The US is officially in a recession….since December 2007!!
It is a well-accepted fact that recessionary indicators cannot be determined with any certainty until the malady has already spread to all the vital sectors of the economy. It usually takes two quarters before, if determined, a recession is officially declared. But it took nearly four quarters this time around for the recession to be formally labeled.
Economists don’t agree on a single definition of recession, but there are two different gauges:
1. The GDP goes negative for two consecutive quarters.
2. The business activity, which includes employment, industrial production, real income and wholesale-retail sales, peaks and then begins to spiral downward.
This second definition is espoused by the National Bureau of Economic Research (NBER), the very organization that broke the belated recession news two days ago.
By the NBER yardstick, the average recession lasts about a year, which means that the US economy should be out of the woods before President-elect Obama is sworn in.
It’s still unclear, however, why it has taken a year for the NBER to put its label on a recession that was so palpable at least two quarters ago. It’s still unknown, and no one seems to care, whether this delay was the result of a genuine glitch, an excess of caution, or some intentional blockage.
The latter scenario is the most likely one as the holdup took place under an administration known for its law-bending inclinations.
What makes the wrongdoing theory even more plausible is Bush’s unusual and surprising conduct in his attempts to tackle the financial crisis. Many say that, perhaps to not thwart the chances of the GOP in an important election year, Bush departed from his party’s conservative approach to government spending and interventionism and stood behind the colossal $700 billion Wall Street bailout.
If the delay turns out to be a cover up, it should become evident that Bush’s gambit was less about helping the economy and more about gambling with taxpayers’ money to help his own party. The delay in itself is bad enough, as it jeopardizes corporate budgetary and business plans and causes unwarranted job and revenue losses.
Deliberately denying the public the right to be informed, especially with regard to the onset of an event as severe and consequential as a recession, warrants a formal investigation.
But those who expect the upcoming administration to introduce any suspects to justice for their possible lawlessness are in for some disappointments. Obama’s already evident eagerness to rule by consensus will preclude him from shaking up Washington. Many Americans rightly argue that, recession or not, Obama was not elected to appease the establishment. If he stays on his current course, Obama may end up losing the support of the bulk of those who have gone out of their way to vote for him. Worse, Obama runs the risk of becoming just another first-term Democrat President, and maybe the first and the last Black American to make it to the highest office in this century.
Judging from the team Obama has picked, there is little doubt that his policies won’t change much from the usual deceitful politicking that drove the country to the brink of bankruptcy.
Obama’s widely cheered promise of change, his famous saying “this is our time, this is our moment to turn the page from the past” may turn out to be just what many had suspected--empty words!
The country is in a recession. That much is now clear. The question is how long and deep this recession will turn out to be. Obama will have to face the impossible task of getting the country out of the recession before it becomes a depression. But time is not on his side. As of January 20th, he’ll have a little over two months to either announce the beginning of an expansionary period or to concede that a depression is in. If a depression becomes the hallmark of his first year in the White House, it would take a miracle to see him re-elected for a second term, as a depression usually drags on much longer than a recession and may continue to haunt his presidency until the end of 2012.
As a rule of thumb, a recession turns into a depression when the real GDP declines by more than 10 per cent. In the current housing and financial environment, such a decline in the GDP is not far off.
This gloomy specter explains why Obama insists that he wants to hit the ground running. His handpicked aides are on an extensive warm-up mode in the hope to grab the baton from the Bush Administration and run with it as fast as possible to beat the looming depression at the finish line. But it’s a white-hot baton that will need a lot of juggling.
It took almost a year to recognize a recession. It may take only a few months before it becomes evident that the US economy is in a depression. Some even say the depression is already here. We can feel it, but we just haven’t yet seen it written on newspapers’ front page.
Martin D. Weiss, in an article published by Money and Markets, is convinced “America is sinking into its Second Great Depression of modern times.” The place, he says, is every home, business, and community, and the time is now.
Other pundits are also beginning to utter the “D” word, and some predict the feared great one may become official right after Obama’s inaugural.
That’s the bad hand with which Obama will have to start his game. After the inaugural litter is swept away and the laser beams are turned off, Washington will likely be a very cold place indeed. The one thing going for Obama up until now is his eloquence--his ability to articulate the problems and his rhetorical prowess in prescribing remedies and giving the overused word “change” an overtone of hope. All that may come back and hurt his image as the ills of the nation become more and more intractable.
If he goes on listening to his discredited old friends in Congress and appeasing his old foes, Obama is more likely to fail than achieve anything of substance in the most urgent issues facing America, namely the collapsing economy, the wars in Iraq and Afghanistan and the awful image of America overseas.
Economists don’t agree on a single definition of recession, but there are two different gauges:
1. The GDP goes negative for two consecutive quarters.
2. The business activity, which includes employment, industrial production, real income and wholesale-retail sales, peaks and then begins to spiral downward.
This second definition is espoused by the National Bureau of Economic Research (NBER), the very organization that broke the belated recession news two days ago.
By the NBER yardstick, the average recession lasts about a year, which means that the US economy should be out of the woods before President-elect Obama is sworn in.
It’s still unclear, however, why it has taken a year for the NBER to put its label on a recession that was so palpable at least two quarters ago. It’s still unknown, and no one seems to care, whether this delay was the result of a genuine glitch, an excess of caution, or some intentional blockage.
The latter scenario is the most likely one as the holdup took place under an administration known for its law-bending inclinations.
What makes the wrongdoing theory even more plausible is Bush’s unusual and surprising conduct in his attempts to tackle the financial crisis. Many say that, perhaps to not thwart the chances of the GOP in an important election year, Bush departed from his party’s conservative approach to government spending and interventionism and stood behind the colossal $700 billion Wall Street bailout.
If the delay turns out to be a cover up, it should become evident that Bush’s gambit was less about helping the economy and more about gambling with taxpayers’ money to help his own party. The delay in itself is bad enough, as it jeopardizes corporate budgetary and business plans and causes unwarranted job and revenue losses.
Deliberately denying the public the right to be informed, especially with regard to the onset of an event as severe and consequential as a recession, warrants a formal investigation.
But those who expect the upcoming administration to introduce any suspects to justice for their possible lawlessness are in for some disappointments. Obama’s already evident eagerness to rule by consensus will preclude him from shaking up Washington. Many Americans rightly argue that, recession or not, Obama was not elected to appease the establishment. If he stays on his current course, Obama may end up losing the support of the bulk of those who have gone out of their way to vote for him. Worse, Obama runs the risk of becoming just another first-term Democrat President, and maybe the first and the last Black American to make it to the highest office in this century.
Judging from the team Obama has picked, there is little doubt that his policies won’t change much from the usual deceitful politicking that drove the country to the brink of bankruptcy.
Obama’s widely cheered promise of change, his famous saying “this is our time, this is our moment to turn the page from the past” may turn out to be just what many had suspected--empty words!
The country is in a recession. That much is now clear. The question is how long and deep this recession will turn out to be. Obama will have to face the impossible task of getting the country out of the recession before it becomes a depression. But time is not on his side. As of January 20th, he’ll have a little over two months to either announce the beginning of an expansionary period or to concede that a depression is in. If a depression becomes the hallmark of his first year in the White House, it would take a miracle to see him re-elected for a second term, as a depression usually drags on much longer than a recession and may continue to haunt his presidency until the end of 2012.
As a rule of thumb, a recession turns into a depression when the real GDP declines by more than 10 per cent. In the current housing and financial environment, such a decline in the GDP is not far off.
This gloomy specter explains why Obama insists that he wants to hit the ground running. His handpicked aides are on an extensive warm-up mode in the hope to grab the baton from the Bush Administration and run with it as fast as possible to beat the looming depression at the finish line. But it’s a white-hot baton that will need a lot of juggling.
It took almost a year to recognize a recession. It may take only a few months before it becomes evident that the US economy is in a depression. Some even say the depression is already here. We can feel it, but we just haven’t yet seen it written on newspapers’ front page.
Martin D. Weiss, in an article published by Money and Markets, is convinced “America is sinking into its Second Great Depression of modern times.” The place, he says, is every home, business, and community, and the time is now.
Other pundits are also beginning to utter the “D” word, and some predict the feared great one may become official right after Obama’s inaugural.
That’s the bad hand with which Obama will have to start his game. After the inaugural litter is swept away and the laser beams are turned off, Washington will likely be a very cold place indeed. The one thing going for Obama up until now is his eloquence--his ability to articulate the problems and his rhetorical prowess in prescribing remedies and giving the overused word “change” an overtone of hope. All that may come back and hurt his image as the ills of the nation become more and more intractable.
If he goes on listening to his discredited old friends in Congress and appeasing his old foes, Obama is more likely to fail than achieve anything of substance in the most urgent issues facing America, namely the collapsing economy, the wars in Iraq and Afghanistan and the awful image of America overseas.
2 comments:
Wow, it's good to know that people have such faith in our next president. :\
Do you think McCain would have been better? Out of all the third-party candidates and stuff, who do you think would have been best?
All I am saying Jennifer is that Obama was dealt a bad hand. It's too bad that an African American starts a historic term at the White House with such a bad deal. I hope he raises up to the challenge by truly setting a different, saner course for America.
Being Black is an extra burden on Obama because his actions will determine the future of the sizable minority of African Americans in US politics.
I don't think McCain would have been a better choice, but I am one of those who believe Ron Paul could have brought some discipline to Washington.
I hope Obama doesn't fail, although his early choices seem to indicate that it's going to be business as usual.
In the land of the brightest, Obama could have fared much better by looking outside the usual circle of those whose policies have already been tried and whose hands are not all that clean.
Post a Comment