US is in depression, not a recession

Do you think that the dismal economic situation you are in, is the aftereffect of the recession that ended in 2009? If you think so, then sadly, you are wrong. It may sound unusual at first, but it is the truth, because USA is going through an economic depression and not at aftereffect of recession.

This new nomenclature will help people to understand the gravity and the severity of the situation. It may create panic in people, but it is also true that this depression has no evident solution and the end is also not visible. So, you need to think about the problem with more seriousness.

Current American economy is experiencing two types of problems, the short-term one and the long-term one. Short term problem is there is a depression in the economy. Economic growth is slow than the population and that is why, per capita income is getting lower gradually. The problem of unemployment and underemployment is looming large in all business sectors. Along with that, there are the problems like over-indebted consumers not spending money and impaired banking industry is not ready to give development loans to people. Businesses are reluctant to expand and hire new employees. All these things are clearly interrelated and interconnected with each other.

These factors are wrecking havoc in the economic future of the country. All these problems started with incompetent economic management by the Bush admiration. The aftereffect of that in efficiency is still large in the economic condition of the country. Situation hasn’t changed much with the new admiration. Various shortcomings associated with different laws and policies introduced by the government have made the whole thing lot more complicated than ever before. That is why the stimulus program of February 2009 has remained ineffective. When the stimulus has been ineffective, it can be easily perceived that the problem is here to stay for a long time.

The long term problem is such, that it is possible to solve that easily. This problem is not associated with federal budget deficit. Rather this is the problem of the growth if the debt levels. Total 9.7 trillion is the debt level and it is big even by USA standards. From 2000 to 2007, the growth of public debt was 56% and the reckless tax cuts by Bush admiration made that amount 134% within the period of 2007 to 2012. Annual increase in 2009-2010 and 2010-2011 were both 17%. The estimated increase of 2012 has been measured to be 18%. These growths are much more than the economic growth of the country.

At this rate, economy of the country will be bankrupt soon. Despite these problems and the grim picture of the economy, USA is not in a recession, rather in a depression. It may be a question in the mind of the readers, if depression can create so many problems, what will happen during recession? This is a valid question, but one needs to remember that after the recession the nation and its economy were recovering. That is why the situation is not that bad yet and so it is still a depression and not a recession.