The Next U.S. Recession is Now
Posted at 7 a.m. on June 12, 2012
John Hussman argues that the “the U.S. economy is presently entering a recession. Not next year; not later this year; but now.”
“In effect, we’re going into another recession because we never effectively addressed the problems that produced the first one, leaving us unusually vulnerable to aftershocks… When the bubble crashed, our policy makers made their crucial mistake – first through the Bush Administration, and then continued by the Obama Administration – they failed to require bondholders to take losses on bad loans… To restore the economy to the path of long-term growth, we need to allocate capital better. This requires the willingness to allow bad investments to work out badly, without being bailed out or otherwise rescued… Of course, stimulus programs can have important short-term effects, but even here, we can’t talk meaningfully about “stimulating aggregate demand” unless we also restructure the debt burdens on individuals, primarily on the mortgage side.”
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