one laid all the world's economists end to end, they wouldn't reach a conclusion. Even so, a surprisingly large number of economists now agree that then-Federal Reserve Chairman Alan Greenspan made a tragic mistake. After the dot-com bubble burst in 2000, Greenspan opened the monetary floodgates.

Specifically, Greenspan allowed the "monetary base" to increase 22% from June 2000 through June 2003. The monetary base, also called "high-powered money," is the base upon which bank loans are pyramided, expanding the total amount of money held by the public.

During the same three-year period, Greenspan cut the federal funds rate -- the interest rate commercial banks charge each other for overnight loans -- from 6.5% down to 1%, the lowest federal funds rate in more than 40 years.

The rationale for Greenspan's easy-credit policy was to provide a "soft landing" for the economy in the wake of the dot-com crash and Sept. 11 attacks. And for a while, it seemed he had succeeded. People marveled that housing prices continued to rise, even amidst the recession of 2001. Indeed, people referred to Greenspan as "the Maestro." ...........(more)

The complete piece is at: http://www.marketwatch.com/story/double-dip-looks-doubly-certain-2010-07-20

[Warpy]

1. The last Depression sure did

as all the measures called for by the PTB failed miserably, one after the other. It wasn't until things were totally desperate, nothing had worked, that they finally tried starting at the bottom and things began to get better. After things had improved, the deficit hawks threw temper tantrums and forced a balanced budget, undoing much of the good and extending the Depression for four more years, until war production supplied the jobs that should have been supplied by the policies that were working.

Top-down economic tinkering just never works.

[OhioChick]

2. Personally...

I think the worst is yet to come.

[TexasObserver]

3. They've been saying that for a year, but it's not true.

http://bigcharts.marketwatch.com/charts/big.chart?symb=djia&compidx=aaaaa%3A0&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&size=2&state=8&sid=1643&style=320&time=9&freq=1&nosettings=1&rand=594&mocktick=1&rand=9805