GARY SHILLING: Here's Why The US Is About To Plunge Into A New Recession

TBI ^ | 4-20-2012 | Simone Fox

[blam]

GARY SHILLING: Here's Why The US Is About To Plunge Into A New Recession

Simone Foxman
April 20, 2012, 3:48 PM

Last week, Gary Shilling wrote a four-part series for Bloomberg View on why the U.S. economy is on the fast track to a brand new recession this year.

While he pointed to various data points and recounted a number of anecdotes to prove his point, Shilling's argument was simple: the consumer strength we saw earlier this year was fleeting and highly accommodative policy from the Federal Reserve and the possibility of more quantitative easing are the only things propping up markets right now.

In fact, the fundamentals of the economy lead him to believe "the U.S. economy is overdue for a recession."

Most importantly, Shilling writes that "consumer spending is the only major source of strength in the U.S. economy this year," but now all signs point to retrenchment:

While consumers should be "reduc[ing] debt and rebuild[ing] net worth, they have been doing the opposite lately."

However, continuing sluggishness in hiring lead Shilling to believe that this trend is unsustainable. "The U.S. has a lot of job openings, but having endured huge layoffs in recent years, employers are being very picky in new hiring," he writes. Further, the workforce isn't properly trained to fill many of the jobs available. And the job market is sticky: "homeowners whose mortgages exceed the value of their houses can’t easily sell their property if they take jobs in distant locations."

Despite a string of positive earnings reports this season and high corporate profit margins, Shilling argues that much of this is hot air. In fact, a closer look at industrial production and inventory paint a grim picture:

(snip)

[superfries]

Until you have turned in a pie tin for the .05 cent recycling $$ in order to catch the subway to and from work search day you have no idea what the great depression was like......not my exp. story told to me by my grandfather.....

[cherry]

I think Rubio would be terrific but what do I know.....Romney is NOT a shoe in...the forces of evil are aligned to keep bamey in dictatorship.....I’m not a Romniac but I’ll vote for him as many times as they let me....