| Recession or Depression
Posted: 7/22/2008 7:44:33 PM | The great economic minds have figured out that we are in a recession and that it might be while before we see the light of day
What I am trying to understand is why could they not forecast this last year or even the year before that?
So I have three questions
1- Why could the brightest economic minds in America not see this coming
2- What can be done to shorten the duration of the recession
3- Will this recession if unchecked end up being a depression
http://news.yahoo.com/s/nm/20080720/bs_nm/economy_usa_growth_dc
WASHINGTON (Reuters) - The U.S. economy will need months to recover from a growth slowdown caused by a home mortgage crisis, turmoil in financial markets and high energy prices, Treasure Secretary Henry Paulson said on Sunday.
Paulson also told CBS television's "Face the Nation" he was optimistic Congress would approve the Bush administration's request for authority to lend money to the troubled mortgage giants Fannie Mae and Freddie Mac.
"We're going through a challenging time with our economy," Paulson said. "We're going to be in a period of slow growth for a while ... I think it's going to be months that we're working our way through this period."
http://finance.yahoo.com/banking-budgeting/article/105427/Uncomfortable-Answers-to-Questions-on-the-Economy
Uncomfortable Answers to Questions on the Economy
by Peter S. Goodman
Tuesday, July 22, 2008
You have heard that Fannie and Freddie, their gentle names notwithstanding, may cripple the financial system without a large infusion of taxpayer money. You have gleaned that jobs are disappearing, housing prices are plummeting, and paychecks are effectively shrinking as food and energy prices soar. You have noted the disturbing talk of crisis hovering over Wall Street.
Something has clearly gone wrong with the economy. But how bad are things, really? And how bad might they get before better days return? Even to many economists who recently thought the gloom was overblown, the situation looks grim. The economy is in the midst of a very rough patch. The worst is probably still ahead.
Job losses will probably accelerate through this year and into 2009, and the job market will probably stay weak even longer. Home prices will probably keep falling, shrinking household wealth and eroding spending power.
"The open question is whether we're in for a bad couple of years, or a bad decade," said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund, now a professor at Harvard. | |
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| Recession or Depression
Posted: 7/22/2008 9:55:48 PM | Unfortunately, I think we are in a Depression. The stock marketing keeps plummeting, unemployment is rising, food prices are rising, people are losing their homes. Sounds like the fallout of 1929, don't it?
F.D.R. guided us out of the Great Depression by spending money on public works projects, like building dams, creating social security and other benefit programs to catch the poor and the elderly and give them a safety net. Also, the war effort put factories and factory workers to the forefront.
Because the Bush Regime's war efforted has made a few corporations, like Halliburton, rich by rewarding them with private contracts and robbing our treasure, I fear the lot of the masses will remain unaffected. Instead, it will probably get worse.
Our tax structure favors the rich and cripples the poor. The trickle down theory is a myth, much like Santa Claus. The money never trickles down. The money stays with the elite at the top. Of course, there are a few people, like Bill Gates, that still believe in nobless oblige and have donated millions to helping the poor. But, they are the rare exception.
The best advice I can give you is "hang on" because the road is bumpy ahead. | |
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| Recession or Depression
Posted: 7/22/2008 10:22:32 PM | Green Depression. Cause in part becasue Americans really don't understand our money system or how the Greens have ruined the rural ecomonics with their false Endagnered species claims, or stop drilling for oil so we imported what 65% of oil and 700 billion leaves this country.
Then we have the Republicrooks telling us we need to fight this war for 100 years what moron came up with that plan.
back in the 80's Honda brought us the CRX that was rated at 58 mpg highway. Now we have the the hyrid only doing 45 mpg we have gone backwards. Europe has Diesel that get 60-80 mpg banned from import to America no doubt the Gang Green found some reason to complain and stop this from coming to America. Don't want the peasants of America to enjoy good gas mileage. | |
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| Recession or Depression
Posted: 7/22/2008 10:28:40 PM | One big change is that what was true then, when "the war effort put factories and factory workers to the forefront", isn't true now. Today that work is done by machines and by people in places like Taiwan and China. So the military-industrial complex and the investors and speculators gets richer off the "the war on terror", while the average tax payer gets poorer because more of their income goes to taxes to pay for the hardware while the jobs go elsewhere.
You also left out the collapsing US dollar, which is now inversely tied to oil prices which seem to rise with no relief in sight, and the skyrocketing US National Debt. Other than that you painted what looks like a pretty accurate picture to me.
My advice would be to invest in gold. | |
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| Recession or Depression
Posted: 7/22/2008 11:39:57 PM | So I have three questions
1- Why could the brightest economic minds in America not see this coming
2- What can be done to shorten the duration of the recession
3- Will this recession if unchecked end up being a depression
1-I don't think it takes a particularly "bright" mind to look at the size of the federal deficit and the grave implications it will have on dollar valuation(de-valuation),but nobody wants to listen, the media doesn't want to tell the story,and the government needs to paint "rosy" pictures.
2-Government "may" be able to shorten the recession through Fiscal and Monetary policy.
"Fiscal policy, taking the scope of budgetary policy, refers to government policy that attempts to influence the direction of the economy through changes in government taxes, or through some spending (fiscal allowances)"
I think government spending decisions and policy have largely contributed to the current situation. The HUGE deficit currently running mainly to support war efforts is beginning to take its toll. Ted Koppel(tv journalist) has reported that the debt to China a lone is between 600 billion and One trillion dollars.Obviously current policy has been a failure. A chinese philosiphor from 1500 years ago Sun Tzu knew that a country should not engage in a war that it can not afford unfourtunately I don't think the Bush administration read that book, "The Art of War"
Fiscal policy needs to be overhauled and a concrete plan needed to reduce deficits,unfourtunately this planiing will be long term does not really offer short term relief the "great grandchildren" could very well be paying this one off. Short term government spending might provide short term stimulus but really can't be implemented due to the deficit position.
Monetary policy-money supply control and interest rate setting by the federal reserve bank are the tools of monetary policy.
Current money supply issues have wreaked havoc on the valuation of the American dollar as well as budget deficits.Basically no one knows how much real currency exists as the government keeps printing money and doesn't seem to know how much American currency is out there.Pretty hard for market forces,supply and demand, to determine real dollar values when the size of the supply can only be "guestimated".Reform in money supply is required but will not offer short term solutions for a recession.
The trend to keep interest rates low consistantly over a long period of time distorts markets and the true value of money.This has been done to fight inflation and keep the masses happy as people feel the effects of inflation immediatly and keeping interest rates artificially low can in the short term reduce the effects of inflation but in the long term may help create dramatic negative effects that will worsen any recession-Stagflation.
So to answer what can be done to reduce the length of the recession?
Fiscal and Monetary policy have long term problems that will require long term solutions. If anything increased government spending used as a short term stimulus "might" work to that end,but where the heck would you get the money?
Unfourtunately the market will have to play out the business cycle that is a natural one.Government should be looking at improving monetary and fiscal policy so that maybe the next downturn won't be so bad.
3.This period could turn into a depression, what will determine that might have a lot to do with what the price of oil . Continuing rising oil prices wil contribute to Stagflation thus furthering chances of Depression.One small hope I have is that the oil companies will come to thier senses a littlebit and lower prices (they will have to ,people will reduce consumption) | |
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| D
Posted: 7/23/2008 12:03:55 AM | So I have three questions
1- Why could the brightest economic minds in America not see this coming
Arguably the brightest minds are also the greediest and most corrupt. The PRIVATE banks that make up the FED are THE instigators of this mess. There greed is off the friggin SCALE. They don't care who suffers as long as they get wealthier and hold MORE and more political clout with the morons and idiots in Congress.
2- What can be done to shorten the duration of the recession
Basically NOTHING can be done. The FED keeps ordering MORE money to be printed which will drive North America into an ARgintinian style hyper-inflation. The world will STOP financing the US and both the financial and the government will (OK - MAY) become insolvent. Who the hell knows what happens then. NOTHING even remotely close to this has happened in the modern world. Total anarchy IS possible if supply chains break down and cities go without food. There simply aren't enough troops (unlike China and Russia) to control 300 million hungry pissed off people all with guns! Use your imagination. No. Don't!
3- Will this recession if unchecked end up being a depression
It probably IS already. It is being held off by this money printing BS by the FED - who BTW has likely completely lost control of this situation. World economies are too complex and they can't control the EU or China who have their own problems. ANyway ... the biggest diff between now and 1929 is that the US owed nobody nuffin then. NOW the US owes $9,000,000,000,000. and that's growing every day. Unfunded liabilities are sitting at around SEVENTY TRILLION DOLLARS. The bubble markets CREATED by the bankers and pension fund managers to make even more money is 800 TIMES that figure.
AMericans have been dumbed down to the point that their Congress can be railroaded into passing laws that allow the banks to do all this incredibly risky trading. The FED have bailed out banks and helped toss as many as 4 MILLION families out on the street with foreclosures. As more and more people lose their homes and their jobs it will begin to take on a life of its own and like a giant sucking whirlpool it will drag America down and the rest of the world will follow because just as a ferinstance China has 250 MILLION people working to supply crap to the North American market. If North America stops buying China is faced with a LOT of p/off out of work and hungry people. Ok, now use your imagination ...
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| Recession or Depression
Posted: 7/23/2008 10:37:30 AM |
Will this recession if unchecked end up being a depression
Yes.
What can be done to shorten the duration of the recession
If everybody pitched in, the current economic problems could be easily solved in a short time. Stop spending money on frivolous goods and services. Borrow more sensibly and in general, less. Invest in assets that appreciate. Continuously improve marketable skills and learn new skills. Live a healthy, sustainable lifestyle. Raise children properly.
Why could the brightest economic minds in America not see this coming
They could. They did. But people wanted the easy way out. They wanted to work less and spend more. They wanted low interest loans, big houses, big trucks, big plasma televisions, big breast implants. No one listens to the brightest minds. They listen to advertisements and politicians that promise them the good life. They listen to anyone who promises them something for nothing. | |
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| Recession or Depression
Posted: 7/23/2008 3:38:03 PM |
The world will STOP financing the US and both the financial and the government will (OK - MAY) become insolvent. Who the hell knows what happens then. NOTHING even remotely close to this has happened in the modern world. Total anarchy IS possible if supply chains break down and cities go without food. There simply aren't enough troops (unlike China and Russia) to control 300 million hungry pissed off people all with guns! Use your imagination. No. Don't!
‘NOTHING even remotely close to this has happened in the modern world’
Really? Take a look at half the African countries that the IMF said ‘Sorry, your country is in receivership, and this is how you have to pay down your debt.’ Fifteen years ago Canada had to take on a belt tightening approach because we were heading in the same direction. The value of our dollar went down, the rest of the world had a field day and bought up our assets and companies.
The US may have to stop playing superpower because it can not afford it.
... the biggest diff between now and 1929 is that the US owed nobody nuffin then. NOW the US owes $9,000,000,000,000. and that's growing every day.
Actually if you owe a lot of money you have a problem. If you owe a HELL OF A LOT of money the people you owe have a problem.
If everybody pitched in, the current economic problems could be easily solved in a short time. Stop spending money on frivolous goods and services. Borrow more sensibly and in general, less. Invest in assets that appreciate. Continuously improve marketable skills and learn new skills. Live a healthy, sustainable lifestyle. Raise children properly.
In other words go back to the 50’s and 60’s when people actually collected wealth rather than wanted everything and right now.
And I almost forgot. It is a recession if your neighbor is out of work, it is a depression if you are. | |
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| Recession or Depression
Posted: 7/23/2008 5:55:09 PM | | My pay isn't keeping up, so I'd say it's a bit recessed. If I were laid off from my job, then I'd say it's a "depression". Economies are always in cycles. We are now being exposed to a new global economy. We haven't seen a depression. | |
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| Recession or Depression
Posted: 7/24/2008 12:32:52 AM | Actually, a number of economists have been calling for this to hit for a while. Nobody listens to that kind of talk because its depressing. Instead we hire the one who tells us about sunshine and unicorn farts. The ones who make up crazy rules that explain how things are "good."
Also, a big part of it is tied to a flawed idea in spending. For centuries everybody knows that a trade deficit is bad. Regan had a brilliant solution "Nuh uh" we have been following that policy ever since calling it a "service economy." It also isn't helped by the fact that we keep draining the coffers without replenishing them. When FDR did public works projects to "fix" the economy he spent money nobody had and alot of people thought he was crazy. But, when people work, they get food and shelter, they drive other industry, they cause growth. On top of that, infrastructure is a good investment over the long term because it lowers transit costs with more direct routes (among other things). What happened afterwards is people looked at what he did as throwing money in a hole, and we were ok afterwards. So, now we don't differentiate between which holes are good and which are bad. So now, we are throwing a third of our government's money into a hole that is actually worsening the economy. Nobody sees the difference because it's still money in a hole.
Additionally, the notion of privatizing banks was a pretty bad idea. It lead to the savings and loan collapse, then we said "hey, that's an awesome idea, let's do it more!" And since the vast majority of money doesn't actually exist, but instead comes from a stable banking system letting someone borrow what they're borrowing from someone else, everything falls apart. I remember from an econ class that depending on the fed funds rate every dollar the mint print turns into about 8 in buying power. It happens because the bank only keeps a certain percentage in the bank and loans the rest out, which winds up to people who put it into something like a mortgage so it goes back into the bank.
I think the point where somebody asks "wait a minute, why are we giving all our money to somebody we know doesn't have it?" is when it goes from a recession to a depression as the amount of money in the economy will deplete 10-fold or more. | |
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| Recession or Depression
Posted: 7/24/2008 5:19:48 AM |
1- Why could the brightest economic minds in America not see this coming
Its kinda like the 7 day weather forecast...sometimes right, sometimes wrong, usually sketchy, could go either way. Also, the de-regulation of the banking system somewhat loosened the dog collar of control on it, the consequence of that being a somewhat riskier system. It was a trade-off.
2- What can be done to shorten the duration of the recession
Things are being done. The lessons learned from the terrible times during the 1970s have helped tweak & refine solutions & the proven strategies are being applied in real time by the Fed, etc. in the 21st century.
The last couple recessions have been surprisingly mild & short-lived. I like to hope that we are understanding it better which enables us to respond more effectively.
3- Will this recession if unchecked end up being a depression
Theories abound, but economics is at best a hypothetical science, much like any other science, theory, or belief. It is a learning experience that gets refined & more understood with each episode.
Much like the Global Warming belief, we understand what we understand & apply todays best theories & "proven" ideas towards the problem. But the problem is, the economy is in constant flux, & a few outside unexpected factors can ruin the best laid plans & debase "proven" belief.....much like that 7 day forecast. Dont bank on that 6th or 7th day as gospel.
Compared to the 1970s, this is nothing, despite the media frenzy. If you think it is, you simply havent lived long enough, much like all of us here cant fathom the true feeling of the Great Depression of the 1930s, because we didnt experience it & have nothing to compare it to. | |
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| Recession or Depression
Posted: 7/24/2008 5:40:27 AM | They did see it coming, but the free marketers didn't want to hear it. Economic tides rise when there is cheap credit, lower gov't interference, etc. Greenspan, you may have heard, didn't bother to help things any. Way back when he was raising interest rates to curb "exuberance", economic experts were saying, "raise only the interest on stock investors who borrow to buy." It wouldn't have hurt the economy, just cut the spectulators off at the knees.
Would that have hurt a good economy? no, b/c its just people making profit off of guesses and other peoples' stupidity, not off of investing in stable growth infrastructure or other vessels that would pay off in the future (which is now).
that would be the inheirent problem with our market economy--we create toys, then create a need for them. Look at the crap in your basements and attics--do you really use any of it? Did you ever buy an exercise machine that does no more work than you could do with the situps and pushups you were taught to do in high school? and so on. | |
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| Depression
Posted: 7/24/2008 10:56:08 AM | It's pretty damn obvious from here which of the two we're facing.
More proof.
***********
Evidence of the US Banking System Teetering on the Brink of Collapse
Interest-Rates / Credit Crisis 2008 Jul 24, 2008 - 06:34 AM
By: Mike_Shedlock
Interest-Rates
Best Financial Markets Analysis Article1. Paulson appears on Face The Nation and says "Our banking system is a safe and a sound one." If the banking system was safe and sound, everyone would know it (or at least think it). There would be no need to say it.
2. Paulson says the list of troubled banks "is a very manageable situation". The reality is there are 90 banks on the list of problem banks. Indymac was not one of them until a month before it collapsed. How many other banks will magically appear on the list a month before they collapse?
3. In a Northern Rock moment, depositors at Indymac pull out their cash. Police had to be called in to ensure order.
4. Washington Mutual (WM), another troubled bank, refused to honor Indymac cashier's checks. The irony is it makes no sense for customers to pull insured deposits out of Indymac after it went into receivership. The second irony is the last place one would want to put those funds would be Washington Mutual. Eventually Washington Mutual decided it would take those checks but with an 8 week hold. Will Washington Mutual even be around 8 weeks from now?
5. Paulson asked for "Congressional authority to buy unlimited stakes in and lend to Fannie Mae (FNM) and Freddie Mac (FRE)" just days after he said "Financial Institutions Must Be Allowed To Fail". Obviously Paulson is reporting from the 5th dimension. In some alternate universe, his statements just might make sense.
6. Former Fed Governor William Poole says "Fannie Mae, Freddie Losses Makes Them Insolvent".
7. Paulson says Fannie Mae and Freddie Mac are "essential" because they represent the only "functioning" part of the home loan market. The firms own or guarantee about half of the $12 trillion in U.S. mortgages. Is it possible to have a sound banking system when the only "functioning" part of the mortgage market is insolvent?
8. Bernanke testified before Congress on monetary policy but did not comment on either money supply or interest rates. The word "money" did not appear at all in his testimony. The only time "interest rate" appeared in his testimony was in relation to consumer credit card rates. How can you have any reasonable economic policy when the Fed chairman is scared half to death to discuss interest rates and money supply?
9. The SEC issued a protective order to protect those most responsible for naked short selling. As long as the investment banks and brokers were making money engaging in naked shorting of stocks, there was no problem. However, when the bears began using the tactic against the big financials, it became time to selectively enforce the existing regulation.
10. The Fed takes emergency actions twice during options expirations week in regards to the discount window and rate cuts.
11. The SEC takes emergency action during options expirations week regarding short sales.
12. The Fed has implemented an alphabet soup of pawn shop lending facilities whereby the Fed accepts garbage as collateral in exchange for treasuries. Those new Fed lending facilities are called the Term Auction Facility (TAF), the Term Security Lending Facility (TSLF), and the Primary Dealer Credit Facility (PDCF).
13. Citigroup (C), Lehman (LEH), Morgan Stanley(MS), Goldman Sachs (GS) and Merrill Lynch (MER) all have a huge percentage of level 3 assets. Level 3 assets are commonly known as "marked to fantasy" assets. In other words, the value of those assets is significantly if not ridiculously overvalued in comparison to what those assets would fetch on the open market. It is debatable if any of the above firms survive in their present form. Some may not survive in any form.
14. Bernanke openly solicits private equity firms to invest in banks. Is this even close to a remotely normal action for Fed chairman to take?
15. Bear Stearns was taken over by JPMorgan (JPM) days after insuring investors it had plenty of capital. Fears are high that Lehman will suffer the same fate. Worse yet, the Fed had to guarantee the shotgun marriage between Bear Stearns and JP Morgan by providing as much as $30 billion in capital. JPMorgan is responsible for only the first 1/2 billion. Taxpayers are on the hook for all the rest. Was this a legal action for the Fed to take? Does the Fed care?
16. Citigroup needed a cash injection from Abu Dhabi and a second one elsewhere. Then after announcing it would not need more capital is raising still more. The latest news is Citigroup will sell $500 billion in assets. To who? At what price?
17. Merrill Lynch raised $6.6 billion in capital from Kuwait Mizuho, announced it did not need to raise more capital, then raised more capital a few week later.
18. Morgan Stanley sold a 9.9% equity stake to China International Corp. CEO John Mack compensated by not taking his bonus. How generous. Morgan Stanley fell from $72 to $37. Did CEO John Mack deserve a paycheck at all?
19. Bank of America (BAC) agreed to take over Countywide Financial (CFC) and twice announced Countrywide will add profits to B of A. Inquiring minds were asking "How the hell can Countrywide add to Bank of America earnings?" Here's how. Bank of America just announced it will not guarantee $38.1 billion in Countrywide debt. Questions over "Fraudulent Conveyance" are now surfacing.
20. Washington Mutual agreed to a death spiral cash infusion of $7 billion accepting an offer at $8.75 when the stock was over $13 at the time. Washington Mutual has since fallen in waterfall fashion from $40 and is now trading near $5.00 after a huge rally.
21. Shares of Ambac (ABK) fell from $90 to $2.50. Shares of MBIA (MBI) fell from $70 to $5. Sadly, the top three rating agencies kept their rating on the pair at AAA nearly all the way down. No one can believe anything the government sponsored rating agencies say.
22. In a panic set of moves, the Fed slashed interest rates from 5.25% to 2%. This was the fastest, steepest drop on record. Ironically, the Fed chairman spoke of inflation concerns the entire drop down. Bernanke clearly cannot tell the truth. He does not have to. Actions speak louder than words.
23. FDIC Chairman Sheila Bair said the FDIC is looking for ways to shore up its depleted deposit fund, including charging higher premiums on riskier brokered deposits.
24. There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Indymac will eat up roughly $8 billion of that.
25. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back.
What cannot be paid back will be defaulted on. If you did not know it before, you do now. The entire US banking system is insolvent.
By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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| Depression
Posted: 7/24/2008 2:08:06 PM | The U.S. while not exactly in a thriving economy is neither in a recession or a depression.
recession - definition of recession - A period of general economic decline; specifically, a decline in GDP for two or more consecutive quarters.
It hasn't happened yet. | |
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NERO1
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Joined: 3/8/2008
Msg: 15 | |
| Recession or Depression
Posted: 7/24/2008 2:13:14 PM | I'm far from being one of the greatest economic minds of our time...  but I would say it's a mild recession. I think depressions are like a broken arm. You don't have to ask, or sit around and wonder if it is that, if you've really got one. So to speak. So I would say, the economy here sucks, yes. It's a recession. Probably clearly (to most people). But not a depression. And I don't think it will become a depression either. Personally I think the election of a new non-Republican, non-BUSH-affiliated administration in November will do something to boost the country's confidence (and the world's confidence in this country). | |
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| Recession or Depression
Posted: 10/23/2009 7:44:34 PM | So I have three questions
1- Why could the brightest economic minds in America not see this coming
2- What can be done to shorten the duration of the recession
3- Will this recession if unchecked end up being a depression
1: We are ALL being played with to avoid panic and action and that includes the brightest economic minds …. It just doesn’t include the “elite” body and minds.
2: Stop believing the lies we are being fed …. Wakey wakey.
3: It IS a depression except it’s in infancy right now and being called a recession. I believe that things are going to get much worse. Ask yourself this …. how prepared are you to live through a depression?
Peace & Disbelief ….the FairyHealer | |
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