CHESSNOID

Everyday, the recession continues to grow more severe.   More foreclosures, more jobs lost, and sinking stock markets keep emphasizing how tough the economy has been.  To understand when the recession will end, I think we need to understand why it is here and more severe than the previous recessions.

NY Times:

The value of outstanding American Treasury bills now reaches $10.6 trillion, a number sure to increase as dollars are spent building bridges, saving auto jobs and preventing the collapse of government-backed mortgage giants. Worry centers on the possibility that foreigners could come to doubt the American wherewithal to pay back such an extraordinary sum, prompting them to stop — or at least slow — their deposits of savings into the United States.

That could send the dollar plummeting, making imported goods more expensive for American consumers and businesses. It would force the Treasury to pay higher returns to find takers for its debt, increasing interest rates for home- and auto-buyers, for businesses and credit-card holders.

“We got into this mess to a considerable extent by overborrowing,” said Martin N. Baily, a chairman of the Council of Economic Advisers under President Clinton and now a fellow at the Brookings Institution. “Now, we’re saying, ‘Well, O.K., let’s just borrow a bunch more, and that will help us get out of this mess.’ It’s like a drunk who says, ‘Give me a bottle of Scotch, and then I’ll be O.K. and I won’t have to drink anymore.’ Eventually, we have to get off this binge of borrowing.”
Some argue that the moment for sobriety is long overdue, and postponing it further only increases the ultimate costs. “Our government doesn’t have enough spare cash to bail out a lemonade stand,” declared Peter Schiff president of Euro Pacific Capital, a Connecticut-based trading house. “Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base. Only by swallowing this tough medicine now will our sick economy ever recover.”

If we let the economy just re-balance itself, I think our economy can be back in 12 months with positive growth. If our government continues to spend borrowed money (with artificially low interest rates and bottomless printing of US dollars), then the economy will continue to be stuck in the downtrend. When our government decides to be more responsible by stopping wasteful spending and funding these useless bailouts, the economic recovery can start sooner.