Sunday, November 18, 2007


Recession is defined, simply, as two consecutive quarters of negative growth. This current quarter, 4th qtr 07, may be the first quarter of negative growth.

I am more concerned about the effect of the increasing cost of petroleum products, including home heating oil, gasoline and diesel fuel, on the consumer's discretionary spending than I am about the effect of the collapsing housing market.

The decline of the housing market is having a severe impact on many financial institutions and it will get worse. But my real concern is about consumer spending. If the increase in gasoline prices causes the consumer to buy less of the items that they normally buy, then retail sales decrease. Now remember as the cost of gas and diesel goes up, the price of all the items the trucks delivered will also go up.

As sales decrease, eventually less items will need to be manufactured. And less people will need to be employed making items that are not selling. Layoffs along with the adjustable rate mortgages resetting will tip the U.S. economy into recession.

I don't know if the various government agencies that report on the health of the U.S. economy will tell the truth. They cooked the books during the Nixon years on the orders of Nixon himself, I was told when I worked for the U.S. government in D.C. back in the 80s. But, personally, I believe that the Bush Administration has lied to us about the condition of the economy, and I see no reason not to expect them to do it again.

Go back, for a minute, to 1991. George H. W. Bush was President and running for re-election. The country was in recession. Senate Majority Leader George Mitchell delayed hearings on policies that would have ended the recession. Even though the recession was technically over in the summer of 1992, the public still felt the effects of and, in fact, thought we still were in a recession when they voted for Bill Clinton for President in November of 1992.

The prospect of a Democratic landslide next November must be terrifying to what passes as the brains of the Republican machine. Recessions are not allowed.

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