Are we growing, or are prices simply getting higher (our purchasing power is deteriorating)? One is good, the other is very, very bad. Which one do you think it is?[/quote]
Yes, we are growing, for now. GDP is still growing in real terms (in other words, after adjusting for price changes). Things could be worse. UK GDP actually shrunk for a quarter last fall. Greece and possibly Spain (not sure) are, technically, still in recession.
That may not last long, though: Republicans are out in full power once again, demanding immediate austerity (including abolishing Medicare and cutting Medicaid) and blocking the debt ceiling increase unless they get what they want, perfectly willing to burn the house even if it falls on their own heads. In the mean time, Obama administration has been a total failure, completely conceding to Republican pseudoscience and failing to exert any effort to resolve this horrible situation.
Krugman calls it 1937 all over again. Given his excellent track record, I see no reason to disagree with him. I’ll give it two weeks. Unless the White House comes up with some kind of radical program to jump-start the economy in the next two weeks, or a sensible deal is reached with the GOP that does not involve any significant spending cuts right now (as opposed to any deferred spending cuts delayed till unemployment goes below 6% – which is the right way to go), on June 16, 2011, I’m going all-cash again. (And, just for the record, I’ve been mostly all-stock since January 2009.)
The general problem is that Republicans are almost sure to oppose almost any government move that might prevent the double-dip recession. For example, a rerun of 2009 stimulus would be extremely effective, and today, when the economy isn’t losing jobs at the fastest rate since 1930’s, it could result in immediate and obvious results (lower unemployment, higher consumer spending). But is there any chance of getting another $1 trillion (6% of GDP) of short-term deficit spending through the Congress, for a chance to end the Great Recession here and now? None at all.
Sensible, intelligent left-wing economists have been trying to catalogue things that could be done now, in spite of Republican stonewalling in the House
