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Here We Go Again

When ECRI founder Lakshman Achuthan speaks, people listen. And he says that our economy is headed for another recession. And it’s inevitable.

It’s only a matter of when: “It’s either just begun, or its right in front of us…the critical news is there’s no turning back. We are going to have a new recession”. And “there’s nothing that policy makers can do to head it off”.

The reality is that policy makers can’t stop it in part because the government doesn’t move as quickly as the business cycle. But even if it did, a recession is an unfortunate reality that has to play out, because it “isn’t simply a statistical event. It’s a vicious cycle that, once started, must run its course”.

The question is how painful that course will be. And the concern is that any shock to the system, like a financial meltdown resulting from the European debt crisis, could make any downturn markedly worse.

The ECRI’s call is based on dozens of specialized indexes, and looking at their Weekly Leading Index (which has a proven track record of predicting recessions), the economy is in dangerous territory. According to Achuthan, “if you think this is a bad economy, you haven’t seen anything yet”.

Our last recession started in December 2007 and ended in June 2009. During that time the economy contracted more than 5%. Since then, we have had an underwhelming recovery. And for the millions of unemployed, there was never any recovery at all.

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