The president and the Federal Reserve chairman say there’s no recession.
That’s No. 10 on my list of the Top 10 signs that we are in a recession. These are the same guys who predicted that the subprime mortgage meltdown would never spread to the broader economy.
9. The U.S. gross domestic product grew at a tiny pace in the fourth quarter of last year, 0.6 percent. GDP grew at 4.9 percent in the third quarter.
This is like driving a car at 50 mph and slamming the brakes down to 11 mph. Sure, we’re still moving, but that’s of no comfort to those of us who’ve smacked our heads on the windshield.
8. The prolonged spike in energy prices is killing us. Oil is more than $100 a barrel. And some are forecasting $4-a-gallon gasoline. Economists who predicted our economy could easily absorb these higher costs should get jobs at a gas station. Oil fuels the economy.
7. Credit also fuels the economy, and the big corporate credit crunch continues. On Thursday, Freddie Mac reported a $2.5 billion fourth-quarter loss, thanks to mounting mortgage defaults.
“If the economy weakens substantially from here . . . it will have a further negative effect on homeowners . . . and drive credit costs higher,” said Freddie Mac chief executive Richard Syron.
6. Foreclosures keep rising, home values keep falling and more Americans have “negative equity” in their homes. Stores, restaurants and car dealerships used to be jammed with free-spending consumers and their home-equity lines. It’s a fading memory now.
5. Retailers are feeling the pinch. The company that owns Sears and Kmart on Thursday reported a 47 percent drop in fourth-quarter earnings. Home Depot’s earnings are down 27 percent. Wal-Mart is doing great, though. In fact, the economic downturn is turning more of us into Wal-Mart shoppers.
4. How low can the dollar go? A euro is now worth $1.52. The pound $1.99. Even Canada’s looney is worth more than the dollar.
The value of a buck reflects what the rest of the world thinks of our economy, and it has only been heading . . . down.
3. Honda’s president and Nissan’s CEO say the U.S. economy is not headed for a recession. “There is no sign that our sales are shrinking,” Honda’s Takeo Fukui said. “There are plenty of business opportunities.”
Particularly for those selling small, fuel-efficient cars to people who want out of their SUVs. Cerberus Capital Management, owner of Chrysler, meanwhile, is preparing for the worst.
“We believe that in the case of an ordinary recession . . . Chrysler will fare just fine,” said Cerberus founder Stephen Feinberg. “It is in the case of an extraordinary automotive collapse or an unusually deep recession that we worry.”
2. Starbucks announced layoffs and store closings. Not even caffeine can ward off the inevitable.
1. If you don’t remember the 1970s, you might think “stagflation” is just one of those things that can happen to a guy at a bachelor party. Nope. It’s rising unemployment and rising inflation at the same time.
“I don’t anticipate stagflation,” Fed chairman Ben Bernanke said Thursday. “I don’t think we’re anywhere near the situation that prevailed in the 1970s.”
So far, he’s correct. Unemployment and inflation may be rising in tandem, but they are not nearing double-digit levels . . . yet. So why is he even using this word?
Respond to Al Lewis at , 303-954-1967 or alewis@denverpost.com.
