The Coming Economic Decline

by Sal on May 16, 2011

in Economy,Election 2012,Politics


America is headed for an economic decline.  What’s that, you say?  We are already in the midst economic slump?  While that seems to be true, the economic data points to the fact that the U.S. economy declined in 2008-2009, remained stagnant throughout most of 2010, and showed some light growth in 2011.  Yet there are many signs now that another, possibly more devastating slump may be imminent:

  • Rising Gas and Oil PricesGasoline in most places is at $4 / gallon.  Within the next few weeks, detergent gasoline regulations go into effect for different areas of the country, making gasoline more expensive than it already is.  Couple that with summer travel, and we could be seeing $5/gallon gasoline by Independence Day.  Fuel prices have a ripple effect on the economy as fuel drives production of most goods, and therefore may contribute to mass inflation.  The Obama Administration has now signaled that it is open to some increased domestic drilling, but exactly how much and how soon remains to be seen.
  • Ever-declining Dollar: The dollar keeps getting weaker and weaker, leading to more expensive imports and less lucrative exports.  Couple that with the news that the U.S. has reached its debt limit and the lack of will from either party to fix it, and this is a problem that is not likely to improve any time soon.
  • Declining Labor Market: Yes, the labor market that was showing signs of strengthening is now in decline again, reaching the 9% unemployment mark yet again.
  • Still-problematic Housing Market: TARP did nothing but punt the problem.  The “troubled assets” that TARP was supposed to fix still exist and will bubble to the surface.
  • Uncertain Tax Policy: When Obama signed an extension to the Bush tax cuts, he simply punted the problem to 2013.  Uncertainty regrading the future of tax policy will again haunt businesses in 2012 just like it did in 2011.

The scary part about this is that we are only beginning to see the repercussions of these trends, and that there is still a long way to go before they fully play out.  Since our economy is starting to deal with these trends in a position of weakness, we are likely to see another major decline in the next 1-2 years.  Thanks to the inept policies of the Hopey-Changey administration, the worst of this economic recession may still be ahead of us.

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