Stocks surged in the new year's first day of trading on Monday — often a sign of a good year ahead for the markets. But Harvard economist Martin Feldstein and other experts are warning that with the real estate still struggling and unemployment remaining at 10 percent, the chances are slim that 2010 will see a "robust recovery." Does the evidence suggest that the economy will continue to bounce back in 2010, or fall back into a double-dip recession? (Watch Scott Rasmussen talk about Americans' suffering morale)
Only another stimulus will prevent another recession: Let's not repeat the mistakes of the Great Depression, says Paul Krugman in The New York Times. In 1937, the Roosevelt administration concluded the depression was over so it was safe to cut spending and raise interest rates — and the economy promptly fell apart again. The same thing will happen all over again if we take ignore the urgent need "prop up the economy" by passomg another economic stimulus bill and keeping interest rates low.
"That 1937 feeling"
Another stimulus could CAUSE another recession: There's a problem with prescribing another stimulus, says Douglas McIntyre in Daily Finance. More government spending requires more government borrowing, which "could stimulate both higher taxes and higher interest rates." Ironically, that unholy combination would quite possibly cause the economy to fall back into recession.
"More stimulus to prevent double-dip recession could cause one"
Enough pessimism. Good times are returning: "My bold prediction for 2010," says Daniel Gross in Slate, "is that the consensus of the forecasters surveyed by the Philadelphia Federal Reserve, which projects the economy will grow only 2.4 percent in 2010, is too pessimistic, perhaps by half." After the "Great Panic of 2008" most Americans won't believe the recovery is here until they see it "in their paychecks, portfolios, or home values" — but it's coming.
"No pessimists allowed!"