Dead Cat Bounce
Are we headed for a depression?
The realization that the economy is in far worse shape than previously assumed is finally starting to come to the attention of the US leadership. Vice President Joseph Biden admitted last week that President Barack Obama's administration had "misread the economy" and didn't fully understand how deep the crisis was even as late as January. Paul Krugman, the leftist Nobel Prize winner and one of Obama's strongest supporters, has called for another immediate massive bailout plan, on top of the $800-billion scheme that was approved only four months ago. These statements clearly contradict the official White House and Fed stance that the crisis is now closer to its end and that America should now focus on restraining its huge deficit. It is not important whether Krugman's idea about additional money printing is wrong or not, his pessimistic read of the current state of the economy is probably right. One of the differences people like to point out when comparing this crisis to the Great Depression is that we are no where near the 25% rate of unemployment that was recorded back then. Maybe that is true for 2008-2009, but what we learnt from June's jobs report is that even if the pace of layoffs slows down in the coming months, we are still getting very close to the frightening numbers seen in the 1930s.