You know the economy is in trouble when you have to go back to Herbert Hoover's administration for an historical comparison, or when the Federal Reserve cuts interest rates to 50-year lows, or when you run out of adjectives to describe how awful home building is.
Manufacturing payrolls dropped by 85,000 in November, and hours worked plunged 1.4%, so it's likely that output also dropped sharply. Forward-looking indicators on the factory sectors in the New York and Philadelphia regions are likely to sink further, economists said.
Economist Kenneth Rogoff considers the United States to be in the worst financial crisis since World War II – and believes that the economic policy in his native country could become more European during the next ten years. According to Rogoff the USA might soon place less value on growth and confront citizens with higher taxes. The 55-year-old is a professor of economics at Harvard University near Boston. He was Chief Economist of the International Monetary Fund (IMF) from 2001 until 2003.
Kenneth Rogoff: "There is no question that what we are seeing today is a reversal of the dynamic that we have been seeing the last ten or fifteen years. So there is a sense in which the slowdown is a payback for the debt-fuelled growth of the earlier era. First and foremost housing prices are still sinking. They probably have at least an additional ten or fifteen percent to fall. That's going to lead to more financial sector problems, to unemployment problems and more headwinds to consumption. The fiscal and monetary authorities have basically tried to fight these bubbles by propping them up. The tax rebates is an attempt to keep consumption up. All the bail outs of the mortgage companies Fannie and Freddie and even investment bank Bear Stearns is all linked to trying to keep the housing market up. But eventually consumption has to come down, housing prices have to come down. The Federal Reserve and Treasury policy has made this a slow-motion train wreck. But it's not going to stop the crash ultimately. The economy has to pay the price. There is a risk of a lost decade if the policy response goes in the wrong direction. We may see a decade where the US recalibrates its system towards one that is slower growing but somewhat more equitable. That seems to be the political winds are taking us." (Bonzer calls this SOCIALISM, tax the rich to pay the poor, redistribution of wealth)