Despite a deepening global depression, establishment economists are in denial. On June 9, the Wall Street Journal said those surveyed expected slow, steady growth through 2011, despite high US unemployment, a housing depression, European sovereign debt in crisis, and the unreported insolvency of major French and other banks.
On June 8, testifying before the House Budget Committee, Fed chairman Bernanke fantasized about 3.5% US growth through 2011, stopping just short of ruling out the possibility of recession he called "unlikely."
And in 2007, when equity and housing bubbles peaked, neither he or Greenspan expressed alarm, destroying their credibility in the process.
Based on an early August survey, establishment (in bed with Wall Street) economists now put the chance of "another" downturn at 30%, compared to 15% in May, expecting 2.5% growth over the next year.
Some, in fact were sanguine, calling America's economy strong, attributing negative views to a crisis of confidence, not hard reality, signaled by the August 4 shot across the bow market rout.
Despite a predictable rebound, it signified much worse to come because conditions are dire getting worse. Even manipulated data show enough to sound alarms, highlighted by economists like David Rosenberg.
On August 15, he expressed surprise about so "little reaction to the shocking US consumer sentiment data that were released on Friday - the worst since the tail end of the Jimmy Carter recession era in 1980."
Moreover, consumer spending is weak even with suspect upward revisions. In addition, "(n)ew mortgage and refinancing loan volumes fell 19% in Q2 to" a three-year low. Further, auto buying plans declined to a decade low, likely headed much lower as economic conditions deteriorate. Other big ticket buying plans also dropped to 2008-09 depths when the economy falling off a cliff seemed possible.
In fact, growth indicators overall are rapidly heading south at a time they're already woefully weak. There's no end to decline in sight. Remarkably, negative household assessments of government policy hit record lows, surpassing the depths of the early 1980s recession and Watergate.
As a result, Rosenberg called the US economy "recession-bound, expecting" even manipulated data to show negative Q 3 growth, followed by greater contraction in Q 4 and 2012 Q 1.
"(P)ractically every major variable is" negative. "We are past the point of no return....I can understand the innate need to be hopeful," he said, but it's impossible to dispute reality.
Weakness and imbalances are extreme. American and European sovereign debt are overextended and troubled. "Anyone who thinks this gets contained (especially in Europe) slept through the last financial crisis after Lehman failed."
And when weak economies beg for stimulus, austerity is force-fed, assuring far greater economic pain. It's coming, will deepen and persist because policy measures are opposite of what's needed.
Commenting on the August 4 market rout, Rosenberg said nearly always it signals downturns. Western economies are fundamentally weak. Unlike earlier times when the Fed could cut interest rates, it now relies on "untested methods to underpin investor confidence and the economy."
And if America's economy plunges, so do others even deeper. Hunker down believes Rosenberg and independent economists believing the worst is yet to come.
Other Respected Views
Economist Michael Hudson is unequivocal explaining a debt deflation caused Depression. The game is over. The global ponzi scheme ran its course. Papering over conditions only works so long before hitting a wall. Tunnel vision assures trouble. Wrecking economies to save banks is lunacy, and forced austerity when stimulus is needed guarantees disaster. It's not a matter of if, just when, how deep and protracted.
Economist Paul Craig Roberts, trends analyst Gerald Celente, and others worry whether Washington will choose greater war to distract public attention from economic distress. In 2009, in fact, Celente warned about the oldest trick in the book, saying:
"Given the pattern of governments to parlay egregious failures into mega-failures, the classic trend they follow, when all else fails, is to take their nation to war."
In 2011, he called it a worrisome wild card, perhaps preceded by a major 9/11 type false flag to enlist public support.
Bet on it, in fact, if conditions become bad enough, public anger grows, and Obama's approval rating crashes ahead of the 2012 election. War based on heightened fear is how to raise it perhaps high enough to win.
Highly respect analyst Jeremy Grantham began his August letter to investors headlined, "Danger: Children at Play" with a "Stop Press Addendum," saying:
"My worst fears about the potential loss of confidence in our leaders, institutions, and 'capitalism itself' are being realized. We have been digging this hole for a long time. We really must be serious in our attempts to resuscitate the 'average (number of) hour(s) worked' and the fortunes of the average worker."
"Walking across the Boston Common this morning, I came to realize that the unpalatable (to me) option of some debt forgiveness on mortgages looks increasingly to be necessary as well as tax changes" he discussed in his report.
"To go further, if we mean to prosper long term, I am sure we need to act to make debt less attractive to everybody: it really is a snare and a delusion" to think otherwise.
Calling America's Congress "dysfunctional," he said it has to decide between two bad choices:
-- austerity to kill demand when the economy is on its knees; or
-- do nothing, risk default, compromise the integrity of the dollar and send "a powerful signal to the world that the US, at least for now," is past its prime.
In fact, growing numbers acknowledge that reality. "Come to think of it," said Grantham, "the choice was between a technical default and looking like a Banana Republic (or) technical blackmail and looking" like the same thing. "Just different bananas perhaps."
Overall he sees hard times, "lean years." Any pretense otherwise "is beyond wishful thinking or weak math skills. It is either childish or gross and cynical politics: that is to say, even worse politics than usual."
With balanced budgets mathematically impossible without major politically unpalatable policy changes, the alternative is "kicking an enormous can down the road" for even greater predictable disaster.
It's the equivalent of not dealing with a metastasizing cancer until the patient dies or is too far gone to save.
Adding his own grim assessment, Grantham said if we keep "drift(ing) around rudderless, if we don't develop some real (nowhere in sight) leadership soon, then seven lean years may be the least of" America's woes.
Commenting on the August 4 market rout, he added that it "always (has a) disturbing habit of ignoring the obvious and ignoring it some more, until, in the blink of an eye, it doesn't."
On August 4, it blinked, making "risk avoidance....a good idea," Grantham believes that may be his polite way of saying watch out! I warned you! There's no visible light at the end of this tunnel, getting increasingly darker. Watch out indeed.
In fact, a deepening global Depression just began. It'll last years before ending, and cause grave harm to billions worldwide, not responsible for their leaders' malfeasance, especially those domiciled on Wall Street, complicit with political puppets in Washington they own.
Moreover, the greater pain caused, the more they benefit like their Western counterparts, wrecking their economies for personal gain.
No wonder astute analysts like Grantham expressed lack of confidence in America's leaders, disgust with a "dysfunctional Congress," and questioned "capitalism itself," perhaps self-destructing as he wrote.
For billions of global victims, it can't happen a moment too soon, if it isn't already too late to help.
Stephen Lendman lives in Chicago and can be reached at firstname.lastname@example.org.
Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.