The beginning of a Very Great Recession or Depression

Henk · 08-28-2008, 05:19 AM

I know what you guys are going through, we here in SA have the same problem. The strategy the government follow to counter inflation is pathetic and is a stupid move. The only way to get a new and better economy is to let the struggling one ride the wave and go towards a better one, but at what cost to the poor and middle class?

Funny thing is that the oil price is going down but is things like food prices going down?

renrich · 08-28-2008, 09:00 AM

The "recession" in the US is a fiction manufactured by the media lapdogs and their keepers, the dimocrats, in order to sell newscasts, make George Bush look bad and gain power. There is no recession and the latest reports as of yesterday show the economy grew by 3.3% in the second quarter which is fairly robust. Of course this relevany news is lost because of the hip, hip, hooray of the coronation of Hussein Obama.

Amsel · 08-28-2008, 10:06 AM

Very optimistic I think. I have been seeing many companies go under and many layoffs. Oil rich middle eastern countries are abandoning the dollar and switching to the Euro. Banks are in big trouble. Foreclosures are at the highest levels since 1932.

FLYBOYJ · 08-28-2008, 10:17 AM

Quote:

Originally Posted by Amsel

Oil rich middle eastern countries are abandoning the dollar and switching to the Euro.

Not true - There are some threatening to do so with Iran leading the charge but in the open markets oil is still traded in dollars.

Note the date of the article.

Trading oil in euros – does it matter? | Energy Bulletin

Amsel · 08-28-2008, 10:34 AM

Thank you sir.

timshatz · 08-28-2008, 10:42 AM

You're right about the banks but not for the reason most people think. They got a little ahead of themselves in the subprime gig and started tossing out loans to anyone, believing they could sell the loans to others with Fanny and Freddie being the buyer of last resort. Pretty much worked out that way and the housing bubble, well...it followed true to form on a speculative bubble.

Here's the kick on the banks. The reason why they are in trouble is nobody will buy the assets on their books. Bank A won't buy Bank Bs loans, even if they are performing (people are still paying their mortgages). That is because nobody knows what the exact value of those loans is. So the credit market is frozen, for the most part. A few weeks back, Merrill Lynch went out and sold that debt for .22 on the dollar. Pretty bad number but good in that it finally gave a number to all that debt. That will set the value of debt on the market as a whole which will set the value of banks.

Plenty of banks are going to fail, for a variety of reasons. Most will be regionals failing for local investments going bad. There should be one or two major banks that fail (Wachovia/Citi level). More likely than absolutely failing is them being broken up. But when that happens, it will mark the bottom.

As bad as all this sounds, it is actually a good thing. It is the market cleansing itself of failed corporations. It will take time but this process is a needed event. The Housing Bubble was way out of hand and the affect of it's markets is being felt. But, as I said, it's a good thing.

The bad news is Europe is trying to fight this thing and it's going to make it last longer and be worse. The dollar will strengthen against the Euro, but more because European economies are starting to tank. Negative growth (a real recession, not the BS the mainstream media is putting out) is already manifesting itself. As bad as it may be in the US, it's gonna be worse in Europe.

Rest of the world is a case by case basis but down as well.

renrich · 08-28-2008, 06:16 PM

All it is is an adjustment which we have after a long period of positive growth. We had 52 months of job growth consecutive under George Bush, a record and it could not keep going, especially when all the adjustable rate loans made in the late 80s and 90s started going up. Housing is a huge part of the GDP and when housing starts slow down, the economy is sure to slow. Bush and the GOP deserve not all the credit for the 52 months of job growth and they don't deserve the blame for the slowdown in the economy. An interesting point is that the US consumes 25 % of the world's energy but also is responsible for 28% of the world's economic output. Wonder if there is any correlation there?

Amsel · 08-28-2008, 08:33 PM

Quote:

Originally Posted by renrich

All it is is an adjustment which we have after a long period of positive growth. We had 52 months of job growth consecutive under George Bush, a record and it could not keep going, especially when all the adjustable rate loans made in the late 80s and 90s started going up. Housing is a huge part of the GDP and when housing starts slow down, the economy is sure to slow. Bush and the GOP deserve not all the credit for the 52 months of job growth and they don't deserve the blame for the slowdown in the economy. An interesting point is that the US consumes 25 % of the world's energy but also is responsible for 28% of the world's economic output. Wonder if there is any correlation there?

There has to be some correlation. We use our vehicles to go to work. at work we are very productive.

mkloby · 08-28-2008, 10:06 PM

Quote:

Originally Posted by Amsel

There has to be some correlation. We use our vehicles to go to work. at work we are very productive.

Energy use goes far above the use of gasoline in passenger vehicles to drive to work. Total transportation energy consumption amounts for approximately 1/4 of total US energy use. Industrial consumption is the largest area, which isn't a big surprise.

renrich · 08-29-2008, 09:42 AM

Well, of course mine was a rhetorical question. As you both note our energy use is closely related to our productivity but as mkloby says it is more about industrial energy use than transportation. The American worker is hugely productive but our use of energy; electric, coal, oil and gasoline plays a big part in that productivity. One use of energy I am familiar with which most people would not think of and which is not really a necessity is in snowmaking. Most ski resorts use snowmaking to supplement the natural stuff. Snowmaking requires a lot of electricity to run the generators. Ski resorts hope for low temps early in the year and early at night when there are off peak rates to make snowmaking more cost effective.

timshatz · 09-05-2008, 09:35 AM

Read an article in Bloomberg yesterday and it wasn't good. Looks like the Credit Market Freezeup has the potential to start, the CIS (Chief Investment Strategist) at PIMCO called "a worldwide financial tsunami". Talking massive devaluation of assets (read real estate) and other business assets.

My understanding, and I am not trying to do it right now so I am not sure, is it is almost impossible to get a business loan out there. That means all business expansion has to be equity (meaning financed from the profits of doing business) financed rather than getting a loan from a bank. The banking sector is showing signs of just failing. Not like having a run on the banks failing, more like not doing anything other than processing checks and deposits kind of failing. In short, they are not being banks but more like clearing houses for money.

No bank loans means projects get done later which means less work is done in the business world as fewer projects are running at any given time which means growth slows and then stops which means recession is here or right around the corner. The 3.3% growth in the economy last quarter was a blip brought on by fewer US imports and extensive US exports.

Not looking good right now.

davparlr · 09-06-2008, 06:19 PM

I'm an optimist, and old. I have seen war: Vietnam, two Iraqi, and Afghanistan. I have seen the Great Society and Guns and Butter of the Johnson administration. I have seen the '73 jump of fuel prices and the resulting recession (unlike today's fuel price increase). I have seen Carter's stagflation. I have seen the predictions of global cooling, and warming. And of course, I have seen the massive assault on the US economy since Bush, the Dot com collapse, Enron, Trade Center attack, Katrina, fuel price increase, and real estate collapse. All in all, I have seen the economy go up and down and it always seem to grow.

I am sure it will survive even Obama.

FLYBOYJ · 09-07-2008, 12:31 AM

Quote:

Originally Posted by davparlr

I'm an optimist, and old. I have seen war: Vietnam, two Iraqi, and Afghanistan. I have seen the Great Society and Guns and Butter of the Johnson administration. I have seen the '73 jump of fuel prices and the resulting recession (unlike today's fuel price increase). I have seen Carter's stagflation. I have seen the predictions of global cooling, and warming. And of course, I have seen the massive assault on the US economy since Bush, the Dot com collapse, Enron, Trade Center attack, Katrina, fuel price increase, and real estate collapse. All in all, I have seen the economy go up and down and it always seem to grow.

I am sure it will survive even Obama.

Agree 100% - If our economy survived Carter and the summer of 79' it could survive almost anything....