Double-Dip Recession Warning

 By Greg Hunter’s 

There has been some positive financial news to start 2010.  Some auto makers reported good sales in December to end the year.  Retail sales also perked up in December, and even home sales in some areas showed a small rebound.  Does this good news mean the recession is over?  I say, not a chance.  In a large part, we saw a bounce in economic activity because of all the bailouts and spending.  Even Nobel Prize winning economist Paul Krugman is worried about a double-dip recession.  Recently, in a New York Times Op-Ed column, Krugman said, “…it will be important to remember, first of all, that blips — occasional good numbers, signifying nothing — are common even when the economy is, in fact, mired in a prolonged slump.”  Krugman thinks there is a “30 to 40 percent” chance of a double-dip recession.  The Nobel Prize winner also thinks the economy will run out of gas by the middle of 2010 and, if that happens, he will surely want more spending or stimulus.  To me, that really means more money printing to continue the  bailout for the rich.

Krugman is not alone in his fear of a double-dip recession.  Economist John Williams of Shadow Government Statistics is also talking about a double-dip in a recent commentary.   Unlike Krugman, Williams says, another nasty downturn is practically unavoidable.  In essence, his analysis is showing a nose dive in what he calls the “real money supply.”  A contracting money supply almost always precedes economic downturns.  Williams, like Krugman, also thinks that the double-dip will be “obvious by mid 2010.” Williams paints a much direr picture of the coming economy than Krugman.  He says that the “tumbling real money supply promises an intensified depression.”   Please note Williams used the “D” word in his description which I think is much more accurate.  Just look at some stories that are not getting the attention of the mainstream media.  The recent headlines below paint a totally different picture.

“Manhattan Apartment Prices Fall as Finance Jobs Lost” (Bloomberg)

Mortgage demand near six-month low as rates jump” (Reuters)

“Strip Mall Vacancy Rate Hits 10.6%, Highest on Record” (Calculated Risk)

U.S. Public Pensions Face $2,000 bn Deficit” (Financial Times)

And by the way, 2009 was one of the worst years for U.S. auto sales in nearly three decades despite an upturn in December!  The economy has a long way to go before it really starts getting better.  Williams thinks, “The renewed deterioration in U.S. economic activity will intensify the systemic liquidity crisis…”  In plain English, that will mean more defaults and bailouts.   This, in turn, will trigger more U.S. dollar dumping and according to Williams, will begin to feed into a hyperinflation…” 

If the economy does tank in the middle of 2010, then look for Congress to hand out some more stimulus money because this is an election year.  At the very least, I predict unemployment benefits will be extended for millions of out of work Americans until at least the end of the year.  Enjoy the positive news while it lasts.

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