I am thinking we'll probably have a double dip recession over the next two years. The cause will be another spike in oil prices like last year's. So, maybe your right about local commercial real estate. It's too bad because if it weren't for oil I think we'd be starting a new secular bull market. The primary reason is the rest of the world seems to have an insatiable appetite for buying up U.S debt at very low interest rates. If the U.S were to invest these cheap dollars half way wisely, the U.S economy could be strong for a decade or more similar to the 80s and 90s.

I too believer we are in for a second leg of a recession, but it wont be as bad as the first. But I think you are overstating the importance of oil. At the current price of $70 a Bbl., the value of all the imported petroleum and petroleum products to the US is 2% of the economy. I think we will see a second downturn next year because too many households will be so deep in financial trouble that consumer spending wont recover like it normally does. It also does not help that there is far too much commercial space that will be foreclosed on (mixed-use development was foolish because it forced people to build unwanted retail space).

I too think there will be a double dip on the recession and I agree that some of it will be due to consumers NOT jumping in as they have in the past (and I think that's a good thing). I don't think it will be oil driven due to the latest oil find. I do think that commercial real estate will play a big part.

Question to Bob Clark - what is a 'secular' bull market?

A double dip is certainly possible. It is unlikely, however, without Fed tightening. But even without a double dip, prospects for a strong and sustained recovery are dim. The forces at work are more gradual and ominous.

Here's the rub. Interest rates are low not only because of what the Fed has done.

Personal savings is up close to $300 billion from its nadir during the credit bubble, while business investment is down close to $700 billion from its peak. Together these shifts close demand/supply imbalances for capital by a trillion dollars, and largely explain why interest interest rates have remained low along the entire yield curve.

Increased savings and reduced demand for private investment have been a big help in financing the federal deficit even as the demand for the US dollar has weakened.

If consumer spending picks up (i.e., savings decrease) and/or business investment builds (one or both of which are necessary predicates for a strong economy) the available capital will be squeezed, driving up the cost of capital (think higher mortgage interest rates, higher APR's for car financing, higher corporate borrowing costs etc.) and constraining growth.

At the same time debt service for the federal deficit (which is primarily financed with short term securities) will grow merely to pay off creditors.

Thus are the seeds of stagflation sown.