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Did the First US Recession ever end?

By : Ziad K. Abdelnour| 5 August 2011
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I certainly do not believe so and strongly believe the U.S. has entered a second recession. It may not be as bad as the first. Economists say that the Great Recession began in December 2007 and lasted until July 2009. That may be the way that the economy was seen through the eyes of experts, but I do not believe that the 2008-2009 downturn ever ended.

As MSNBC recently noted:

“Home prices have fallen to 2002 levels. Values have dropped nearly 50 percent in parts of Florida, California, Nevada and Arizona. Property values are also down that much in parts of troubled big cities like Detroit. Estimates are that as many as 11 million homes have underwater mortgages. Banks have inventories of as many as 2 million foreclosed homes which have not even been released to the market. Home prices could fall another 10 percent if current trends persist”.

Perhaps the most powerful argument that the US recession never ended or that a new one has begun is the persistence of unemployment. Fourteen million people are out of work. A third of those have been jobless for more than a year. May employment data showed the jobless rate rose unexpectedly and that the economy added only 58,000 jobs.

But I guess this is not news to anyone who has been paying attention….And billion dollar fund managers agree: the government never fixed the underlying economic problems, so we’ll have another crash.

As CNN Money recently pointed out:

Wal-Mart’s core shoppers are running out of money much faster than a year ago due to rising gasoline prices, and the retail giant is worried.

States and Cities on the other hand are in worst shape since the Great Depression. California in fact is issuing IOUs for only the second time since the Great Depression. Things haven’t been this bad for state and local governments since the 30s.

Going back to 1930, there were though 123 million Americans….and at the height of the Depression in 1933, around 25% of the total workforce or about 12 million people were unemployed.

Will unemployment reach 25% during this current crisis?

I don’t know. But I believe the number of people unemployed will be higher than during the Depression.

Specifically, there are currently some 300 million Americans, 155 million of whom are in the work force.

Unemployment is expected to exceed 10% by many economists, and Obama “has warned that the unemployment rate will explode to at least 10% in 2009″.

10 percent of 155 million is 15.5 million people out of work – more than during the Great Depression.

Given the above facts, it would seem that the government hasn’t been doing much. But the scary thing is that the government has done more than during the Great Depression, but the economy is still stuck in a pit.

The amount spent in emergency bailouts, loans and subsidies during this financial crisis arguably dwarfs the amount which the government spent during the New Deal.

It is a fact that we are still committed to spending levels that surpass the cumulative cost of all of the major wars and government initiatives since the American Revolution.

According to Dave Ramsey, host of a nationally syndicated radio program discussing personal finance topics, “If the US Government was a family, they would be making $58,000 a year, they spend $75,000 a year, and are $327,000 in credit card debt. They are currently proposing BIG spending cuts to reduce their spending to $72,000 a year. These are the actual proportions of the federal budget & debt, reduced to a level that we can understand.”

We all better be able to relate to this. If you can’t, you don’t get it.

Wanna look at it at a more macro-level?

The New Deal had a price tag of only $500 billion. The Marshall Plan that enabled the reconstruction of Europe following WWII for $13 billion, comes out to approximately $125 billion in 2008 dollars. The cost of fixing the S&L crisis was $235 billion in inflation adjusted dollars.

So even though the government’s spending on the “war” on the economic crisis dwarfs the amount spent on the New Deal, our economy is still stuck in the mud.

Government leaders make happy talk about how things are improving, but this talk will not and cannot fix the economy.

Since the dawn of the Twentieth Century, we have been told that the federal government has the answers to solve all of society’s problems. We have been promised, by supposedly serious men who have sworn an oath before God and man, that if we just give Washington DC more of our money and more of our personal freedom, the problems of poverty, illiteracy, racism, unemployment, crime and corruption will all be solved. Today, each and every one of these problems is worse than it has ever been. The federal government and its blood-sucking bureaucracies do not have a solution to the problem, they ARE the problem.

Albert Einstein once said “The definition of insanity is doing the same thing over and over again and expecting a different result.” We, the People of the United States of America, appear to have gone insane. It is time to do something different. It is time to fundamentally change the way we do business in this country starting with the way we govern ourselves and OUR economy. That will surely be a painful process, but the alternatives before us are slavery to the system or global war. It is time for new leadership in the US; someone who truly understands and believes in American Exceptionalism.

Your feedback as always is greatly appreciated

Thanks much for your consideration


  1. jrjr

    Let’s face it. We need leadership. Any or all of the solutions offered in these comments “could” work, but they all must be DONE to be effective. That will require strong leadership to make the hard decisions and to stay the course. Regardless, forces are already in motion cannot be reversed. We will be entering a period of deflation in mid to late 2011 that will likely run through 2016. The housing market has another 30% to lose as a result of the inventory overhang held by banks. Criminal charges will be filed against banks, Wall Street and the rating agencies for their part in defrauding investors in the CDO debacle. The AIG suit will be the first of many. S&P is next. They rush to downgrade US debt, but where were they during the CDO days? AAA rated my ass! The stock market will bottom out at 3000 in late 2013~early 2014. Consumption (i.e. spending) will continue to fall as fewer jobs are created and more people have less to spend. All of this is already in motion and it is going to be a very bumpy ride. Keep your powder dry. In a deflationary environment with prices going down, cash will be king.

  2. Nick TeeNick Tee

    It is somewhat of a pointless exercise debating whether or not the current situation is part of the last slump/recession. To me it is far more important to realise that this is the early stages of the transisition – the handing over of the reins from those nations that were the former economic powerhouses of the world, to those that a decade from now will be firmly entrenched as the global economic leaders. And while we can debate this all we want, it is already happening, and all of us should be positioning our businesses for that change. It is already substantially easier for me to raise funds in India than what it is in America or the UK.

  3. Doug WolfgramDoug Wolfgram

    It’s not that tough. We need serious tax reform (flat tax with very few deductions and loopholes) and far less spending on bailouts, subsidies and corporate welfare. Everyone works. Everyone pays 15% tax and nearly everything they earn (allow charitable contributions and mortgages to be deducted) and we’ll be out of this quickly. Problem is we’ll also need to lay off about 500,000 unnecessary government workers as well.

  4. Ed BlackEd Black

    I am an economist, among other things. I understand the “official” definition of a recession. The fact of the matter is that, on average, GDP has continued a steady decline since 2007. Unless you are hung up on definitions, that looks a lot like a single, continuing recession. I understand the appeal of the policy remedy of “just stop spending.” The problem is that the money is already spent, and that it carries with it legacy costs in the form of, among other things, interest on earlier ill-advised borrowing. The “stop spending” crowd should have stepped up in 2002, when Paul O’Neill had the temerity to suggest to Dick Cheney that another round of tax cuts was a bad idea. O’Neill was fired the following month. “You know, Paul, Reagan proved deficits don’t matter.” — Dick Cheney Comparing the US to a household requires one to ask, “Why would a household voluntarily give up so much of its income when it was already so far in debt?” Maybe the previous adminstration was hoping for “the rapture.”

  5. Peter SchulzPeter Schulz

    Sir, Does it matter if the US still is or going again into a recession? Fact is that on either side of the Atlantic problems rise. Japan is in dire straits for over two decades now. China will end the US claim for leadership soon. China is not a democracy, their leaders don’t have to be reelected, they don’t have to ask the people, they can act quickly. Economicly they did a great job in recent years and probably will continue to do so. Western systems have the built in mistake, that all action, meaningful or not, will be oportunisticly fought by opposition. Politicians’ success is not doing the best for their country, it’s reelection. I doubt it serves the purpose critisising. Propose what would be the better solution and fight for it in public. And there is something else Americans have to learn: If they continue the dream of “American Exceptionalism” it will end tragically.

  6. Ronald WopereisRonald Wopereis

    Excellent blog, as always, Ziad. Would things get better if banks would add VAT to their invoices to other banks, money itself being the product sold? Best regards, Ron

  7. Joe BallJoe Ball

    Here are some solutions to the problems: Pass the Fairtax bill currently in both houses of Congress. Bring the troops home and adjust our foreign policy to reflect sanity instead of Imperialism. End the Federal Reserve and get our money back on Gold backing. Make all housing loans fully assumable-non qualifying like they used to be, and quit trying to alienate investors with constant changes in “policy” from Freddy and Fannie and HUD, so we can get the housing glut off the market.

  8. Roger AklRoger Akl

    I am not an economist, but when i have no money, I do not spend on unnecessary pleasures. For the US, no money should be spent on unnecessary wars; we have to stop the wars in Iraq, Afghanistan and Lybia at once and not play soldiers with other countries like Syria. We will then the money of the wars for promoting jobs, social expenditures and in infrastructure. Second no money should have been spent on bailouts of corrupt banks and now we should have a lot more taxes on the rich minority and the corporations that are employing foreign people in foreign lands, especially oil ones. But who governs the United States?

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