Next week it will all come together... One thing is going to lead to the next. Wall Street is going to collapse, the European markets are going to follow suit. There will be panic.
That prediction was made by a Kossack diarist on August 5th as a result of the fools at S&P downgrading US debt. It generated 132 comments. But, as of today the Dow is at 11,483. That is HIGHER, repeat HIGHER than the Dow was when this 2nd Great Depression prediction was made. Some panic! The Dow is higher than when S&P made their downgrade. American treasury securities are now safer than ever. The whole S&P downgrade was a tempest in a teapot.
This probably won't make me popular (with some) on DKos: there will not be a 2nd Depression this year, or the next. There won't even be a recession (as defined by economists) this year. Unfortunately, we will muddle along --- unless the Europeans are much dumber than I think they are.
US companies are sitting on a lot of cash, and our banks (while not making much money), are quite solvent. Only a crash of the Euro-zone can cause a recession --- in the short run.
The bigger problem for the US economy is that, as soon as we gain any economic traction, the price of oil goes through the roof. If we can't figure out how to handle this problem, we can't get out of this hole...We need regulation of the oil market to make it harder to jack up the price for no good reason.
I hope those of you who worry about the economy have read Kenneth Rogoff's recent work...
What Rogoff calls the Great Contraction is essentially an inversion of the debt-inflated consumer bubble of the 2000s, a continuing collapse of demand that has lingered longer than many of Obama's top advisers or the Federal Reserve thought would occur. Though the recovery technically began in June 2009, the reason for this "jobless recovery" is pretty straightforward: Consumers aren't buying, stores aren't selling, and as a result companies aren't making--or hiring. That has been exacerbated by a credit crunch that is also historic.
Obama should have forgiven homeowner debt at the same time he gave bankers the 2nd "traunch" of the TARP money. I fear he may regret this more than anything he did in his 4 years in office. I think it is undoubtedly the worst mistake of his Presidency.