An International Monetary Fund economist warned Tuesday that a double-dip recession – defined as a slide back into negative growth following a short recovery from a previous recession – is a risk for both the U.S. and the Euopean Union.
A double-dip recession is considered a “worst case scenario” because producers and employers become even more gun-shy about increasing output and hiring workers after being burned the first time.
IMF economic counselor Olivier Blanchard told reporters at a press conference in Washington that the fund was cutting its growth forecasts on both sides of the pond because government efforts to ensure recovery from the Great Recession of 2008-2009 have stalled, and global trade imbalances are getting worse rather than better.
And by doing “just about everything in his power to make matters worse,” President Obama has actively courted a double-dip, says University of Maryland economist Peter Morici.
While the massive $700 billion trade imbalance continues to drag down the U.S. economy, “this time there is no housing boom to offset it,” notes Morici, the former director of the Office of Economics at the U.S. International Trade Commission. Full employment under such conditions, he says, is “the economic equivalent of a perpetual motion machine.”
Morici blames “incompetence in Washington and arrogance on Wall Street” for the dire situation. But too-big-to-fail Wall Street firms would not be nearly as reckless and arrogant if they didn’t think Obama had their backs. So it really comes down to White House incompetence.
While “the Fed vainly tries to resuscitate a failing U.S. economy, until we get a President who will drill for oil, tax the conversion of dollars into yuan to offset Beijing’s currency market intervention, and split commercial banking from other financial activities on Wall Street, we are simply not getting out of this mess,” Morici predicts.
If that’s the case, relief won’t arrive until well after the 2012 elections.
