It is a minority opinion, but one held by some astute people. The recession which may hit the US, or has already hit the US, could be the worst in 50 years.
The argument is based on the normal fall-off in housing prices and rising fuel costs, but it adds the factors of "heavy consumer debt, a growing federal budget gap, and rising prices," according to Reuters.
While the number of economists and pundits calling for a recession a mile wide and a mile deep is still fairly small, they can make a compelling case. Fuel prices are likely to stay at their highest levels ever. Demand from China and an unwillingness to push more supply from OPEC are the critical factors here.
Housing defaults could indeed accelerate rapidly. If the economy goes through a job creation slump, out-of-work homeowners are likely to add to the rolls of those who simply have high costs and low incomes.
Consumer debt has been a concern for over a decade. High employment and a rising GDP driven by consumer spending could be a counter-balance. But 18% credit card debt will catch up to people who are not seeing real increases in their incomes and those who do not have jobs at all.
The automotive, retail, newspaper, real estate, and building industries are now done laying people off. In some parts of the economy, that process is only beginning. Cities and states may have to cut employees as the tax base falls.
A three year recession with a 5% GDP fall-off? No longer a position only taken by residents in asylums
Douglas A. McIntyre
Top Gaining Stocks
Top Losing Stocks