Recession or Depression?

Despite the fact that many political leaders in Washington haven't admitted it, we have been in a recession for several years now. It's always interesting about recessions. When we are in one no one admits that we are in one, but years later they refer to the recession of such and such a time.

We've been mired in one for a few years now.

The dropping of banking regulations led to an amazing run of predatory lending. Many folks either overly eager or just ignorant as to what they were getting into, purchased large homes with adjustable rates mortgages with fabulous rates. They were lured by low interest rates and no need for down payments. It was a mortgage bonanza.

Many people purchased homes that they otherwise couldn't have afforded but the low monthly payments made it possible. The problem was that they didn't seem to understand what the word 'adjustable' meant and the person who sold them the mortgage greatly underplayed it. For many, when the rates shot up, their payments doubled or tripled. This has obviously led to lots of defaults and the real estate market became a wasteland.

The people who had the mortgages often had no equity and walked away. Bankruptcy when you have nothing vested in the house became a good option. The banks were fine. These mortgages were insured. The companies that insured them? Huge, huge problems and many of these are on the verge of collapse. Their collapse will be a huge blow to the economy.

Bigger than that is the price of oil. The day that the price of oil hit $3.00 a gallon we were in major trouble. Oil companies got major tax relief and raked in major profits. One would almost think that the President and Vice President had been former oil executives the way this all transpired. As I write this, right now, oil companies are making record profits and we are paying over $3.00 a gallon for gas.

This is catastrophic on so many levels.

First, all those who drive anywhere are paying more money to travel than ever before. It ought to give anyone pause before starting their cars. These vehicles with their own zip codes that burn copious amounts of fuel, their usage of fuel increases demand and raises the cost on everyone.

Secondly, the price of oil means that it costs more to travel, to commute, and to heat our homes. But it also means that the transporting of goods has become more expensive, so items like bread and milk keep going up in price.

Finally, as people spend more and more on traveling, heat, and basic necessities, they have less money to spend on anything else.

I'm also concerned for people who have investments. Real Estate is doing poorly. Stocks are erratic and going nowhere....if we are lucky. Interest rates have been dropped. Bonds are offering nothing. There is no place to invest money right now.

It's almost like economists are saying to keep your investments for the long term, but also feed your pets more to fatten them up in case....

The disparity between rich and poor grows and the number on the bottom is growing rapidly as the middle class begins to collapse.

So, is this a recession or are we on the way to a depression? The thought is frightening.