gurgled the Captain of Titanic.

And this "might happen":

http://tinyurl.com/d8lvpp

re: Obama's "solution" to the problem is the same as the cause of the problem.

As James Howard Kunstler writes in The Coming Siege of Austerity

It's a curious symptom of the consensus trance zombifying the American public and its auditors in the media that something like a "recovery" is now deemed to be underway. And, as events compel me to repeat in this space, it begs the question: recovery to what? To Wall Street booking stupendous profits by laundering "risk" out of bad loans with new issues of tranche-o-matic securitized paper? This I doubt, since there isn't a pension fund left from San Jose to Bratislava that would touch this stuff with a stick, even if it could be turned out in collector's editions of boxed sets. Does it mean that American "consumers" (so-called) are awaited momentarily in the flat-screen TV sales parlors with their credit cards fanned-out like poker hands, ready for "action?" Not too likely with massive non-performance out in cardholder-land, and half the nation's electronics inventory wending its way onto Craig's List. Are we expecting more asteroid belts of new suburbs carved in the loamy outlands of Dallas and Minneapolis, complete with new highway strips of Big Box shopping and Chuck E. Cheeses? Go to banking's intensive care unit and inquire (if you can) among the flat-lining production home-builders and the real estate investment trusts on life support when they expect to rev up the heavy equipment.

The idea that we're about to resume the insane behavior that induced the current epochal malaise of economy is so absurd it will only be heard in the faculty dining halls of the Ivy League. And if America is not picking up where it left off eighteen months ago -- the orgy of spending future claims on wealth unlikely to accrue -- then what is our destiny? Based on what's out there in the organs of public thinking, it seems that we don't want to think about it.

http://www.kunstler.com/mags_diary25.html

Not a Real Test at All

Bottom line: there were no real examinations. Banks continue to overstate asset quality. The bankers pressured Congress, which extorted the Financial Accounting Standards Board, which gutted the accounting rules on loss recognition. Because there were no real examinations, there were no real stress tests. So only one question is key: why does Treasury believe that anyone will believe its compound fiction?

--William K. Black

http://tinyurl.com/clf9t9

Real stress tests will be conducted as the global economy continues its downward spiral.

re: the US economy will take a very long time to recover, if ever

Any recovery will be snuffed out almost immediately for two reasons:

1.) Rising interest rates

2.) Rising oil prices as demand ramps back up

The reason for #1 is obvious.

I covered my reasoning for #2 here:

http://tinyurl.com/dzqgyl

[China's] growth rate [was] 6.1 percent in the first quarter of 2009, the lowest in a decade.

A Morgan Stanley report in March warned that the November stimulus may have helped maintain gross domestic product growth, but it is unlikely to deliver corporate earnings. Other critics note that the package has funded too many local pet projects, which could in the long run contribute to China's industrial overcapacity, poor rates of return - bad bank loans in future - and exacerbate China's environmental problems.

Moreover, with global - particularly American - demand for Chinese exports declining, China must either lower its production levels or increase domestic demand for goods that were once consumed by foreign countries. Currently, China is doing neither...the most daunting challenge for China remains the collapse of its export industry. China saw its exports fall for the fifth straight month this year, dropping 17.1 percent in March compared to the same month last year. Whether the economy will be able to maintain the needed growth in the face of declining demand in Europe and the US remains the big question. Even with its hefty stimulus spending this year, China will need demand from the rest of the world to sustain its current recovery.

http://news.xinhuanet.com/english/2009-05/07/content_11326601.htm

Given this last statement, let us revisit a snippet from one of Andrew's previous posts:

Economist Willem Buiter, writing in the Financial Times, does not believe that China will maintain "a sustained early recovery" precisely "because of its external trade dependency."

http://www.salon.com/tech/htww/2009/05/01/china_surges_ahead/index.html

If Mr. President was actually like Mr. Spock, he would've quit giving away the Treasury to Wall Street and the banksters and instead thrown the lot of them into the brig.

As Mr. Spock said in The Wrath Of Khan, "Logic clearly dictates that the needs of the many outweigh the needs of the few."

re: If the downcycle you describe isn't breakable, how would ANY recession end?

This is not just any recession. There is little in the past that can inform us about what is presently happening.

Engines of Recovery Flame Out as Economy Seeks Obama-Fed Rescue

The engines that have lifted the U.S. economy out of every recession since World War II will be of little help this time around.

Inventory rebuilding, household spending, home construction and payroll growth -- the forces that powered, to a greater or lesser extent, each recovery since 1945 -- may remain missing for much of 2009. A glut of unsold properties may keep housing depressed, while shriveled savings will discourage consumers. Companies may be reluctant to restock and rehire while their profits are squeezed.

“There are no obvious drivers of growth from the private sector,” says Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York.

http://www.bloomberg.com/apps/news?pid=20601068&sid=anuuEj0tNs1Q&refer=home