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Are we heading for a double-dip recession?

Karl Case, co-founder of the famed Case-Shiller housing index, thinks his earlier optimism about the economic recovery was misplaced. He now believes “the probability is very high of a serious double dip like 1982.”

Making that more likely is that much of the government scaffolding supporting the economy is about to get taken away: Fannie Mae, Freddie Mac, and the Federal Housing Administration are all set to tighten lending policies. The stimulus is set to drain out of the economy over the next year. The Federal Reserve evinces little interest in steeping into the breach and Congress is too bitterly polarized -- and too inanely concerned about the deficit -- for major action. It's worrying.

By Ezra Klein  |  December 30, 2009; 11:30 AM ET
Categories:  Economic Policy  
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Comments

There seem to be widespread layoffs/payroll reductions on the way in the governmental and education sectors, a delayed reaction to the current economic crisis.

Posted by: Ken D | December 30, 2009 1:11 PM | Report abuse

Concern about the federal deficit is certainly not "inane." Clearly Ezra has not considered an inflationary death spiral for this American economy, but he should know that a nation can not pile debt on top of debt and debt service payments on top of debt service payments without catastrophic effects.

Smart people from both parties from Kent Conrad and Peter Orzag to Chuck Grassley and Judd Gregg are well aware of this.

Posted by: lancediverson | December 30, 2009 2:28 PM | Report abuse

A very interesting and important question is why doesn't the Fed do a lot more? Bernanke appears to be extremely intelligent, rational, and knowledgeable about dealing with recessions and depressions.

But just how much power does he have over Fed. decisions? A lot, but he's not a dictator.

Here's one of the first good leads I have in investigating this:

http://research.stlouisfed.org/publications/review/05/03/part1/Meade.pdf

It's important to know who has power in the Fed., so that we might influence them to do what's best, or replace them, or change the Fed.'s voting system.

Posted by: RichardHSerlin | December 30, 2009 2:48 PM | Report abuse

We really need good discussion about what Fed can do and it is not doing and then why. We just have feelers from various folks, but no great insight.

I believe, Fed's job is done and it is more towards policy execution - Congress and President. They have to still do more than what they have done so far, with more creativity.

Posted by: umesh409 | December 30, 2009 3:16 PM | Report abuse

--"We really need good discussion about what Fed can do and [...]"--

The Fed should be abolished. Period.

The double dip *is* coming, it's not going to be like 1982, and other people's money won't save you.

Posted by: msoja | December 30, 2009 11:14 PM | Report abuse

Let me guess the solution ...

More tax breaks for the Real Estate industry and lower lending standards for the FHA ... maybe nothing down interest only?

That's the ticket !!!

I will bet anyone reading this post $1,000,000.00 that the Real Estate tax credit now due to expire this summer will be extended till past next November.

Anyone want to bet against me?

Posted by: cautious | January 2, 2010 2:40 AM | Report abuse

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