Last Friday Laksman Achuthan, co-founder of Economic Cycle Research Institute (ECRI), announced that not only has the economy entered a new recession, but that “it’s going to get a lot worse. The vicious cycle is starting where lower sales, lower production, lower employment and lower income [leads] back to lower sales … you haven’t seen anything yet.” Despite some evidence that the economy is growing in places, it’s not enough to overcome the significant array of indicators that Achuthan has used successfully for years to predict the economy. According to The Economist, ECRI has never issued a “false alarm,” and this time should be no different.On Achuthan's website he states:
ECRI’s recession call isn’t based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down – before the Arab Spring and Japanese earthquake – to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes. In fact, the most reliable forward-looking indicators are now collectively behaving as they did on the cusp of full-blown recessions, not “soft landings.”
A new recession isn’t simply a statistical event. It’s a vicious cycle that, once started, must run its course. Under certain circumstances, a drop in sales, for instance, lowers production, which results in declining employment and income, which in turn weakens sales further, all the while spreading like wildfire from industry to industry, region to region, and indicator to indicator. That’s what a recession is all about.
It's going to get worse.
More government spending is not going to make it any better.
Keynesian interventions by the federal government and the Federal Reserve simply don’t work, or, as noted by Rosenblum of the Dallas Fed, “The patient isn’t responding well to the medicine.” It’s long past time to take the patient off the medicine and let him begin to recover on his own.(Read the article in its entirety)
People like Peter Schiff and Ron Paul have predicted this and were summarily laughed at and ridiculed. They, however, understand the economics of the situation, and the fact that Keynesian policies practiced by the Obama administration have exacerbated the problems that we face by spending and borrowing more and creating/continuing policies that are choking American business and agriculture. Entitlement spending is unsustainable. People who are relying on the government for jobs and for their general welfare are going to be sadly disappointed.
I hope that people recognize what is coming and have been doing something to prepare for it.
All I can say is this - Don't expect government to help you out.