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Kimberly Amadeo

Crisis Not Over, Even if Recession Is

By September 15, 2009

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Did you breathe a sigh of relief when Federal Reserve Chairman Ben Bernanke announced the recession was over? I didn't think so. You have a queasy feeling in the pit of your stomach which says too many bad things are still rising, such as unemployment, bankruptcies, and foreclosures.

Even IF the recession is over (notice the big IF), the crisis is not. "We are in the chronic phase of the crisis. The real crisis is systemic," according to Jim Wygand, Principal Partner at Critical Corporate Issues, an international risk management consultancy. Mr. Wygand points out that debt was driving "a whopping 25% of total global consumption."

Now that Americans are cutting back, and the U.S. government is maxed out, on debt, China and emerging markets will have to increase their own consumption to keep their factories running. Wygand recommends that businesses will need to become smarter about developing products to supply both emerging and developed markets. Be prepared for more economic hiccups as banks and the government try to manage their way out of what had become a debt-financed economic imbalance. The global economy didn't topple, but it is still wobbly.

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(Photo Credit: Joe Raedle /Getty Images)

Comments

September 15, 2009 at 6:59 pm
(1) Renata says:

The recession isn’t over until people start hanging out like zombies at Home Depot on the weekends again.

September 16, 2009 at 12:56 am
(2) Kimberly Amadeo says:

Renata,

That’s a great economic indicator. The Home Depot Zombie Index.

Kimberly

September 16, 2009 at 9:16 am
(3) dude says:

Bernanke is whistling past the graveyard. The GDP is only slightly up because of the stimulus (bubble). No jobs=No recovery jobs produce consumers which circulates money producing wealth. money doesn’t circulate, the economy doesn’t recover.

September 16, 2009 at 9:55 am
(4) dadavis says:

Right on dude… And…the government needs to stay OUT of business. Reform the checks and balances, but STAY OUT of business. Decrease the size of government – not increase it. Government needs to decrease their spending and put a real plan together that stimulates the economy and capitalism. Small businesses are being penalized as well as corporations under this administration and it will all roll down to the taxpayer. Let companies fail … stop the handouts…stay out of business…stop spending taxpayer money…balance our budget…stop the handouts. Handouts breed a lack of responsibility and accountability…this leads to increased taxes…taxpayers/citizens have to pay for all these programs… which decreases spending.

September 20, 2009 at 8:24 pm
(5) useconomy says:

I agree. Deficit spending means we are borrowing from our children’s future prosperity to pay for current consumption. This is the opposite of investment spending. See Is Stimulus Spending Best Investment?.

Kimberly

September 27, 2009 at 5:50 pm
(6) Robert M. Collinsworth says:

A recent headline read: “Obama: Global economy ‘back from the brink’”
This is so scary! The man simply has no clue what so ever . . . . or does he?.
We have not even hit the worst of it yet and he is claiming to have brought us back from the brink. Here is what is coming folks:
(1) At least one more round of foreclosures because he has done nothing to promote legislation to help create jobs in America, Keep jobs in America, or bring jobs back to America and he could have promoted and requested such legislation from Congress.
(2) Failed mortgages on commercial properties will be the number two item to hit us and it will hit us hard.
(3) More bank failures are on the way and again . . . a very hard hit.
(4) Insolvency of the FDIC, which has already started. The FDIC is currently active in trying to borrow the taxpayer dollars the government used to bail the banks out back from the banks. Nice isn’t it when they borrow our money and then charge us a much higher rate of interest to loan it back to us?
(5) Continued rising numbers of unemployed American Taxpayers – more jobs are being lost every day than are being created and with the restrictive laws we have in place, it isn’t likely to change soon.
(6) Inflation – it is not possible to hold off the inflation we are bound to experience from the insane level of spending that this administration has been doing, forever. Eventually, the piper must be paid. Some economists are predicting hyperinflation. Even if we do not experience hyperinflation, we will almost certainly experience inflation that will surpass the worst seen during the Carter years. The question is when . . . not if.
So, the question is “Is he really that stupid or is this just another line of BS from the Whitehouse propaganda machine”? My suggestion is to pull in whatever you can convert to ready cash and sit on it. The market will drop below 7,000 long before it ever hits 14,000.

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