While economists have made no secret of their fears that another recession is about to strike, the real danger could be worse.
Instead, the country could be headed for a 21st century version of a depression, an economic term that, unlike a recession, defies a standard definition but instead conjures images of soup lines, 25 percent unemployment and a devastated economy (see Shadow Stats US Unemployment graph at bottom of page, they are almost there).
A drastic view? Perhaps. But with the US economy facing growth well below expectations two years after a recession, and an increasingly ominous European debt crisis, the superlatives being used to describe conditions are gaining in intensity.
“Here we are today, with a severe recession (2007-09) followed by the weakest recovery on record and now on the precipice of another economic downturn,” David Rosenberg, senior economist and strategist at Gluskin Sheff in Toronto wrote in a special analysis. “This is a modern-day depression, not entirely dissimilar to Japan’s post-bubble experience of the past two decades.”
Rosenberg takes issue with the standard issue of a recession being two consecutive quarters of negative growth, and rather says it measures peaks in sales activity, jobs, industrial production and income growth.
The US already has had something of a lost decade, Rosenberg reasons, citing stock values still around 1998 levels and little net job growth.
This is occurring even despite unprecedented policy measures including a massive monetary easing campaign from the Federal Reserve and about $800 billion in government stimulus.
”Simply put, an economic depression occurs only once it becomes painfully obvious that the markets and the economy are failing to respond to repeated bouts of policy stimulus,” Rosenberg said......read on
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