Recession Unavoidable! It’s Going to Get a Lot Worse!
Published October 2, 2011 | 
What are the simple causes of an economic spiral into recession? A vicious cycle is starts where lower sales volume, production, employment, and income, work together to then lead back to lower sales. Weakness in these and other leading economic indicators has become so enveloping and persistent the Economic Cycle Research Institute now predicts a new recession is unavoidable.
Lakshman Achuthan, co-founder of ECRI declares in the accompanying video.
The “contagion” of spiraling lower economic activity results that feed on each other has slowly crept in to overcome the leading economic indicators, and is now spreading like “wildfire.”
Although the actual recovery we have been in by nearly every measure, felt like we never got out of recession, was a real recovery disguised to most average Americans as a recession, the worst is yet to come. Lakshman Achuthan says. “You haven’t seen anything yet. It’s going to get a lot worse.”
The real scary part is ECRI’s primary raison d’etre (reason for existence) is predicting recession and recovery calls. Second, and more importantly, The Economist reports ECRI has never been wrong when issuing a call for recession, which means hold on to your seats, we could be in for economic turbulence ahead.
Recession Unavoidable!
Signs of Recession Return – Housing
Published August 22, 2011 | Housing
When you think of housing and its place in the economy, think of the crucial hub of a wheel and housing is the hub from which all the spokes feed, and is considered by many economists to be the single largest drag on the American economy. So goes housing, so goes the economy and the housing market has become much worse in 2011, especially the last three months.
A recent report from The New York Federal Reserve states “When home prices began to fall in 2007, owners’ equity in household real estate began to fall rapidly from almost $13.5 trillion in 1Q 2006 to a little under $5.3 trillion in 1Q 2009, a decline in total home equity of over 60 percent.” The loss of home equity is a significantly difficult decline for any economy to recover from.
Recently, real estate research firm Zillow reported on more developments stating, “Negative equity in the first quarter reached new highs with 28.4 percent of all single-family homes with mortgages underwater, from 27 percent in Q4.” As a result, countless homeowners who want to sell their homes are not in a position to do so for the reason that they can’t come up with the money to pay their banks at closing.
For many, many years whether for good or bad, the American home became like the hub of a wheel, the most important primary source for money used for everything from retirements, to college educations, rainy day funds, and the purchases of many expensive and exclusive items such as cars and boats.
Many economists will point to this leverage as a major contributing factor to the continuing credit crisis, as a significantly large segment of home owners could not pay the costs of home equity loans confronting them as real estate values collapsed virtually everywhere. While this may be true, the steep drop in value happened so quickly that the net worth reflected on balance sheets of millions of Americans were damaged, if not destroyed. As a direct result, their ability, capacity, and desire to continue consumption at past high-levels was severely damaged, the effect of which continues to negatively impact GDP.
Once manageable high-mortgage payments have bankrupted or practically bankrupted people who have lost valuable jobs or have stagnant incomes with no relief in sight. The powerful economic engine of the building industry sputtered and stalled seemingly overnight. And, whatever the size and impact to the economy the effects have been over the last three years, they are progressively worsening as home values continue to spiral downward to decade lows. The U.S. Federal Government tried to prop up housing prices with home buyer credits, delaying the inevitable, as natural market forces given time eventually find the bottom. Meanwhile, there is no real relief in sight because potential buyers worry that price erosion has not ended, and rightly so.
Signs of Recession Return – Access to Credit
Published August 19, 2011 | Access To credit
Access to credit has always been a key factor in the success of any business small and large, and the lack of access to sufficient credit has hurt the economic activity whether start up or expansion, both individuals and small businesses. This problem doesn’t affect very large companies, which can borrow money at low rates, many times as low as 2 percent because of their strong cash flows and balance sheets.
Now on the other hand, banks have taken and maintain the position of being much less willing to loan money to small businesses with less than 100 workers. Traditionally, businesses of this size most often rely on a few customers for revenue and they are in a poor cash position reflecting very little money on hand, thereby a direct negative impact on risk by making a larger than acceptable risk-level.
Early this past June, the House Small Business Committee hearings produced findings that were concerns about greater risk and a slow economy, which made financial institutions once again reluctant to lend to small businesses, the main driver of any economic growth. As a result of congressional impasse, there is no plan to accomplish increased lending to small business. 
And individual borrowers find themselves in a similar position, with the cost of credit card debt still considerably above 20 percent in many cases, although in contrast the Federal Reserve still continues to loan money to large financial firms and institutions for interest rates close to zero.
The housing market where credit concerns were simply non-existent not too long ago, potential home buyers, who might have been able to help break the gridlock of slow house sales in the U.S., often discover that banks now want down payments as high as 20 percent. As a matter of fact, recently the median down payment in nine major U.S. cities rose to 22 percent in 2010 on properties being purchased by way of conventional mortgages, according to a detailed analysis prepared for The Wall Street Journal by real-estate portal Zillow.com. 
The actual percentage doubled in a three year span and represents the highest median down payment since we started tracking the data in 1997.
Unfortunately, homes which are unsold quite often place such great burdensome obligations on owners they are barely consumers of essential goods and services that are the biggest drivers of GDP. As a result, home builders have continued to struggle, and directly related construction jobs, which were an enormous amount of the total employment base in states like Florida, California and others, have not returned.
Signs of Recession Return – Debt Ceiling
Published August 18, 2011 | Debt ceiling
Unless you’ve been marooned on a desert island with no satellite or web access you are probably aware of the debt ceiling issues the U.S. has. The new U.S. debt ceiling, has been raised to $14.694 trillion, will probably need to be raised more sooner than later before the government once again has to cut back essential services.
It might seem to most that the debt cap effects on the economy and employment are the same as the deficit, but they are in reality more dangerous and much longer term. In examining the first by-product of debt reduction including at least a deceleration in its growth, is a blend of higher taxes accompanied by a lower level of government services.
Higher taxes tend to directly slow and delay improvements in the economy, and the impact of the effects is particularly greater when they are not coupled with any stimulus measures.
A large number of economists have brought attention to the fact and highlighted the need to clearly understand that reducing expense alone will not sharply improve the United States balance sheet (the balance sheet concept is difficult for most to quickly grasp). The rapidly aging population and increase in older demographics has triggered significantly rising costs in Medicare and Social Security benefits, brought on directly by the aging population. This growth is likely to trigger a need for higher taxes, much sooner than later.
The direct impact of tax increases could keep the economic growth of the US sluggish and on hold for many years. 
The taxation of companies directly impacts the bottom line (net profit) to either substantially decrease or frequently eliminate profits all-together, especially in the midst of an already troubled economic period.
As negative momentum builds, profits which evaporate usually trigger quick cuts in purchasing and jobs as a direct result. Taxes on consumer wages and inheritance directly weaken consumer confidence and spending. And, to complete the circle, a growth in national debt that is already at all-time high-levels will then increase the borrowing costs of the U.S. That, in turn, drives interest rate increases for everything ranging from mortgages to credit cards, as well as other debt instruments.
Signs of Recession Return – Unemployment
Published August 17, 2011 | Unemployment
It’s a hard cold fact that unemployment immediately creates two serious problems. First of all, people who find themselves without jobs or unemployed even for a short period of time, drastically restrict their spending, which in due course affects GDP growth of the economy. The second problem is the significant need for tens of billions of dollars every year in government aid which is meant to prevent the unemployed from becoming destitute.
The support of the chronically unemployed has greatly increased and magnified attention and concern on deficits, since the resulting unwanted domino effect is the need for cash-strapped governments to make additional meaningful spending cuts. This by itself may be the single biggest challenge any economy faces.
Something that is unique to the current economic situation and a direct negative impact on unemployment, and which has worsened because people over 65 continue to work due to the home values they once reliably counted on as the financial basis of their retirements, have plummeted so sharply and quick. 
In addition, senior Americans fear, and rightly so, that cuts in Medicare and perhaps Social Security are absolutely inevitable which in turn increases the cost of their golden years.
The jobs older Americans have taken are more often than not, ones that younger Americans normally might have under ordinary economic circumstances. Young people in their 20s have to endure low wages to simply enter the workforce. This has delayed directly their prime years of consumption deep into their 30s which immediately damages GDP recovery and worse yet, for another decade.
Finally, the very worst of the unemployment problems is the approximately 5 million Americans who have been chronically unemployed for over a year, and some for two. 
Their individual unemployment benefits have run its course and been fully depleted in many cases. At which time and as a result, the burden of their care falls directly to their families, friends, community organizations and non-profits.
Many times, a family which finds itself having to support an unemployed person may be a family that doesn’t have the capacity to spend beyond its basic needs. To the extent that the federal or state governments are able to provide support the unemployed, the cost to run support programs increases as a direct result.