The summer has brought the likelihood of a double-dip recession, which could mean slow or nonexistent growth for two years or more.
Early in the year, the always prescient Economistmagazine warned that the North American (and perhaps world) economy might pull out of its mortgage crisis in early summer, and that could signal the beginning of the end of a mild recession. But the magazine warned that a more likely scenario was the "double-dip", in which the conservatism of banks with large losses on their books would destroy consumer credit, even for those with excellent records, while drying up the corporate loans that feed startups and established companies alike. All indications from the last two weeks suggest we're going to get two scoops of ice cream in our summer misery.
The news networks have been chiding both Obama and McCain for failure to come up with practical ideas, but when engines of debt financing slow down, what can an executive branch do outside of working with the Federal Reserve on interest rates? We've been living a profligate existence for far too many decades, and it looks like we're entering payback time.
Are there positive aspects to a continuously-slowing economy? Obviously, particularly in the energy and environment fronts. Whether the oil price explosion is due to true refining shortages or speculation in commodities, it comes at a time when peak production is approaching or here. Putting consumers in the mindset of conserving in transportation and energy use is a good thing.
But in some ways, an economy that stumbles in "slo-mo" toward reduced goods and services is more painful than a sudden sharp crash. The front page of the July 2 New York Times is not much fun to read in this regard. The supply chain in electronics and OEM products, like the supply chain in agriculture, automobiles, or raw materials, can hum along, albeit at a reduced rate, until an unforeseen speed bump caused by credit panic somewhere along the line causes the line of dominoes to collapse. This impacts other areas, such as venture funding that leads to IPOs, virtually nonexistent in the electronics industry today.
The interviews of consumers and business managers alike, featured in recent weeks on TV, radio, print, and web, provide a gloomy view of a globalized economy sinking into a double dip. Those who play by the rules, whether individual consumers or corporate startups, get hammered just as badly as the subprime mortgage players and hedge-fund speculators. A perfect storm recognizes no favorites. And there does not seem to be a politician out there who can offer shelter from the storm.