I wonder if 10 years from now, when we look to today’s economic environment, all we would conclude is that is was nothing more than a slowdown. 1.9% GDP is decent compared to other industrialized nations and far off from negative territory. Which camp are you guys in: 1) we are overblowing this credit crisis 2) we should reconsider the definition of recession because we have been in one for awhile 3) things will get much worse in the coming years
It’s very possible that the economy won’t meet the criteria for a recession (or that numbers will be played with by the political establishment to say that we just missed, i.e. didn’t have one). However, for the majority of Americans, it will feel like a recession, with the same fears and worries that go along with it. There’s a lot of debt and other sins to be paid off. So I am in camp 2, and possibly in camp 3.
Personally, I fall into camp 3. Most average Americans are struggling right now (high gas/food costs, rising education and healthcare expenses). We are not a nation of savers, obviously. We’ve created a society of materialism, and it is coming home to roost. If FNMA/FRE were to go under, and the Fed were forced to take them onto the balance sheet of the Gov’t, we’re buried. Marginal tax rates would have to go up, with social services declining (at least you would hope whoever is elected would at least try to adhere to a balanced budget, however unlikely that may be). IMHO, our kids will be the first generation that will have a lower standard of living as compared to ourselves. Sorry for the grim outlook.
former trader Wrote: ------------------------------------------------------- > I wonder if 10 years from now, when we look to > today’s economic environment, all we would > conclude is that is was nothing more than a > slowdown. 1.9% GDP is decent compared to other > industrialized nations and far off from negative > territory. > > Which camp are you guys in: > > 1) we are overblowing this credit crisis > 2) we should reconsider the definition of > recession because we have been in one for awhile > 3) things will get much worse in the coming years which industry,sir,do you work in?. and how many times the median american salary do you get paid?. do you fall into the category of americans who have a negative savings rate? i am for © clearly. the 37 year expirement with uncontrolled credit growth cannot be inconsequential (sp?).
3 for me too.
Former Trader…what are you talking about??? Maybe you missed yesterday’s release that revised DOWN the 4Q2007 GDP number to -0.2% from the preliminary estimates of 0.9%. If you recall, the preliminary estimates for 1Q2008 were also 0.9%. If that also gets revised down, you have yourself a textbook recession. Even yesterday’s number looks suspect. It is inflated by the goverment returning cash to comsumers. Secondly, do you REALLY think the govt is reporting inflation accurately? Remember they have a vested interest (think social security) in keeping the reported inflation number low. The price index was 4.2% for the second quarter. If that was understated, it is easy to watch the +1.9% fall a lot closer to zero. What we have here is not a “V” economy, but a “W.”
i watch “The Fabulous Life of…” on Vh1 to benchmark the situation of the American economy
pacmandefense Wrote: ------------------------------------------------------- > i watch “The Fabulous Life of…” on Vh1 to > benchmark the situation of the American economy LOL +1
The stimulus payment itself added 2-3% to the GDP, so when the actual number comes in at 1.9%, the answer to the original question is obvious. Besides, two of the three options actually subtracted thought.
Things will not get worse. The natural course is growth. The economy is not some phantom entity on its own path; it’s the culmination of the people’s efforts and ideas. The problem with the bubbles of the last 10 years is that too many people took the path of easy money (tech stocks, real estate). All that stuff has or is shaking out. Business and economies will once again prosper… the only direction possible is up unless nature decides that growth, expansion, and improvement are no longer viable options. The worst thing that can happen is that passive America continues to be passive. I saw a clip of Obama yesterday pandering to a bunch of American manufactuing workers about how bad the economy was, basically to the tune that it’s the economy’s and government’s responsibility to pick itself up and make these people’s lives better. And the people were just loving it. Don’t these people realize that we as individuals create the econmy? When’s the last time these people put together a series of constructive thoughts instead of going through the same monotonous routine day in and day out. The other camp is doing the same thing. What needs to be done now is to wake up individuals. No individual’s life can be made excellent by any external source, especially government. If everyone took 100% responsibility for their own circumstances, no matter what they are, this whole economy discussion would be moot. It’s time for the American people to stop looking for a handout. That’s not what this country was built on, nor is it the course of nature. If people wake up this economy will take care of itself. Thanks for allowing me the soapbox minute.
i vote for world peace…and an end to hunger.
former trader Wrote: ------------------------------------------------------- > > Which camp are you guys in: > > 1) we are overblowing this credit crisis > 2) we should reconsider the definition of > recession because we have been in one for awhile > 3) things will get much worse in the coming years i’m in neither the above camps. I think we will see one more downturn in the markets, credit spreads will rise, equities will fall, people will really start to worry about the end of world/capitalism/US. Then for no other reason then individuals looking to make money, investors will start lending, equities will rally, but credit spreads will remain elevated for some time, housing will stablize (after the rally in equities). It will be harder to access credit, consumer will start to save more/spend less. certian excesses will be eliminated ($3 latte’s, BMW’s) etc from individuals that never should have been purchasing them in the first place. The fear index (VIX > 30) will happen again and hopefully for a good bottom will open >35. What will cause this? Iran/Israel conflict? Another Large Bank collapse? (WAMU?) I don’t know, but that is when I will be buying calls on XLF. We will prevail, we always have, we always will, but this doesn’t mean we come out of this with same standards/regulations then in 2006.
CNB, IMP, TSFG…all good buys MFE once we get the big flush in equities…holdem for a few years and you got your double up no prob
It might wind up being a recession, but I think it’s just a slowdown that’s a natural result of coming off a bubble. Americans get used to whatever the current state of affairs is, and we got used to a really long period of low inflation and low unemployment. Throw a hiccup into those things and we’re in a state of despair. People are just pissed off that it costs $100 to fill up their SUV so they think the world is coming to an end.
jimmylegs Wrote: ------------------------------------------------------- > Things will not get worse. The natural course is > growth. The economy is not some phantom entity on > its own path; it’s the culmination of the people’s > efforts and ideas. The problem with the bubbles > of the last 10 years is that too many people took > the path of easy money (tech stocks, real estate). > All that stuff has or is shaking out. Business > and economies will once again prosper… the only > direction possible is up unless nature decides > that growth, expansion, and improvement are no > longer viable options. > > The worst thing that can happen is that passive > America continues to be passive. I saw a clip of > Obama yesterday pandering to a bunch of American > manufactuing workers about how bad the economy > was, basically to the tune that it’s the economy’s > and government’s responsibility to pick itself up > and make these people’s lives better. And the > people were just loving it. Don’t these people > realize that we as individuals create the econmy? > When’s the last time these people put together a > series of constructive thoughts instead of going > through the same monotonous routine day in and day > out. The other camp is doing the same thing. > > What needs to be done now is to wake up > individuals. No individual’s life can be made > excellent by any external source, especially > government. If everyone took 100% responsibility > for their own circumstances, no matter what they > are, this whole economy discussion would be moot. > It’s time for the American people to stop looking > for a handout. That’s not what this country was > built on, nor is it the course of nature. If > people wake up this economy will take care of > itself. Thanks for allowing me the soapbox > minute. Amen to this Jimmy good post!
here’s a couple of things to chew on: - the National Nureau of Economic Research, who declares when a peak/tough ends and begins states a recession is when “a significant decline in economic activity” occurs. doesn’t have to be two consecutive quarters. - look at the revised GDP figures: Q4 2007 experience negative annualized growth! http://www.bloomberg.com/apps/news?pid=20601068&refer=economy&sid=aZMDdtdqEPOU - High crude oil prices is deflationary (long-term) and will bleed economies worldwide! http://www.washingtonpost.com/wp-dyn/content/graphic/2008/07/26/GR2008072601566.html?sid=ST2008072601558&pos=list - 7th straight month of job losses, totaling -463,000 lost jobs for the year http://www.bloomberg.com/apps/news?pid=20601087&sid=apPnyEIjZJ5Q&refer=home - on top of the month job losses, there are also an increasing number of people forces to work pat-time… 3.7mm people http://www.nytimes.com/2008/07/31/business/economy/31jobs.html?adxnnl=1&adxnnlx=1217620915-mKM/075qor8fK2aF/72Qdw - initial jobless claims spikes to a 5+ year high http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aotyRRyiNjmA - the avg American has more debt than ever before (click Start, “lifetime”, & then “Launch Interactive”) - see how much we save today http://www.nytimes.com/interactive/2008/07/20/business/20debt-trap.html - MBS/CMO/SIV, et al write-downs are only half way through - we still have $500B more to go http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/Investment+Outlook+Bill+Gross+Mooooooo+August+2008.htm - oh, and housing has yet to hit a bottom Camp 3 Post Script to MFE - i’m long SKF until more dust settles. XLF is discounted these days, but not enough.
I wonder if the same question was asked during the late 70’s and early 80s, if the answers would be the same. That period was arguably the most challenging since the Depression.
s23dino Wrote: ------------------------------------------------------- > jimmylegs Wrote: > -------------------------------------------------- > ----- > > Things will not get worse. The natural course > is > > growth. The economy is not some phantom entity > on > > its own path; it’s the culmination of the > people’s > > efforts and ideas. The problem with the > bubbles > > of the last 10 years is that too many people > took > > the path of easy money (tech stocks, real > estate). > > All that stuff has or is shaking out. > Business > > and economies will once again prosper… the > only > > direction possible is up unless nature decides > > that growth, expansion, and improvement are no > > longer viable options. > > > > The worst thing that can happen is that passive > > America continues to be passive. I saw a clip > of > > Obama yesterday pandering to a bunch of > American > > manufactuing workers about how bad the economy > > was, basically to the tune that it’s the > economy’s > > and government’s responsibility to pick itself > up > > and make these people’s lives better. And the > > people were just loving it. Don’t these people > > realize that we as individuals create the > econmy? > > When’s the last time these people put together > a > > series of constructive thoughts instead of > going > > through the same monotonous routine day in and > day > > out. The other camp is doing the same thing. > > > > What needs to be done now is to wake up > > individuals. No individual’s life can be made > > excellent by any external source, especially > > government. If everyone took 100% > responsibility > > for their own circumstances, no matter what > they > > are, this whole economy discussion would be > moot. > > It’s time for the American people to stop > looking > > for a handout. That’s not what this country > was > > built on, nor is it the course of nature. If > > people wake up this economy will take care of > > itself. Thanks for allowing me the soapbox > > minute. > > Amen to this Jimmy good post! I’m in 100% agreement! You running for office? . . . you got my vote. (Although I foresee a really challenging environment over the intermediate term. . . long-term things will improve).
As much as I despise the sanctions on the natural flow of an economy that this particular government imposes, Jimmy is absolutely right: capitalism still works, and it always will work. If you believe in the theory, you have to believe that things will improve themselves (read: individuals will come up with solutions) because there is still a great incentive to make money on correcting inefficiencies in the way we live our lives. If the other systems that have thus far been invented are really that bad, they will kill themselves. Edit: In the long-term, of course. In the short term, shit happens.
There are lots of assumptions about what makes capitalism work that don’t necessarily hold in the real world. When resources become too concentrated, the enormous gains received by the top few percent in society do not necessarily benefit humanity as a whole, and benefits to humanity as a whole is one of the main justifications for capitalism. It is also true that capitalism tends to allow greater freedoms in principle, and that is very good, but if the concentration of wealth is extreme, it can get to the point where these freedoms become effectively unexercisable by most people. They become, for the majority, freedoms only on paper, which is more or less what freedoms were under socialism too. Capitalism tends to concentrate wealth, and in the first generation, there may be some justification for granting profits to those who work hard and take on risk successfully, but then how do you deny these people the right to pass wealth on to their children, who did not necessarily earn that wealth, but become entitled to the power and benefits it grants. I’m not saying that you should deny them this right, but if you grant people the freedom to use and consume assets as they see best under capitalism, one of those benefits is to pass on wealth to children and heirs, and then all of a sudden you have wealth that isn’t the return on diligence, and risk taking, and all those things we think capitalism is good for. So capitalism tends to concentrate wealth, and concentrated wealth tends to undermine the social benefits of capitalism, but there is no method within capitalism to correct this tendency. In my mind, this is one of the strongest reasons for having democracy as a counterweight to the concentration of power and wealth. Not that democracy always works, since the wealthy can often buy the powerful (e.g. the Bush administration), but when democracy is functioning well, it can serve as a counterweight to excessive concentration. Amartya Sen points out in one of his articles that the fact that capitalism is more productive than alternative systems and therefore generates a larger amount of wealth per capita suggests that it is superior because everyone could in theory be better off under the system. However, this theoretical superiority is only an illusion if an evening of the distribution of that wealth never actually happens. I’m not advocating socialism as the answer (main problem is that those who control the state can be just as self-interested as those who control the means of production in a capitalist economy, but without the threat of competition to keep them in check), but one must be aware of the limitations of capitalism and be willing to search for solutions to address them. Anti-trust law is one good thing, very hard to explain to most people, but it is more than just that which is needed. I’m not an advocate of the state intruding into everything (I don’t like how many Republicans suggest that the state ought to regulate my family and religious life, and I think that there are many politicians who are too eager to use the power of the state to implement not-well-thought-out plans), but I think that blindly asserting that the state should stay out of everything is a formula for disaster.