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Fears of Double-Dip Recession in California

Posted on Sep 17, 2010
Flickr / edEx

As the national unemployment rate hovers quite stably below the double-digit mark, California’s troubled economy continues to dive into despair. The state’s jobless rate rose to 12.4 percent last month, renewing fears that California may fall into a not-so-delicious-as-it-sounds double-dip recession. —JCL

The L.A. Times:

California’s deeply troubled labor market took another hit in August as the unemployment rate rose and employers laid off more workers than expected, renewing fears about a double-dip recession.

The state’s jobless rate increased to 12.4%, up from 12.3% in July. Employers shed 33,500 jobs in August, marking the third straight month of payroll job losses.

“It’s surprising and very, very disappointing,” said Stephen Levy, director of the Center for Continuing Study of the California Economy. “This marks a couple months now where we’ve done worse than the nation.”

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Fat Freddy's avatar

By Fat Freddy, September 18, 2010 at 7:39 am Link to this comment

What “double-dip” recession? That implies that the “first” recession is over. You’ll forgive me if I chuckle.

*chuckle, chuckle*

I suppose, if you want to look at GDP numbers, you could say the first recession is over, and that employment lags GDP growth. That would be fine if we actually had real GDP growth. Nouriel Roubini showed that most of the GDP growth, and almost all of the growth in the S&P 500 over the past two years, has been in bank stocks. That’s not real growth, anymore than debt is wealth. The growth in the banking sector is the direct result of capital infusions, such as TARP and TALF, and a whole alphabet soup array of liquidity programs, AND the change in accounting standards. All banks are now exempt from mark-to-market accounting. That’s what got Enron and Michael Milken in trouble. It is now legal! Also, what was once a useful tool in accounting, “off-balance-sheet”, has been pushed to the extreme, far beyond any reasonable reporting requirements. The toxic assets are still there, they are just hidden. Everybody knows they are there, but nobody knows exactly what they are, or where they are, or what they are actually worth.

We will not recover from this recession until all of the mal-investments are flushed out, and the rule of law is restored.

Imposing accurate accounting standards, stopping high-frequency trading, quote-stuffing and front-running, and prosecuting fraud to the fullest extent of the law are prerequisites to restoring trust in our economy.

But instead of doing what is necessary, we will continue to do what “feels good”. Borrow more, print more, spend more, increase the debt of not just the government, but of individuals and private institutions, as well.

Up until about 1980, we were a nation of savers. We were a net creditor around the World, because we had savings based investments. Yes, we actually used to loan money to foreign countries. We are now a nation of debt. Over-leveraged assets have driven both private and public debt far beyond any sustainable means. So, more of the same will certainly fix things, right? Wrong. Even if we borrow and spend enough to actually lift us out of this recession, it will only create yet another bubble. The bursting of the most recent bubble, the mortgage bubble, almost sent us into a full blown, worldwide currency crisis. When the next bubble bursts, it will be much worse, if we even get that far.

The decision we face is to either take our medicine, or blow another bubble. One is sustainable, one is not. Children blow bubbles and don’t like medicine. Are we children, or responsible adults? I truly wonder.

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PatrickHenry's avatar

By PatrickHenry, September 18, 2010 at 7:05 am Link to this comment

I’ll bet the underground economy is booming.

Once taxes get in the way of subsistence living, they will be avoided.

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Robespierre115's avatar

By Robespierre115, September 17, 2010 at 6:02 pm Link to this comment

I live in California and can testify that the situation is even worse than what is described in the article. This is what happens when you have crazy Republicans running the economy and a pathetic liberal culture that protests for Tibet but not for change within California itself.

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By Big B, September 17, 2010 at 4:50 pm Link to this comment

We see in the Golden State the legacy of Ronny Ray-Guns.

The rest of the nation will soon follow

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By FRTothus, September 17, 2010 at 4:15 pm Link to this comment

The real numbers are, of course, much higher than the
12.4% in California, and the “single-digit” hovering
elsewhere, but where would businesses be if it
weren’t for creative accounting?  The real numbers,
the real percentages, are closer to twice what is
being reported, but telling the truth has never been
the purpose of the MSM.  They stay in business (or
don’t) by selling ads (or not) to capitalists out to
sell you what you don’t need, pay their employees as
little as they can get away with, and keep the rest
for themselves.  Reporting that at least 1 in 5 are
unemployed is not good for ad sales, and might cause
the ads’ targets (you and me) to think twice, and
that just won’t do to keep the house of cards
standing, and the kleptocracy in power.

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