Why the next recession will be worse than 2001

Discussion in 'Economics' started by silk, Mar 18, 2007.

  1. silk


    This is an interesting article which points at reasons why we might expect the next recession to be much worse and more difficult to pull out of then the 2001-2002 recession.


    This time around.

    (1) no housing bubble to pull us out of recession

    (2) less room for gvt to increase spending as this time we already have huge deficit verus a record surpluss in 2000.

    (3) China will likely fall into recession with us next time.
  2. initially this might kill the commodity bubbles, (deflation) but attempts to revitalize will cause inflation post deflationary shock. volker style interest rates will be needed.
  3. silk


    I'm thinking that lower commodity prices will be the way to get out of the next recession. Fiscal and monetary stimulus will be less effective then in last recession. Next time around things like cheap oil/gasoline might be the force that helps prop up a dead consumer.
  4. Now we have much more military spending than we had in 1991.

    But contrary to most people believe, military spending is bullish, NOT bearish.
  5. the war is keeping the economy afloat at the moment. People might rally the market initially if the troops come home, but once the war spending stops propping up the economy. nothing left.
  6. Military spending sank the Russian economy....spending comes at the cost of taxation or borrowing...both are bearish.
  7. This is very true.

    I don't want to get too political here, but pressure from the military-industrial complex was ONE of the reasons the push to war with Iraq was as aggressive as it was (although President Eisenhower, in his farewell address, warned of this exact dilemna), but spending on war is very stimulative to the economy.

    We will have a hangover when the inevitable withdrawal occurs.
  8. Unfortunately, natural resources like gas/oil are finite by definition. Prices will have a strong tendency to rise in the coming decade. Lower prices would have to be forced by federal measures, putting another strain on the GDP.

    Alternative energy resources and technology might become an interesting economic exciter though. US should have invested in it earlier and more. Might have missed the boat already.

  9. i sure hope rates get up that high
  10. Paine is just another socialist democrat. Claims rising wages is the answer. Maybe everyone should join a union.

    #10     Mar 18, 2007