Introduction to The Economic Doldrums: Why Many Predict a Recession Before 2020
The global economic landscape is fraught with uncertainties, and the possibility of a recession in the coming years has captured the attention of both economists and the general public. This article delves into the reasons why many predict that an economic downturn may occur sooner rather than later, focusing on the aftermath of the 2008 financial crisis, the current economic strategies, and the political influence on economic projections.
Aftermath of the 2008 Financial Crisis: No Full Recovery
The 2008 financial crisis was a watershed moment that had far-reaching consequences for the global economy. In the United States alone, the crisis resulted in a significant loss of $22 trillion from the US economy. The recovery efforts, while they brought some stability, were not comprehensive enough to address the underlying structural issues that contributed to the crisis.
For instance, James Ricard, a renowned economist, argued that the economic recovery was inadequate and unsustainable. He maintained that we were in a structural depression that required massive stimulus. However, the measures taken to combat the recession were never fully reversed. Record low interest rates on bank deposits and the influx of cheap money led to an artificial economic boom, primarily fueled by stock market investments and corporate share buybacks.
The continuation of these measures is crucial, as indicated by the pressure placed on the Federal Reserve by the Trump administration to maintain record low rates. The Federal Open Market Committee has consistently aimed to prevent an economic reset, thus perpetuating the cycle of low interest rates and easy credit.
Unsustainable Economic Strategies
The prolonged reliance on low-interest rates and easy credit has created a fragile economic system. The idea is that by keeping borrowing costs low, businesses and consumers can continue to spend and stimulate economic growth. However, this approach is not without its risks. Over time, it can lead to inflation, asset bubbles, and a cycle of borrowing that can be difficult to break.
The current economic landscape is characterized by record unemployment, which may surface as a disguised unemployment in the form of underemployment or low-paying jobs. Such a situation can create a false sense of economic recovery, as low interest rates and easy credit can mask underlying employment issues. The consumer confidence is indeed up, but it comes with the concern that it is driven more by the stock market rather than genuine economic growth.
The Political Influence on Economic Projections: Trump Derangement Syndrome
While the discussion on potential recessions and economic downturns is often grounded in economic data and analysis, the political landscape must also be considered. The concept of Trump Derangement Syndrome highlights the significant role that politics plays in shaping economic predictions and narratives. This syndrome is a phenomenon where Democrats and some Republicans hate Donald Trump so much that they fervently hope for his electoral defeat, even if it means a total economic collapse.
The economic success of the current administration, as evidenced by record unemployment and stock market highs, makes it difficult for the opposition to present concrete alternatives. Consequently, the primary strategy seems to be attacking the economic policies and performance of the current administration, rather than proposing viable solutions to address the underlying economic issues.
Furthermore, the dissatisfaction with Trump often stems from his personality and political style rather than his policy outcomes. Many who disapprove of him would likely support a Republican president with similar economic policies. The main issue is not with Trump’s policies but with his implementation and communication style, which often polarizes the electorate.
Conclusion: Addressing the Risks of an Ongoing Recovery
The economic recovery post-2008 has been marked by continued low interest rates and easy credit, which are not sustainable in the long term. There is a strong likelihood of an economic downturn unless these measures are gradually phased out and replaced with more robust, long-term economic strategies. It is crucial for policymakers to balance the need for economic growth with the risks of overheating the economy.
The political narratives surrounding potential economic downturns should be examined critically. While political motivations can influence economic predictions, it is essential to base them on solid economic principles and data. Only by addressing the underlying structural issues can we avoid the economic pitfalls of the past and build a more resilient and sustainable future.
Keywords: economic recession, structural depression, Trump Derangement Syndrome