The economy actually would have gone into a severe recession after the Nazdaq crash, but Greenspan zeroed rates. That created false demand via massive debt accumulation in the private sector. Consumers bought way more shit than they could afford, which "papered over" the Naz and offshoring fallout. Also bear in mind, the deficits in early to mid 2000, while relatively small to todays numbers, were 2.5-3% of GDP. That's a big deficit. Deficit spending isn't one-to-one. For every dollar spent, it circulates through the economy and creates more demand than just the contractor who is paid first. So the deficit is actually a much stronger fiscal tool than we think. In actuality, the Naz and Sept 11th would have precipitated probably a Depression. However, at that time, consumers had equity. So Greenspan dropped rates, consumers leveraged their balance sheet, blew their HELOC load, which juiced the hell out of the economy, which created huge over-consumption, which made it appear no jobs were lost from Naz or offshoring, when there were... Bring us up to today. Why a bad recession? Bubbles destroy wealth. Consumers went long stocks and homes into the collapse, at hugely inflated prices. And their wages didn't keep pace. In many cases, they didn't grow at all! So here the consumer is, tied to a house or stock portfolio they leveraged themselves to the moon to buy, expecting the market to go up forever and flip it (like they had), but they got caught long. Now, they have to pay that 500K teaser loan or HELOC back, on a schoolbus drivers salary. That's the problem. So now, most consumers discretionary incomes are decimated. Most of their paycheck goes to payoff their 600K mortgage on some shitty 2-bedroom spec home that today appraises at 450K, if they can find a buyer... If you look at the GDP formula, private consumption got wiped out. Consumers maxed out their debt-to-equity and got smashed in the process. Now they must pay down all that huge debt they accumulated back in the early 2000's, at wages that never grew....So they ain't buying shit. Those that are solvent, are paying paying paying to Citi, JP, whoever. No perks, no vacays, no cars, no homes. Back to basics. This is why retail, durables and home sales are crap. So the Government stepped in to prop up GDP via deficit spending. This is where people don't get it, I imagine because they're not familiar with how GDP is calculated. Government consumption is part of the formula. So now we have Government spending 10-12% of GDP, and what are the recent GDP prints like now? Flat. Zilch. Nada. That means, at the very least, if that deficit stimulus is removed from GDP equation, GDP will drop by at least around 10-12%.
Oh, a Depression is fact. Post the GDP formula and we can discuss it. Guv spending is well accounted for... And yes, people will find other jobs. But that economic restructuring takes a good year or two to happen. First, the bad debt must be cleared before investors and lenders are confident the worst is behind. That means huge bankruptcies and massive layoffs. A big shakeout and settle period. Also consider Government spending that must be cut, is from Medicare/Medicaid, food-stamps and welfare. Granny and Grandpa won't get their meds. The eldery will die early and the poor will get hammered. An 18% economic contraction is nothing to sneeze at. Americans are soft and lazy from decades of handouts and freebies. And they're about to get a suppository the size of goats head shoved up their hind end. Look at Greece. They haven't even hit the wall.
Other "healthy economies" are not spending $700B/yr to be policeman to the world, either. It's a heck of lot cheaper to be policeman than it is to fight full blown war.
Aren't we fighting other people's wars? While they spend THEIR money on their own country, we spend OUR money fighting for their causes.... Not only expensive, but stupid.
Years ago there was always a discussion about "Guns or Butter". Now we have "Guns AND Butter"... we just borrow what we need to have both... at least until somebody calls BS on what we're doing.
The handle isn't Old Timer. It's oldtime. Because we play that oldtime fiddle music. Not that new fangled Bluegrass you young kids all listen to.
RandomCapital says don't worry, be happy. You know, it'll be somewhat fun watching Europe and America get flushed. Only because I have money in the bank. Good thing most Americans got a big retirement account and don't live paycheck to paycheck