Can Washington break the deflationary spiral?


A lot of economists and commentators are having trouble figuring out what to call our current economic situation. Should it be the Great Recession, the Financial Crisis, the Greatest Depression? I don't really think we'll know what to call it until we get some historical distance from it. And we won't get much historical distance until we figure out why it's continuing and then do something positive to get out of it.

I recently conducted a webinar, "The Economic Outlook for the U.S. and Key Industries."

Webinar: Economic outlook: U.S. and Key Industries from Scott C on Vimeo.

My basic conclusion was that when you have an economy which depends so heavily on consumers for growth -- personal consumption expenditures accounted for 67% of the GDP growth in the third quarter -- and millions of those consumers are unemployed, this creates a deflationary spiral that is hard to escape. Without income from jobs or easy credit for debt-fueled spending, it's hard to see how consumers can drive a recovery.