Analysis from the New York Times: Double Dip Recession Could Be Much Worse than First

The American Bankruptcy Institute sent the following summary of a New York Times article this morning:

If the economy falls back into recession, as many economists are now warning, the bloodletting could be a lot more painful than the last time around, the New York Times reported today. "It would be disastrous if we entered into a recession at this stage, given that we haven’t yet made up for the last recession," said Conrad DeQuadros, senior economist at RDQ Economics. When the last downturn hit, the credit bubble left Americans with lots of fat to cut, but a new one would force families to cut from the bone. Making things worse, policymakers used most of the economic tools at their disposal to combat the last recession and now have few options available. "There is no approachable precedent, at least in the postwar era, for what happens when an economy with 9 percent unemployment falls back into recession," said Nigel Gault, chief U.S. economist at IHS Global Insight. "The one precedent you might consider is 1937, when there was also a premature withdrawal of fiscal stimulus, and the economy fell into another recession more painful than the first." There is at least one factor, though, that could make a second downturn feel milder than the first: corporate profits, according to the experts. Corporate profits are at record highs and, adjusted for inflation, were 22 percent greater in the first quarter of this year than they were in the last quarter of 2007.