Are We Headed Towards a Recession?

Aug. 31, 2007 5:10 AM ET3 Comments
Jim Kingsland profile picture
Jim Kingsland
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Accurately predicting a recession is about as easy as pinpointing the landfall of a hurricane several days out. That's still not stopping CEOs, government leaders and economists on both sides of the fence from weighing in on the matter with increasing frequency.

The U.S. economy with a $13-trillion output of goods and services, as guaged by Gross Domestic Product, or GDP -- is not only the world's largest economy, but thus far has been a reslient economy.

This week the government released its second estimate of growth during the second quarter of the year. A rapid 4% growth rate was reported. The second quarter seems like the distant past as the "perfect storm" of events has converged to threaten future economic growth.

The problems range from a rapidly declining housing market, wild stock market swings, to credit market turmoil which is drying up financing to a wide range of consumers and businesses -- far beyond the original flash point of defaults by subprime borrowers.

The slump in the housing market and the loss of easy credit has sparked worries that consumers could take the economy over the edge if they become tapped out, or become vulnerable to job losses.

Consumer spending accounts for about 70% of GDP and during the housing boom - they felt wealthy because of cash from the home equity ATM and a wealth effect from rising home values. Now the housing ATM reads 'insufficient balance' and the wealth effect from rising home prices is all but a fond memory.

"Out there, there will probably be some kind of recession, whether it's a year or so, I wouldn't know, I'm not a trained economist," says John Bogle, founder & former CEO of The Vanguard Group. But Bogle, who points to "cycles that come and go" as reason why things will turn negative, assigns about a 75% chance the economy will contract, but

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Jim Kingsland profile picture
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Jim Kingsland has been a broadcast journalist since 1978, presently serving as an Assignment Editor at the Fox Business Network. He has also held positions at Bloomberg Radio, CNBC, and the Financial News Network, reporting on business and the markets. He authors The Kingsland Report, a subscription-based email service that examines and provides commentary on events impacting the markets. His expertise is in rare coins and precious metals and recently published his book, "Coin and Precious Metal Values 2010: Trends, Deals, and Predictions for the Smart Investor" which is available for purchase at Amazon (http://tinyurl.com/c9lpxv). Visit his site, The Kingsland Report Newsletter (http://buttonwood1792.blogspot.com)

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