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View Full Version : Double-dip recession?



stuboyle
8-2-11, 3:48pm
I am starting to get that sinking feeling that we may be heading for the dreaded double-dip recession. I fear all of the boost that we got from the stimulus spending is done and we can't afford to do any further stimulus because we overspent (or under taxed) when the economy was doing well.

Actually, with the government reducing its spending, this will further shrink the aggregate level of consumption (which is the sum of all consumer and government spending). The total level of government employment will likely shrink which could increase the unemployment rate further. This could lead to further declines in tax revenues which will lead to further cuts. Are we in a downward cycle? Where is the bottom?

ApatheticNoMore
8-2-11, 4:45pm
I don't much like the term double dip because that implies things actually got better!! If we are looking at employment: around here the official unemployment rate fell from nearing 13% to being closer to only 12%. There are a lot of words that can be used to describe that but recovery is not one of them. There are a lot of words that can be used to describe politicians who call that a "recovery" but they are all obscene.

It is possible any effect from cutting back federal government spending (if any takes place as opposed to just reallocation of spending) will be mitigated by another round of qualitative easing. However I am not exactly optimistic about the situation for too many reasons to name.

Rogar
8-2-11, 4:49pm
I've been fairly positive about the economy having a slow but steady recovery, but I'm starting to think you might be right. Paul Krugman, who is a bit of a liberal but also a nobel prize winning economist, wrote some similar thoughts about the reduction in government spending in a recent article. On top of a fragile economy, the recent financial debates certainly made the economy look bleak. I think much of this was drama created to bring attention to the gov't debt, but some was probably real. I think this will have a psychological effect that will dampen business practices and the stock market.

creaker
8-2-11, 9:00pm
I don't see how we can avoid it - we've been spending trillions created out thin air for years - and now we're going to put the brakes on it (a little, but a significant amount). It will be a huge amount of money taken out of the economy.