Technically we might not even hit a "government measured" recession because their numbers are a complete fantasy - but read behind the scenes and when multiple sectors of our economy are in depression - autos, airlines, housing, finance, and retail.... you tell me how in an economy which is 70% based on spending we cannot even get -0.1% GDP (whereas Canada has gone negative? Please). The government statistics are now beyond folly. (why is consumer confidence at 28 year lows if the aggregate numbers show such strength we hear from our friends in D.C. with their gold plated benefits and six figure salaries - living in a parallel universe). Years upon years of trickle "down" economics are showing to be nothing more than trickle "on" economics - you know when the greatest proportion of GDP ever goes to corporate profits and the least percentage ever to employee wages = something eventually breaks. And "it" (employees) are now breaking - slowly but surely. Maybe the market is signaling they are seeing this, and why we are getting this relentless flood of selling.
Oh look there, another 2,500 jobs lost at Northwest Airlines; but that's ok - because it's an old school industry and we don't need those type of jobs. Send these folks over to Walmart along with the Starbucks folks, the auto workers, the hotel workers, the Las Vegas folks, the Steve & Barry workers... man we're going to have a Walmart every 50 feet at this pace to keep up with all these new workers that need a home. Walmart, federal government, and healthcare - the "growth" areas of the economy ex farmers and wildcatters. How about a national inititiative to at least put the construction guys back to work with the NEXT stimulus? Nope - more borrowing from China to hand to people to spend on luxuries such as ... food. And gas. The booming 2nd half 2008 recovery we were promised for the past 6-9 months has commenced. Aren't we all enjoying this?
Unfortunately the great cleansing has to happen. Housing prices need to fall to a level people only spend 30-35% of their salary on a roof over their head. (What Should Median Housing Prices be Today?) So they can pay for all the other things in life. Many of which increasing at 10-20% rates. The income pie for most is growing at best 3%ish. For many, as they lose jobs at higher pay, and take newer jobs at lower pay - the income pie is shrinking. That leaves even less money for "discretionary spending". So unfortunately the inflation is things we don't directly control (but need) could lead to the Fed's greatest worry - deflation. Deflation is what gets rich people worried - after all for that small sliver of society assets, not income, is what matter most. When assets deflate - then they will feel like many in the middle of America are now feeling. Poorer.... and feeling "trickled on".
