The National Bureau of Economic Research confirmed today that the U.S. has been in a recession since December 2007.
The NBER is a private group of leading economists whose mission is to officially date the start and end of economic downturns. A recession is defined by 2 consecutive quarters of negative GDP. An official depression occurs when real GDP declines by 10% or more.
Does anyone else feel they've been purposely lied to? Remember all the assurances we were hearing all year about how sound our fundamental economy was? Turns out we were already in a recession, but up and down the line, most govermental spokespersons kept blabbing about temporary real estate market problems, soft landing corrections, short term small hike in inflation, how the 2nd Qtr GDP was not a loss, etc. Of course, all this came crashing down in September, with only Senator McCain failing to get the memo: ix-nay on the ound-say undamental-fays!
How long will the recession last? Here are the historical figures:
....(click to enlarge this table) ....
and note it does not even include Depressions, as in The Great Depression (which drug on for 10+ YEARS)!
So now it's official, wooo hooo! And all those who had been feeding so furiously at the Free Market Deregulation Table are loudly screaming for a share of federal bailout rescue money. They know $700 billion is only the tip of what will be required, and as usual, they are first in line for any free money. They know we will do whatever it takes to turn things around. It's up to us to make sure it is NOT free, that the strings attached to the money will ensure that it accomplishes the purpose of economic recovery.
Paul Krugman recently wrote, "anything that has to be rescued during a financial crisis, because it plays an essential role in the financial mechanism, should be regulated when there isn't a crisis so that it doesn't take excessive risks".
It's up to us to make sure the regulations that were so cravenly discarded, regulations that were put in place after the Great Depression to prevent it from ever happening again, are reinstated AND redesigned so that we can better understand how the system works to prevent future malfunctioning. It's my opinion that all the overly complicated financial products introduced as a sort of shadow banking system in the last 20-yrs were very disruptive. They weren't boring, but no one really understood them. By design?
Here's a brief recap of how billions of rescue dollars have been spent so far in 2008:
WALL STREET BANKERS:
$1.6 trillion in loans to banks in exchange for unwanted collateral (the Fed raised its monthly auction limit to $300billion in Oct '08).
$70 billion PER DAY "lent" to investment banks, since March '08.
$92 billion PER DAY "lent" to commercial banks.
$250 billion out of $700 billion allocated to banks in exchange for equity shares (no word on who got what or how they are using it).
Fed rates cut down to unbelieveable 1% in October 2008.
Unlimited Dollars to 13 foreign central banks (the cap was $24 billion in December '07, raised to $620 billion in October '08, but now it will be "unlimited" because apparently $620billion is not enough american dollars for foreign banks).
$200 billion to bail out Fannie Mae & Freddie Mac (The Fed also took control of these firms & their $5 TRILLION in home mortgage loans).
$29 billion to Bear Stearns.
$152.5 billion to AIG.
$345 billion to prevent Citigroup from failing.
$25 billion in the works for automakers.
$270 billion in corporate debt commercial paper purchases ($1.4 TRILLION has been allocated for this program).
Business stimulus of $68 billion in tax breaks.
MAIN STREET: Stimulus checks totalling $100 billion earlier this yr.
$8 billion to expand unemployment benefits.
$15.5 billion drawn down from FDIC reserves after 22 bank failures in 2008 (I believe this brings the total reserve down to $40 billion).
$50 billion to insure money market funds, followed by $69 billion in direct money market debt guarantees. Then in October, the Fed said it will loan up to $600 billion directly to money market funds over the next six months (anyone smell another bailout on the way?).
$300 billion approved for at-risk home mortgages (but lenders aren't cooperating because they weren't mandated to, only encouraged to).
$100 billion more to underwrite cheaper home loan rates through Fannie Mae & Freddie Mac.
$800 billion approved for consumer loan products, incl credit cards & car loans (once again, lenders are not cooperating).
FDIC coverage increased to $250K per depositor through 2009.
This adds up to a staggering and unprecedented $7 TRILLION. Since some of this money is investment, it's not a total loss. However, "a lot of it will be lost" said Dean Baker, co-director of the center for Economic and Policy Research. Comforting?!?
I don't know about you, but after seeing how much has already been thrown at this beast and how little it has accomplished, Recession is starting to look a whole lot like Depression to me:
Debtor's Prison, or Detention Dungeon?