Now that the cat is out of the bag and everyone is pretty clear on the recession we’re in, maybe more people will take seriously the notion that we’re not in “just another recession” like 2002, 1991, 1981-83, 1972-74, et. al.  No, I think you can pretty much bank (er, maybe not the best use of the word) the fact that 2008 marks the beginning of the Second Great Depression.  This go around, GDII (as I have coined it) will make the First Great Depression seem like a walk in the park.  All you dismissive pollyannish types might want to leave now, because you can’t handle the truth.

Well, even the White House is trying to tamp down expectations of the much vaunted stimulus package they’re peddling on Capitol Hill.

Joe Biden said “it’s going to get worse before it gets better.”

It’s not as if I take everything politicians say at face value, but believe me, this time we’re getting the straight dope.

I’ll present detailed explanations  why in a future post,  but in the meantime here are a few things to consider:

1.  We have an unsustainable level of debt (total private and public)

2.  Our financial system was built on a complex set of unsustainable business practices and is delaminating every minute.

3. Greed, avarice, fraud, and institutionalized theft are endemic and until many of the perpetrators have been put in jail, we cannot move beyond the mistrust and damage that has been done.

4.  Foreign ownership of our debt cannot continue at the level it has, creating a difficult scenario for “Helicopter Ben” and the US Treasury.

5.  The paper wealth created in the last 19 years was largely illusory.

6.  The housing bubble is THE ONLY THING that kept our economy from declining in the post 2001 period.  It has finally burst under its own weight.

7.  Real wages are down over the last 40 years.

8.  Government statistics to track inflation (CPI, core inflation) and unemployment have been changed to reflect policy objectives and do not paint an accurate picture.  They understate the real price of things and the real level of unemployment.  Thus we cannot reassure ourselves that compared to the GD I, it’s not so bad.

9.  Credit and Investment capital are not being put to use; people who have capital are hoarding it.

10.  US Monetary and Fiscal policies of the last 19 years have created conditions that are unescapable.  We cannot, even with the best and brightest minds, clearest sense of purpose, and most aggressive tactics, pull ourselves out of two decades of disastrous policy without a long and painful recovery.

11.  Free (or almost free) markets do not work.  Regulation is essential.

12.  Globalism and corporate capitalism have killed the American century of prosperity, a vacuum exists, and new forms of capitalism (with a more balanced regulated marketplace) are not yet ready to fill the void.

13.  Debt deflation will wreak havoc on our economy in the next 2-5 years.

14.  Massive cuts in consumer and corporate spending will contribute to the downward spiral of our economy and GDP.  Until that bottoms out, we’re still on the downward slope.

15. Layoffs and rising unemployment will be the norm for the next 2-5 years.

16.  Housing price deflation, unsold inventory, and foreclosures will continue to plague the economy and contribute to the superfecta of economic depression: layoffs, housing decline, spending cuts, and capital freeze.

17.  People are afraid of losing their jobs, homes, standard of living.

18.  We are not alone in this crisis.  England, Iceland, the EU, Canada, and many other nations are experiencing many of the same issues, though to varying degrees.

19.  If the dollar ceases to be the world’s reserve currency, because our economy has fallen so far and so hard, it will create a vicious downward spiral on all of the factors listed above.

20.  Cycles of prosperity and decline are part of the natural rhythm of capitalism.  We are overdue for a contraction–despite the best attempts by Alan Greenspan and Robert Rubin to prevent it.