Global Advice Center

Double Dip Recession Explained | Economy and Business

Posted on Sep 12, 2010 06:47:58 AM

The 2008 economic recession was supposed to have recovered by now.  The bailouts and all of the stimulus that we have seen was supposed to bring about the summer of recovery.  In fact, there were signs earlier in 2010 that a recovery was here, but it has not come to pass yet.

Many economists are now saying that we might see a double dip recession.  At the very least, there will be very slow growth.  Major investment bank analysts have downgraded their expectations for GDP growth in the US economy to 1-2% in the next year.  Although it is still positive growth, it is so low and so slow after such a dramatic crash that it won’t feel any different to most people.

With such slow growth, even the best financial investment strategy must be re-evaluated.  The stock market may not come back to strength for a while.  If you need to liquidate your investments and get cash out for retirement any time soon, you may want to look at something else other than equities.

There are several reasons for the continuing stagnant economic growth.  The first is that the stimulus money has run dry and it has come up short.  The stimulus money initially gave a short-lived spurt back to the economy.  Now that those programs like cash for clunkers, mortgage modification and low interest rate loans have ended, the economy is correcting itself.

The other major reason the economy is continuing to struggle is because the jobs situation in the US is continuing to be weak.  It’s stock market basics that jobs are vital to any vibrant economy.  The jobs reports for the last 2 years have been very bad and continues to be bad.  As long as people are unemployed, they will not spend money.  If they don’t spend money, the economy will continue to struggle.

The stimulus not working and the jobs situation have been the main reasons for the economic stagnation.  The stimulus has ended.  The only hope we have is job creation.