The rumblings of the double-dip have been growing recently, if you can’t tell already. Many “experts” are divided on this issue, but it is clear that we are not back up to par just yet.
“The economic souring is, of course, being spearheaded by a familiar cast of characters: An anemic labor market, a skeptical consumer base, a weak housing market, and a global debt crisis that threatens to overwhelm national governments, just to name a few. Further deterioration in even one of these arenas could be enough to trigger a double-dip, which is loosely defined as a period during which a recovery is interrupted by economic contraction, usually in the form of negative GDP growth.” -Yahoo.
I am not surprised to be hearing about this. Our economic situation has ripened for the double-dip. In a previous article, “…And the Cycle Continues.” (12-04-2009) I wrote the following:
“If people don’t consume, then businesses lose money, people get fired and businesses do not want to hire new employees or take out loans, because they fear a lack of consumption. Ben Bernanke and the Fed sought to create an influx of new credit that was really cheap; they did this to encourage those banks to accept more money from the Fed. The banks will then lend the money out to people, students and businesses. This is supposed to create more consumption which will lead to more jobs.
But, what happens when the initial influx of money does not spur consumption or if it works for only a limited amount of time?
This is how a double-dip recession is born. The initial investment (stimulus) would be wearing off and this leads to a reduction of the cheap loans, a decrease in government spending on projects (like construction) and this leads to higher unemployment and reduced consumption.
It seems as if our economy is propped up by a cyclical system that is breaking down. Without a large amount of savings per capita there is no large pool of wealth to draw from in order to spur this growth and consumption. In the distant past, people would spend because of a sale or special deal; they had money saved up and did not have to take out a loan in order to make a purchase.
After multiple recessions the savings of our country has dried up (currently the per-capita savings in the US is negative) and our spending and growth has been related to the amount of credit extended to these borrowers. We are at the point where if we educate the public about their spending habits and credit borrowing it will damage the chances we have for sustained economic growth.”
We are now seeing the influx of Government funds drying up. (also unemployment benefits were not extended, which is a bad idea.) There has been some job growth, although most of that is in the public sector due to the US census. What we are missing out on is growth in the college aged bracket and growth with the middle class. People cannot live off of a Wal-mart salary alone.
If the Republicans do not want the Government to step in with Healthcare, economics, job creation or a number of other aspects then they are going to have to step-up and support the middle class. Otherwise, Government will step in and provide the services that the private market failed to provide.
8 Problems That Could Trigger a Double-Dip Recession
1. Unemployment.
2. Housing.
3. Expiration of stimulus.
4. Spending cuts.
5. Tax hikes.
6. Consumer confidence.
7. Consumer spending.
8. European debt crisis.
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