CBO: Unemployment headed over 10 percent

May 21, 2009

This ugly news from the Congressional Budget Office:

In the Congressional Budget Office’s (CBO’s) judgment, the economy will stop contracting and resume growing during the second half of this year, but the hardships caused by the recession will persist for some time. The growth in output later this year and next year is likely to be sufficiently weak that the unemployment rate will probably continue to rise into the second half of next year and peak above 10 percent. Economic growth over time will ultimately bring the unemployment rate back down to the neighborhood of 5 percent seen before this downturn began, but that process is likely to take several years.

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Yeah, right. The US economy will grow, and everything will be eventually fine. The future is bright indeed.

Yet, our Cassandras somehow fail to explain what would cause any real economic growth in the country that has been de-industrialized and that produces not much but the green paper. If I’m a capitalist, why would I build any piece of the real economy (i.e. design center, factory etc.)in the US and not in China, India, or any other low-cost country with the well-skilled workforce ? After all, we live in the free-trade world, where goods and services produced cheaply overseas could be imported into the States with no tariffs, thus creating an amazing source source of super-profits: labor arbitrage.
The world crisis we experience today is not uniform.
In the places like China, Japan, Germany, it is a classic capitalist crisis of overproduction caused by collapse of the US consumption market. However, in the US it is a profound structural crisis of destruction of the real economy and creation of several financial bubbles to compensate for it.
A double digit unemployment is the only credible part of the CBO’s report. The Great American Depression will continue and will deepen further, until changes of truly historical proportions occur in the United States.

Perhaps the one good side to the issue of unemployment is that more people will have lots of idle time, and maybe they will pay more attention to Washington. Besides, the socialists in Washington will just keep printing money and telling us the recovery is just around the corner!

Posted by Erik Gustav | Report as abusive