Welcome to Act II of the Great Recession

Joe Biden announced the “second stimulus” today.

In an interview on ABC news “This Week” he said the administration, “misread how bad the economy was and didn’t foresee unemployment levels nearing double digits.” While he went on to defend the stimulus plan, he did offer that the current unemployment rate was too high. So what’s he going to say when it ticks up another one or two percent?

The employment report Thursday pretty much sealed the deal. The more you look at it and think about it, the more dire it seems to become. Wage deflation fingerprints are all over the data and there’s little doubt that politicians at home over the holiday weekend are hearing the anecdotal evidence that you and I see every day. This is the sort of news that tends to put politicians into a panic mode. Unemployed people are not prone to reelecting their representatives.

Throw in a reaccelerating foreclosure trend, anemic bank lending and the likely implosion of the commercial real estate market in the next six months and you have an explosive mix. There may be an uptick in some numbers as depleted inventories are rebuilt, but with so much slack in the economy it’s likely unemployment could keep moving up even as output recovers at least for a little while.

The administration is getting painted into a corner. They cannot let the situation deteriorate further lest they open the door to a Depression scenario. Even if the economy stabilizes at this low level, it’s unacceptable politically so the only recourse is going to be to open the spigots wide. What this means for interest rates and the dollar is, of course, the wild card. Unintended consequences abound.

Welcome to Act ll of the Great Recession.

More: here

Comments

[Northstar10000:]

It will be great fun to watch the Obma voter lunes as their great savior plans implode into oblivion. What Bush did to the republican party the Obmanator will do to the democrats. Both complete fools and the father's of economic ruin.

Jul 05 04:32 PM

[Dave Wrixon:]

I don't think Obama or Ben have any wiggle room with the dollar. Any more monetary easing is likely to trigger panic.

Jul 05 05:47 PM

[herbert hoover:]

Is it time for another stress test for the banks?

Jul 05 06:01 PM

[Mark54:]

Inflation or deflation... I honestly hope its inflation.

Jul 05 09:51 PM

[Steven Hansen:]

taking a page out of the depression, hoover mostly did the right things but was seen as letting it happen. roosevelt did many wrong things but was seen as a man of action.

if you were president and wanted to be re-elected, what would you do?

Jul 05 10:26 PM

[Adam855:]

Anyone who couldn't see unemployment hitting double digits, even assuming the "green shoots" of recovery in 2Q/3Q '09, wasn't paying attention. Unemployment historically continues to rise even after recessions are technically over. This should surprise no one, particularly the Vice President of the USA. Most likely it's political posturing to sell an agenda.

Jul 05 10:40 PM

[conceptwizard:]

America needs a new birth of freedom, it needs a government for the people, it needs a government that puts people first, but it won’t get one unless Americans come to realize just how immoral and vicious our economic system is.

Biden's statement opens the door for the banks to line up once again with their hand out. If these guys dont get it right this time and support housing, small businesses, and put manufacturing jobs in place for the long term were screwed. We might get one last kick at the can before the dollar evaporates. I dont have the faith anymore that they even now what they are doing after a statement like “misread how bad the economy was and didn’t foresee unemployment levels nearing double digits.”. Where the blank has he been for the last few months?

Jul 05 11:08 PM

[punk_ash:]

What is scary is that Obama was the better candidate than McCain, we can only imagine what McCain would have done.

Ron paul anyone???


On Jul 05 04:32 PM Northstar10000 wrote:

> It will be great fun to watch the Obma voter lunes as their great
> savior plans implode into oblivion. What Bush did to the republican
> party the Obmanator will do to the democrats. Both complete fools
> and the father's of economic ruin.

Jul 06 01:42 AM

[Dave Wrixon:]

It is just possible that the Grey Haired Dude might have remembered some of the important lessons from the Volker era, that is if he understood them in the first place.


On Jul 06 01:42 AM punk_ash wrote:

> What is scary is that Obama was the better candidate than McCain,
> we can only imagine what McCain would have done.
>
> Ron paul anyone???

Jul 06 05:55 AM

[Leftfield:]

The empty suits have shot quite a few of their spin missiles at the problem. Unfortunately, their most solid accomplishment has been to put the dollar on deathwatch and our descendants on the hook to save Wall St. Even they may be out of ammunition since they have clearly demonstrated only an ability to worsen a crisis and lie smoothly.

Jul 06 09:31 AM

[ebworthen:]

"Misread how bad the economy was.."

Translation:

"We are going to need a VAT tax, increased capital gains taxes, and to increase taxes on everyone 'for the sake of our children'."

Jul 06 10:12 AM

[billddrummer:]

To ebworthen,

I'm impressed that your post was properly punctuated. These days, that's a rare talent.

Your comment was spot on as well. Why don't we ask the children whether they'd like to pay off the debt we've incurred?

Thank you.

Jul 06 11:51 AM

[Gregman2:]

This next stimulus needs to be truly bottom-up and should involve a debt jubilee.

Jul 06 03:42 PM

[old folkdancer:]

The Bush Recession is over. We are in a weak recovery. We will soon be in the Obama Depression. There is no easy solution. The Democratic Congress and Bush and McCain rushed one stimulus bill into reality. Then Obama and the Democratic Congress rushed another stimulus bill through. Those actions may have provoked companies to lay off people, stop advertising, stop cap ex, reduce inventory with discount offerings, and anything else that would contribute to cash hoarding. The present US administration will self destruct. The next may not fare too well either. The US might have several one term Presidencies in the nest decade and a half.

Jul 06 09:21 PM