The Second Recession

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Expecting insight about the economy from Barack Obama is like hoping to learn about Paul Revere from Sarah Palin.

However, inadvertently, the President seems to have gotten something right.

President Obama stumbled into the truth at an appearance with German Chancellor Angela Merkel when he said that he is not worried about a second recession.

Although the evidence is both mounting and credible that the economy is sinking deeper, it is foolish to think the downturn will mean a second recession. That's because the first recession, the one that officially started in December 2007, never really ended.

The pronouncements by the National Bureau of Economic Research are regarded as definitive statements about when economic downturns begin and end. By their calculation, the worst downturn since the Great Depression ended in June 2009 after eighteen months, and the recovery got underway.

Never mind that it took them more than a year after the fact to reach that conclusion.

Look, if the economy hasn't recovered, then a recovery couldn't have begun. It's like saying an airplane took off, even though it never left the ground.

Something was going on that created the illusion of a recovery, but now, two years after it was supposed to have started, there is no recovery in sight.

The price of oil had been on a tear back when the recession began; it's even higher today. The price of gold has almost doubled.

After three and a half years, GDP is virtually unchanged, while retail sales are actually lower.

Some recovery.

More Americans are on food stamps and the unemployment rate is almost twice what it was when the recession began.

In fact the signs of the economy slowing even more now are visible in the latest jobs numbers. For May the feeble addition of only 54,000 jobs means the unemployment rate ticks up.

Last time the bureau declared a recession over, in November 2001, unemployment didn't pick up for two years.

So where did the bureau get the idea this time that the economy was recovering in June 2009? It must have been influenced by Obama's $830 billion "stimulus" package. While Bush's billions for bankers were still fresh in the their hands, the new president came into office and began throwing more cash around. There was cash for clunkers, cash for automakers and unions, cash for home buyers, cash for transportation boondoggles, cash for politically-connected green projects, cash for government buildings, cash for the arts.

You get the idea. Everybody was high on Obama billions. It was like Saturday night at the Roxy. But given enough cocaine you can probably even get a corpse to show a pulse.

It must have been a fun party. The Keynesian economists and other statists thought that it would go on and on and the bill would somehow take care of itself.

The takeaway from all this is to beware of all such boards, bureaucrats, and bodies, especially those with designs on managing the economy. The economy lives in the experience of people and not in seasonally adjusted statistics and weighted aggregates. If you and sixteen million people like you don't have a job, you're still in a recession.

So when the president says he's not worried about a second recession, and that you shouldn't panic, he's half right.

The first recession never ended.

Charles Goyette [send him mail] is the author of the New York Times bestseller The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments, now available in paperback.

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