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October 10, 2011

How Bad Is It? Much Worse Than You Think

If you wonder how really bad the economy is, today’s New York Times has a front page article about 2 recent studies that really lay it out.  Entitled “Recession Officially Over, US Incomes Keep Falling,” it shows that incomes from the start of the recession through this June dropped an astonishing 9.8%.  

Even more troubling is the lead: “In a grim sign of the enduring nature of the economic slump, household income declined more in the two years after the recession ended than it did during the recession itself, new research has found.” 

For us non-economists, let’s round the income drop to 10%, add in the 16.5% U6 measurement of total unemployment, underemployment and discouraged workers, then add in the tens of millions of home foreclosures and the even more tens of millions of homes under water (i.e., worth less than their mortgages), both of which are increasing at an increasing rate, and you get a pretty good picture of the state and trend of the American economy.  (Yes, there’s some double counting, i.e., income drop from unemployment, house lost due to unemployment, etc.), but that doesn’t change the basic picture.  

Making matters worse, when the number of Americans directly affected by these bleak statistics are added up (i.e., 25-40 million Americans and maybe more), the impact on those who are related to them, who know them, who see them, who used to work with them, ride the bus with them, have lunch with them, is equally devastating for the economy.  When you know someone who lost their job, their house, their standard of living, their hopes and dreams, you don’t spend as much and you fear as much or more.  That ripples throughout every corner of the country.  

“Catastrophe” is the only word that describes this and no one is talking seriously about it or doing anything serious about it.  



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