While the media, the US government and Pro-Obama political analysts (read economic cheers leaders) are boosting the mood of Americans before next week’s presidential inauguration, and some economists are even forecasting a mild recovery in mid or late 2009 on the basis that some US stocks are posting 10-20 % gains from their November 2008 lows and the hope that the Obama stimulus package will be enough, people on “main-street” aren't buying it . More and more they are starting to throw the word “economic depression” around more casually and with reluctant inevitability and inescapability.
According to a recent USA Today/Gallup poll, 35 percent of Americans think that a "depression" -- is very likely, and another 39 percent think it's at least somewhat likely. That’s 74% or 3 out of 4 Americans that are reluctant to spend, reluctant to invest and reluctant to borrow money, even if they find someone that will lend money to them and in general risk-reluctant. Frugality is in; Cheap is Chic and “Save a dime on 2009". It’s the top topic of all US talk shows from Regis to Dr Phil & Oprah. A total collapse of economic confidence and trust. This could lead to a run on one or more banks if conditions don’t improve or worsen in 2009-2010 or if there is a sudden unexpected geopolitical shock.
"Depression" -- is defined by the poll as "an economic downturn that is much more severe than most recessions and would last several years"
Other signals include news of more home foreclosures, trends toward double digit unemployment in some areas, continued layoff announcements or chapter 11 bankrupcy, desperation in job seekers, retailers announcing bankruptcy, severe price deflation or stagflation (dropping wages and rising living costs and prices).
Prediction markets such as Intrade (that track the wisdoms of crowds) puts the chances of a depression occurring at some point in 2009 at 58 percent.
Some more respected and conservative academics are acknowledging the risk of depression. Richard Posner, an influential law professor at the University of Chicago, believes the United States has entered a depression. The conservative lecturer believes Keynesian-style stimulus would be a better solution to the economics crisis than tax cuts. Posner acknowledged that "depression" is an ambiguous term, but in the Becker-Posner Blog, a daily commentary he writes with Nobel Laureate Gary Becker, he argued that the current environment fits his own definition: "There is no widely agreed definition of the word, but I would define it as a steep reduction in output that causes or threatens to cause deflation and creates widespread public anxiety and a sense of crisis."
BOTTOM LINE; It's up to you. People can see these trying times as a time of crisis (and do nothing) or as a hidden window of opportunity (and act) or a time of transformation (and promote change)
Related Posts:
82 Signposts to the current Recession Depression Summary from 2008
When will this recession end ? Part 2 Do you listen to the Optimists or the Pessimists in 2009?
When will the recession end? Part 4 The double dip housing crash in the USA
When will the recession end? Part 5 Stop Auto Industry Bailouts, start buying Electric
© 2005-2009
Walter Derzko -"Changing the world, one idea at a time"©
Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression featuring 45 opportunity scenarios.
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