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Tuesday, August 10, 2010

Reasons for a double dip recession in 2011

Many economists are starting to come around to the idea of a double dip recession.  Aside from the ECRI dropping to a -9.8 (a drop below -10.0 indicates a recession is coming) and M3 money supply indicating a contraction in credit, here are some other reasons we may see a double-dip recession in 2011.

1. Rollback of tax cuts across the board and the new taxes/fees imposed by the healthcare bill.
2. Import demand from China weakening and Chinese exports surging (i.e. Trade deficit widening).
3. Increased State and Nationalized bank bailouts (ex. Fannie Mae, Freddie Mac, Teachers & medicare increasing our debt).
4. Continued irresponsible lending policies ($1000.00 down for a mortgage by Fannie Mae and States)
5. Upper class or Americas wealthy spending less and saving more.
6. Reigning in on hiring due to double-dip fears (data suggests confidence is down)
7. Increased job losses and temporary jobs attempting to fill the gap (less money to spend in an economy that is addicted to spending)
8. Stimulus money drying up effecting the auto industry.
9. Inflation in key areas like energy & food (ex. wheat price surge) and deflation in asset prices (ex. housing and wages)
10. Interest rates tumbling indicating a weak economy.

This is not an all encompassing list, as there are many more reasons being stated.  What I see missing in other lists are the basic fundamentals listed here that will put the squeeze on the consumer and small business as well.

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