This Recession is Over: A Much Larger Recession is Starting

Why this recession is over and why a much larger recession is starting-

First of all, why did the Dow Jones Industrial Average drop from its euphoric high of 14,093 to a mere 6,626 in nearly two years? There were two main issues that caused the recession. One reason, banking, and another, housing. I will explain both in the article.               

Banking, Housing, and the Auto Industry

The banking industry had issues that directly correlated with the housing market. The banking industry had problems, because people could not afford the payments they had to make on their loans and mortgages. The reason was people over bought what their personal budget could not afford things like houses and took loans out for cars.  

The Result

When people stopped being able to pay for their mortgages and loans, all the payments they had made were lost. The people lost money that they were planning on getting back, and perhaps spent more on something else because they expected that money back. People started to not be able to afford things they used to buy on a regular basis.

The banks lost money on their balance sheets, because they were also expecting that source of income. What happened were banks started to lose money because they weren’t making as much money off of people anymore and their costs were more than their expenses. As a result they had to lay people off.

Put simply, people weren’t spending as much because of their loses in loans.  Average everyday company’s balance sheets starting going negative because of the huge pull back in consumer spending.  The companies that were hurt by consumer spending had to lay off employees to put them back on track to profitability. 

Eventually, enough people were laid off so that companies were making money again, started to hire again. This past month, unemployment has gone down to 9.4% from 9.6%. That was the first time in 15 consecutive months that unemployment has gone down. Companies are now starting to hire again, how else would unemployment go down? What has caused this? The normal cycle that the economy goes through to heal itself.

Stimulus

What President Obama failed to realize when he enacted the stimulus bill, was that the economy was already starting to heal itself. The Dow Jones Industrial Average, a fairly accurate index for measuring the outlook of the economy, is currently at 9,337. Obama has spent approximately $1.3 trillion on an economy that is already healing itself. If the stimulus actually did work, then why was $1.3 trillion needed? Only approximately $70 billion has reached the economy, let alone have any effect yet. The stimulus money has only added on additional debt to the already debt laden economy for future generations.

What will the primary effect of the stimulus will be is inflation, the economy is getting billions and billions of dollars put into it. Inflation is when people’s income stays the same, and the price of everything will increase dramatically.  And to think Obama is going to spend trillions more on health care? I for one, think he is crazy. It will only cause more inflation.  The other effect is sky high taxes. Obama is saying he will not raise taxes, so basically the U.S. Treasury will take on the debt. How is that debt going to be paid off? The answer is taxes.

An alternate theory is that the dollar will become so worthless that the USD itself will be discontinued. Canada, Mexico, and the United States of America will combine currency and switch to the Euro. Another possibility is the creation of the Amero; a currency of Canada, America, and Mexico combined. The creation of a Union similar to the European Union is another possibility.

If you liked or want to see my other article, then click on the site below -

http://socyberty.com/organizations/what-the-federal-reserve-has-done-to-the-united-states-of-america/