I don't want to start off this week's posts with the usual comparisons of our current economic climate to the Great Depression, but we do have some news out acknowledging the onset of a notable US recession.
From FT, "US faces worst recession in 26 years":
"The US economy appears to be plunging into what many experts believe will be its worst recession since 1982.
Senior officials at the Treasury and Federal Reserve are confident that the rescue plan for US banks will succeed in preventing a financial system meltdown and ensure there will not be a repeat of the Great Depression. But they know that a sharp economic downturn is already baked in the cake. They do not,however, know how deep or protracted it will be.
The focus of concern is shifting from the markets – although these remain dangerously stressed – to the wider economy, where the consumer finally appears to be cracking.
The Fed and Treasury were expecting the economy to weaken but not as rapidly as it has, with collapsing consumer confidence, falling home starts, slumping retail sales and falling industrial production."
There are worries of an upcoming jump in the unemployment rate (which makes sense when you read about all the recent job cuts and firings from New York to Silicon Valley), and this in turn has led to worries over (gasp!) decreased spending and increased saving by ordinary Americans (now known as "consumers").
Of course, this spells doom for our consumption and debt-driven economy. Bloomberg has the details in, "Turmoil may make Americans savers, worsening 'nasty' recession":
"The U.S. may be on its way to becoming a nation of savers, whether Americans like it or not.
With home and stock prices declining and credit hard to come by, consumers who have fallen out of the savings habit are being forced to curb borrowing and rein in spending.
That is bad news for companies catering to them, which will have to retrench as well. Detroit automakers may need to slash costs and merge as Americans hold onto their cars longer. Shopping malls might be forced to shut as retail traffic trails off. Hotels may have to shelve expansion plans as vacationers become stingier with their dollars.
The big concern is that households, spooked by the turmoil in financial markets, will cut back rapidly and sharply, plunging companies into bankruptcy and deepening a recession that many economists say has already begun."
It seems all the bailouts and government stimulus packages (paid for by current and future generations of Americans, along with help from our foreign creditors) that have been conjured up to date were not enough to prevent our having to face economic reality.
But wait! What if we come up with another new "stimulus package" to spur the economy? Maybe this one will really do the trick to get us out this "protracted slowdown" Ben Bernanke is talking about.
But don't worry; despite the job losses, slowing economy, and falling asset prices across the board, technically this isn't even a recession:
"...Bernanke, who with Treasury Secretary Henry Paulson has led the government's extraordinary efforts in recent weeks to stem the financial crisis, was asked by Rep. Rosa DeLauro, D-Conn., whether the economy is in a recession.
"We are in a serious slowdown," Bernanke said, refusing to give the yes-or-no answer DeLauro said she wanted.
He said "recession" is a technical description of economic conditions. "Whether it's called a recession or not is of no consequence," Bernanke said."
So there you go. The government spends hundreds of billions of dollars to ward off what they can not or will not define.