So it is time to move away from the soft landing vs. hard landing discussion and start considering seriously how deep the coming recession will be; in the view of this authors the 2008 recession will be more deep, protracted and painful than the short recessions of 1990-1991 and 2001; this time around – unlike 2001 when only tech investment faltered - most components of aggregate demand are under threat: falling residential investment, falling capex spending by the corporate sector and now evidence of a sharp slowdown and near stall of private consumption that accounts for 70% of GDP. When the US saving-less and debt burdened US consumer is now under threat the risk of a more protracted and severe recession than the mild one of 2001 are significant.
As I've written before, I think the country has lost its cultural memory of serious economic downturns and it's hard to imagine the broader impact of longer term economic pain. While there were harder hit regions, overall the two prior recessions were relatively short and painless. Whenever I write that people email me recounting a personal experience which was neither short nor painless, or point to areas which were harder hit. I know! But overall the recessions weren't that big of a deal.
Still we live in a world of easy credit, and even when people are already saddled with debt and there's a relative credit crunch, the existence of it might prevent the collapse of consumer demand.
Or not.
WHEEEEEEEEEEEEEEEEEEEE