Via AMERICAblog:

Robert Reich: We're heading toward a double-dip recession

From Alternet via DFA Anne Arundel (my emphasis):
Why aren’t Americans being told the truth about the economy? We’re heading in the direction of a double dip – but you’d never know it if you listened to the upbeat messages coming out of Wall Street and Washington.

Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It’s weaker today on average than at the lowest point of the Great Recession.

The Reuters/University of Michigan survey shows a 10 point decline in March – the tenth largest drop on record. Part of that drop is attributable to rising fuel and food prices. A separate Conference Board’s index of consumer confidence, just released, shows consumer confidence at a five-month low — and a large part is due to expectations of fewer jobs and lower wages in the months ahead.

Pessimistic consumers buy less. And fewer sales spells economic trouble ahead.
Reich goes on to talk about the job numbers and notes that 200,000 jobs is "peanuts" compared to what's needed:
[T]he nation has lost so many jobs over the last three years that even at a rate of 200,000 a month we wouldn’t get back to 6 percent unemployment until 2016.
There's other data in the article, including comparisons to GDP growth during the mid-1930s. I recommend reading it all.

But let's look at his opening question: Why aren't Americans being told the truth? Reich's answer — Dems want happy voters, and Repubs want voters who don't think they need government to help out. That plus the DOW, which is above the magical 10,000 number most people measure the economy by.

Except that this time, a DOW of 12,000 isn't enough to boost confidence. And the reason is certainly the mound of consumer debt people feel dangerously saddled with. Consumer debt, not wage growth, fueled (1) the Reagan "boom"; (2) most (but not all) of the Clinton boom; and (3) allowed the economy to tread water (i.e., not tank) through most of the Bush years.

Those days are gone for good, in my estimation. 2008 was a wake-up year for consumers, and I don't think all the wide-screen bargains and happy talk in the world can lull them back to sleep.

My advice, added to that of many: Pay off your debt if you can; reduce your expenses if you can; build up cash, if you can. The Bigs are screaming "hyper-inflation" to create the next pro-Billionaire flash-mob of spending cutters.

Don't be fooled. Deflation is more likely, and in a deflation, cash wins. (There's a primer in this post on the dangers and opportunities posed by deflation.)

GP


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