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Recession 2009: Is It Different This Time?

Lincoln Ellis was on NBR last night with some interesting thoughts:

"Lincoln Ellis of the Lind Group on Inflation & The Economy"
(www.pbs.org/nbr/site/onair/transcripts/l.../)

This statement really jumped out:
  • "In the past recessions you've had the dual tail winds of expanding credit and interest rates coming down. And in fact this time around we have exactly the opposite. We will have interest rates moving higher over the course of the next 12 to 18 months and you have seen a massive contraction, the largest contraction in consumer credit since World War II, which really will crimp the consumer's ability to spend and unfortunately sustain themselves. Because, remember, there's one in 10 or one in six depending on how you count it persons out of work that are highly dependent on that credit to patch them through these past recessions and it's not going to be there this time and that puts is in a very precarious position."

No doubt, if Washington does nothing we could have a serious (and likely protracted) correction.

Ben Bernanke will try to keep rates as low as he can, but that can only last so long.

But, if the Obama Administration and Congress are proactive and get credit to small and medium size businesses, who will then hire new employees (there has been talk about a hiring credit program circulating), and then those employees can spend, maybe some of the correction can be mitigated?

Dan Senor, has a new book out: Start-up Nation: The Story of Israel's Economic Miracle, and he interestingly points out that Israel has done a very good job of harvesting the military for the leaders of new startups and growing small companies, and maybe the U.S. should look at doing the same.  Maybe we need a military personal/veteran credit program?  You can catch a synopsis of Senor's thoughts on last Monday's Tavis Smiley show.

There was a similar theme expressed on yesterday's Worldfocus: "Israel thrives as the Silicon Valley of the Middle East."

Israel had to take bold steps because of their unique situation, and we need to reinvent ourselves a little here in the U.S. and take a bold step to do so.

The Dutch did the same thing with the promotion of wind energy after the dual oil scares of the 1970s, also profiled on Worldfocus on Monday's show in "Everyday Danes profit from pioneering wind power."

There is no doubt that some pain is coming sooner or later, but if the powers that be along the Potomac get creative, as they did in Denmark and Israel, with solid job creation, it won't be so painful.