Recession? Maybe. Depression? Get real.

I totally love these writers who live in an insulated world and make enough money to never have gas or high food prices affect them telling us–the middle class and less folk they never rub shoulders with on a daily basis–how bad it is and isn’t with the economy. Excuse me, but all you have to do is watch the nearly deserted major highway to the mountains that runs outside my front door in a season when the traffic should, and normally would, be cooking to know how bad things are and are going to be. Do these writers ever stop to wonder what the lack of tourism is doing to all those businesses that depend on summer to make their yearly profit? No. Do these writers actually hang out with people who’ve lost their jobs or have been forced by budgetary considerations to limit their driving to groceries and/or work, if a person still has a job? No. They, like the Fed and the Congress, rely on statistics and analysts to tell them how it’s going to be, and how many times have the analysts been wrong? There’s a reason the first four letters in analyst is anal.

Please do, oh great writers, prophets all, wait along with the Fed and Congress for the hard statistical data and the interpretations by the vaunted analysts to tell you what we, the shrinking middle and lower classes already know. The economy is dead in the water, my friend. And no amount of wishing on your or any other unaffected person’s part is going to change that.

You only have to sit and watch the traffic, or lack thereof on the highway to the mountains that runs right outside my door to know just how bad the economy is and is going to be.

The Sunday night after the long July 4th weekend you couldn’t even tell there’d been a holiday at all, the traffic was so non-existent. And it’s only gotten worse since then.

And why, if oil prices have come down so, so much, is gas still over four dollars a gallon? Don’t try to foist the crap that it takes a while for the cheaper oil to get refined and delivered to the stations–gas prices rose right along with the price of oil, they should be dropping just as fast–but they never do, do they?

Economists will give you ideological answers and/or answers that benefit their employers. Most of what they tell us is pseudo-scientific public relations.

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My advice: Don’t listen to what economists, Anderson Cooper, Warren Buffet or anyone else tells you.

Do your own homework.

Debt – commercial and consumer – was a large factor in bringing on the Great Depression. Anyone taken a look at levels of debt recently? People are drowning in debt and in an effort to keep up their payments, consumers are not buying new products which will result in lower demand, layoffs and greater unemployment which will only feed on itself and spiral out of control. Plus, necessities like gas (to get to work) and food (to stay alive) are increasing in cost daily. The Greater Depression is upon us. Buy silver coins. Stock up on non-perishables. Buy a shotgun if you don’t already have one – and plenty of double-ought Buck shells. Transform your lawn into a vegtable garden. Learn to can and preserve foods. Buy live chickens. Pool resources with friends and buy a cow. Have a water storage strategy. Learn a USEFUL second trade like herb doctoring, gun repair or locksmithing. That’s how our parents and grandparents got through the last depression. It will be a long time before President Obama can reorganize the CCC camps so your kids can send money home to you. You may get work on a new WPA or the like if you are lucky. Cross your fingers, folks. It’s gonna be BAD.

As long as unemployment remains low, there won’t be a depression. Most baby boomers bought their first home in the 20th century, and are watching the housing “crisis” w amusement. That said, if the demand for oil continues to exceed supply, watch out, all sorts of bad things could happen.

There is no doubt that the headlines are deliberately misleading; either on purpose ofr by idiotic omission. For example, yetserday the headlines rang “Case shiller Index show 14% drop in house in first quarter” which makes it sound like house droped 14% from Jan 1 to march 30 and it’s only after reading teh article closely that you see the explanation that prices at the end of the first quarter were 14% lower than at the end of first quarter 2007. I.e., the headline should have been Prices drop 14% in one year. Also, reliance on the case-Shiller Spindex is really part of teh problem. The CS Spindex is fundamentally flawed in that it amalgamates massively disparate regions into one “national media” and includes the jumbo non-conforming market with teh regualr conforming market. Why? Sloppiness? Doubtful. It’s deliberate. The CS Spindex only has any value in a volatile market, so it is S&P’s interest to fudge numbers and make teh market look as volatile as possible, even if this is ridiculously innacurate and sloppy.

That’s just one example of how the media is basically fanning the flames.

As the best US President of the 21st Century, G.W. Bush said, “Economists don’t have a definition for the conditions that we are in, but it feels like a recession to many folks out there.”

As I said yesterday, the economy is GROWING, interest rates are LOW, and inflation is LOW. At $.25/cup, gas is CHEAP!! Compared to any other industrial economy, the US is practically stealing gas/oil! While it’s true that as americans we have to start to live within our means, asking for more government bailouts in regards to healthcare, education, or housing is going to exacerbate our problems. The graph posted by Peter Pgh on Non-Borrowed Reserves of Depository Institutions by the St.Louis Federal Reserve is eye opening. The Fed probably wont raise rates, but they also probably wont lower them as well. The good news is that the TED Spread @78BP (Difference between 3MO-Libor and 3MO-UST) is narrowing, which means that banks are becoming more comfortable loaning to each other. A week ago the TED spread was 86BP, last October in the eye of the credit storm it was 150BP. Before this started, back in June ‘07, it was around 40BP. So we have a ways to go. What this does tell me is that things ARE IMPROVING, the economy is SLOWLY GROWING, and we are not, nor will we move to a recession or worse.

First, if unemployment and inflation would be calculated the same way as they were calculated in the past unemployment would be around 8% and inflation around 7%. The formula how to calculate unemployment was purposely changed under Kennedy (hint: “discouraged workers”) and the inflation formula was changed under Clinton to slow the increase of entitlement spending & salaries which is usually linked to the CPI. It now uses geometric means and “substitution”. Like if the price of Filet Mingon goes up you substitute it with something cheaper, like dog food and you won’t have any inflation.
The fundamentals of the 1929 economy were a lot stronger when compared to today.
Extremely high debt level compared to GDP, about even.
Financial schenanigans gone bad, about even.
Funtioning rail system versus dying air lines & interstates, advantage 1929.
Self sufficient in commodities, in particular oil. Advantage 1929.
People willing to do hard physical labor, advantage 1929.
Functioning public transportation system, advantage 1929.
Our reputation in the rest of the world, advantage 1929.
Our currency, back then gold & silver, today paper. Advantage 1929.
Times are tough and getting tougher. A lot tougher than most people realize. The times where 5% of the worlds population are consuming 25% of the worlds resources are radiply drawing to an end.

“I see no reason to believe that anyone understands the global financial system enough to say anything one way or another.”

I think that is about right. Economists will give you ideological answers and/or answers that benefit their employers. Most of what they tell us is pseudo-scientific public relations.

We are obviously not in a 30’s style depression and no one has suggested that we are. There are no bread lines and people aren’t selling apples on street corners.

That said, the credit crisis has the potential to be devastating. If the American consumer decides its time to start paying off their debt the economy will be in a world of hurt. And it may well be out of the hands of the US government to do anything about it – because this isn’t the 20’s and the US economy is not an island.

Americans take 300 Billion in equity
in 2007 from their home equity , As home prices fall that equity dries up.. that is going lead initially more
credit card borrowing then credit card
loan defaults.. If feds save more banks from defaulting & increase intrest rate to fight inflation results less spending from consumer ..
resulting recession .
Since China is an export based economy
a recession in US and Europe (b/c of strong euro) result in depression/recession in China , results in bust in commodities .. then recovery start in US economy..What you guys think

La Monica now says “Maybe” to a recession, yet a month ago he was writing about how the worst was over…

http://money.cnn.com/2008/04/25/markets/thebuzz/index.htm?postversion=2008042511

Tough to take his opinion seriously after that article! Remember, If you go against public opinion and you are Right you look like a hero and can say “I told you so”. I think that’s what La Monica is looking for in his writings, but its not happening!

There might be Recession or Depression, but who cares, we would not know about it anyway.
All we are going to hear is 5% unemployment, 2% inflation, whatever % growth, etc., etc.
Statistics is the powerful thing. Give me the numbers and I will put together whatever picture you want to see.

A recession, yes. I think that a depression is a long way off. 1980 was a rough year with unemployment above 10%, the housing market was in the gutter and inflation was running rampant. It was still just a “recession” and we are a long way off from 1980.

By the way, one common denominator between stagflation now and stagflation in the 1970’s…Dick Cheney. Think about it.

Those who do not learn from the past are doomed to repeat it.

What the columnist does not understand is that there are more ways to depression than the path America took in the 1930’s. Secondly, he does not perceive that lightning can strike the same place more than once when the conditions are right. Well, the conditions are getting more favorable. Today, our society is bankrupt with debt which is a condition that did not exist in the 1930’s. Credit is increasingly being used to pay for essentials rather than necessities. The same can be said for people taking money out of their 401k’s to pay for today’s living expenses. We cannot just borrow our way out of this without devaluing the dollar and the all risks that entails. No FDR to spend us out of this one. We have revelled so long in the excesses of a credit based economy and the bill must be paid someday! Individuals can’t live this way forever, how can a society do any better? History shows that there is no such thing as a perpetual free lunch. Just look at the state of our society…single parent households the norm, the societal belief that right and wrong are relative rather than absolute, personal bankruptcies at all time highs, costs for healthcare and higher education skyrocketing, youth violence and disregard for learning, stagnating wages not keeping up with the cost of living, etc. Our society is struggling to teach alternative sex lifestyles in its schools rather than teach our children wise money management. Our society is morally bankrupt which is leading the way down for us. We are not in depression now and won’t be for awhile as things are still fairly good, but the long term direction we are headed is a depression. There is still enough liquidty to hold off the inevitable for awhile longer. When depression does come within the next 20 years if not sooner, it will probably look something like this: the very few ultra-wealthy who are insulated from it and the rest of the country living hand to mouth in hyperinflation first and in deflation later. With no more to borrow, our economy will just have to start over. It is not too late to prevent the next depression, but the clock is ticking.

Why do there have to be similarities to the Great Depression for our current economy to fall into it’s own depression? Aren’t the economies of the world different today? It only makes sense that if we are going to have a depression it would be different from any other, right?

The Fed has admitted they they were responsible for the depression. First they flooded the markets with money by making lots of low cost loans. Then they restricted the money supply. No one had moeny to purchase much of anything including stocks so the markets crashed along with the economy.

Remember all that money out there from the housing loans that seems to be causing us problems today? Don’t we read about banks having liquidity problems. What happened at Bears Sterns? Whos next?

Easily LaMonica’s best piece to date.

Anyone who thinks we’re heading for a “Depression” is clinically insane. We’re not even in a recession, nor will we be.

http://research.stlouisfed.org/fred2/series/BOGNONBR

need I say more?

I don’t think so but what do I know. I think the power government/financials/big-business has is an illusion to get the majority of the population to believe a certain way. There are a lot of us, and a little of them and that’s were the real power is. If enough people start thinking and subsequently acting like there is a recession or depression, you may get one.

You said:

Plus, if the Federal Reserve can stabilize the dollar, that could cool off the recent runup in gas and food costs.

That’s a pretty big “if”, IMHO. Add to that the quote you captured:

“But the Fed has cut interest rates. Congress has responded aggressively with a fiscal stimulus package,” Probyn added. “One of the problems in the Great Depression was that there was no fiscal policy employed preemptively to stop it.”

And what we get to is the fact that the very reason we could be entering into a depression even though it doesn’t *look* like the 30’s is because decades of govt intervention is putting lipstick on this downturn pig.

Depression is a big word, indeed. Not to be used lightly. I concur with SwilliamP … I think the potential is higher than most are willing to recognize. Denial ain’t just a river in Egypt

No we are not in a depression yet but will be very soon. Now, nobody ever said this will equal the “Great” depression. It may have a name of its own because of its characteristics:

The Worst Depression
The Horrible Depression
The Bush Depression
The Neo-con Depression
The Federal Reserve Depression
The Fiat Money Depression
The Inflation Tax Depression

Take your pick, in the end we are just splitting hairs about semantics – bottom line is that we are worse of than last year and next year will be worse than this one.

I have to take exception to Joe in Pensacola on the numbers of starving people in the US. How can we have so many starving people in the US when we are the fattest people of all time? The poor in Zimbabwe can only dream about being poor in the US. The poor in the US are still in the upper 10% of all incomes in the entire world. There is no comparison to the poor in this country to the poor in the 3rd world. Many families in the US who are doing poorly are doing so because of their own decisions in life. I have read far too many stories of people who made stupid choices in the recent past, and now expect the rest of us to bail them out. Why should people like my wife and I who have been fiscally responsible the past several years bail out people who made poor decisions in their life? It’s totally different for people in the 3rd world who don’t even have a choice.

So, your postulate is that we Americans have learned from our past mistakes and so perfected our socio-economic system that we can never again experience the likes of another 1930s Great Depression.

This highlights the problem. The headlines people criticize all say the housing market is tumbling, foreclosures skyrocketing, and paint a picture that every consumer is floundering. So whatever the reason, if the below statement is true (which it is) than you (the media) know just as well as me that your headlines are misguiding people. I don’t care why you are misguiding people, but take some responsibility for it!

Oh how can the readers blame us huh?

“Woes in the housing market get a lot of attention. But the vast minority of homeowners are subprime borrowers at risk of foreclosure.

For many people, the decline in housing prices is frustrating, but it is something that can be ridden out. For a lot of people, a house is still a place to live, not a short-term investment to be treated like an ATM machine. “

I’m sure if you would have asked people in the late 1920’s if they thought that the economy was going to go in to a severe depression by 1930 they would have laughed at you. No one knows for sure what is going to happen. It’s always those unforeseeable circumstances at the time that make people look back and realize that anything is possible.

Right now my view on the economy is it’s teetering back and forth. What unforeseeable event is going to push us over? Panic played a big role in the great depression. I think that element is definitely out there right now if something were to trigger it. I watch the markets every day wondering “is today going to be the day?”

Are you serious with this? Quite bullish I’d say. You seem to take the government numbers of 5% unemployment and slight GDP increase at face value. I could cite numerous reports and studies contradicting these “cooked” numbers, but I’ll leave that to the reader.

First, this 5% unemployment number does not include people forced to work part-time and on “contract” work, nor those who have been unemployed for longer than 6 months.

Inflation has been understated, and the government even lets us know what it doesn’t consider in its calculations (e.g. oil prices).

I have only heard the opposite about wages increasing, where did you get that information? Let’s take a look at consumer confidence and we can see that people do not feel richer than they did a few years ago.

The Fed’s recent actions have only deflated the dollar and created a $250B liquidity bubble that has moved into the commodities market, subsequently contributing to the rise in gas prices.

As for housing, where have you been on this one? Yes, subprime is the majority of forclosures right now, but have you seen the charts listing the reset schedule for ARM and liar loans? The worst is yet to come (and I’m far from the only one saying this).

Your single source in this article is bullish as well, stating that we are safe since the government is paying attention and directing fiscal policy. But, action alone is not the golden bullet, it’s what actions are taken. So far, according to many analysts, those actions have not had the intended results.

While I do agree that we are not in a depression, I find many of your reasons lacking. Particularly, I don’t think we can make apples-to-apples comparisons from the 1930s to now. I would wager that the calculations of GDP, unemployment, housing and market health where much different back then, since much has changed in 80 years.

Then again, I may just be too bearish.

I see no reason to believe that anyone understands the global financial system enough to say anything one way or another.

I think we are in a recession, not depression. However, if you are the one out here looking for a job, that can pay the bills, buy food and gas for your car, GOOD LUCK. Those kind of jobs aren’t out there. The government statics can say anything they want them too. Hey, I CAN make my checkbook say there is money in there too, but it isn’t true. We need our govenment to do it’s job, and stop the spending on all the extra’s.

Just because there are several differences between the 1930’s and now does not mean that we are or are not entering a depression. There is nothing to say that we have to travel the same road to end up at the same point.

Lets look at our economy. GM was overtaken by a foreign car maker as #1 in the world. Our auto makers are performing miserably at this point. Oil is at near an all time high and still there. Most of our industries have left for foreign land due to constraints placed on them by federal law (EPA) and lower wages. We manufacture next to nothing in this country.

What’s worse than having everything deflate? How about having everything you own deflate in value and everything you need inflate in cost. No, right now we are not in a depression, but we can’t dismiss the idea either. We are a service country with little manufacturing so there is little that a foreign government buys from us. As far as locally, how many people are buying other than necessity? We are not hiring contractors to do work we can do ourselves. We are not going and buying that couple pair of jeans we don’t really need. There isn’t much we are buying outside of what is absolutely necessary. There is a breaking point from recession to depression and yes we are close. To laugh it off like its not possible because there are other factors involved, well, that isn’t wise. Yes there is money in the markets, but each one of those stocks represent a product or service. If those products or services stop selling, I don’t care how many investors you put into it, the company can not survive if it continuously can not turn a profit.

Depression now? No. Potentially? Not as unthinkable as people think. The factors to watch are not the stock market, but consumer spending, energy and food availability, and potential for panic. The triggers would not be the same as in the 1930s, Mr. LaMonica is correct. But one can get to the same destination on different paths. I would love to be way wrong about this.

There is a disturbing trend of ’survivalism’ growing in the US. I have read many reports recently of people who are stocking up on food, with the expectation of food shortages; people switching over to solar or wind power, with an expectation of no fossil fuel supplies being around in the next couple of years; and people loading up on weapons, with the expectation that the gov’t is soon to collapse. I think the rate of change in the world is getting to a lot of people, and they don’t know how to handle it. There are just so many fear mongers who honestly believe we are at the end of days. Honestly, 5 years from now we’re not even going to give what’s going on right now much thought. If you live for the long-term the short term problems seem more like potholes, rather than canyons.

I’m not sure of the reporters qualifications and loyalty, but I don’t agree with their line of thinking.

If people want to call it a depression, then they will. There is nothing wrong with free speech. For some people, it is a depression. I’m lucky, for the time being. However, there are many who are hurting. They, in fact, are depressed. We send billions of dollars to feed the world, but who is going to feed an American family that is out of options with empty food banks?

In addition, the formulas, laws, regulations, etc. are vastly different in calculating inflation, unemployment, and PPI.

Lastly, the depression was most likely caused by the Fed. They worked fast after they forced their way into our economy to take from others. They need to go. Our founding fathers warned us about central banks. I hold all of you older generations responsible for not putting them down back then.

As a history professor, I concur with your position that we are by no means in a Depression. I believe that view bespeaks not only a myopic view of the economic world (gas is expensive, the world is coming to an end), but also deep ignorance about the past. Know something about what happened in the 1930s, hah, that’s ancient history. If people had any knowledge of their past, they would not only stop throwing around words with no idea of what they mean, but they might also have a more intelligent understanding of the world.