How to Break the Recession
Government and consumers with jobs will need to ramp up spending to end the vicious cycle.
I continue to hear from people who don't believe the economy can get better without a big improvement on the jobs front. This argument makes some sense; how can consumers spend money if they aren't making any? If fewer jobs lead to less spending, and less spending leads to fewer jobs, how do we break the vicious cycle?
If this pattern were truly self sustaining, we would never get out of a recession. To break the cycle, those who do have jobs must spend more, we must have more exports, businesses must spend more, or government has to step up to the plate. Exports are off the table for now (other than some capital goods for Asian markets), and business investment, other than inventory, tends to be a late-cycle phenomenon. That leaves the government (which is doing everything it can to help) and consumers with jobs to help break the cycle.
In past recessions, more favorable lending rates and cheaper prices have motivated those with income to spend more. I believe that this is what will lead us out of a recession this time. However, the bounce may be more from reduced savings, better prices, and real incomes rather than a sharp rise in borrowing.