Not calling it a recession anymore

Okay, so I spent the summer trying to keep Max entertained, gardening, canning, listening to the Harry Potter series on audio, and obsessively reading everything I can about this economic downturn.  This last one is an illness, I know.  But I can't help it; reading the media coverage infuriates me.  Clearly, we've all been had, and we're still being had.

I'm calling this one now: this is a depression.  A serious depression.  Not a recession; this is not cyclical.  It's not a matter of inventory getting overstocked an industry taking a little break until it moves.  We are in serious economic trouble as a nation.  The recovery is not going to be a recovery for the average Joe because even though industry may be able to not move backward, to break even now, they've done so by massively retrenching and the jobs that keep the country on an even keel aren't coming back.  Many, many of them aren't EVER coming back.  The ones that will emerge will not be middle-class achieving jobs, either.  We are all in for a serious lifestyle adjustment in the short and middle term, and I am talking multigenerational living as a way of survival - in the short term because Gen X and Y are so encumbered by credit card and student loan debt they can't establish themselves and in the long term because the Boomers completely screwed themselves over by living high on the hog for most of their adult lives.  They won't be able to afford to retire and live independently.  

We are a year since the freefall began and none of the underlying problems - toxic assets, gov't regulation of industry, the criminal behavior of the mortgage industry - have been addressed in any but the most superficial way.  All those toxic assets still exist.  They haven't been sifted out from the good loans.  They are still going to have to be dealt with.  Government regulation hasn't been reinstated, and none of the high flying rake-it-in thieves who illegally and unethically sold bad financial products left and right are in jail.  

Furthermore, the average person has no money to fuel an economic recovery.  He spent all of his future earnings in the last ten years. He literally doesn't have anything and is up to his ears in credit card/student loan/car payment/mortgage debt.  Unemployment may "slowing" but it's not going to stop anytime soon.  All of those small businesses who rely on splurge or luxury spending aren't going to have any customers.  They will go out of business.  More unemployment will result, and even fewer people will have money to spend.  We haven't seen the end or even the bottom slope of the foreclosure crisis, and ahead of us is the foreclosure crisis for commercial properties (see above: businesses can't make money if no one spends any).  

Credit card companies are going to have a hard time getting any blood from stones, and credit, already seriously dialed back, is going to be frozen for a good long time because no one can take it on and banks won't lend except to a sure thing.  

Plus, plus, we've taken on TONS of debt communally for the future in government borrowing.  Cash for Clunkers and the new mortgage tax incentives are only spending future revenue in the now, further limiting our ability to buy anything in other sectors and costing the taxpayer future revenue to boot.  

Seriously, we have got to stop thinking in THE NOW.  Stimulating the economy - essentially taking the payday early - is fine if there is a payday coming.   Is there a payday coming?  Not unless everyone on every level - gov't/industry/personal does the hard work of deleveraging now.  You've got to get out of debt before you can buy more stuff.  No one wants to say that though because we are so used to instant gratification.  But there is no instant solution to this problem.  You can't buy your way out with money you print in the basement (or at the Treasury).  You have to eat little/buy nothing/move in with your parents/scale back your expectations to the level of decades ago until you have something you can work with.  

I don't see that happening.  The consumer is spending less but not acknowledging the true permanent seriousness of this situation and the government and the media are fueling this delusion with talk of a recovery.  

In my opinion we are looking at a Lost Decade in America if we keep on the path we are walking now.  

tags: great  recession  depression  economy  money