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Looming Economic Realities

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Looming Economic Realities

Serious economic trouble coming.

by Stephen Lendman

Conditions show weakness, not improvement. Soft-land enthusiasts face rude awakening challenges. Later in 2012 and especially 2013, expect tougher times to reshape their outlook. They're always notoriously behind the curve.

Bad policy begets bad results. Force-fed austerity promises hard times getting nasty. In fall 2007, residential housing's reversal shaped events going forward.

Real estate kept overvalued markets safe. For most US households, it's their main discretionary income source. Its trajectory went straight up for years. Doing so formed a classic bubble. Eventually they all burst.

Real estate crashed and went straight down. Recovery is nowhere in sight. Hard times remain protracted. Main Street's been in Depression since 2008. Stability and economic growth are distant. Household and small business balance sheets contracted noticeably for over four years.

Belt-tightening reduced overall household debt to disposable income modestly from 135% in 2007 to 120% now. What happens going forward as economic weakness increases? Bipartisan support for $4 trillion in largely domestic cuts kicks in post-November when conditions can least tolerate them.

Obama administration policies have been spectacularly wrongheaded. Planned late year austerity when stimulus is needed will be disastrous. Inflation is much higher than reported. So is unemployment, growing poverty, and public pain.

At the same time, high food, energy, medical, transportation and other costs grow more unaffordable. Households with limited resources feel it most. 

Home prices haven't stabilized. Meaningful job creation is moribund. Solutions for issues this important aren't addressed. Rhetoric substitutes for sound policy.

Expect more wars instead of ending current ones. At the same time, homeland needs go begging. Europe's sovereign debt and banking crisis looms ominous. Standards of living in Western countries keep declining. No end of hardships continue.

China's property market began deflating. It's got a long way down to go. Its economy may prove much weaker than predicted. It has major unresolved problems.

Economic softness spread from Europe and America to Asia and Latin America. Chinese manufacturing is contracting. So is Brazil's.

Despite healthy corporate balance sheets, median OECD country public and private sector debt exceeds 400% of GDP. The OECD government debt to GDP ratio exceeds 100% for the first time post-WW II.

Unwinding excess will take years. Consumer spending will suffer. So will economic growth. Bad policies exacerbate hard times. Public pain generates instability. Strikes and angry protests continue. They'll grow and spread.

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I was born in 1934, am a retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.
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