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There is the old saying, a recession is when your neighbor is out of work, a depression is when you are out of work. According to CNBC there are a lot of “yous” who are going to be unemployed in the very near future.

Peter Yastrow is the “world’s largest LIBOR trader,” according to CNBC. His trading focuses on equities, currencies, and interest rates.

Yastrow, market strategist for Yastrow Origer, said he is seeing ‘near panic’ with investors unwilling to punt on unpredictable commodities.

‘Interest rates are amazingly low,’ he told CNBC. ‘We’re on the verge of a great, great depression. The (Federal Reserve) knows it.’

One fund manager said ‘almost every bit of data about the health of the U.S. economy has disappointed expectations recently

 There is no clear textbook of a depression, before the “Great Depression” any economic downturn was called a depression even if it was what we would call today a recession. A rule of thumb used by some economists for determining the difference between a recession and a depression is to look at the changes in GNP. A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn that is less severe.

To put  Mr. Yastrow’s prediction in perspective the “Great Recession” we recently suffered had a GNP decline of 4.1% so in order for him to be correct we are about to go into a downturn that will be almost two and a half times worse than what we just went through.

Another fund manager told CNBC how worried he is about the economy:

The last month has been a horror show for the U.S. economy, with economic data falling off a cliff, according to Mike Riddell, a fund manager at M&G Investments in London.

“It seems that almost every bit of data about the health of the US economy has disappointed expectations recently,” said Riddell, in a note sent to CNBC on Wednesday.

“US house prices have fallen by more than 5 percent year on year, pending home sales have collapsed and existing home sales disappointed, the trend of improving jobless claims has arrested, first quarter GDP wasn’t revised upwards by the 0.4 percent forecast, durables goods orders shrank, manufacturing surveys from Philadelphia Fed, Richmond Fed and Chicago Fed were all very disappointing.”

“And that’s just in the last week and a bit,” said Riddell.

Its as if the economy has hit a brick wall. Over the past few weeks, unemployment, manufacturing, housing prices and durable goods orders have already begun a downward trend. Although it is by no means clear how severe the downturn will be.

Former Clinton Secretary of Labor Robert Reich said that our government is not dealing with the issues while the likely hood of a double dip continues to grow. In fact many key economic bellwether figures are already in worse shape than they were during the recession.

The US economy was supposed to be in bloom by late spring, but it is hardly growing at all. Expectations for second-quarter growth are not much better than the measly 1.8 per cent annualised rate of the first quarter. That is not nearly fast enough to reduce America’s ferociously high level of unemployment. The labour department will tell us on Friday whether the jobs situation improved in May, but there has been no sign of a surge in hiring. Nor in wages. Average hourly earnings of production and non-supervisory employees – who make up 80 per cent of non-government workers – dropped to $8.76 in April. Adjusted for inflation, that’s lower than they were in the depths of the recession.

Meanwhile, housing prices continue to fall. They are now 33 per cent below their 2006 peak. That is a bigger drop than recorded in the Great Depression. Homes are the largest single asset of the American middle class, so as housing prices drop many Americans feel poorer. All of this is contributing to a general gloominess. Not surprisingly, consumer confidence is also down.

Reich places the blame on both parties for dithering while Rome is burning. He wrote in the Huffington Post that things are about to get worse:

The only reason the economy isn’t in a double-dip recession already is because of three temporary boosts: the federal stimulus (of which 75 percent has been spent), near-zero interest rates (which can’t continue much longer without igniting speculative bubbles), and replacements (consumers have had to replace worn-out cars and appliances, and businesses had to replace worn-down inventories). Oh, and, yes, all those Census workers (who will be out on their ears in a month or so).

But all these boosts will end soon. Then we’re in the dip.

Retail sales are already down.

What Reich a long term supporter of the Obama Administration is reluctant to say is the President’s  policies are hurting rather nor helping the economy. Rather than create an environment that encourages business to grow and create jobs, it promotes an air of uncertainty, new costs and regulation. When it should be cutting tax rates to generate investment in the US economy, programs such as the new banking regulations, the oppressive EPA , anti-drilling policies and even Obamacare has increased costs and uncertainty to the point where many corporations and investors are spending their capital elsewhere.

Rather than try to work with the GOP to find a solution, our President and his progressive lemmings just try to cast aspersions on every Republican who dares to suggest a solution.  When a Republican speaks against the Democratic party call for tax increases, or suggests a way to get out of the mess that is Medicare the rhetoric begins:

Republicans are cold-blooded, capitalist pigs who want to push old people off cliffs, kill all people of color and/or gays who spend their time plotting how to take advantage of the poor and middle-class so they can line their coffers with more money than anyone deserves  (or give it to big business) and gloat brag about it at their white-supremacist militia meetings or at church (being a conservative of the Jewish faith I miss out on the last point).

If the progressives don’t get of their fat arses and start working on solution rather than hysterical prose, we will find ourselves in a severe downturn. Based on the latest numbers, it is probably too late to prevent any slump but perhaps the harshness of it can still be controlled.

It is reminiscent of that old Groucho Marx routine:

Groucho: “If I gave you a million dollars, would you sleep with me?”
Woman: “A million dollars is a lot of money, and you don’t look that bad, so I guess I would consider it”
Groucho:: “Ok, but I don’t have a million dollars, would you sleep with me for $10?”
Woman: (indignantly) “What kind of girl do you think I am?”
Groucho: “We’ve already established what you are. Now we’re just negotiating the price

That’s the answer to the question of whether we are heading for a recession or depression. We have already established that the economy is heading down, the question is will the Democrats stop fear-mongering and work on negotiating the size of the dip.

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