Amidst all the economic disparity people have witnessed lately, Americans fear that the turmoil will not improve, but instead get worse again. In what would be dubbed a “double dip” economy (like the alliteration?), the conditions would worsen again.
In my last blog I wrote about what double dip recessions are and discussed them from an historical standpoint. However, what do economists say about this recession? What are the chances that our GDP could go negative in a future quarter before the economy fully recovers?
According to a money.cnn.com article, in spite of the oil spill, the European financial crisis (cough Greece cough), and jobless rates being finicky, economists seem to believe that the economy appears more stable than earlier. In fact, many are saying that there is less of a chance of a double dip economy now than there was a year ago: now the chances are at 20% instead of 25%.
But why?
These economists cite the fact that Europe approved their own bailout package, but mostly the fact that many US businesses reported profit growth. However, the article doesn’t attempt to trick you into thinking that economic matters are fine and dandy – unemployment is still high and, as I reported in my last blog, jobless claims spiked upwards recently.
On the other hand, according to a second article from seekingalpha.com, Andy Harless, the chief economist from Atlantic Asset Management, acknowledges the fact there is little literature on economic forecasts, especially regarding double dip recessions. For a recap, I reported in my last blog that there have only been three double dip recessions in American history since 1854.
Paul Krugman of the New York Times has a pessimistic view of macroeconomic advisors, who believe that the chances of a double-dip economy are close to nil. Krugman says, “When short-term interest rates are up against the zero lower bound, a positive term spread tells you nothing…”
Even though there does not appear to be a definitive answer on this particular question, the economic solution for all families is universal: be sure to budget your finances responsibly, spend within your means, and take care of your fiscal responsibilities. That way, in spite of double dip economies, families can plan for the worst and not be as beholden to economic circumstances.
Read the articles for yourself:
“Double Dip Recession: What Are the Odds?”
<http://money.cnn.com/2010/06/09/news/economy/double_dip_recession/index.htm>
“Chances for a Double-Dip Recession: Key Quotes”
<http://seekingalpha.com/article/210555-chances-for-a-double-dip-recession-key-quotes>
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