This time it is different

Wondering why people think ‘this time it is different’ during a bubble but ‘this time it is no different (from the previous recessions)…’ during a recession Any behavioral theories that explain this disconnect ?

But if they didn’t say that, the price level back in the bubble couldn’t sustain itself. :stuck_out_tongue: There is no disconnect here. Prices are determined by supply and demand. It has nothing to do with the intrinsic value of the assets. Of course, how supply and demand changes might be explainable by behavioral theories

I’d like to know who ‘they’ are… just about every article discussing the economy that I read goes on to say how this recession is unlike the last one… one thing I’m finding in common, however, is that at the onset of each recession, people talk about how it’s going to bounce back quickly and be a ‘soft landing’. I’m not a psychologist, but I believe that people, en masse, are happier deluding themselves in to thinking that the end is far far away when in fact it’s already here.

‘they’ are the common man, who bought dot com stocks, who bought homes, who looks for grocery coupons… ‘they’ do not include the so called experts who write articles.

Each recession is different, so of course “this time it’s different.” The trick is to figure out if they are different in important ways. One difference is that white collar workers in the US are much more vulnerable. The service sector appears to be hit harder. With some of the emerging markets out there, it’s not nearly as certain that lost jobs are going to come back. The population is substantially older, so out of work older people may be especially out-of-luck, and younger people may be spending less on usual stuff in order to help them out. This might be a long recession, or worse, another jobless recovery, where US based corporations recover but the average american doesn’t feel more secure. A lot of paper equity wealth in the real estate market may evaporate. This is different because this wealth was leveraged higher than most assets available to ordinary people. There are all of these collateralized obligations out there that nobody knows whether they are worth anything or not (possibly a good buy if you plan to hold to maturity, but if you are trading them, they can blow up quickly). Warren Buffet called them “financial weapons of mass destruction.” I’m struck by the comparison, especially after the anthrax attacks: it was only a little anthrax that got spread around, but somehow, it got over EVERYTHING it touched, and you couldn’t see it once it scattered. Anyway, those are the things that make this recession somewhat different. What that means for the long term outcome is hard to say. I think the effect of emerging markets is probably the most significant change from previous recessions.

I think the dessisive strashing McCain gave Guiliani [and now Romney] proves that perhaps the economy is not in THAT bad shape. McCain, don’t forget is about as good as most of the Level 1s in economics. Willy

who cares if McCain doesn’t know economics? Most fund managers I read on this message board don’t know how to pick stocks! McCain served his country as a prisoner of war in vietnam and he has a record of busting his arse to kick lobbiest out of DC! I’ll take that over GWB who inherited his fame from his daddy.

I don’t think you get my point. Willy

busy_people Wrote: ------------------------------------------------------- > ‘they’ are the common man, who bought dot com > stocks, who bought homes, who looks for grocery > coupons… > > ‘they’ do not include the so called experts who > write articles. You got a problem with coupons?

When I was a poor professor I used to have competitions with a guy who had a named chair n economics about who could get the best coupon discounts at the grocery store. We ended it when it started controlling our grocery shopping too much and got our wives angry.

Warren Buffet called > them “financial weapons of mass destruction.” Didn’t he call all derivatives like that…