I was always skeptical that recovery was “around the corner.” There is too much statistical and anecdotal evidence to the contrary. The S&P US Treasury downgrade and the climb of gold above $1700 suggest that the smart money knows what’s up: the stimulus didn’t stimuluate, we’re still going broke, and we blew a few trillion dollars in misguided Keynesian efforts to prevent the inevitable.
The housing crisis and the broader entitlement and debt crises are the main causes here. They yield a shrinking economy while the currency is being devalued, the basic stagflationary deadly duo. Underlying those causes, perhaps, we might point to demographic changes, including aging, a lower human capital American populace, and various impediments to economic growth and investment. These are all coupled with the impact of globalization, which will trend towards a worldwide equalization of labor costs, i.e., wages. All these factors mean that we’re in the middle of a multigenerational shift from US preeminence in the world economy, and it is all happening just as entitlement spending is slated to explode, accelerated by the Obamacare fiasco.
It’s not looking good.