Wall Street Journal survey results of economists gave positive on Recession. Now the New York forecasting firm sings the same song. Economist Lakshman Achuthan quotes “This is a recession of choice,”, “The business cycle does not sit around and wait.”
So how bad is this recession ? The one that US faced in late 1960’s and 70’s. Similarities are many – Stagflation is key. Stagflation is stagnation in economic growth with rising prices (inflation). The Fed in late 1960’s lost the confidence and it took a decade to regain that confidence in Fed under Regan administration. Lots of negative criticism on the Fed for not acting on issues in year 2007 when housing bubble burst started showing up its ugly head.
Weakening dollar, rising unemployment rate and rising inflation is all adding more fuel to the recession of 2008. We don’t need to be economists to see the data by ourselves – A gallon of milk (2%) now touching $3.00, heating bills (from gas) just hit a record bill and gas price is hovering around $4.00. That is data for inflation.
DJIA (Dow Jones) is shredding points on a daily basis at a faster pace except a record one day rise of 400+ plus points recently. When Bears Sterns collapsed to $3 from $80 in span of two days, it sent strong tremors to all financial stocks. Morgan Stanly, Lehman Brothers, Meryl Lynch and Goldman Sachs stock prices hit their 52-week lows casting doubt on whole financial model itself.
To sum up – now the focus should be how bad is this recession and a tough test to the Fed to see what recovery measures of them will work this time.