Double Dip Recession?

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I have been following the events in Europe with interest, and am concerned it may cause another credit crisis. If investors lose faith in the government of Spain or Italy, it could spell a serious crisis for the euro, and plunge the world back into recession.

Equally concerning (to me) is the overheating of China's economy. Just because China has grown so rapidly over two decades does not mean they can sustain growth indefinitely; they need a bust at some point. Japan followed a similar boom trajectory from 1955-1990, and are now dealing with two decades of stagnation. A Chinese bust will be equally as devastating. Of course, one cannot discount more mortgage trouble in the US.

So what do you guys think? Is a double dip recession likely? Inevitable? Or are my fears overblown?

Growth is never sustained indefinitely. Equilibrium has to be attained.

I can't remember which one, but some economist wrote that everything is so volatile right now that there isn't any way to accurately make good predictions--it's like trying to hit a rapidly moving target. It's a scary time, that's for sure.

theres one man who can sort out a double-dip recession, and that man is george costanza.




note: this is a seinfeld reference (US sitcom)

George would police up that double-dipping like none other.

In my opinion things are just going to get worse. The situation in Europe is only the start. Look at all of the countries which have budget deficits and huge debt. Latvia, Hungary, Poland, Ireland, Iceland, Greece, the UK. In fact that probably includes many States in the US as well. I mean people may think that the budget cuts in the UK are bad but it's nothing to what's going to happen.

Whether investors "lose faith" depends entirely on whether the governments are fiscally irresponsible.

Unfortunately, government irresponsibility is difficult to predict.

Deficit terrorism is the problem. The Czechs voted for people who will drive the country into the mud because of debt hysteria even though theirs is insignificant. They propose to hand the pension system over to Wall Street! Deflation is taking place in the US already and in Europe and a double-dip appears to be inevitable. Who is to blame? Stupid leaders, stupid media, stupid dogma that won't die even though it fails again and again and again and again. I hate these people.

People who speak of "fiscal responsibility" are feeding into the problem. Being "fiscally responsible" is supposed to mean deflating and throwing millions out of work - cutting spending cuts GDP and you're worse off and you ruin millions of lives.

The stupid markets called for deflationary blood, when the Germans forced this on Greece then we heard that the markets realised that depression is inevitable with that scheme and that's bad too so they said thumbs down on that... idiots!

Some deflation is to be expected during the depths of a recession. However, despite a "stimulus" bill that held off on most of the spending until 2010, deflation for 2009 was only 0.4% - negating only a tenth of the 3.8% inflation from just 2008. Prior to that, annual inflation hadn't been negative since 1955.

So far in 2010, every month has been inflationary, despite the fact that we haven't really pulled out of the recession yet. Here's a table if you want to check:

http://www.usinflationcalculator.com/in ... ion-rates/

Long term deflation is not a real threat in the U.S.


As demonstrated above, there is no problem in this area.

I do not, however, advocate fully balanced government budgets; rather, I think a small deficit can be sustained if policies are put in place to allow the economy to grow. Fiscal responsibility simply means cutting spending enough to permit borrowing wisely, rather than borrowing profligately as has been the case in the last few years.

Edit: with respect to the original topic, I note that to have a double dip recession, we'd have to pull out of the first dip, which hasn't happened yet.

I think the world financial system is absurd.
Real wealth comes from industry and agriculture. The fact that, in the modern world with all its technological advances, you can have a country's economy booming one week and then in recession the next thanks to internationalist investors crunching numbers on computer screens on the other side of the world is a nonsense.
But it looks like the current financial system is one we're stuck with, and it can still provide "interesting" talking points.
I predict the 21st century will be China's, whatever the globalist rags say.

The Government says, "When I put my hands on my hip you dip you dip you dip."

I question China's short-term prospects for two reasons. First, China is not a dynamic society. Even if the Beijing politburo makes liberal reforms, China is still much too homogenous and ancient to change. For one, I question if Chinese can accept immigration to reverse the massive demographic decline they will have the first half of this century. At least the United States can absorb some immigrants.

Secondly, China's financial system is inefficient. State-sponsored banks make bad loans for political reasons, and not for fundamentals.

I'm counting on it, not that I want it that way, but I think it's what's going to happen and I'm trying to be ready. I'm in cash and ready to buy when the shock waves hit again.

I think that a shift in economic power from the West to the East is happening. It doesn't surprise me though because if you take Indonesia for example it's a country with a huge population, enormous natural wealth and a very hard-working population.
The US may have political and military power and influence but they've lost their capacity as an industrial/manufacturing nation to China.

I do think Asian economies are rapidly industrializing. In terms of economic power from one nation to the next, though, they have a long way to go. For one, most Asian nations (Japan excepted) lack a sophisticated market of their own. For another, they lack control of their own financial systems. For the moment, they have to go to the US, Japan and Europe if they want capital. They can't really raise it in their own nations.

The US, btw, does not really have a decline in the manufacturing sector. It's certainly had a decline in manufacturing jobs, but not really in industry itself. The sector has just become much more efficient, either outsourcing or becoming automated. I guess this just further reflects the growth of services. One day, most services will become automated, too.

what will happen then? how will people make a living when the lions' share of all the manufacturing and service jobs are just automated history? will it be like what was depicted in the movie AI- Artificial Intelligence, where the unemployable masses are distracted and pacified by "flesh fairs" [bread and circuses]?