GRAPH: The current recession has already beaten all other economic downturns in terms of length since the Great depression from 1929 to 1933. Former Fed chairman Alan Greenspan managed to keep recessions in the last 20 years below 12 months. But he had a weapon that is not available anymore to his successor Ben Bernanke: Starting at higher interest rate levels Greenspan had a lot of rate-lowering ammunition to tame the bear. With zero interest rate policy Bernanke has used up the Fed's only weapon long before the present recession will begin to show any significant changes. Chart courtesy of chartoftheday.com
Now let's have a look at the level of indebtedness:
GRAPH: As all economic crashes base on too much money in the system, while nobody has any in her/his pockets, the current GDP/debt ratio of more than 400% (this chart ends in Q2/08 and the Fed only started pumping up money supply later last year with growth rates in the 3-digit area) implies the US economy is going to remain below the waterline for some more time well into the next decade. Take note that this GDP/debt ratio does neither include future federal and state pensions liabilities nor exploding health care expenses that are the result of worsening demographics. Chart found on tickerforum.orgAs always, one does not need to be a financial whiz kid or tea leaf reader to see when the economic situation will turn into something the Fed and bankers like to describe as unprecedented once it starts happening. You only have to look back in history to get a reliable picture of future developments as there are only two constants in markets: greed and panic.