Sunday, August 07, 2011

2 Scoops Please: When a double dip recession is a depression

Congress and most politicians are not in the real world. They do not cut their grass, go to PTA meetings at public schools or wash dishes. Rather, they have lifelong guaranteed pensions and health insurance, there children attend private schools and to top it off they take a five week vacation and Obama celebrates his birthday by raising millions of dollars for 2012. These folks are not like us, but I have said this before as well as that there is no difference between democrats and republicans. I mean more than 40 percent of senators are millionaires with democrats comprising four of the top five and more than 230 members of congress are millionaires.

I hate to say it (not really but I warned folks three years ago that we were in a depression, that the fat lady had not started to sing and the vultures were circling. All was based on the premise that our solutions from a federal standpoint are topical and isolated, ignoring that we are not in a closed economy as we believe, but rather a global economy. Keynesian approaches cannot work as they did in the times of FDR for we are no longer on a gold standard and because spending is moot since most dollars will go to foreign debt holders who will spend the money abroad and not here to create jobs in the US.

First no matter what we do or don’t do via political dysfunction cannot the escape from the fact Europe is financially crisis from the run on banks in Greece or the observation that Italy from September 2011 will be broke to the fact that the risk related to both Spain is and Italian government bonds is unsustainable and unbailoutable (if such is a word). This is essential to understanding the US economic crisis because 25 percent of our exports go to Europe and a large corpus of our business operates out of Europe. Making money in Europe has sustained us but it may be over because nations with bond yields above 6 percent in two days market terms (Italy and Spain) will eventually destroy the European economy. Not to mention none of our debates, even the recent debt ceiling debacle do not deal with this or address what is at issue – long term economic growth.

The danger zone confronting Europe is hitting America. Pundits fear the ubiquitous double dip recession but the truth is that we are passed such and already in a depression. Our structural weaknesses accumulated during the boom years are still not being addresses. The U.S. is headed not just for double dip recession but rather a full-blown depression. Obama, following the bush inept plan to grow the economy only temporarily interrupted by a bunch of stimulus which ultimately weakened the economy further (2 million more unemployed since it started).

So to understand this, go to your local ice cream parlor, if you can afford it, and order two scoops of ice cream, and see how long it take for both to merge into one. Yes a double dip recession does equal a full blown depression.


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Kofla Olivieri said...

I personally think the worst is yet to come.
Kofla @ God of War Diaries

Anonymous said...

Being able to read a teleprompter with ease does not qualify one to govern a country.

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Here, I do not actually imagine it will have effect.

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