Many economists are worried about the possibility of a double-dip recession.
But Graeme Maxton, chief economist at The Insight Bureau, says the country actually needs another downturn to erase our crushing debt burden and pave the way for a lasting recovery.
“For the last two years, it has been perfectly clear that we cannot lift ourselves out of this recession,” he tells CNBC.
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The housing sector remains in the doldrums, the unemployment rate stands at 9.2 percent, and the federal government’s debt burden totals almost 100 percent of GDP.
“We need to actually have a recession. We need to burn off the debt,” Maxton says. The government has rushed $5 trillion of fiscal and monetary stimulus into the economy, which has produced only $600 billion of economic growth, he calculates.
“That is a pretty bad investment. And we have still got a situation where consumer debt is almost as high as it was, bank debt is almost as high as it was, and then we have government debt,” Maxton says.
“It is wasted money. We have to go through the economic pain.”
Meanwhile, Americans are deeply pessimistic about the future as economic concerns rise and White House talks on raising the U.S. debt limit sputter, according to a Reuters-Ipsos poll.
The number of Americans who believe the country is on the wrong track rose to 63 percent this month, up from 60 percent in June, with stubbornly high unemployment and prolonged gridlock in Washington dashing hopes of a swift economic recovery.
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