economic recession

Who said anything about a recession? Sometime between the government bailout of Bear Stearns and the Bureau of Labor Statistics report that America lost 80,000 jobs in March, Lee Tachman spent roughly $50,000 last month on a four-day jaunt to Miami for himself and three close friends.

As if the economy wasn't already fighting enough strong headwinds, the risk of capital shortfalls and outright failure of the nation's banks is rising. The Federal Deposit Insurance Corp., the federal agency that backs bank deposits, last week reported the biggest jump in "problem institutions" it has seen since the savings and loan crisis of the late 1980s. While the extent of the problem is still low by historic standards, it identified 76 banks as in trouble - a 52% increase from a year ago.

A few months ago, in a piece entitled “Subprime Geopolitics,” we addressed two questions. The first was whether the U.S. economy was heading into recession. The second was whether such a recession would represent anything more than the normal business cycle, or whether it would represent a fundamental, long-term shift in the way the American economy works. We answered that while the economy could reasonably go into recession — and we would not be surprised if it did — in our view, a recession did not seem imminent. As for whether such a recession would represent a fundamental shift in U.S. economic life, we answered, no, this would not be “the big one.”

The US economy is on its way to recession and the crisis will last until next year, a chief economist for Standard Chartered bank says.