The post by Harv in LA on August 2 shows someone who clearly isn’t living in America. This country’s media preaches nothing but doom and gloom? Are we in the same America?
How many articles in the last year have there been suggesting the housing bust is nearly over, or that the worst may be over? How many articles in the last year have there been suggesting that the credit crunch may have hit bottom? How many articles have we seen just this year suggesting that the inflation we see is nothing special when we take out food and energy? (gag me!) For Christ’s sake, BusinessWeek even had a cover story last year about how economic statistics we all know may be outdated and may really be painting a less positive picture of the economy than the reality!
The truth is, the media here is so stubborn in not wanting to get real about the issues in this economy that I wonder if they’re not paid based on how “positive” the message of their article is. To have them tell it, the housing bust was close to being a thing of the past quite often in the last year, but anyone with a clue knows that’s far from the case. They want so badly to say that the economy is just fine that they stretch small positives and make them look like huge positives, or like BusinessWeek, try to spin the numbers to put that message out.
I saw the kind of trouble we’re seeing right now a couple of years ago, and I don’t get paid big bucks to figure this stuff out.
I have yet to see one media member even point out something about inflation that seems to escape everyone: the real rate of inflation is probably appreciably higher in this fee-based economy where we get nickeled-and-dimed at every turn. Companies keep prices artificially “low”, then tack on loads of taxes and fees that are sometimes more than the price that we get quoted. The inflation rate doesn’t take those taxes and fees into account.
I’m a realist and expect a prolong recession like the one they had in Japan.
Our service economy which accounts for 70 percent of GDP is weak and unsustainable.
The government is bailing out banks and financial institutions trying to delay the inevitable which is falling home prices. Americans are max out to the limit, income is stagnant, we have a negative savings rate. By continuing to act irresponsibly, the government is creating a moral hazard and risk losing trust and confidence in the Anglo-Saxon model. That’s all it takes for our creditors to cut us off. When they do, the government will forsake any reason or sanity and start printing money until we run out of trees. We know most can’t prosper in an environment of hyperinflation. Imagine doctors and lawyers struggling to meet ends meet.
Without a President that understands this, we are screwed. As individuals you can protect yourself via learning about the issues, and moving your money out of dollar denominated assets.
To Paul in Denver: I would like to share your view but I cannot. As a boomer, I find the country now barely recognizable from that of my youth. I wish it had not lost what has been lost. As an individual I try to be a good citizen. But factors beyond my (or your) control are at work and I believe this country is in grave danger. Financial collapse engenders social collapse even in a country with as proud and noble a history as ours. If you are right and I am wrong, I would actually be very, very pleased. We shall see.
The media and others just do not understand, the days of the U.S. and player in world markets is over, done. We are in a downward trend our money is worthless and debt at more 5 Trillion is killing us, as a country we refuse to increase use of our natural resources such as oil and coal, have no manufacturing base and do not want to develop one. the stock market may see a 2500 before it sees 14000 again.
Chicken Little here to Mary – the sky IS falling. It always amazes me that people that are temporarilly secure think that everythings fine. Sheesh. That is so shortsighted bordering on blind. I make a good living and am secure, temporarily and am not just worring about what happens if/when I lose my job BUT what will I (we collecticvely) be doing in 2, 5 or 10 years! What will be left?
6% inflation is a joke, Mary. There are many people that either live on just the wifes income or live on an income that half or LESS that what they used to make. I spoke to one such gentleman at Home Depot the other day. Sad, really. Over a million manufacturing jobs have been lost in MI alone. Gone. Forever. Here in MI we know that for every lost maufacturing job 7 jobs are directy affected. There are other numbers out there that say 11 or 12% may be more realistic. We’re already 8% in MI and we’re the canary in the mine shaft.
I’m glad Dallas is good for you. I remember back in the 80’s when oil got cheap and my brother-in-law moved back from Alaska. He went from working for the oil company to living in a rough area of Detroit and selling insurance, unsucessfully.
To address Paul R. La Monica’s question — are we closer to the end or the beginning?
I wish I could be as positive as Paul seems to be.
Paul’s question brings to my mind Winston Churchill, and with apologies to Churchill, I quote:
“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” — Lord Mayor’s Luncheon, Mansion House following the victory at El Alameinin North Africa, London, 10 November 1942. ( Excerpted from http://www.winstonchurchill.org/i4a/pages/index.cfm?pageid=388#not_the_end )
For those amongst us who are looking for a ‘quick fix’ I think that such a solution does not exist. The only probable solution is TIME itself.
Why might this be so?
The CIA might concur with this opinion and might have even tried to promote this message to the President, but the message did not seem to be getting through.
We have, over the last several decades created a monetary system (in all Western currencies) that is dysfunctional. It is so because it does not send the proper signals to those who are making economic decisions every day in American and our other Western societies. This leads to incorrect decision-making and to not just sub-optimal behavior but even to bizarre behavior that is corrupting of society and of progress in general.
I cannot pretend to be an expert (like can Ben Bernanke or Alan Greenspan), but in reading from different sources, many of them from the so-called Austrian School of Economics (the Mises Institute is a good source) I feel IMHO that we have created a system or systems that are leading us in a direction that will cause us grievous harm.
This is not unique to America, although like with most other things, America is ahead of the rest of the world.
Namely, we no longer have an economic and monetary system that dissuades us from bad decisions nor protects from the jeopardy resulting from those bad decisions. We have instead adopted a system that leads us directly to those bad decisions and practically guarantees the jeopardy from those decisions.
For one thing, as quaint as it might sound to the ‘sophisticates’ that we have all seemingly become, we have discarded that ‘barbarous relic’ GOLD. Gold was never ‘magic’ — it just happened to be the best thing we had come up with as far as ‘money’ was concerned. Does anyone think that ‘paper money’ is as good? Shades of Moral Relativity!!!
For those of you who have the time and interest, I would encourage you to read the 2 articles at http://www.theconservativevoice.com/article/13463.html and at http://news.goldseek.com/JamesTurk/1126711755.php
We have lost the impartial arbiter that gold was. It performed the “invisible hand” function of arbitration and allocation within the money system. Without such an impartial hand we only have had the FED’s hands (Federal Reserve) and the hands of other Central Banks — those hands have tragically given a value to money that was NEVER accurate for avoiding misallocation and “malinvestments”.
In the old days the value of money allowed for the most stable and sustainable growth by helping set a ‘price’ for money; that is, the natural rate of interest at any point in time. This took account of all the supply and demand for money at that point in time, at that point in the business cycle.
That state of affairs provided for proper feedback of market information. It helped prevent the kind of excesses that we have all seen recently. It would most certainly NOT have allowed for the building of the Debt Mountain we live with today (and will die by).
The “human hands” (Maestro-Wizard behind the Curtain as somebody wrote) at the FED are the hands that have controlled our system for the last 3 decades and more (including during the Great Depression).
The FED is guilty of many mistakes. It has grievously hurt many people. And Ben Bernanke has admitted as much: “I would like to say to Milton [Friedman] and Anna [Schwartz]: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”
This is a little disingenuous on my part — Bernanke was actually suggesting it was because the FED allowed the money supply to drop that the Great Depression was prolonged. Please see http://mises.org/story/1949
(This is also a little disingenuous on Ben Bernanke’s part — Milton Friedman was always a champion of a rule-based driver for calculating the nation’s money supply. Friedman KNEW that we could not trust HUMAN hands and minds to do the job. He knew we would not go back to a gold-based system. He came up with a solution that would work so long as we kept politics out of it!)
The truly tragic part of this story is that Ben Bernanke thinks that by increasing the money supply he can solve this type of problem. What confusion! What a Greek Tragedy!
Up until Paul Volcker’s term as FED Chairman, the Federal Reserve made many terrible mistakes. Like any Central Bank the “FED” is supposed to mitigate the ‘bad’ effects of the naturally-occurring Business Cycle — instead of mitigation it usually ends up causing exacerbation of the problems.
Under Paul Volcker the FED had to painfully correct the results of those earlier missteps. For the last 20 years first under Greenspan and now under Bernanke “accommodation’ has been made the byword of the day.
Both Greenspan and Bernanke have been riding the benefits of Volcker’s painful interventions. They have done nothing other than this. They most certainly have ‘solved’ nothing — Greenspan’s term was especially egregious in its misuse of the FED’s powers IMHO!
Sadly, of course, it is not only the FED as an institution where “Expediency” has been so misapplied. All throughout society we have taken the easy way out — so-called “easy money” and OPM (opium) = Other People’s Money.
It has been a very seductive and a very addictive practice. Now we are finding out how very painful the withdrawal can be from such a long-standing practice.
As the Credit Bubble slowly implodes, the Debt Mountain built up also begins to collapse.
When a dot.com boom becomes a dot.bomb bust, fixed assets like those of miles of fibre cable are left behind. So with housing.
But how are those “assets” now valued? That is, what value-added function do they perform in our ongoing economy?
With cable many of us seemingly benefit by using the Internet for communications. However, compared to the original costs of those “assets” the current valuation is a mere pittance.
So what? you ask.
The loss was taken by those unfortunate investors who were expecting a much higher future valuation and some return on their investments.
Did not society as a whole benefit?
No, not in net terms. As with housing, these ‘assets’ were largely built with OPM, i.e. with borrowed money.
What happens when such debts are repudiated?
If such debts are pervasive and society-wide — not with just one individual or a few — that particular class of assets with which the debt was “collaterized” (as in “backed up,” much as you back up your own debts with your own personal assets) — that class is now “written down”.
This is done because that specific class of assets will NEVER — in present value terms — reachieve the original valuation — it will never PAY ITS WAY BACK — there is a PERMANENT loss on the original investment.
With any given house (in such a losing class of assets) it means that the original buyer can likely NEVER justify the original cost based purely on economic terms. That is, BASED on his or her future economic realized benefit from occupying that house — it can never be “home” on that BASIS.
But of course someone else might indeed benefit — on the basis of a much LOWER capital cost basis — when that new buyer buys the lower-priced home.
What does all of the above verbiage mean to our present discussion about “where we are” with regard to this “recession”?
It means that we have a LONG and painful road yet ahead to travel before reaching the end. It means that it will take a long time for all the collateral pledged (to all the bad loans made) to be revalued and repriced and to be resold (“liquidated”) into the economic system. There is natural resistance to revaluations. That alone will cause interminable delays. Then there is government and FED “help”. That will further slow the road back.
Since it is probable IMHO that the majority of such loans made have not yet even been acknowledged as being “bad” it follows that the collateral behind those loans has also not been repudiated or resold.
There will unfortunately still be many more yachts, vacation homes, condos, autos, jobs and businesses, office buildings and even rental rates (and so on) yet to be recognized as being ‘redundant’ or subject to revaluation, seizure, foreclosure, repossession, and ‘liquidation’.
Even cities and counties are finding that the basis on which they had set their property taxes is no longer economically justified — in many cases there is no one to collect the taxes from! Even the banks will not acknowledge “ownership” — hey, who is the “owner” if the mortgage was “bundled” and sold offshore? Good luck! What a mess!
What is most tragic (it goes without saying) is the associated “collateral human damage” associated with this future activity — and I am “Looking Forward” Paul!
This damage includes, but is not limited to, the future divorces, crime, societal breakdown, homelessness, mental and physical health breakdown, drug abuse — all of which never needed to happen. So it goes. (Apologies to Kurt Vonnegut.)
Things will get worse for a bit. We just got so carried away from credit/debt that we can’t expect a shallow recession.
-housing is now way from ending. the foreclosures are peaking, not waning. The numbers are terribel. houses are still overpriced in many areas.
-Bond, they pay such low rates forever. they have to go down in value to refelct real inflation.
-credit card debt/alt a. next bomb
to blow.
-foreign exporters are prime to be slaughtered. we still run the economy. no decoupling here. that bs was so 2005.
-job loss is underestimated and we still keep losing jobs. jobs now pay crap and dont keep up with inflation.
-inflation is roaring, not 2.8 ppi crap.
-down times last a year or two, not 4 months. that fantasy is owned my cnbc. Housing was going to bottom also, remeber that one?
But bad times end, stocks may even start to be a good buy. they bottom and rise before therest of the economy.
Hi Harv, I don’t think the media are to blame. This is a REAL problem, not something manufactured by CNN or FOX or a few ‘naysayers’. And I don’t think they can make it ‘worse’. Forums like this can help.
The thinking of many always trumps the thinking of one.
But sometimes we have to read a lot of superfluous material to synthesize that “thinking of many” to come up with the best of the best.
I am sure Paul La Monica reads and weighs all of our contributions.
I also hope that Mary from Dallas and John from Ellicott City, Maryland, and Paul from Denver CO, and D. from Colorado Springs, CO, are right. No one is saying that we are IN a Depression, at least not yet. What some of us are afraid of, is that it might yet come to that.
I know Mary is not insensitive to the plight of those in more dire circumstances. We also have to remind ourselves of that old adage: “a recession is when your neighbor loses her job, a Depression is when you lose yours”.
Regardless of any small disagreements I might have, I really enjoyed reading EVERY single post. Thank you everyone!
Great post from Andy of Waynesburg, PA. As Western societies have moved more and more to Moral Relativism and decadence, others will pick up the torch from those in the West who used to practise the so-called Protestant work ethic.
While the 50-s were never perfect — never the land of Howdy Doody and Leave it to Beaver — there is something to be said about what we have ALL lost, and I agree we are STILL lost on some road to somewhere we would likely prefer not to go. To all of us a question: Quo vadis?
To Kevin of Palm Harbor, Florida. Yes indeed, one can only wonder whether the 2003 quote from Warren Buffett will indeed prove to be prophetic. “…Mr. Buffett argued that such highly complex financial instruments are time bombs and ‘financial weapons of mass destruction’ that could harm not only their buyers and sellers, but the whole economic system.” Please see quote at http://news.bbc.co.uk/2/hi/business/2817995.stm
As to Kevin’s point about more damage than OBL could ever have hoped for — sadly very true. One wonders where the CIA analysts were. This was and is a fault at the heart of our capitalist, Western way of life. We have not learned. Without learning we can hardly hope to correct our path.
In reading Concerned Massachusetts Resident’s entry I could only think of Lou Dobbs and how he — sometimes yelling into the wind — is still trying to wake us up. It is Middle America (and Middle Canada and Middle Europe and Middle Australia and Middle New Zealand and Middle Japan and Middle South Korea and Middle Everyone) who will pay the piper — we are always left holding the bag — we will be the ones with no chair to sit on when the music stops.
To the list from Lewis from Vienna, VA, I would like to add Ron Paul. One of the few people in Washington who can see what the FEDERAL RESERVE (along with deficit spending) has wrought.
No question that Paul from Chicago has a valid point — we don’t save, we live check to check, or debt to debt — but do we really deserve to be woken from our dreams so rudely? Was it only OUR fault? What about our leadership? Who was it who encouraged us to go ‘nuts’ with our spending at the malls after 9-11? To ‘feel good’ and ‘to save America’s economy’? At what cost?
Where do people obtain the gall to pretend they can represent us when they have no idea how to lead? Where does this and the last FED chairmen get off thinking they know best? They are playing politics, they are gambling, with people’s lives. The hubris is unbelievable. The arrogance completely unjustified.
People in government, like good doctors, should ‘first do no harm’. But these people treat us like we are rats in some big financial and moral experiment. Even rats deserve better!
Come on everyone! You know in your heart of hearts that when the Federal Government sends out “stimulus” or phony “tax credit” checks to everyone, that they have run out of meaningful ideas. Not only that, but they have effectively given themselves a grade of “F” on their own Financial Report Card of their past economic performance. They are bereft of ideas. They are morally and intellectually bankrupt (as a group).
Where did the Contract with America idea go? Joe E. from Plant City, Florida is right — it is immoral to pass our debts on to the next or later generations.
John, from San Diego, you are scaring even me! Sadly though, I cannot disagree with your sentiments.
While the Economic Talking Heads all say that Protectionism is wrong and will kill us like it did in the Great Depression (and I am a financial conservative as you can tell) I do agree that we have to start buying locally. We will be forced to cut back on our ‘extravagances’ our travel, our eating-out, our big houses and cars, our trips to beauty parlours, our pet grooming, our big TV-s…
But when we have to cut back on food, medical care, shelter, clothing, and gifts for our children. What then? Mike from Redwood City, CA, I hope you are right, that we can successfully find cheaper sources.
Mike from Portland, OR, makes an excellent point. What long-term good has actually come from all the bubbles inflated by Greenspan? What did the booms leave behind? Did the FED, in helping to create obscenely “easy money,” do us any favors?
Mr. Greenspan, did you achieve what you wanted in 2002 to 2006? OK you said Yes back then, and again recently when you said you would have done nothing differently. But what will you say in 2010? Or even 2009?
You are right Mike — Lord, please spare me from having to live through another so-called boom again.
And James in Detroit, MI, you got it Pontiac (sorry, couldn’t resist). You are right IMHO, which is all that I have — my opinion — this is indeed (sadly) a WHOLE new ball game.
Again thanks to everyone who contributed. I don’t think Paul La Monica could ever have dreamt of such participation by all of you!
BEST danged thing to happen here is gas at $4.50 a gallon; we have been so bloody stupid with SUVs, frivolous spending on $4 lattes, no doc mortgages, execs making $100 million a year for destroying shareholder value – bush in the White House…we needed this like a good dose of ExLax. From the ashes, a phoenix (not the Arizona one, though) rises….can you image how the USA could re-invent energy usage IF, we had leadership in either Political Party.
I see the worst is yet to come. This is a slow-motion recession/depression that will take awhile longer to bottom out. The one last bastion of strength for our economy – exports – will slow significantly as the rest of the world responds to our slowdown with one of their own. The notion that they can prosper without us is pure bunk: their stock markets rise and fall nearly in lock step with ours. I disagree with those who contend the economy will bounce back like it always had in the past. The silver lining in past downturns was that there was money to spend. Where is the money going to come from this time? Our country is leveraged to the hilt with debt. A negative savings rate and no education about money management along with falling real income will keep the consumer restrained. Add to this the fact that employers have not shared the wealth with the employees. Productivity gains go to the salaries and bonuses of top executives who make while the hourly employees’ wages rise ever so slow. Compounding this is high paying jobs are off-shored and replaced by low paying service jobs. Only by more borrowing or by debt-financed govenment subsidies will consumers avoid a sharp pullback in spending (with all the risk that entails) that will soon begin. The “phony recession” of the last twelve months is about over and the real one is set to begin. Business will not pick up the ball and spend us out of this because the consumer is sinking. The federal government is increasingly bearing the economy on its back which risks a move towards socialism. States and municipalities are suffering from falling tax revenues and must add debt, raise taxes, cut spending or all of the above. So I see no magic bullet on the horizon to turn this around soon. Let’s be frank and look at the last twelve months. The optimists said this was all contained to subprime. Then they said the economy would rebound in the second half of this year. Then they said that Freddie Mac and Fannie Mae would never reach the brink of needing govenment assistance. Lately they have even called a bottom to the housing abyss only to be rebutted by the Case-Schiller report. Whether the analysts are bullish or bearish, you must understand that they have investments in the stock market. So you must judge for yourself. I have such investments too, but I will still be candid and tell it like it is. Going forward, what’s going to happen? Up until now, the numbers on employment, productivity, factory orders, retail, etc. have been fairly stable albeit down a little from last year. Assuming no unexpected miracles, these numbers will begin to reflect recession more and more. Watch the unemployment number. This will be the first major number to move out of the comfort zone of the last twelve months. With the layoffs announced by the big employers in the last few weeks, look for the new unemployment claims number to continue its upward climb. Soon consumer spending will begin a more rapid drop in response. The vicious circle of unemployment begtting more unemployment will start working in earnest. Another taxpayer stimulus package is a given and will help at the expense of making the debt problem – the cause of this slowdown – worse. If oil falls, it will help by delaying the inevitable for a few years at most. Earlier I said there was no silver bullet to fix the economy’s downturn. Well, that’s almost true. The only geniune fix I see is if employers start sharing more of the wealth with their employees, keep high paying jobs in the US, and consumers saving significantly more. Given our society’s moral condition, this will probably never happen. So goes the old proverb: those who exercise less self-control are slave to those who exercise more. Given that America finances its excesses by borrowing from the rest of the world, the future looks grim indeed unless we rise to the challenge and confront our greatest enemy – ourselves!
If we don’t understand how exactly we have got here, how can we learn from it and avoid it to happen again?? So I don’t agree with “Look forward, not backward”. I also don’t believe that media created this “gloom and doom”.
whether the economy comes back or not, the jobs that are being created dont keep up with inflation. republicans think like wall st were making a good living who worries about middle class? they certainly do not, i have completely switched to being a democrat. republicans do not stand behind what they say!!
Hey Harv – The media can certaintly spin the numbers however they see fit to spin them. however, the number do not lie. The data is proof of a downturn. The media dictates only to people who don’t know how to interpret the numbers for themselves.
Our economic conditions will continue to be dictated by this country’s media. They preach nothing but gloom and doom. As long as the majority of the people in this country form their opinions based on what the media provides us as “the truth”, the worse the situation will become. Don’t forget, our MEDIA is a business. They’re in it to make money and they’ll do anything they have to to make a profit and that includes fabrications, distortions, purposeful slanting and downright lying.
All I can say about the economy is, if it isn’t over soon, I’ll have to join the ranks of the poverty level in this country and I’m afraid I’ll lose my home and have to file bankruptcy.
The problem seems to be in how the government figures SSI COLA’s. They omit fuel and food which is the biggest expense for seniors and continues to rise at a exponential rate so that a person like myself loses ground each year. This may be the year the government takes me down.
Frank Yanczer Osage Beach, Missouri
I get so annoyed at people who say we are in a depression. The unemployment level in the Great Depression was 25%, which is almost five times what it is now. We are in a cyclical downtown, which happens every decade, and the economy will recover, as it always does.
Thanks for a dose of reality, Paul; I’m glad to read some common sense to temper the “the sky is falling” mentality of many readers.
We are headed for deeper trouble. America is running out of credit. Houses have lowering equity. Credit card debt is at a record. The federal budget is heading for a staggering $480 billion deficit to be added to the national debt. In a number of years, the Social Security Trust fund will cease to be a place to dump US bonds, but a seller of bonds as well. Then a Tsunami of aging baby boomers will be hitting Medicare whose foundation is on a malfunctioning health care system and projected inadequit funding.
The global economy is slowing,housing,auto’s and I’m guessing any type of RV is doing bad.Where is the growth going to come from?Please Paul shows whats making up for the houses being used as ATM’s
What amazes me most is how so many people have forgotten that our troops in Iraq and Afghanistan are keeping us from seeing the real unemployment numbers. Think about those 140,000 troops, over 50% being Guard/Reserve. So lets dump 78,000 adults back into the job market and then add all those contractors making great wages so another 12,000 a thrown back into the fray. So suddenly 90,000 people dumped back into the populace no longer making a regular check and looking for jobs. Maybe a thrid will go back to work at their old jobs if they still have them. So at the least another 60,000 unemployed join the rolls. More homes lost, more bankruptcies. In essence the folks overseas are on the same jobs program proposed during the 1930’s New Deal Campaign. The only difference is Bush and and not Roosevelt is leading this one. Bush and his cronies have kept his business track record perfectly intact. Failure after Failure. Not what most people would call something to base a life on but Bush has done just that. He failed in every business he has had dealings. He ran the ball club he was part owner in into the ground. Lastly the only thing more perverse than his track record of failures is his lack of ability to not ask for the Saudi’s to keep bailing him out. No Honesty, No Integrity, No Morality.
Yeah, that’s what we have been done in by for 8 years now. Another 8 years under the same style of leadership will bankrupt this country forever. Please think before you vote! Please someone ban the public’s ability to hit a button to vote straight ticket. Make people at least go thru the motions to vote, then maybe they will think before they make that call. Take heed to what the Oracle of Omaha has been quoted as saying time and time again. We have not yet begun to see the worst!
The major problem is that Fed Chairman Bernanke,in attempting to bail out the stock markets,as well as prevent a recession,which in my opinion,has already occurred,has created a severe inflationary(stagflationary)problem by badly eroding the value of the dollar and creating new bubbles in commodities and particularly oil.These costs are being borne by consumers worldwide.The CPI numbers are badly underestimating the inflation problem.It did not exist until Bernanke starting ,with the aid of a number of other central banks,pumping hundreds of billions of dollars into the world economy.
Reading all these “doom and gloom” posts actually gives me hope for the future. People aren’t stupid. They look at the real world around and not some highly watered down government report on the economy. People know what is going on and they know where the faults lie. I’ve seen changes all around where people are starting to pay off debt and working towards savings. Is that helping grow the economy? No, it’s helping drag it further in to recession but I believe it needs to happen and I think it’s setting it up for a better, more stable future.
The economy needs to correct itself and the government needs to stay out. The last time they tried to step in and fix things in the 2001 recession they set us up with the mess we have today. We don’t need anymore temporary fixes. We need long term stability.
Here are a few opinions:
Building a strong Nation requires strong States.
Strong States are built on strong communities.
Strong communities are built on strong Families.
A strong Family is one in which one Parent goes out and works to earn the money to build a house, while the other Parent works with the Children to build a Home.
You cannot build a strong Nation, therefore, by taking actions whose ultimate effect is to drive down continually the relative market value of the average worker.
We make much of the Individual but, in truth, it is the Family that lies t the heart of our Nation’s greatness. Why? Because it is the Family that will determine the nature of the Individual’s character.
We call them The Greatest Generation not because of a few wondrous Individuals whose achievements became the stuff of legend. Rather, we so honor them because the average member of The Greatest Generation was a Selfless Individual, not a selfish individualist; because they acted not in their own self-interest but in the interest of their communities.
The Greatest Generation DID NOT — I REPEAT, DID NOT — come from day-care centers.
Our growth has slowed to a crawl, while Communist China’s growth leaps ahead, year after year. Why?
Because our corporations gave to the ChiComs all of the wealth created by The Greatest Generation.
Henry Ford paid unskilled workers five to nine dollars a day at a time when the most highly skilled craftsmen could be hired for two to four dollars per day. The Ford Motor Company skyrocketed to success–at one point, nine of ten cars on the road WORLDWIDE were Fords.
We drive down the value of a day’s work and our economy collapses. China uses the capital we gave them to double, triple, quadruple its workers’ wages and their economy blossoms.
Why does their economy grow? Because the __dramatic__ __increase__ in real wealth being transmitted to the average Chinese worker has produced the one thing that every business needs more than any other thing on Earth: ___DEMAND___
Car companies cannot sell their cars in the USA today because — SURPRISE! — Americans do not have the money!
Americans have had their wages driven downward for so many years that they have become accustomed to taking second mortgages on their homes to purchase depreciating assets.
Just a few years ago, had you suggested suvch a thing to your banker, he’d have admonished you sternly to save up your money and pay cash for the purchase of any depreciating asset–and then he’d have shown you the door.
Indeed, those who did find it necessary to take a second mortgage were thought to possess poor financial judgment, or to have been the victims of an extraordinary piece of bad luck.
WOuld you like America to have another “Greatest Generation”? Simple: Pay the average American worker enough to enable one parent to work at building a Home home while the other works to earn money to build a house.
With half of all married persons dropping out of the workforce, wages will far more than double as businesses compete for a scarce resource: Workers.
There will then be no need for a minimum wage; the average high-school student will be able to find plenty of offers for part-time work at $15 to $20 per hour. Full-time work will pay entry-level workers $25 to $30 per hour.
We will then enjoy growth like that of the ChiComs, to whom our corporations, like the Biblical Esau, have given our birthright in exchange for a mess of pottage.
Our economy, in fact all economies, are cycle. The problem is that in the past when we hit bottom we could either lower rates and or lower taxes and increase government spending. Bush has put us in a place where we can’t lower taxes or increase governmant spending. And rates are already near all time lows (besides you can’t force businesses to borrow, they have to need the money or want it to make long term investments that would help us). There is no equity left for people to borrow from and even if there was how much more will the banks be willing to lend them given the enemic income growth?
It just doesn’t make any sense to expect the end of the weakness is near. It will be worse and last longer than anyone has been willing to talk about.
Here’s what really scares me. We haven’t been attacked since 9/11 but what Bush has done in response is doing more damage than OBL could ever have hoped for. He has proven that he is way smarter than Bush. Just like the Russians in Afghanastan we are in the process of really doing severe long term damage by spending so much in Iraq etc.
We are at our most vulnerable to further attack right now. Think OBL doesn’t know that? Think he’s sitting on his hands and not putting some plans in motion? Forget it. Remember his ultimate goal is to crush our economic engine,the banking industry. If it comes soon it will put the downward spiral into overdrive and there will be panic and blood in the streets.
On a month-to-month basis, price declines are slowing. And new home sales in June were better than expected. What’s more, new home sales figures for May were revised upwards.
When the expectation is to expect the absolute worst, it’s not very hard to beat expectations. This is a poor barometer. Instead of we expect EXTREMELY Bad it’s only very, very, very bad. It still stinks.
Not only is this likely just the beginning of a bad recession, but our political “leaders” only want to make this worse. Senator Menendez (NJ) wants a huge increase in foreign workers – mind you, Americans have lost 463,000 jobs since December.
Add that to rising inflation and stagnating wages – yes, companies are posting healthy profits, but it’s the executives benefiting the most – and you have a recipe for disaster.
Sometimes I think economists and others in the business media are paid based on how positive their writing is. So few want to get real about the economy, instead bending over backwards to try to say that the economy isn’t in such bad shape. They look as out of touch as politicians in doing so.
To D, of Colorado Springs, I live in Colorado Springs and do reasonably well financially, but am cognizant of my income source and its uncertainties. I’ll bet you live in one of those Briargate or Mountain Shadows McMansions. So let me ask, in 5-10 years when you want to sell that 4000+ sq ft monstrosity you paid $300-500k for to “downsize”, who’s gonna buy it? Look at the demographics of “potential” late 20 to early 40 somethings buyers. Are they making the money that lets them buy your house at a price that allows you to make a profit on your “largest” investment? Doubtful. I think that is next major real estate calamity (read continued home price depression) – expensive homes + aging boomers/Gen-Xers wanting out + no one with the income to buy at a level that returns a profit, only more losses. Oh yeah, this was Ground Zero of the 1980s S&L scandal – Remember Neil Bush, Silverado, McCain and the Keating 5). Think we could see a repeat?
Like someone said earlier the greed and corruption by the power elite, at all levels of society I might add, will be our downfall. Until we have responsible Government that fully discloses the true national debt (not the deficit – the debt, two different things lost on many in the media and public) including “off budget” items like the Iraq Occupation (what’s the true cost now? Over $3 trillion by some estimates?) we will never work our way out of this mess. So tell me again how could our fiscally responsible Bush administration and his Republican stooges running Congress for 6 of the last 8 years allowed the Government go from a Budget surplus in 2000 to the largest budget deficit in history? It didn’t happen in the last 2 years. Tax and Spend Democrats? Don’t make me laugh. Bush is the only president that has given a tax cut (43% of benefit went to wealthiest 1%) during a war. If anything we should have had a surtax on incomes over $100k regardless of source (wages, interest, capital gains, etc.) to help pay for the war. We ask our troops to put their lives on the line and we as a nation can’t sacrifice even this modest amount? For shame.
Paul, I admire your confidence and cheerleading for the moneyed interests, but maybe you should get out of NY and talk to people in the real world (and I’m not talking about polyannas like D in Colorado Springs either). I think you’d find things are a lot rougher out here. Just looking through the posts, aren’t too many positive ones out there, doesn’t it make you wonder?
We’ve had years of conservative/Republican leadership hostile to the middle class. For starters consider: A minimum wage unchanged since 1997 until recently, a health care system that breaks you if you get sick and don’t have a company plan, tax code that encourages transfer of wealth from poor and middle class to the wealthy, corporate greed, a lack of Government oversight in: consumer product safety, food/drug safety, financial institutions, environmental protection, energy policy. The list is endless. Yup, The Republicans, Supply Side Economics, outsourcing, off shoring, unnecessary war, excessive tax breaks for corporations and the wealthy, etc. have done wonders for this nation. The chickens are coming home to roost.
It is very simple. Greedy bankers, concockting hair brain schemes and throwing money at those who could least afford to borrow it and then the domino effect took hold. They will never learn. But then again, the bankers have only themselves to blame. America is clearly already in recession, no doubt about that and most likely has been since the beginning of the year. We are about to see a very deep recession around the globe including a slowdown in China. I just knew it would all end in tears.
It is interesting that some people think that the end of the business side of the crisis is coming to an end. My observation is that even if that is true, the effects of the slump will haunt us for quite a while, possibly forever. For example, NY and some other states, CA as well, are now in financial straits and are beginning to tax the h3ll out of what’s left of the hard-working folk. The bailout in home loans is yet another example of the frugal, hard-working people being stuck with the bill. Now some might argue that ‘Oh the taxes will go down after the crisis’ must either be from another planet or have their heads in the sand or somewhere else the sun doesn’t shine. After 50+ years I have NEVER seen taxes decrease (BTW ‘fees’ are just another name for tax). Only two items can ‘fix’ this problem; 1) require personal responsibility 2) require government to be fiscally responsible. If both these were done and done without exception, then things MIGHT get better. People need to be held responsible for their actions and the consequences thereof without excuses. Ignorance is NOT an excuse because the information is out there. Every choice has a consequence, so be ready to be accountable for yours. In government you get what you choose, you’re responsible for that as well. If you don’t like it, change it (Anyway you need to)
What I don’t get is how those of us who are MOSTLY responsible have to pay for the people that aren’t. I have relatives who bought houses (interest only, of course) that otherwise would have been way out of reach for their salary. One of them lost his job and is now desperately trying to hold on to this PALACE he purchased.
My wife and I have a small amount of debt and have managed excellent credit ratings; why do we have to pay for the government to bail out Fannie and Freddie when they allowed people to get into loans they couldn’t afford?
Just a side note- I also don’t think it was JUST Fannie/Freddie, there are some borrowers out there who KNOWINGLY signed loan applications that grossly misstated their income/savings and then signed the application stating those figures were true and accurate.
There definitely are some unscrupulous loan officers/brokers out there but their liability for SOME of these borrowers ended when they signed their name to the application.
That being said, I agree with many of the other posts that believe that a little prioritizing is good for everybody. Times like this really make you realize what is necessary and what may be more frivolous.
The Economy stinks and it will not get better for a while, years maybe.
The US had too many people spending too much money, running up all kinds of personal debt. Unfortunately, it’s been those foolish folks who had been keeping industries rolling along. Now, those folks have hit the wall, much of the foolish spending has stopped and now we are paying the price. They don’t have the money for those high-priced electronic gadgets, they can’t traded in for a new car every year, they can’t even afford the big house they live in.
So, what to do? The Gov’t has decided to bail those foolish folks out – a big mistake in my opinion. Why should my tax dollars go to help some idiots who can’t add 2 + 2 to get 4. Gee, maybe I ought to go on a wild spending spree myself, then write my Congressman to help bail me out.
Fred,
Turns out I could’ve told you that, considering it’s been a known quantity since the 1970’s that gas is tied to oil and the auto industry is tied to gas. Did you think the world had unlimited oil? Did you think the price of gas isn’t reflective of the price of oil? Did you think the auto industry and SUV sales weren’t tied to gas prices?
LOOKING FORWARD!!!
This is NOT 1929 people! Do you see Hooverville? Do you see people in bread lines?? Do you see brokers and bankers jumping out of windows??? No! NO!! NO!!!
Things are not that bad. Oil is down 18% for the year! Not expensive at all! Things like health care, education, and affordable home prices are luxuries. People forget that there is nothing in the Constitution that guarantees these luxuries. It shouldn’t be the Govt’s job to provide these things!!
The Constitution provides the right to “pursue happiness.” The rest are luxuries. Back in 1929 the saying was a “A car in every garage and a chicken in every pot.” Even the poorest americans today have refrigerators, tvs, multiple cars, etc. Our country is so remarkably wealthy!!! People are breaking the law, and politicans are allowing it, for people to come!!!
I was told by one gentleman to “Get out of my gated community…” I have. I didn’t need the Govt to make a policy to propel me to donate $1000’s to the workers at the WTC after 9/11. I also didn’t need the Govt to make a policy, tax an oil company, or interfer by stampeding on civil liberties to encourage me to donate $1,000s to The American Red Cross after Katrina hit in September 2005.
I have gotten out my picturesqe community and have seen the world. I didn’t need the Govt to tell me to. And the more they interfere, the more incentive I have to NOT leave my community.
The economy is not bad. Phil Gramm is right: It is MENTAL, and a figment of our imagination. Americans have been used to extreme wealth for a very long time. The rest of the world is jealous of GW Bush. Every country wishes they had our problems. Things are looking up!!!
Those that buy stocks will be far wealthier and thanking me in the coming decade. Heck, they might even be my future neighbors.
Welcome, Old Sport!! BUY STOCKS!!!
It’s going to get worse. God help us, when the Democrats win the White House. To enact a wind fall profits, tax would be the, “nail in the coffin”.
The country will come to a stand still. Serves us right, for buying energy from our enemies, and not doing anything on our own. At least I won’t be alone.
The comments here amaze me! I’m disgusted at the lack of faith in our Country, our democracy, and the pettiness of many other writers. Our country has been through 2 world wars, a revolution, a civil war, the great depression, and many other depressions and recessions. Never did any responsible people suggest it was the end of America…..as many are doing here. I’m disgusted that my co-citizens could even suggest that America isn’t the greatest country on Earth. Furthermore, we haven’t even entered a recession! GDP has accelerated each quarter this year.
Do you own a pice of America, or do you just work here? If you have been spending your wages on “lifestyle” instead of investment, then you are probably financially unhappy right now. America was designed to benefit ingenuity, creativness, investment, and growth. In other words, Americans were never intended to continually work for someone else. If your job is not enough to keep up, then get out, start your own business, and compete! If that’s too scary, then stay in your job. Eventually, the job will become more scary! You have the freedom to make choices here.
This economy is AWESOME! I am thrilled that we discovered the causes of the Great Depression, and now have finanacial models to prevent a recurrance. I am happy we have a Fed and Treasury who are taking steps to resolve the causes of the current issues; issues that will pass as fast as they swept in. Thanks to a lower dollar, our export industries are booming. I see an America that is fair to all – rewarding those who make smart investments, and punishing those who consume the wealth of the country. the economy is working just fine.
Todays news – “Auto Sales Plunge” and “GM loses $15.5B” I thought the economy was robust? I thought only the Midwest was in a recession? If the midwest is such an insignificant percentage of working people then sales should still be strong. Shouldn’t they?
I’ve been in auto related manufacturing for 25 years. Many companies are and will be feeling the pain of the auto companies’ losses in more states than just MI. OH, IA, MO, KY, AL, NJ, IN, IL, TX, TN, CA, etc will or are feeling the pain of the millions of manufacturing job losses. And to the people that say to “move” or “reducate”, not everyone has the resources to do that. I raise a family of 5. Working 2 jobs there is no time for me to go back to school and become a dentist. Speaking of dentists, a friend of ours and our families dentist said things are very slow. He said he’s only at the office 3 days a week and feels people are NOT spending money on thier teeth because of the economy. And his office is in a wealth community in MI.
As long as we buy more than we sell (as the United States of America) someone is going to get poorer and someone might get richer. In order for the rich to be rich, the poor need to be poor. For the rich to get richer, the poor need get poorer.
We can attempt to raise the bottom for the “poor” classification by redistributing wealth via taxes. That’s feeble at best.
In order for the United States to be successful again it needs to either eliminate the trade deficit or be coming out ahead on trade.
The United States has switched from a manufacturing (building and selling widgets) entity to a service and intellectual property entity. We even buy electricity from Canada. Electricty production isn’t rocket surgery. In order for someone to be able to buy a service they need to get money from somewhere. You aren’t going to be able to buy Starbucks coffee if you work at Starbucks.
White collar workers that used to look down upon blue collar workers as overpaid uneducated gorillas are now finding that India and other foreign countries have people that’ll do white collar work for less. So now even the white collar people that indirectly caused the demise of the blue collar lifestyle are hurting. Why build stuff in the US when it’s cheaper to build it in China? Why have engineers and office workers in the US when they’ll do the same work for less in India?
It’s the white collar worker that has taken the most abuse as far as stagnant wages in the past ten years. My Dad is blue collar at General Motors. He makes more money than I do and I’m an Electrical Engineer being paid more than competitive market wages. While there are 25 years between my Dad and I, he’s nearing retirement. I *HOPE* I do not make the equivalent to what I do *TODAY* when I’m 25 years older.
It’ll require a lifestyle change for the United States as a whole to come out of this economic downturn on a positive note. Corporations, and the people that operate them, will need to learn how to make an honest buck again. No longer can they choose to say “Well, Johnny Law doesn’t say I can’t do it so it must be all right to do” and think about the consequences of their actions.
Citizens need to change their lifestyles so they have a certain financial future. No longer should people say “I sure want a boat” and then go get a boat. Do you need a boat? How much use are you going to get out of the boat? Do you have a place to store it and a way to tow it? What is the depreciation value? While it’s almost always cheaper to borrow someone else’s money than use your own to buy something the first thing you should ask is “how much does it cost?” rather than “how much are the payments?”
So, getting back to the beginning of this mini-novel.. the US needs to buy less and sell more. People need to buy more american and sell more american. That means buying American made flags on the Fourth of July instead of Chinese made ones. That means buying a an american built car owned by an american company. That means buying a Weber grill instead of a Chinese one.
“I wish you had picked up the phone and told me the auto market was gonna colapse, my 401K was gonna be cut in half, the price of gasoline was gonna go to $4/gal, and food prices were gonna skyrocket. Then I would have been able to save more of my $110K income an been able to afford more than a used $5000 Ford Focus. ”
I LOVE this comment. Duh Uh, a lot of us were able to see that the economic CYCLE goes up and down. Pretty much anyone making 100K a year should be smart enough to suspect that good economic times are followed by bad.
My 401k is in the tank too. Like it was in the 90s and like it was in the early 2000s. But I’m not worried because it’s not going to stay down forever. And if I do get laid off (which I might) I’ll fall back on my emergency saving. Which I saved up during boom times NOT when the economy headed south.
The economy is bad now and its going to get worse over a long perior of time. Prices up on gas, groceries, housing market down, new cars not being bought, utilies increase. Everyone is suffering the pain of high cost, except the Oil Companies that made record profit of 12 billion and up, highway robbery. It is time people to speak up in voice and a loud voice to your representatives. A new president can’t change things overnight they are just giving lip service, empty words to be elected.
The federal government has led the way to our troubles since 2001. Republicans – Bush and Congress – and Greenspan’s Fed built an economy based on debt and consumption, rather than savings and investment. Interest rates were too low, credit was absurdly easy to get without much regulation, and federal spending was reckless and too much based on ideology, with taxes being cut at the same time! There is fundamentally dishonest accounting re the Social Security cash flow surplus (will end within a decade) being used for current expenses, so that the true federal budget deficit is at least $150B larger than stated in press headlines. Also, the cost of the Iraq war has mostly not been included in the regular budget. All of this happened with full knowledge of our demographics, which are leading to huge unfunded spending on entitlements for older people, as the population ages. Is it any wonder the dollar has plunged in value?
I will be very pessimistic about the long term future of our economy until I see some adults take over economic management of our federal government. All I see at the moment are a few lone rangers, like Rep. John Spratt of SC, and David Walker who left the GAO earlier this year, crying in the wilderness. Meanwhile, Congress loves their earmarks much more than any real fiscal responsibility.
As for the current recession, I think it will take quite a while to unwind the credit bubble unwisely leveraged for several years, especially since we have managed to export our subprime mortgages and unsound derivatives all over the world.
Maybe you & your readers are all in the top 1-5% of wage earners. If that is so then this “slowdown” may be a blip when seen in 20-20 hindsight.
For the vast majority – the median HOUSEHOLD income in the US is less than $50,000 – the current economic reality is severe, with no relief in sight.
In the last five years of the Bush reign:
our heating bill has gone from $1,500 to $3,900 &
our commuting fuel went from $1,300 to $3,600.
The total of just those two items was $2,800 to now $7,500. To take home that difference means that an additional $6,000 before taxes has disappeared from our budget! Then on top of that throw in all the other inflation effects. There is nothing left at the end of the month for many necessities let alone discretionary. We, the middle class, are going broke in a heartbeat! Baby boomer retirement? We can’t afford to live today!!!
The government says that core inflation is key. Tell me: who lives without food & energy?
Then we have the war spending, a growing federal deficit that will need to be repaid & the balance of trade deficit selling our country to foreigners & a weak dollar and jobs moving overseas.
In the end we will be extremely fortunate if we avoid a MAJOR depression with massive unemployment & homelessness and a collapsing infrastructure that will all be owned by a few elite Americans, the Chinese government and the Arab oil barons!
God bless us every one!
DS said: “This truly is a country of opportunity, six and a half billion people on the planet and counting, most of them would like to live in the USA.”
So how many foreigners OUTSIDE America (not including Mexico) have told you they want to move here? I can’t believe people STILL think this. It’s propaganda you’ve been hearing your whole life, how “everyone wants to move to America. Everybody would move to America if they could”. I lived abroad for years and traveled to many different countries, and the best I could hope to hear was, “Yeah, I’d visit America sometime.”
Wandering through all of the economic predictions, media coverage about corporate/banking failures, industrial & gross product averages swinging like a college basketball game, commodity traders inflating futures, and all of the legislative finger-pointing – When does it get simplified for consumers? Go ahead, put some blindfolds on and take two aspirins.
There is a begging need for realistic solutions and an end to the camp style rhetoric from our leaders! It is time to put down the voodoo sticks and curses towards the exploiters (you know who I mean)!
Get sensible – my vote is for consumers to continue weaning their luxury expenses, simplify their life-styles, retrain their budgets, live on what they EARN, and save at least something in the bank.
You mentioned the vibrancy of this economy which I think is now going to be much slower & weaker than before. One of the companies you named was IBM for our strength. I worked for IBM & I can tell you that they do not manufacture hardly anything in the USA. The servers & hardware come from Mexico and China. And the jobs at IBM are being out sourced to the new I in IBM which is India. Bangalore India to be exact. IBM’s policy of out sourcing to India is so strong that managers in some departments tell me that they are not allowed to back fill & should try to get employees to want to quit. Now, IBM does provide service jobs in the US. But software and hardware are overseas. Back to the economy, Globalization & the rise of other economies will lower the growth of the US economy just a fact. Your statement about this being a short recession due to history well the US economy had less imports & greater GDP when going into recession than it does now. Lower GDP heading into down turns usually means longer slow downs. Just ask the Japanese. I do agree with you to some degree it is not as bad as some like to think but it is bad and it will take awhile to get better.
Present conditions are tough – no money left at the end of month after bills, food, and gas. Employers are not giving raises either and there are not any jobs outside. It is a squeeze for us.
Looking from our position, economy seems to be in recession/stagflation already. This may continue for a while, till manufacturing sector recovers.
I’m in a very small minority of one when I say this, but I think we need a recession to wake people up. Everyone has been like a pig at a trough, oblivious to what is going on as long as they gorged themselves at the trough. A big shake out won’t solve everything, but it will wake some people up.
Some of these comments are laughable:
‘Everyone scared of layoffs’, The ‘Meteoric Rise in Price of Food’ — Hint The Average American doesn’t look like they are starving.
Housing Prices — Yes in some cities this is true but if you can’t find a job that pays enough to match housing costs — the solution is to move. Obviously more people can afford than not or else rents wouldn’t be continuing to rise
And Every Other Household Expense — You probably won’t shop at Wal Mart but instead allow yourself to get hosed at these smaller neighborhood drug stores or chains like CVS
I live and work in So. Cal. Everyone is losing their jobs. We recently put an ad out for an Ad min Assistant and within an hour had 180 resumes to sift through. My raise this year as an accountant for a small company, although generous, does not cover the increase cost of my rent on my apartment or my increase in gas expense. I can barely get by and eat pasta 4 out of 7 days. I don’t have a gas guzzler, am not over-extended on any credit cards, etc. I have student loans that I keep paying on and I can’t even afford to go to the dentist. I am disheartened in that I had all of the ability to pay for these things and more, ten years ago, when I made less money. My money does not go as far as it used to. The horrible shame of it all is that the working people like myself are always the ones who suffer. All of the wall-street guys roll their eyes, complain and threaten until the Fed lowers their short term rates, and then they cash in on others misfortune. We are left maintaining bank owned properties with our own sweat and money so that our own properties are not devalued. The same thing happened with ENRON, etc. Where did all of the money go that was collected in fines? To fund the people who worked for the companies pensions? No, back into government coffers. I just wish that it could be one way or the other. If the Government is going to tax the crap out of me for everything I make or purchase, then give me a free education and free health care. If not, then stay out of my pockets so that I have something left to pay for this myself.
This feels like a slight recession that the media would have you believe is more liek a depression. Some things to consider though:
1) Can we really trust any of teh numebers the governement reports? Unemployment, CPI – they seem optimistic
2) The downturn in the economy has been going on for the better part of this decade.
3) I really don’t know too many people who are better off now than they were in 2000.
4) Energy independence is the key to climbing out of this hole. If everyone, who can, delays buying a new car for 12 to 24 months, the auto companies will be forced to produce what we want. That is very high mileage, efficient vehicles to get us off the addiction.
This will be a prolonged downturn; no amount of “fiscal” stimulus will alleviate the real pain to come. The lifeblood of the country, the availability of credit has gone from the equivalent of Niagra Falls to a trickle from your faucet. The vast majority of citizens have no savings to fall back on, Paycheck Johnny is in hock to his eyeballs. The fear-mongering the media has been propogating induces people to tighten the purse strings even more. Simple economics, if the consumer doesn’t spend the country will slow to a crawl.
Fiscal stimulus in the form of “rebates” is robbing from our future to pay for the present. Seems like the politicians haven’t learned a damn thing! The deficit is coming back to bite us…in the form of higher interest rates, irrespective if the Fed does or doesn’t cut the rates. Wake up!!!
Looking gloomy for the long run. How can either one of the guys running for President turn around the tide of jobs going overseas? Corporate leaders are in a “win win” situation. The lowly middleclass is in a”lose lose” situation. Whom to blame?
This DEPRESSION has been building for years and will last FOR YEARS TO COME.This is the longest running mainia in history and so will the DEPRESSION!
We are over $19 TRILLION in DEPT, and nobody even comes close to talking the true figures, this country has been bankrupt for the last 20years and keeps right on spending like there’s no tomorrow.
Our OIL problem is our own oil company AND A TOTALLY CORRUPT CONGRESS THAT SIT’S ON THEIR ASSES AND DOES NOTHING, but to line their own pocketbooks.
Our Auto Industry is bankrupt and on the verge if disappearing. Very very soon and the JAPS will have won the second world war AGAIN! Our Congress has given all of our heavy industry to every country all over the world, YUP that one thing Congress has done a very good job of, SCREWING the American people, all that counts is the New World Order!
Wake up American, IT’S HERE!
Ok, trying to look forward here what is this economy going to grow on? I don’t think the growth we’ve had since the mid 90’s is even sustainable. I wouldn’t be a bit shocked to see the market fall in to pre 90’s levels. If anything I see businesses looking at all the technology they have in place and utilizing it to do more with less, less being less people. Less people means less consumers. Less consumers means the market shrinks. Sure the companies profits will increase in the short term as they’re able to increase profits by decreasing overhead but over time profits will decrease as demand drops from lack of consumers.
Keep watching unemployment…
to John from San Diego-
You are actually too optimistic and here are the reasons why. We have already used every gimmick to artificially boost the economy. We have some of the lowest tax rates ever. We have a started a war which with it’s off the books deficit spending increases GDP. We have lowered interest rates as low as possible (actually, too low as we are now in an inflation spiral). Bernanke wrote his PHD thesis on what happened when interest rates were raised in the 1930’s. He is stuck between an Andy Gump and a used open pit and he knows it, but I digress. We have already sent out happy money to almost every American tax payer. We have injected billions of dollars into the economy by loaning money to banks that use toilet paper valued loans as collateral. There is still another 150 TRILLION dollars worth of derivates on the 4 majors books that will need to be moved to the balance sheet some day. We as Americans have one of the lowest saving rates as a nation ever. We as Americans are also carrying the highest personal debt levels ever. Americans have the lowest belief in their government’s ability to control the economy ever. Unemployment is increasing, disposable income is shrinking, and small business credit is decreasing. Commercial construction is starting to fall. More banks are failing every month. How much longer can we continue to bail out these institutions? Foreigners, heck Americans, are scared to hold dollars. American business icons (CITI, GM, etc) will disappear unless there are more bailouts. These losses will more than anything cause the consumer to cut back. Money market funds may be at risk. Stocks are going down. Home prices are falling. The metric with the highest correlation to home foreclosure is being underwater. There will be another million homes that reach this metric by the end of the year. We have lost our best antidote, education. The last generation likely grew up with a mom at home to help with home work or social issues. Now if a child does have two parents at home they are usually both working. There are fewer opportunities to help a student find a path to excellence these days. Even if a child does make it through these barriers, they often find themselves burdened with student loans for an extended period.
This is a fine mess we have gotten ourselves into. I can not say if it will take 10 years of no growth of 5 years of negative 3% contraction, either way we will see plenty of misery. The good news is that you will be able to buy in beautiful San Diego for 200K in a few years.
Charles is right. This economy is not close to bad. The early eighties were more difficult, and 1972-1974 was not great either. Yes, we have some complainers but they are always here. (Didn’t senator Gram talk about them?) The talk of recession has so far been a cry of the media. Individuals have just picked up on the news of the second. Soon someone will say that, it is over, and we might not even see two quaters of negative GDP growth which is the definition of a recession. Yes, CNN I-reports do tell of people complaining about the high price of gas, but most seem to have jobs. That is the difference. If unemployment doubled this year, then you might have something to talk about, but at the moment, it is just hot media coverage.
Bad, in my mind, is 12% unemployment and cost effective 16-18% fixed rate mortgages. Yes, the good old days when hair was big and leg warmers and sweat bands were the cool thing. My cousin was happy to get her 14% fixed rate mortgage. If she did not work for Apple in the eighties, she could not have afforded it.
Things could be worse, much worse. When the media pundit predicted that this “recession” could be a depression, boy they were way off line. Immagine a world where the women do not work outside of the home. Then take the “work force of men” and subtract 25%, that would be a difficult time.
Be glad that you have a job and live within your means, that is where responsible people should live anyway.
Lacking any leadership or willingness in Washington to address the source of the problem, I think it is nearer to the beginning. Housing alone will take 10-15 years to recover.
Long, long road ahead.
Dear Johnny Coffee Mug,
I wanted to clarify my comment of yesterday. I live in Long Island, not NYC but I work in NYC, so without thinking, it’s the place I put down where I live. Sorry ’bout that. I like to be honest.
My comments regarding the economny are based on my in-the-trenches-experience. I used to be a chef and still retain lots of friends in the Hospitality business. What they’re telling me now is things suck outright. For example, to see the lack of discretionary spending on the family level, look at the recent bankruptcy of the once mighty Bennigans restaurant chain. Just the start of things really, not the end. Restuarant spending is one of the first things to increase when times are roaring and is also the first to go in a sagging economy and nobody I know has seen a decrease in spending of this magnitide – in a long time. In NYC, true, the foriegn tourist is keeping things going but since the economies overseas are now starting to suffer for the same reason ours is (see recent devepments in England and Spain regaring declining home values for example) – this leads to the question – how long, prudence, will this too last?
Our economy was essentially over-inflated by the easy-home-loan/home-ATM-mentality money decade created by Chairman Greenspan to bail us out of the dot-com crash. Not news. Everybody knows that.
But the pain we are feeling now, is the end result of an economy that was artifically propped up over the last years by cheap and easy access to money, whcich created artificial rises in home prices and artificial rises in employment – all because of the overinflated spending — and now it must adjust down for the obverse reason – the restriction of access to cheap money for the consumer. No more easy home loans!
While people aren’t spending like they used to – which is good because it means you’ll now live within your means (thats how it always should have been) – it is also bad now, because the economy can’t absorb the loss of that spending without taking it through layoffs, bankruptcies (bennigans) and overall cost reduction.
Which leads me to review the history books. We have a economic situation that is starting to resemble characterisitcs of the depression of the 1930’s – rising inflation (by the way wish I could “strip out” volatile engery and food prices out of my purchases like our government does), deflation of personal assets (home), and creeping unempolyment. Granted, it is a different day. There are safeguards now, but given the right set of finanacial circumstances, those too can be undone. Things may not unfold the same. But they will unfold. Just how and the depth of which right now, nobody knows.
to end, I’d like to quote two people,
- Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929, “This crash is not going to have much effect on business.”
Ben Bernake, 2006, in testimony in front of congress regardign the subprime mess (paraphrsed), “We’ll be lucky if the subprime situation amounts to $50 billion and it won’t have any affect on home prices” (notre: the total now approaches $1 Trillion dollars. )
The cliche one hears is, it’s a recession if your neighbor loses his job; a depression if you lose yours. The analogy can be extended to homes, cars (the repo man is alive and well), and to a lesser degree benefits and health care (for those who have it). This ‘recession’ is turning into a ‘depression’ for more and more people under one or more of the above criteria. I work in one of the sectors that your other readers stated is in decline; but the ripple effects go far beyond that sector at the local level. that includes support businesses and even local government, as far as tax revenue goes.
It is just very, very hard to be convinced by the offhand observation that this is a shallow recession and near its bottom (”…pay no attention to that man behind the curtain…”)
“I think this bad economy is all a bunch of bull. I remember 11 to 12% unemployment and Interest rates of 18%. This is a walk in the park. If you say it is bad it will be bad. The only thing that is killing us right now is our energy dependence. A whole new congress can fix that. That is why I am voting for no incumbants!
Posted By Charles Hays, Thomasville GA : August 1, 2008 12:31 pm”
Charles you are obviously old and not working any more. When un-employment was 11-12% at least the jobs available paid. Ya unemployment is 5-6% now but that is because people either gave up entirely in the job market or they gave in a make close to min wage working for Micky D’S or Home Depot. Ya interest was 18% but home prices were reasonable makeing you payment afforable. You probably don’t have any cost of living expenses anymore and had some money saved in dumb cd’s and underneath your bed
Bottom is still a long way down. Economic terrorism such as we have will bring the west to its knees and it is only starting. Middle eastern oil money is slowly buying up what ever it can in the US and Europe. It is moving very slowly to go unnoticed. With $700B leaving the country each year combing back as a purchase of the Chrysler Building and other properties and businesses including the banking system. The economy will recover only to backslide once again unless we halt the flow of cash out of the country.
I think this bad economy is all a bunch of bull. I remember 11 to 12% unemployment and Interest rates of 18%. This is a walk in the park. If you say it is bad it will be bad. The only thing that is killing us right now is our energy dependence. A whole new congress can fix that. That is why I am voting for no incumbants!
Other than the impact of the price of gasoline, I would say we have bottomed out. At least where I live. I work for an industry that is expanding. I just bought a brand new home at a great price with the lowest interest rate that I have ever bought a home in 30 years. Both of my cars are just a couple of years old. I have one credit card with a small balance. The only thing that I am not doing is traveling like I used to.
I do believe we’re in a slowdown but I hope some positives come from it. This may be the wakeup call for Americans to stop living beyond their means, invest in energy saving items and the government to really start looking for alternative fuel means. My family of four have slowed down some from going out to eat as much, but you know what, that means more family time together to cook and play outdoors. We’re building and investing in stronger family ties. Try to look on the bright side – maybe people will learn to live within their means and spend more time with family and friends.
Economies go up and down, stock markets go up and down; regardless what party is in power. There are cycles. Most people only have themselves to blame with their spending habits.
So instead of contributing to your emergency fund, go ahead and keep drinking that daily Starbucks, keep that new fancy gas-guzzling lease (double whammy), keep that house you really couldn’t afford even when the economy was good.
No person, party, government or whatever can help you more than you can help yourself. Have some responsibility for yourself and your family. It isn’t always someone elses fault.
This truly is a country of opportunity, six and a half billion people on the planet and counting, most of them would like to live in the USA. Two weeks ago, after the Indy Mac debacle, I purchased WM stock at almost three dollars a share, today the stock is approaching six dollars, great opportunities’.
After reading the comments found on this blog for almost six months there is definitely an undercurrent that has me concerned. I asked my father in is eighty years, “Have you ever seen the price of bread, milk or gas go down?” He flatly replied, “NO”. I continue to see a handful of Americans raking in the dough, while the majority of Americans continue to pay the price, and this appears to be the way it has always been.
The plutocrats that run this country will not let the middle class die; they are too dependent on the backs of the middle class. Whether it is with Unemployment Insurance, GW six pack checks or the economic stimulus package, the middle class will not die. Hopefully, you can pick the correct opportunity and live the American dream.
I am under the following impressions. If I am wrong on any of these, some one please correct me.
The nation as a whole is much deeper in debt then ever in history.
If one was to take borrowed money (government deficit + increased personal debt) out of the equation, our economy hasn’t grown in a decade.
If one takes the top 2% of earners out of the equation, real income has made a significant drop in the last decade.
Maybe this is not Armageddon, but it also is not the same thing we have seen before. Everyone has been saying for as long as I remember (and I ain’t young) that “someday” the US will have to deal with a continuous accounts deficit.
Maybe “someday” is here. And maybe pretending we can continue the same is silly.
THE WOREST IS YET TO COME.ANY ONE WITH A CLEAR HEAD CAN SEE IF THE DEMS WIN ITS TAX TAX TAX. WE CAN NOT HANDEL MORE TAXES ON THE WORKING FAMLYS OF AMERICA. IF ITS SR JOHN ITS MORE OUT OF CONTROL SPENDING PLUS WAR WITH IRAN. WHAT WE NEED IS A 25% CUT IN FED JOBS A NEW ROUND OF STIMBLUS CHECKS FOR THE WORKING POOR AND THOSE UNDER 50.000 A YEAR A CUT OF 20% IN TAXES FOR 6 MONTHS FOR SMALL BUSINESS OWNERS A FREEZE ON FED TAXES BEING TAKEN OUT OF THOSE EARNING LESS THAN 25.000 A YEAR FOR 1 YEAR EXTENTION OF UNEMPLOYMENT FOR 12 MONTHS FOR THOSE WHO HAVE DEPLETED THEIR BENFITS A 1000 DOLLARS FUEL ADJUSTMENT PAY OUT TO EVERY AMERICAN WHO PAYED TAXES IN 07 THIS DOES NOT NEED TO BE SENT TO THOSE ON WELFARE AND A 1 DOLLAR INCREASE ON THE FED GAS TAX PER GALLON TO GET AMERICA SERIOUS ABOUT CONSERVEING AND MR T BOONE PICKENS TO RUN AS A INDEPENDENT PRES CHOICE FOR 08
It depends on where you live. Most of the US is experiencing a downturn, however.
In my opinion, the downturn is the hangover from excessively liberal government policies over the last 2+ decades. The notion that little to no regulation of business is a good idea has its limits. I agree that such policies foster competition and lower prices in general, but it seems to me that business promotes competition in other sectors of the economy, while trying to create a monopoly in their particular sector, often asking lawmakers to push sweetheart legislation on their behalf, to the detriment of the public. There have been countless examples of this, many that are related to support services in the Iraq war (Halliburton and Blackwater leap to mind). The people must retake control of our government soon, or we will soon be merely subjects to large business Robber-Barons, just as in the late 1800’s. In summary, the government has relinquished nearly all control of the economy. Its time to take it back.
I’m no fan of excessive taxation, but I’m also wise enough to know that you don’t get something for nothing. I like well maintained highways, clean water, convenient sewage disposal, compassionate medical care and all the other trappings of an affluent society. These must be paid for by the public. Continual tax cut upon tax cut is a denial of responsibility and a disgraceful disservice to our children and future generations that will have to pay our tab.
These days, many of our vital services are paid for by user fees (such as increasing toll roads, etc.). This is merely a tax in sheep’s clothing, most affecting those who can least afford it. Before 1980, most tax policies were better balanced. We need to return to more pragmatic policies, to remove the burden on the average citizen and require that those that can best afford it contribute more to the public welfare. Scripture in many, if not most, religions require that to whom much is given, much is required. Idle (hoarded) wealth does the world no good.
Government DOES and should have a role. That role should be to provide services that are vital to life, liberty and the pursuit of happiness, such as good roads. (Can you pay directly for the street in front of your house? How will you get to that beach or to work, for that matter if taxes are so low that the funds are not there to construct and maintain these facilities? How will business be profitable without operating infrastructure?
Wake up people! Shoulder your burden and stop passing it on to your children!
I’ve seen a lot of bad periods over the years but 2008 has got to be the worst I have ever seen. Even in previous downturns, people I talked to were still secure in their jobs. This year EVERYONE is scared because layoffs are becoming so severe. Put that on top of the meteoric rise in food, housing and practically every other household expense a family faces. We’re on a treadmill and are no longer able to keep up!
Also, many people have themselves to blame for poor choices. Don’t think you can raise kids in a city like NYC, SFO, Boston, DC or LA unless both you and your spouce are each making $150,000 a year and have stable employment. I couldn’t imagine raising a child anywhere in this area on a 5 figure salary– even $99,000 a year
Don’t buy a home where the purchase price is 4 times your income and then act shocked when the monthly payment jumps on that teaser loan.
I personally feel that we have not been out of recession since 2000. I remember older friends of mine getting jobs easily in the 90’s after they graduated. When I graduated 5 years ago looking for a “modest” job, a step above McDonald’s, was and still is tuff. With the recent housing boom rents/cost of living became unreachable for me. I still believe rents/housing is still way to high to this day. I would like to personally thank all the 35-55 year olds who made stupid greedy decisions to make my life harder. Then they have the gall to say when I was younger I did this at this age etc…. Now I don’t like to blame others for my woes but come on people, I wish I could pay 25% of my expensive college educated income to rent.
It really is the cost of living — if your income is too low then you are SOL. Here in NYC, $100,000 is really minimum wage for one person. I make a little less than this and would never for one minute think I could support children or a family here.
Economically, the city & NYC metro region are doing great as good or better than 1998-2000 but housing costs, food, utilities and other necessities are ridiculously expensive.
Right now, I am just biding my time here at this company since I have been here less than 1 year, paying off debt and then looking to move. I grew up in NYC and now live in Stamford CT which has gotten extremely expensive. I pay $1,894 for a 2 bedroom apt just for myself and that is cheap for the area.
I probably spend a few hundred a week on gas & train fares just driving into Manhattan after work to go out on weeknights.
On the other hand, I am optimistic — I constantly get calls from recruiters & actual companies about my resume and I am not even looking.
People who complain about not getting raises, the cost of health care etc.. you have to quit whining and do something about it so you can get a better job where your skills are more in demand.
In past recessions, did we have a near complete collapse of the entire financial system? No. Did we have the two GSEs nearly fail? No. Did we see massive across the board fare and fee hikes at airlines? No. Did we see massive across the board record losses at investment banks, airlines and auto manufacturers? No. Did we see record foreclosures and delinquencies? No. Did we see record home price declines? No. Did we see record oil prices? Yes, in some of them. The bottom line is there are soooooo many things going wrong in the economy right now that I can’t help but think we are on the verge of a global recession, and a very deep one. I don’t think we’ll see a depression, but all of the economy’s ills are just STARTING to affect growth. These things will take time to work their way through, and when they finally do, ya better buckle up, because it is going to be one very rough ride. I challenge ANYONE to convince me of the contrary. The only strength this economy has right now is exports. And wouldn’t ya know it, suddenly the rest of the world is starting to slow down now too. Oooops! There goes the last shoe…and we’ll soon be barefoot!
“If consumers start buying smaller, more fuel-efficient cars instead of SUVs, that makes this a depression? And I’m the one who’s accused of having my head in the clouds?”
I would agree that this is a good thing, if the smaller cars we were buying were made in the USA, but for the most part they are not.
The US is in a relatively shallow recession and very near the bottom. The market fluctuations over the past few weeks are indications that we are bouncing along a market bottom. Some areas are contracting and some are growing. The “media” seems to seize on the negative news and repeats it over and over which results in the average American feeling as if the economy is tanking. It just is not true. The US Government needs to stay out of the way so that the recovery can occur. Watch for improving economic numbers over the next 6 months.
The economic slump comprises industries that are slumping (airlines, autos, homebuilding, mortgages, real estate, etc.) and industries that are expanding (agriculture, energy, health care, mining, technology, etc.). The gains outnumber the losses, so we get slow growth. But, the growth is slower than the rate of productivity gains, so jobs are slowly shed. We need to increase exports and cut the trade deficit, and we are. We need to cut the federal budget deficit, and the only way we can do this is to tax the rich, because they are the only ones left who can afford it. It’s ok: we made them rich. Everybody else will have to switch to cheaper sources of the basics: food, clothing, shelter, health care, and social services. We can do it.
This slump will eventually end, and growth will return. Then, some day, we’ll have another slump. It goes on and on and on and on.
Paul, I’ve got another one for you: why is the news that Governor Schwarzenegger slashed the wages of 200,000 state employees down to federal minimum wage and laying off 20,000 temp workers in order to address a $15.2 billion deficit buried in the local news?????? http://www.mercurynews.com/localnewsheadlines/ci_10056677
Corbin, you did everything right? you picked the right state to live in that is carrying the rest of the country. You picked the perfect field to work in, have 2.5 children, put 20% down on your house, don’t jay walk.
I wish you had picked up the phone and told me the auto market was gonna colapse, my 401K was gonna be cut in half, the price of gasoline was gonna go to $4/gal, and food prices were gonna skyrocket. Then I would have been able to save more of my $110K income an been able to afford more than a used $5000 Ford Focus.
Many of us ARE doing the right thing and are still in a pickle because of circumstances beyond our control!!!!
for D, Colorado Springs- if you’re going to comment on how dumb the group of idiots are, you may want to check your grammar first.
I do not see the point in comparing this so-called slump against past recessions. If I had to guess (and simplify), I would say that a large part of this slump stems from the extensive housing-bank bust. That makes this slump unique from other slumps-recessions and those who attempt to predict all the “whens and ifs” ridiculous. It does give them a job though.
Free market indeed- i think it’s time to reaccess the definition of what a free market is. So free that the government has to get involved to bail out “key” companies who made bad biz decisions (to increase profits sooner than later), and homeowners who bit off more than they can chew.
Until the United States makes some effort at balancing their budget, I look at the current problems as being a systemic result of its $50 trillion debt and $460 billion deficit for the coming year, which works out to about $16,000 debt and $1,500 deficit for each American citizen, over and above any personal debts they have. This indebtedness is coming home to roost in the form of a depreciating dollar and inflation around being exported to the rest of the world. Stimulus packages like the one the US government just passed amounts to writing yourself a cheque to make yourself richer, and that’s why it didn’t really help. I don’t know if we are closer to the end or the beginning, but I feel we still have a long way to go.
While I feel for the rest of the nation, I feel the economy is being bolstered by states such as Oklahoma, where gas is the cheapest in the nation, the housing market is strong and our economy has been labeled recession-proof.
I think it proves the point that many of the hard times today are the fault of the people who swipe their home ATM to buy another new SUV or a house beyond their means. It is certainly a tough lesson to learn, but it has to happen.
As far as the recession goes, I think labeling it a “recession” or not is a futile exercise. Times are hard for the majority of the middle class, and whoever said auto loans and credit card defaults will be next is right. People who lived beyond their means now can’t pay back that debt due to balooning costs. Turns out they should have saved money while they could. But I believe that sometime towards the end of 2009 and beginning of 2010, after the credit card defaults are bottoming out, the average finances of the middle class will improve, which I believe is a much better indication than the GDP of the state of our nation.
Paul, have you ever thought of the simple question: why do you think everybody should be happy to see the next economic boom on the horizon ?
For example, I am not.
Sure, If I was Wall-Street speculator, I would love to see the next bubble growing so I can make easy profit and then when things turn south, government will bail me out.
But what do the regular people have from it ? What did we have from so-called 2003-2007 housing boom ?
In most places: no raises, no bonuses, just house prices we cannot afford anymore ?
Yes, on the good side you see 2-3 years of more or less stable job market, but then opportunities disappear quickly once bubble is burst.
At the end of the day, you are out of job, with the house and debt you cannot afford. And all your retirement contributions went to the overpriced assets
so you would be better off even if you saved cash all that time.
We are always taught by the different “financial gurus” to chase some pyramid scheme, such as stock or houses or whatever the next delusion is going to be.
And, sure, we are always have to stay there for the “long term”, or, I guess, forever, in their dreams, so we will never see our money back.
So, you know what, if there going to be a recession or depression – fine, so be it.
But, please Lord, save us from the next economic “BOOM”.
D, Colorado Springs, CO,
It’s not that easy to “quit”, “move”, go back to school”, etc. I provide for a family of 5 and work a full time job and work till 2AM at my side business http://www.DetroitMuscleTechnologies.com.
Years ago things were great. Raises at work. Full rentals properties. Made very OK money. BUT the economy caved in around ME. It was nothing I did. I’d like to sell my house and buy a very modest house (I DON’T live beyond my means and have 50% equity) but would be LUCKY to get what I paid for it TEN years ago. It’s that bad here in the Detroit area. It’s nothing I did when my employer stopped passing out raises. In fact I work harder than ever. I looked for work but there is nothing left that pays better. I had nothing to do with the auto market caving in but it directly affects me and everyone else in the midwest (and a bigger area than just OH and MI). Things are TOUGH and trust me, even you will feel the trickle down of outsourced/loss of manufacturing. The only way you can avoid it is to accept a much lower std of living. Maybe you have already.
PS Your attitude to your fellow man is definately not flattering.
Althought your data is technically correct, the back to back recessions of 1980 and 1981 – 1982 were, effectively, more like a 2 1/2 to 3 year recession. Jobs really never recovered between the 80 and 81 – 82 recessions (although technically we had a short period of economic expansion). I’m probably older than most of your contributors, but I lived (and worked) through that recession. I can tell you that this one is beginning to feel a lot like that one – stagflation here we come. (To be more precise, this recession seems like a combination of oil shock and stagflation recessions of the 70’s and 80’s)
I agree that the economy will come back. I just believe we are close to the beginning than the end.
Wow, this might be dumbest group of idiots that have ever been allowed to express their opinion.
I am middle class and doing fine, I can make a phone call and have two jobs from past employers (I must actually be that good) with decent pay. It is called working hard and being a good employee. 1/2 these boobs are probably the type that if they have a headache they gotta go home, or try to soak the company for every minute of sick time. Or like a couple of gents I know, get drunk on Sunday and suddenly have the flu on Monday. I am not rich but have a great home, decent cars, and have travelled the world, buy what I want, go out to nice restaurants…only debt is my house.
Look, companies are making record profits, 98% of homes are being paid for on time, and my last trip to Home Depot I was fighting the crowds (somebody out there is spending)this “recession” is the media looking for some news, 1.9% growth ain’t great but it is growth.
For all you saps that don’t like your job, quit! Cost of living to high in NYC, move! Made a bad decision on your house, deal with it (nobody is giving me freebies)! You all are what is wrong with America today, sorry, lazy, whining, want something for nothing hacks……..
John from Ellicott City-
obviously you do quite well for yourself since you live in the 3rd wealthiest county in the US. it’s no wonder you are a GW Bush fanatic. Your comments, as well as your arrogance is not surprising. “the slowdown is largely mental” those words sound awfully familiar.
if you removed yourself from your gated community for once, you may see a different picture sir.
Are we near the end of the recession? possibly. Will it get better for the little guy? not any time soon. What we tend to forget is that there is a difference between the economy and finances. If the economy recovers, our finances will still be in shambles. The middle class standard of living will deteriorate as we struggle to pay off what we borrowed and what has been borrowed in our name. We will watch bloated industries such as health care and higher education go through a revolution as they realize that we can’t refinance our homes for everything. This will sort itself out in a decade or so (especially if the government keeps interfering with the “free market”) and we will have to reassess what is truly important to us (and pay cash as we go…)
How come we never see this dribble “At some point, the economy and markets will turn.” while the market is rising? There is a reason why it’s called “bull!”
Listen Walt Burnt Coffee,
You’re far too pesimistic Old Sport. You chose to live in NYC, correct? No one is forcing you to live in the Big Apple, correct?
I don’t know where you are looking, but perhaps you should be looking elsewhere. Have you looked at XOM? IBM? JPM? All RECORD profits. Not losses. Did a few businesses overexpand? Certainly. There is not a public or private policy ever created to prevent poor business decisions. But that does not mean we are in a great slowdown or great whatever! People who speak of gloom & doom want to sell newspapers or have a political agenda to get their candidate elected.
If your friends aren’t spending, perhaps you need new friends, Old Sport.
There NEVER was a recession. The slowdown is largely mental. And yes, the bottom is in! Buy, buy, buy!!!
Stocks always go up!!!
This country is so full of greed, corruption, and a meddling government that this recession may outlast our grandchildren. The pitchforks shouldn’t be sent to Glen Beck at CNN. They should be sent to Congress.
Although I admire your continuous optimism, I mean someone has to say good things, I am one of those half-empty guys when it comes to economic matters and especially my regard for Wall Street which is filled with pundits who really know very little except how to make those beautiful charts of meaningless statistics. I don’t know how those pundits missed the mess we are in, I mean don’t they read? Couldn’t they collect data from various news articles and come to the same conclusion I did right after Katrina hit? Unfortunately I believe this will be a long winded recession. With inflation draining the middle class and the ‘perceived’ wealth of most Americans shrinking as their real estate fortunes drop, I think this will be a recession unlike any of us has experienced in a long, long time, if ever. One of the major problems is the last recovery we experienced since the dot.com and 9/11 bust. This last so-called recovery was the first time, ever, that the middle class did NOT directly benefit from. Our incomes didn’t rise nor did our benefits. Sure, many felt richer when the value of their homes increased but that was just ‘paper’ wealth and not real wealth as evidenced by larger paychecks and bigger savings accounts. The only groups who seemed to benefit were the wealthy (tax cuts and increased dividends taxed at 15%), the know-nothings on Wall Street who earned outlandish bonuses selling junk to mutual funds and anyone else who would buy the junk they were peddling (see CDOs etc), mortgage company executives who disregarded all caution and opened up the bank to everyone, and I mean everyone. In the end I hope, the falling housing prices, increased energy costs and the multitude of other problems we are facing, will make us stronger in the long-term. That is unless our intellectually-challenged politicians cannot enact ‘wise’ legislation regarding energy, deficit reduction, fixing social security and whatever else that needs to be done. On the downside I think our politicians are really too stupid and too petty to enact or adopt anything that is meaningful or wise.
I truly believe the economy is going to contract hard. Times are changing. Looking back historically this probably has more in common with the great depression than post war recessions. This was pretty much a kick in the head to wake up to people who have been using their homes as an ATM machine and credit cards to supplement their salaries. The economy grew large and fast artificially on credit. Now people are starting to realizing how vulnerable they are now that the ATM is running dry and that they’re going to have to start paying it back on their salaries alone. Flooding the market with credit is not going to save us this time. People see the edge now and realize how close they are to going over it and don’t want to be “that” person. The days of people living off credit are ending and the economy will shrink (just as it grew) because of that. Most of the people still using credit at this point are probably using it to survive because they’ve already gone over the edge.
The government can’t afford to be bailing anyone out. They’re already living in debt. When is their credit line going to be cut off so they’re forced to live within their means? I really hope the next president makes balancing the budget a top priority.
The problem is that with a higher retired to worker ratio than any time in history, expected soon to reach 2 to one, there are too many baby boomers to care for for us to see the kind of growth we saw in the nineties. IN addition, people need to realize that we have a limited supply of oil, so even if prices go up, they will come back down again. Societies do NOT always recover from economic woes. Rome did not, neither did the Mongol Empire. But eventually these regions did “readjust” and economically recover from their “economic end of days.” It just took hundreds years.
I wanted to write you that you are too optimistic, but apparetnly the job has already been done by the first twenty or so contributors. “This too shall pass.” – of course, it will, but how long will it take? Remember, in the long run, we’re all dead.
Uh, Listen Johnny Coffee Mug,
Things really suck here in NY. I’m in a good stable job but with the rising cost of everything from food to home heating fuel, I feel tapped out. I don’t know what cloud you live on, but it isn’t in the economy I see around me. The economy is tanking everywhere I look – nobody I know is spending like they used to (which is a good thing) and there is only one question left – is this the Great Recession or the Great Depression? It all depends upon consumer spending. We wont recover from this for a least several years – so don’t hold your breath and try to call a bottom. The bottom is a long way off and nobody knows how far down it will go yet.
I reach retirement age in 6 years. I pretty well expect this recession will still be present then.
Forget the historic trends and pay attention to the facts. We have lots of problems. Housing prices will continue to decline for probably another 3 years, if not longer. Well-paying jobs for what was the non-college-educated middle class are all but gone. Wages for the rest of us are stagnant (that is, those of us who aren’t CEOs). The costs of oil and other commodities aren’t likely to see pre-2008 levels again. Consumers are leveraged to the hilt. Companies are cutting inventory? That’s because their sales are down with little prospect of recovery on the horizon. But of course lower production means they’ll need fewer workers…
Widespread defaulting on credit cards and auto loans will come next.
What may be the most dangerous factor is that at the top of our economy are several layers of financial enterprise that have nothing to do with reality. It’s a grand Ponzi scheme that could well collapse.
At this moment, we are very lucky that it is only a recession. It could get a lot worse.
There never was an economic slump, so we can’t say it is beginning or ending. Sure, some people are hurting, but some other people are doing quite fine, thank you very little. This is the NORMAL process, the ebbs and flows of money. Just like the ocean, there is high tide and low tide. If you own a diversified portfolio, you can ride out any rough waves.
NOW IS THE TIME TO BUY STOCKS!!!
THE MARKET HAS BOTTOMED!!!
The Feds have rescued us. Think of how many crises G.Bush has had to respond to: Tech Bubble, 9/11, Al Qaeda, Sadaam Hussein, Katrina, High Oil prices, Housing Crash.
History will remember him as the Great Janitor because W has to clean everyone else’s mess up.
THE BEST IS YET TO COME!
as a partner in a IT consulting and staffing firm, we are directly tied to 2 very critical items in our economy. Capital expenditures by corporations and jobs. Clearly, judging by our financials, this started back in Sept/Oct of last year. We have also seen things start to flatten out. Whether it is a pause in a steeper decline or the bottom is unknown. We did recapture what we lost last year in the 1st and 2nd quarter.
The Chicago housing market has a supply of 99 months to work through according to Crains. 8+ years due to overbuilding.Consumers have pulled back, but what I hear about most is a lifestyle changes.I believe we are in for 10 years of relatively flat growth. Not the end of the world, just a sea change in how people will live and what is really important.
Also to those who say we have to manufacture things I say we do.Now we are the ones who conceptualize dreams and who design them.they are built elsewhere. What we need to do is make sure are children are prepared educationally for the future or they will end up at dead end service jobs.Truly a country of haves and have nots.
All these big shot MBAs and Governement leaders could not determine right from wrong in all of the latest busts (housing, financials, etc.)and now we are expected to be believe them that all the bad things have passed. Things are going to only get worse. We produce nothing but paper. Paper profits, paper jobs, paper companies. Remember a house of cards is made from paper and what we have is an economy of cards (paper). Real estate and other financial gurus say housing will rebound and to go out an get the deals now. Why? Prices of house have only one direction to go – down. Down until the price of an average home comes down to where it is affordable for the average family. Families can’t be making $45,000 per year and buy $800,000 McMansions.
No one is saying anything about the other serious economic problems being experienced in the credit card and automobile financing. The default rates here rival, if not exceed, the foreclosure rates for homes. Funny no one is even mentioning them.
Our leaders need to be candid with the people and tell them about the upcoming struggles for the long haul. We can’t keep using the governemnt to bail out anything and everything.
How do you stay employed?And what is in that coffe cup as it certainly is not coffee? The consumer is not only dead but has been burried in 200 ft of perma-frost.
Nothing changes with stimulas checks and Real Estate bail-outs asthe lousy economic numbers just get moved to an even lousier government category on the U.S. balance sheet.
You are a shill if you say that we are near the end of a recession. There is a lot more toxic garbage that needs to be rid of from the financials. The death by a thousand cuts policy adopted by Merill, will only serve to prolong the agony and recession.
It’s all about jobs and wages. Absolutely nothing will turn around until the cost of living takes a big hit downward – don’t count on that – or we create real jobs that pay a living wage – don’t count on that either.
While we’re tring to figure out how to get out of this mess, foreign nations will buy our prized assets – corporations and real estate.
They will control the direction this country is going – it’s sickining to think of but that’s where we’re headed. Remember when the Saudi’s tried to buy our ports? They currently control our economy via the cost of oil – our economist call the rising prices inflation when infact it is a tax on our income. The cost of everything has gone up and jobs and wages have gone down. Don’t kid yourself – if we don’t wake up soon it won’t be a depression – it will be a take over by foreign gov’ts i.e. china, india and saudi arabia.
The jobs that have been outsoursed to other countries should be reported to homeland security – have you tried to commmunicate with these people? It’s the biggest run around and rip off in the world. If this isn’t terrorist activity what else would you call it?What happened to customer service? Outsoursing is the problem. Our corporations are being destroyed by these clowns and CEO’s are making more money and employee benifits and salaries are going down.
Don’t expect anything to get better soon – the worst is yet to come.
First of all, if goverment would still report honest inflation numbers the way it did up to 1996 instead of cooking the books we would have been in a recession for a while.
Second, the earth’s resources are finite. We (the US) have 5% of the world’s population and consume 25% of the world’s resources. In case no one has noticed, over 3 billion Asians and South Americans (India, China, Iran, Saudi-Arabia, Brasil, etc.) have just pulled the chair up to the table. They will demand and take their fair share of the cake.
We have been living on borrowed money and resources, this is the end of an era versus a typical boom-bust cycle. An economy simple can’t be sustained by selling houses or fairy dust to one another with borrowed money and have government bail out every possible Ponzi scheme gone wrong.
This isn’t like your dad’s recession. This is a WHOLE new ballgame. The MBA’s have outsourced SO many jobs that there is nothing left to manufacture to turn this economy around.
Some might say HEALTH CARE is the panacia. How can that be? What are we gonna echange the same dollar as we put band-aids on each other?!?! The small, 40 person company I’ve worked for for 15 years has gone fromGREAT, full coverage Blue Cross to a $5000 deductible heath savings account that costs me $360/mth. I used to get an adult acne med for $300/mth with a $15 co-pay. NOW, because I have to pay ALL medical expenses for the first $5000, I get the generic for, GET THIS, $6/mth at Costco! I recently avoided the ER that the Urgent Care recommended when I had Pneumonia. I called my family doc at 10PM and said I’d see him in the AM for a shot. Even HE said I saved myself $5000 in that one ER vist alone. So if I, a healthy 45yo, am avoiding $8000/year in medical costs, and a millions of others do the same, WHO is gonna pay for the Health Care panacia? Even a doc that live across the strert agrees.
Basically this country NEEDS to MAKE stuff. Look at all the emerging and solid economies around the world. Show me one that is stricly an importer and doesn’t manufacture STUFF.
On top of that, the younger generations, seems more inclined to to listen to thier Ipods that actually do any work. I kn ow some will chime in that THEY aren’t like that but look around, MANY are (lazy). We recently fired the 2nd 20 something that emailed, text messaged, talked on his cell and basically avoided anything that resembled real “work”. And they were hired for PURCHASING.
Whew, we’re screwed. Gotta get back to work. seems like the people IN THE TRENCHES that actually DO WORK are REALLY getting dumped on. Oh, and our small 40 person company, has give no raises in 5 years but the owners have purchased a 2008 Vanquish, 2008 Challenger, 2008 “427″ Vette, Copperhead Viper and taken a week long trip to Pebble Beach golfing and upon return had a semi deliver wine frdges, cases of wine and a 4′ x 4′ picture of the 18th hole. The rich ARE getting richer. Time for a revolution!
We will continue our decline. They may mask it however we are losing manufacturing jobs by the thousands and replacing them with nothing. Even educated jobs are leaving to lower cost countries. Until they revise the trade agreements only the companies doing business overseas will benefit. However even this is limited because they still count on US people to buy their products. People need to make enough money to pay their bills and have some left over. THis is currently not the situation and unfortunately nobody is trying to change this. I wonder why? If we don’t have enough jobs in the US to keep our own people employed then why would our government encourage companies to ship jobs away? Seems like they would offer tax breaks to keep jobs here instead of shipping them away. What are we thinking?
Last I heard even traditional rah-rah cheerleaders such as brokerage analysts didn’t expect any housing recovery until the end of 2009 at the earliest.
With real wages stagnane since the 1970s, without the ability to use their home as a glorified ATM, consumers have little choice but to cut back their spending.
And previous recessions show us that consumers will indeed cut spending and save with a vengence, once they are convinced their job is threatened.
Let’s see minimum wage has been increased to $6.65 an hour that comes to around $13,832 a year before tax. Rent is conservatively around $900 a month in the not-so-good neighborhoods, around $10,800 a year. Gas, food, utilities, health insuren, clothes….get the picture, oh yeah half of the nation might be seeing a turnarond, but what about the other half. Look around and see the direction that our leaders are taking us. There are countries around us already who have the extremely wealthy and the extremely poor. It looks like we are joining their ranks.
I feel we are in a recession, but no where near the end of it. People are surviving by using their credit cards. When those are maxed out, watch out below
I’m expecting the recession to be approaching the end. I’m investing as though it is. I’ve been screaming about a recession and the falling value of the dollar long before the incompetent federal administration admitted it. Once the Fed raises rates, and the dollar gains some value, all those imports(including gas!) will go down in price. People will spend more and this recession will ease.
I think the economy will go sideways similar to Japan until we make some really heard decisions. Those decisions won’t be made at least until after November. It will be status quo stinky at least until then and probably longer.
I think it’s an overstatement to say we’re in a recession. We’re in a period of slugghish growth, but it’s still growth, not a recession.
Housing has a couple more years to go. I may be off but the housing decline which lasted thru the early 90s really didn’t get a rebound until around 2000, and than only lasted five furious yrs. That cycle may not be a template for future boom bust periods but it makes it simpler to guess.
The banking crisis has been lifted off of Wall Streets shoulders and added to the public debt. That should lead the bull market and I think we are in the beginning of a first leg up.
That doesn’t mean we won’t see more corrections, but unless we get really voluminous days with a great upheaval of 400-700 points these 200 pt gyrations are nothing compared to the 80s. What is exceptional are the moves in highly illiquid funds which cause the stocks prices of active trades to be more than quaint. It’s not unusual to see 10% declines followed by a recover in a few days. That reeks of special programs playing with the market. Go ahead and deny it like a good soldier. But even the town idiot on a bad day knows the houses on the Street are owned by the families of Greenwich. So if they feel like scuttling a deal or making the pension fund manager a fool for the day they will just to spite them. After all, whats a hundred million dollars to someone with their right arm on the Treasuries printing presses and the left on the wheel of a great ego? Nothing.
What this means is if you want to make money the old fashioned way you’d better have a seat on the xchange. It’s no coincidence that Bill Miller is lagging. How could he miss the commodities? Not for lack of ambition. He probably just didn’t wear the right tie to school. And in five to 10 yrs we’ll be reminded that he got his long term survivors back on track while the holders of biotechs and energy stocks were engulfed with debt that no one wanted.
When a bank sells its paper for 20 cents than tell me, who is honestly making money on the Street. That is except the Lodges and Mellon’s, the Rockefellers and Carnegies. Old money my friend doesn’t dine on Wall Street. They eat it.
I truly feel we are in for a long haul when it comes to this recession. There is still alot of truth telling that needs to come to the market, and the consumer will bear the results. All of the discussion around mortgage related securities and the governments involvement is scaring your average consumer out of the homebuying arena. Until housing regains its footing, the economy is a house on sinking sand. Beware of the Pay Option Arm portfolio, Wachovia’s recent announcement and corresponding writedown was the tip of the iceberg.
Government has no fix for the CDO, there are simply too many layers. As the recent housing rescue bill illustrates the lack of understanding. The height of the boom was flush with 80/20 lending, yet the new policy states the borrower must satisfy all subordinate liens to qualify for aid. How does a borrower who cannot make the payments come up with cash to cover a 2nd mortgage balance in full?
Again, much talk, little solutions.
Of course “Near” an end or “just” beginning are concepts that are pretty loose. I suppose you mean are we nearer the end then the beginning of this thing.
Now, me, I think we haven’t actually come out of the crash of 2000. All the so called “growth” since then was fueled by borrowing and a totally artificial housing bubble. Now are are paying the price for hiding our spinach under the table cloth because mean ol’ step mom is going to make us eat it now. And it was a whole lot more palatable then. But the point is, if seen in that light, we are closer to the end then the beginning, but there is still quite a lot left. As Mr. M. pointed out, every month of “slowdown”, “correction” or what ever you call it is a long time for the people in it.
Not to mention, we wont even see the real picture until after November.
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It’ll be fine after election year. We are not in a recession! 2008 is still better than 1978, it’s even better than 1988 when Americans were whining that the Japanese becoming powerful in the USA, today whining about Dubai becoming powerful in the USA.. It’s a never-ending cycle and the USA ALWAYS BENEFITS. Now is not the time to be isolationist.