Early Retirement Blog

A year ago I wrote an article, here on the Early Retirement Blog, predicting a double dip recession would begin in the second quarter of 2010.  Well, the second quarter just ended, and talk of a double dip recession is reaching a fever pitch.

In this article, I am going to expand upon my double-dip recession prediction, and explain how it will impact your retirement.   Why should you care what I, a relatively unknown economics blogger, has to say about the economy?   I and only a handful of economists, such as Nouriel Roubini, correctly predicted the global economic collapse, the stock market bottom, and the coming double dip recession.   And, my timing has been near perfect, plus, I have no agenda and charge nothing for my insights.   I suggest you subscribe to this blog.

First, what is a double dip recession? A double dip recession is when the economy experiences at least two quarters of negative economic growth (a recession), followed by a short but sharp recovery, and then falls back into a deeper longer recession.

The reason why we will have a double dip recession is simple.   The economic recovery we experienced, a booming stock market and stable housing prices, was caused by massive global stimulus spending and artificially low interest rates.   Both of which are rapidly coming to an end.

At the recently held G-20 meeting in Toronto Canada, Europe and China announced to the world, that their deficit spending days are over.   Here in the U.S., President Obama could not get an extension of unemployment benefits passed by congress, and the leaders all agreed to halve their budget deficits by 2013.   Without coordinated global government deficit spending, to pump money into the economy, economic growth will collapse and recession will return.

How will a double dip recession affect your retirement? Most Americans have their net worth’s divided between housing and stocks.   Both of which will get hammered by a recession.   Deficit spending countries, which had been enjoying artificially low interest rates, will be forced to raise interest rates to keep funding their budget deficits.   Higher interest rates, caused by the double dip recession, will crash both stocks and housing.

How can you protect yourself against a double dip recession? I don’t give investment advice, read the paragraph above, and make your own investing decisions.   However, when a double dip recession does occur, retired seniors living on artificially low interest rates, will benefit as interest rates rise.

When will a double dip recession begin? It already has.   We will most likely see positive economic GDP growth this quarter, Q2 2010, and if we are lucky, flat GDP growth for the third quarter of 2010, but the die has been cast for a double dip recession.

Some final notes.   I have left a lot of details out of this article in an attempt to not bore the non-economist reader.   However, their are many many economic and political indicators, that make a double dip recession inevitable.   An article by U.S. News and World Report does a good job of listing some of the major double dip recession indicators.

Also, I would like to let readers know that none of this, not the global economic collapse or the double dip recession needed to occur.   The fault for both lies squarely at the feet of America’s Wall Street controlled politicians, Republicans, Democrats, and Presidents Bush and Obama.   The world has given the United States numerous opportunities to clean up it’s act.   Unfortunately, a fatal combination of greed, arrogance, and incompetence, has doomed the U.S. and the world economy to a double dip recession.

If you had been delaying your retirement, because of the last recession, you may want to take advantage of the current situation and retire now.   Visit the Early Retirement Website and learn how to retire early.