It is not just a double dip that is taking shape, it is Japan falling into an official depression.

Lately Japan’s GDP have been juiced by deflation, the reality is that nominal GDP continues to fall rapidly and is quickly approaching a 10% contraction, which would make it a depression.

The big falisy we are facing with economic statistics is that in these times of economic distress all of the window dressing (seasonal adjustments and inflation adjustments) no longer apply. If there is deflation, it is not caused by price declines, it is caused by pricing pressure brought about by lack of consumption. So it is not the underlying commodities that produce the deflation, i.e. raw material costs, falling wages, it is the need to drop prices to try to spur rapidly dwindling demand. Demand that is gone due to the economic effects of the recession/depression. Using this as a positive to the statistics underestimates the actual negatives of this behavior, especially on unemployment.

So you get this wierd low growth scenerio where people continue to lose their jobs because businesses continue to cut costs to try to move ever dwindling product demand.

Japan looks like the first major economy to hit depressionary contraction numbers. Germany might follow if the hangover from their cash for clunkers is big, although they seem to be getting a big boost from China’s continued consumption.

The US is still on the ropes, we have been stimulated into some growth, but there is massive anti stimulus just around the corner that no TARP slush fund money is going to be able to overcome.

2011 will be a tough year as the $787B stimulus expires, TARP runs out and everyone gets whacked with a massive tax increase. I don’t see the economy being strong enough by then to be able to handle that kind of a smackdown.

- gluesch

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• Why is market getting giddy again? What changed in last 2 weeks?
• Companies don’t see revenue growth for at least a year: study Most companies still reluctant to pursue new market opportunities
• The US economy is in deflation:
• “For far too many, there is too little income, too much spending, too little saving and too much debt.”

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