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Monday, February 16, 2009

When did This Recession Begin?

Well, that's a very good question.
After the Internet bubble burst in the late 90s, and as we moved into this millennium, the US economy forked such that corporate America improved their profitability by cutting costs (rather than increasing revenue) - they accomplished this by shifting production overseas and other cost-reduction methods. While US consumer income stagnated, this stagnation was compensated by rising housing values which created an illusion of prosperity among consumers. This coupled with cheap and easy credit meant that consumers could continue spending while their income was stagnating and their savings were moving into negative territory.
And then as they say, the chicken came home to roost, when the housing market burst. This was bound to happen as housing prices had moved into unsustainable territory.
So in my opinion, the recession earlier in this decade (I am not sure if it was technically a recession) never really ended, it just became more intense as more fuel was added to the fire.

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