Tags: Rickards | Double | Dip | Recession | Depression

Rickards: We Should Still Fear a Double-Dip Recession

Wednesday, 29 Feb 2012 07:38 AM

Despite improving economic indicators, the U.S. economy remains at risk for a double-dip recession, which would indicate the country is likely mired in depression, says James Rickards, a hedge fund manager and author.

Unemployment rates and initial jobless claims are falling, growth rates are up — and so are stock prices. But that doesn't mean the country is out of the woods by any means.

Some of those data points are lagging indicators, meaning they were illustrating conditions improving at the end of the last recession. Such indicators were never really that strong in the first place and some appear to be losing what little growth they've recovered.

Editor's Note:
Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did


A look ahead paints a different picture. Technically, the United States is likely in an upward correction before double-dipping back into a recession — often interpreted as an economic depression.

"The Great Depression featured a double-dip of its own. Within the start and end dates of the Great Depression, there were two recessions, 1929 to 1933, and 1937 to 1938," Rickards writes in a U.S. News & World Report column.

In a typical recession marked by a cooling in the business cycle, the economy contracts and then bounces back at a solid pace.

Not so in a depression.

"Recessions inside a depression are completely different phenomena than typical business and credit cycle recessions," says the author of "Currency Wars: The Making of the Next Global Crisis."They are the result of behavioral shifts in a larger wave of deflation and deleveraging," Rickards says.

He claims that is what the economy is experiencing today.

Furthermore, a look back at the Great Depression shows that while fiscal and monetary policies may have caused it, policy uncertainty made it last so long.

"As FDR (Franklin Delano Roosevelt) skittered among price supports, gold confiscation, court packing, and other ad hoc remedies, business executives waited on the sidelines until some consistency and certainty in policy developed," Rickards writes.

"This situation is also the same today. Will the Bush tax cuts expire or not? Will Obamacare be upheld in the courts or not? Will payroll tax cuts and unemployment benefits be extended? Is corporate tax reform coming? This list goes on with the same effect as in the 1930s."

Some say ousting President Barack Obama from the White House could seriously speed up recovery by ending uncertainty.

"It would be a tremendous boom," if Obama weren't re-elected, trader, commodities expert, and index developer Victor Sperandeo tells Newsmax.TV.

"These are unknowns and if he were out and they [the Bush tax cuts] were to remain intact, and investors and people would know what the future was going to be — you'd have a boom," Sperandeo says.

With Obama gone, businesses would take advantage of low interest rates and high liquidity levels — and invest and grow again.

"Investors and businessmen would start to really become aggressive if Obama lost the next election," he said. "And they would start to use that money and borrow more of it instead of saying 'I want to see what's going to happen," Sperandeo tells Newsmax.TV.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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