Analyst: The Double Dip Is Here

As a trade group announced today that existing home sales unexpectedly plunged 27.2 percent to the lowest level in 15 years, one widely followed Wall Street strategy firm announced that the much-debated double-dip recession "is here."

The National Association of Realtors said the sale of exiting homes fell in July to an annual rate of 3.83 million. The decline was about twice as big as expected. Even considering that July is the slowest month for home sales, the report—the worst since 1995—is disturbing. The June report was revised down to 5.26 million form 5.37 million.

Even typically cautious Fed officials are talking openly about the odds of a double-dip recession. The prospects are higher than they were six months ago, according to Chicago Fed president Charles Evans, although he still thinks that the most likely outcome for the economy is moderate growth.

Not everyone is so optimistic, though. KCW, a Wall Street strategy firm, announced today that it will hold a conference call on September 1. It's called "Double Dip Is Here!"

Financial markets were unsettled by the housing report. Major stock indexes were down about 1.5 percent during the morning, and while the Dow pared losses to a drop of 1.3 percent, the average and the S&P posted their fourth-straight losing session ending the day at a seven-week low.

The economy has created a major policy challenge for the Federal Reserve and a political challenge for the Obama administration. House Minority Leader John Boehner today called on President Obama to fire his economic team, including Treasury Secretary Tim Geithner and White House economic adviser Larry Summers. The Republican said that the White House economic strategy is "killing jobs."

Goldman Sachs predicted today (see the chart at ZeroHedge) that the Fed will begin another major round of "quantitative easing," the term for using purchases of bonds to lower, or ease, long-term interest rates. The economy has slowed considerably since the first round ended in March. It's a tricky strategy for the Fed, which has few options since it already has lowered the targets for the shorter-term rates it controls to close to zero. If the Fed pushes longer-term rates down, and the strategy fails to boost the economy, the Fed risks losing the confidence of investors. If the strategy works, its success in forestalling deflation, or falling prices, could lead to inflation down the road.

The Obama administration has been urging the House to move forward with its plan to create a $30 billion fund to boost small-business loans. Small businesses account for the majority of jobs growth in the U.S. The political muscle to make that happen is considerable, though. Republicans are deriding the measure as a backdoor bailout for smaller banks.

The House won't consider the small-business bill until mid-September, by which point—according to KCW, at least—the double dip will be well under way. That underscores one of the underlying problems with the economy and the housing sector—no one in Congress seems to be home.