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How The Economy Could Grow and Why the Recession is Likely to Last Another Nine Years

By: Steve Johnson

7/28/2010 - 71 Comments

Nine years is a long way to go before the U.S. will be out of the recession.

The talk of recovery by Obama and team is pie in the sky.  The recovery will not even begin until he and most of Congress have retired on their golden parachutes.

In the mean time, the real working people like you are I will need to struggle through a decade long recession.  In fact, there is a good chance that the world will look completely different in nine years and the U.S. dollar may not even remain the global reserve currency.

And I’m not saying that the economy will be recovered in nine years, I’m saying that the recession will be over and the nation will begin to recover.  I know that sounds like a long time and no one in power is going to say something like this because everyone want to hear that the economy will be recovering in the next few months. 

But that is simply BS.  The recession is already beginning a double-dip as the wave of stimulus winds down.  By the end of the year, Congress will be crying for more stimulus money and the Fed will be cranking up the printing press (by giving more money to banks and buying their assets for more than their market value). 

Then the economy may hold its own for six-months before beginning its triple-dip as this round of government stimulus winds downs.  By then Obama will be forced to start making federal government cuts, pointing fingers at Republicans to cut their programs like the military while he continues to expand the funding for his programs - like Obamacare, which is capable of bankrupting the nation by itself.

Obama’s will talk a lot about cutting spending as he prepares for his 2012 election bid, all the while passing bill after bill to increase taxes to pay for his massive programs. 

By 2012

By the end of Obama’s term, the economy will be worse than it is today, with 12% unemployment and a small-business sector devastated by increases in taxes and regulations and unable to hire.

The only hiring that will take place will be the government and even that hiring will be slow as many state government agencies will be forced to make bigger and bigger cuts. 

As a result of the poor economy, Obama will lose the Presidential bid for re-election in 2012 and the new Pres will have campaigned on restoring jobs as his number one priority. 

All the while, the community bank market will continue to erode as home prices continue to decline because of the massive number of homes that are bank owned due to foreclosure.  At the current rate of home sales, it will take 7-10 years to liquidate the bank owned homes.

With high unemployment, consumer spending will remain weak and that will keep these millions of homes from being sold. 

By 2016

The next President will make even bigger cuts to government spending, perhaps following some of the ideas at

http://www.downsizinggovernment.org/

The world leaders will have had enough of our reckless monetary policy and will begin demanding their money back.  Gold will be pushing three to four thousand dollars per ounce as world leaders discuss a replacement current to the dollar.  

The global financial community will put a lot of pressure of the President and will likely cause him to tighten even further then would like too, as the dollar comes under pressure from the bond market sell-off, the Fed will be raising interest rates and assuring the foreign nations that we will get our debts and spending under control.   

The new President will have an understanding of how the economy works and realize that jobs don’t come from government intervention or spending, but from the small-business sector.  The President will cut as many bad policies and taxes that he can in order to stimulate growth, knowing that the world is watching and the value of the dollar is in question. 

But higher interest rates will be very difficult because of the high level of U.S. debt.  The nation will be facing default or inflation, and will likely chose inflation.

Many of the taxes that the Obama team passed will be repealed, but some of them like Obamacare may linger on and become too hard to change, forcing small-businesses to pass the expenses on to the public.  So consumers will be facing higher prices due to inflation and government taxes like Obamacare and high unemployment. 

I don't think the stock market is likely a continue upward at this point or even before this point as the U.S. consumer becomes a dead horse, investors will be looking for other horses to bet on.

By 2020

By 2020, it will be a miracle if the dollar does not lose 50% or more of its value and its global reserve currency status.

The U.S. national debt will be well over 100% of GDP, but the economy will begin to see a drop in unemployment as the small-business sector finds it legs from the cuts in taxes and regulation.

The economy results will be clear to see, giving the President a very good chance of getting re-elected for a second term.

Failure of Liberalism

The decade long recession facing our nation was and continues to be a failure of liberalism – not the free market.  The liberal agenda that resulted in the reduction in lending standards and the expansion of Freddie Mac and Fannie Mea in the name of ‘inequality’ and ‘spread the wealth’ doctrine are pure socialism ideas that have a history of failing.  

Luck would have it, we elected one of the most liberal politicians as President at the beginning of the recession.  The liberal agenda of the ruling party today is on a tare; taxing, spending and regulating the nation deeper into the recession.

It will take another eight years to fix what they have done to our nation.  The November elections will be the beginning of the economic recovery.  The sooner we vote these bums out of office the sooner the economy can start creating jobs.

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