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Page added on April 3, 2008
It’s not a Recession or Depression that’s coming, it’s a Stagflationary Abyssal
Abyssal
Some people will look at my list and wonder why I don’t talk about unemployment or the price of stocks or other indicators but those items are all symptoms of issues with the five primary items I listed. When corporate income is down affecting corporate health this affects stock prices, causes corporations to reduce spending and also results in layoffs and increasing unemployment. Layoffs and rising unemployment typically cause consumer ability to spend to go down, obviously among the people who are laid off but also among those who fear that they might be laid off and thus need to save their money to prepare just in case they lose their jobs.
The most recent recession of 2001-2002 was a result of problems primarily with #2 and a slight resultant hit on #1. Businesses were struggling and thus were not spending money on non essential items and as a result most firms that rely on corporate customers lost money. When they lost money, they laid people off. Unemployment rose, but those consumers who were not laid off kept spending and this kept the economy from experiencing much more serious issues. Throughout this period, the government was solvent, the lending and banking system lent huge amounts of money to businesses and individuals and prices were flat. With the more severe downturn of 1979, known as a global stagflation, items #1, #2 and #5 were the issues. You had double digit inflation and unemployment, corporate spending was down, it was a real mess. The great depression of 1929 featured massive problems with items #1, #2 and #4. Banks failed en masse, unemployment reached 25% with obvious implications on consumers’ ability to spend. If 1/4 of the country’s consumers didn’t have money to spend, business income went way down and many companies failed completely. As bad as some of these bad economic times were, none of those historic downturns compare with what is coming.
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