Economy Dangerously Close to Complete Meltdown

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Ben Cohen
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By Ben Cohen

According to several respected economists, the economy is close to complete melt down. Paul Krugman writes:

1. The economy is falling fast. We'll see what tomorrow's employment


report says, but we could well be losing jobs at a rate of 450,000 or


500,000 a month.

2. Infrastructure spending will take time to get going -- a new
Goldman Sachs report suggests that projects that are "shovel-ready" are
probably only a few tens of billions worth, and that a larger effort
would take much of a year to get going. Meanwhile, it's very
questionable how much effect tax rebates will have on consumer demand.
So it may be hard for stimulus to get much traction until late 2009 --
and that's even if Congress goes along, which may be a problem given
all the bad analysis and disinformation out there.

So here's what I'm wondering: will it, in fact, even be possible to
pull the economy out of its nosedive before unemployment goes into
double digits? I'm starting to wonder.

Former Treasury secretary and Alcoa chairman Paul O'Neill is even more pessimistic. Here's what he said in a recent interview :

If the United States doesn't get its finances in order, the coming
years will make the current recession "look like a child's birthday
party," said former Treasury secretary and Alcoa chairman Paul O'Neill.

"We're headed for the wall at lightning speed. And every day that we
don't deal with that set of problems is another day closer to
absolutely vaporizing our economy," he said.

"Not to overstate the problem."

Nouriel Roubini, professor of economics at the Stern School of Business, New York University warns of the horrors of stagflation:

In the next few months, the flow of macroeconomic and earnings news
will be much worse than expected. The credit crunch will get worse,
with de­leveraging continuing as hedge funds and other leveraged
players are forced to sell assets into illiquid and distressed markets,
leading to further cascading falls in prices, other insolvent financial
institutions going bust and a few emerging market economies entering a
full-blown financial crisis.

The worst is not behind us: 2009 will be a painful year of a global
recession, deflation and bankruptcies. Only very aggressive and
co-ordinated policy actions will ensure the global economy recovers in
2010 rather than facing protracted stagnation and deflation.

Check out our interview with Noam Chomsky for his take on the economic crisis. He's not too hopeful either. Does anyone else think it is time to boot Bush out of office early? The longer this idiot and his cohorts are running the show, the closer we are to the abyss. If anyone knows of any emergency laws that permits the congress to kick him out for incompetence, please make themselves heard. Now.