Economists Expect Deep, Prolonged Recession

The National Association for Business Economics, surveyed a panel of 50 experts and found that most expected continued deterioration of the U.S. economy and a prolonged recession, according to CNN Money.

Regardless of what you hear out of Washington, the United States has been in recession for at least two quarters (six months) and will likely stay in our current state for some time. Increased unemployment decreases disposable income, which decreases consumption and thus decreases profits, leading to more layoffs (i.e. more unemployment). It is a vicious cycle, and it is one that the U.S. has been stuck in for months. Rising costs for food and fuel (don’t be fooled by the pump, you’re still paying more now than ever before) have cut into budgets and forced Americans to cut back. Cutbacks in turn make the economy worse, and that is precisely the case in the United States today.

The NABE expects the U.S. economy to have grown by just 0.2 percent (down from a preview 1.2 percent forecast in October) in 2008. Growth numbers are dampened across the globe as what started as an American disease has turned into a bit of a global pandemic. However, none of the major industrialized countries seem to be in the same sorry state as the U.S. Primarily because they all still have some industry to fall back on (in the case of China they have every industry to fall back on).

The one industry which remained in the United States after decades of ruinous “free-trade” was the financial and banking sector. Clearly, banking and finance are no longer strong enough in this country to prop up its other obvious shortfalls. With the government over-spending year after year, and refusing to budget for worthwhile endeavors like infrastructure buildup and education, the economy will likely be in peril well into the future.

The surveyed economists did mention a “bright spot” in their discussion of the U.S. economy: housing prices are expected to level off “fairly soon.” This sentiment is meaningless to the millions of Americans who are threatened by increasing mortgage rates and or impending foreclosure. Furthermore, after watching housing values plummet for well over a year what exactly could “fairly soon” mean? How much longer must we wait before the biggest store of value in this country stops depreciating?

The original intent of the $700 billion bailout (that number has since grown to perhaps over $1 trillion) was to buy these troubled mortgages and save homeowners. The mandate has since shifted toward capital infusions for banks meant to save investors. All of the important parts of the economy are being overlooked (as a whole there is more money to be had and lost in real estate than in the stock market) while the trivial sectors are subject to overreaction. With all of this confusion at the top and such a mess at the bottom, we should prepare ourselves for a long road ahead.

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Source CNNMoney:

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