Did anyone hear of the 100 Trillion in toxic derivatives circling the globe? Who’s going to write these down? Until the middle class comes back, Wall st. won’t…period!
to: Stephen- ‘As goes GM so goes the nation”,
To hell with the Big Three Auto Companies. Them and their private JETS!
How many Americans fly around in a @#!% private jet? We’re lucky if we fly first-class!
They’re “too good” to fly even first-class with the americans they’re begging.
Any of you who agree with this bailout, I’ll like to point you to a welfare recipient who pulls-up (in a Cadillac) to a welfare office to collect a CHECK.
NO DIFFERENCE !!!!!!!!!!!!!!!!
If the morons, we call our Federal representative(who they represent is still to be determined), extend some type of help to the Auto industry, then 2009 might just be a year that the economy started to head in the right direction. ‘As goes GM so goes the nation” is not just a slogan and there are still many industries that depend on the Auto makers and I for one do not want to give up one more manufacturing industry to our overseas competitors and sometimes adversaries. The government is quick enough to suck tax dollars out of the Auto industry in good time, however in their wisdom they seem to want to let them and the rest of the nation go under.
While I don’t see it happening, any kind of recovery happening as early as 2009 will be nothing but a mirage. A mirage caused by massive infusions of capital from the government (capital that it must borrow).
The government can “goose” the economy all it wants with stimulus packages and bailouts. Until the fundamentals (job security/creation, entitlement program reforms, health care cost/quality/accessibility/expectations, income inequality, housing affordability, energy security, education cost/quality, and aging infrastructure) become sound once again, growth will continue to flatline.
I work in emergency medicine, and all of this reminds me of a pulseless patient who has an electrolyte imbalance. One can shock or pace the patient all one wants, but until the underlying problem is treated, any observed positive results are transient. The body’s own balance must be restored before the medical team can have any hope of the patient surviving on his/her own. Our economic situation is similar. We can create temporary growth using–as in medicine–successively larger stimuli, or we can “treat” the underlying problems. Only then can we return to true growth.
Until that happens, I won’t be taking on any unnecessary financial obligations. My 401(k) balance will also remain in a guaranteed interest fund, where it has been since I moved my money back in July. All of my banking activities will be done with the local credit union I moved all of my funds to. I will continue to drive my five-year-old car and I will continue to vehemently oppose any government intervention or “quick fix.”
There will be no recovery until the truth is faced.
The system is being cooked by crooked con artists.
It will take many years of sweat and tears to came anywhere near where the common man was 18 months ago.
HELLO PAUL!
Your Massive Bailout… FAILED !!!
We told you, so!
These people are CROOKS !!! When will you learn. The BAILOUTS WON’T WORK- homeowners, companies, banks, etc.
Half the Bailout spent enriching the banking thieves. Paulson and his “royal change of mind”- promising one thing and doing another.
I am just sorry the country is suffering because of incompetent economic engineering do-gooders like you.
Face it- this is a capitalistic society not socialism. This country was founded as such. The wheels have been in motion for hundreds of years. Paulson and his band of thieves can only make matters worse.
Lastly- What do you expect should happen to an economy when crooks like the CEO of Goldman-Sachs makes $50 million last year and the company is rewarded by former employee Paulson with a Bailout.
Paul- you are so naive.
Let’s see.
Early 2009 or late 2008 the autoindustry goes bankrupt. That’s how many million jobs lost?
I’d say no.
Wake up Polyanna.
The economy will bottom around the end of next year, probably in Q4. Housing prices are correcting towards being affordable, but they aren’t there yet. The correction seems to be accelerating.
We need the new government to enact a direct stimulus program that makes jobs, like the WPA of the 1930s. Then, force the lenders to sit down with the buyers and lower the interest rates on their exploding HARM loans, with no taxpayer money involved. Any loans that can’t be reworked should go directly to short sales of the properties to clear the markets and the debts. Force the write-offs and get on with the future.
We will see growth in areas of the economy other than mortgages, housing, and autos by the end of next year.
Everytime I see one of these boards I cringe. Everyone is totally ignoring the REAL reason we are in this mess.
Reaganonics people!!! Remember?? “Let’s make the rich RICH! and they will be so happy it will trickle down to you grunts on the factory floor.” Didn’t happen. Both Republicans and Democrats are guilty of perpetrating this horror. Wages are stagnant for 15/20 years. Come On! No wonder we are all in debt. Ask anyone who worked a factory job 25 years ago what their wage was and look what they are now. .01 percent of Americans own 99 percent of the money. The CEO and owners of companies only care about themeselves. The true goal of a wage slave class has been successfull. And now it’s all falling apart. Our wallets and purses are shut tight. We haven’t saved a penny since 2005…well, it’s payback. It’s gonna be a rough ride but the strong will survive. I agree with other posters that are indicating 5 years before anything to ‘normal’ returns. Question is: Should we allow ‘Normal’ to return? One more thought:Everyone needs to contact their Congress rep and DEMAND no more (self voted)raises for 10 years!
Dear Johnny Coffee Mug,
We’re probably not even going to see a glimmer of the end of this until 2010 or 2011. Economists don’t want to admit it, but we’re following the same path of the Great Depression of 1929, including the same stupid mistakes made by lawmakers and politicians then as now, ala the bank bailout to help put a “floor under housing prices (which is green-speak for artificially keeping them high priced and unaffordable to the masses, which preserves their bank equity and makes the loans valuable but houses still unattainable by other buyers), the car maker bailout and whatever future disastrous program the future Obama government initiates. The Depression of 1929 was made much worse and three-fold longer, by government intervention, in the propping up of house, food and commodity prices, which in turn caused higher levels of unaffordability, which in turn caused the government to spend more money on jobs programs and subsidies – which is just like what the incoming President is proposing now. The Chief of Merril Lynch tends to agree that were heading toward a depression-style period. To quote from a Financial Times article published on line on11/8/08: “The global economy is entering a slowdown of epic proportions, comparable to the Great Depression, John Thain, chairman and chief executive of Merrill Lynch, warned on Tuesday. “Right now, the US economy is contracting very rapidly. We are looking at a period of global slowdown, and a global slowdown in economic activity that affects everyone who participates in global markets,” he told investors. “This is not like 1987 or 1998 or 2001. The contraction going on is bigger than that. We will in fact look back to the 1929 period to see the kind of slowdown we’re seeing now.”
This is the most outright, jaw-dropping admission by a public figure, which, by the way, mirrors what the average Joe the plumber already knows – which is that the people have stopped spending in it’s tracks and the economy is sickly and is shrinking extremely fast. To make matters worse, we have left the inflationary cycle in the dust and entered a deflationary cycle, which is worse then inflation and scares the pants of those uber-optomistic economists we keep hearing from, telling all of us in the trenches that we’re not in a recession yet, even though everyone you know knows somebody that has either lost their savings in the crappy stock market, or has lost their job or is going to shortly bite it — and while all that’s going on, you’re watching your income evaporate due to higher food prices and other uncontrollables, which the government says don’t count in the consumer price index!
We’re clearly entering a time of severe economic retraction. Nobody knows how deep or long it will go but everybody is afraid to admit that little factoid, fearing that an admission in turn will make things much economically worse. As the saying goes, deny itand it doesn’t exist. The elephant in the room really isn’t there, folks. You just think it is. The stock market is tanking, and will get worse until it bottoms out, probably around 5500 points. People are loosing their savings and will loose much more of their retirements and savings. More jobs will be lost. The cycle of decreased consumer spending and increasing unemployment numbers will continue for some time, with 2009 being a grim wake up call for anyone thinking that this was going to be a “quick, tidy recession”. News flash – it’s going to suck for a long time and anyone that thinks otherwise has their head in the sand. But, like everything else, this too is a cycle, but call it what it is, which is a Great Recession or the Great Depression 2.0. Recessions and Depressions are like the tidal patterns of the sea. They must be allowed to run their course to self-correct. Interfering with them prolongs them and makes them much worse, much like how interfering with the ebb and flow of the tides disturbs the sea. The sooner we wake up and recognize what we’re dealing with, the sooner we’ll be able to let it run it’s cyclical course (without government intervention), let it bottom out and begin our path to economic recovery.
Hard to know. What are your “experts” saying?
But here is a different question you can answer for us. Look back over the past year at the “experts” you have interviewed and gently name names. How many were correct in calling this year’s stock market collapse and deepening recession and who were they? How many weren’t?
Perhaps this exercise will help you be a bit more skeptical of “perma-bulls” who wouldn’t know a bubble from a bauble. And how is the Forester Value Fund doing? I seem to remember he was happily buying when the Dow had come down below 10K in Sept and early Oct. I imagine he wishes he still had that cash with the Dow at low 8K now. I plan on having mine in 2009 when the Dow has a fine chance of being well below 8K, or do I hear 7K?
well……….whats to worry about with gas under a duece a gallon? but seriously folks, the new year will start off with retails worst christmas sales in 50 years and we will go into a tailspin from there. the big government and corportae honcho’s STILL do not get it …..solve the housing crisis and everything else will moderate and Maybe get better in 2009. neglect housing and the foreclosure mess and we are in for 2-3 more years of H>>E>>double hockey sticks. that’s all i’m sayin’……
It’s no problem for the USSA to pay off its national debt. After all, the Weimar Republic did it. Easy-peasy Japanesey: just print more deutschmarks – err, dollars.
I don’t have to tell you things are bad. Everybody knows things are bad. It’s a depression. Everybody’s out of work or scared of losing their job. The dollar buys a nickel’s work, banks are going bust, shopkeepers keep a gun under the counter. Punks are running wild in the street and there’s nobody anywhere who seems to know what to do, and there’s no end to it. We know the air is unfit to breathe and our food is unfit to eat, and we sit watching our TV’s while some local newscaster tells us that today we had fifteen homicides and sixty-three violent crimes, as if that’s the way it’s supposed to be. We know things are bad – worse than bad. They’re crazy. It’s like everything everywhere is going crazy, so we don’t go out anymore. We sit in the house, and slowly the world we are living in is getting smaller, and all we say is, ‘Please, at least leave us alone in our living rooms. Let me have my toaster and my TV and my steel-belted radials and I won’t say anything. Just leave us alone.’ Well, I’m not gonna leave you alone. I want you to get mad! I don’t want you to protest. I don’t want you to riot – I don’t want you to write to your congressman because I wouldn’t know what to tell you to write. I don’t know what to do about the depression and the inflation and the Russians and the crime in the street. All I know is that first you’ve got to get mad.
You’ve got to say, ‘I’m a HUMAN BEING, Goddamn it! My life has VALUE!’
This was written in 1973, why does it ring so true yet today? Today’s Depression started back in 1973, all the Big (brother) Government was doing was masking its existence.
I believe it is because Big (brother) Government has failed; our Government has lost its direction, and is doing too much spending in trying to control the economy and people. This was not what the founding fathers had set out in the US Constitution.
Only when our Government begins to reduce its spending radically will the average American Citizen begin to improve. Only with a major step back to the values of freedom and Liberty for all (including those who are not of the majority view), will we survive as a nation.
Recover? The strongest economy in the world? What a joke!
“Made in USA” has given in to “Made in China” and “Outsourced to India”.
These two bubbles have yet to burst before we get back on track.
It should be clear by now that these and other bandwagons lead to nowhere.
Yes, sure the economy will improve next year. Oh, and I do believe in Santa Claus.
It makes me sick to think that CEOs like Jamie Dimon, Vikram Pandit and the like are still holding their positions after what we’ve seen in terms of write-offs. Several billion dollars later and these crooks are even seen as “heroes” when in fact they SHOULD BE IN FEDERAL PRISON!
How dare they lay-off people when they themselves are nothing more than criminals?
We will not see any recovery until home prices bottom out. For this to occur those values will need to go where they should be at which is still lower than where they are. Home prices will probably bottom out towards the latter half of 2009 and possibly in 2010 wiil we begin to see modest gains. Again at that point if home prices jump too high we will end up in the same predicament we are now in.
It’s simple math:
Home prices historically increase 3% in vale per year. During 2002 – 2006 they increased 30-40% per year. To be corrected those ridiculous gains need to be erased.
Now that stated income mortgages have been cancelled across the board, we will begin to see areas like NYC which has held it’s value fairly well begin to drop and catch up to the rest of the country. Not many people can show full income on a 500K mortgage because not many people earn 100K+ per year. Therefore less homes will be purchased and values will fall.
What people need to understand is that this whole mess was not caused by defaulted sub prime mortgages alone. First of all there are plenty of conventional or conforming loans that were arms that defaulted and the trecherous neg am loans were mostly conforming and required excellent credit. The problem was that these loans were packed as securities and sold 10 times. So now when that mortgage defaults, the ten times it was sold lost value therefore 10 times the loss. Wall Street is the problem. It has evolved into a quick earnings report rather than running a long lasting stable growing company. When the next earning report is your only goal long term goals/problems get overlooked and numbers are fudged.
Like every other cycle the markets will come back. I think we have all finally given up on finding an overnight solution and have come to terms with the current situatiion which by itself is a good start. Its just like having an addiction, the first step is to admit it. We are tired of lies upon lies. The end will come when its ready and thats not for a little while. Put your head down and push through. We’ll make it.
Since we have yet to address the core issues of this meltdown, I say we are in for a long depression. The 2008 is just the outer bands of a much bigger storm that will give us another band in the third quarter 2009 when the T-bills are due, and the Fed has no money to make good on them. Also sometime next year the credit card balloon will burst as well. But this will not be the straw that will be as unemployment continues to rise into 2010, 2011, and inflation rears it’s ugly head, after we have exhausted all possible red ink bailouts.
Than the focus will turn to the National debt sometime in 2011, but it will be too late, and America will have to go bankrupt.
What needs to be done is not going to be popular, but we need to stop throwing good money after bad with the bailouts. We need to pay off the national debt not add to it.
Recovery in 2009? A big IF. Though probably very painful, if the previous economy is allowed to naturally shrink and recover to more sustainable levels WITHOUT gov’t intervention, bailouts, loan mods, stimulus packages, etc and thus the economy reset itself naturally, we’d probably recover. But every time the gov’t puts a foot in with money borrowed from other countries, the inevitable only gets worse. Sooner or later the countries we borrow from will make the decision for us (if they haven’t started already) and say no more (and they have their own citizenry to protect) and then the decision of when and how bad is taken out of our hands.
Due to the bailout already, the October 2008 deficit is already several hundred billion dollars and the “regular” budget deficit US spending hasn’t even started. What will the 08-09 deficit be, $1Trillion? I have read we are very close to where $1 borrowings won’t increase GDP $0. All borrowed funds go to pay the debt interest. What happens when that line is crossed?
I like Tim’s optimistic tone for those financially responsible people, but he forgets that collectively they will be ready prey for new government policies. Who is going to pay for the $700B bailout? This unfortunately may be the real “payback for being responsible.” I hope this is not so.
The most ARM resets to date happen in 2009. Subprime has passed, it’s now time for Alt-A and Prime mortgages to reset and time to see just how strong those buyers were.
My guess is that we will be looking forward to many more foreclosures, unless those people have already walked due to reduced housing values shattering their dream of housing riches.
I’d say a bottom in 2011-2012, and 3-5 years after that before we start a sustained recovery.
There is no way to predict until we see what kinds of policy comes out of Washington. If they throw money at every ailing industry and do not put in the appropriate conditions and policies that support long term solutions then any “improvement” will be short lived. We have to deal with, energy, health care, and entitlements in a meaningful way NOW or a pall will hang over theis economy-this country indefinitely.
I don’t think we will show a recovery in 2009, not until 2010. We will still be deleverging from the splurge in spending from the last couple of years. People are just starting to realize that if you have a poor credit score in the future you will not be getting credit. The credit card companies are starting to weed out the deadbeats by raising interest rates and lowering credit limits or cutting off people completely. The days of easy money are gone. This is a necessary but painful process that we must go through. Those of us that have good credit, paid our bills on time, and have not used our house as an ATM will have no problem getting credit or home equity loans when needed.
I just leased a 2008 Jeep Liberty for my wife for 36 months, 12,000 miles a year at $205.00 a month and they paid off our old lease which still had 5 months to go. Walked out of the dealership with ZERO out of pocket. I look at it as our payback for being responsible.
People are being forced to live within their means and that is slowing consumption. This is going to be a drag on the economy until we reach an equalibrium. Hopefully we will see a big drop off in the Payday Loan shark offices in the shopping malls. The Big Three will need to be able to manage their business based on 10-11 million cars a year instead of 15-16 million being sold. Their current business model makes that prohibitive because they have lost control of the ability to manage their business long ago.
There could be recovery by the end of 2009 if the economic numbers will become so bad so quick by the end of 2009, they have no where to go but up.
The reality is it does not matter when the recovery begin or how it ends, American will never return to the standard of living of 2005 to 2007 years in the foreseeable future.
Define “Improve”.
I think we will start the long and difficult process of shifting to a realistic and sustainable economy. Not the house of card borrowing games and retail pyramid schemes that have taken the place of actually building stuff and living within our means.
I, for one, believe this will be an improvement.
Obviously, nobody knows. My take is that people were scared by Bernanke, Bush, and Paulson. That’s the primary reason for the across the board bad sales results in October. All the doom and gloom talk has become a self fulfilling prophecy. When people start clutching their purses/wallets, the economy suffers. The stock market will likely stabilize and turn upward before the economy recovers.
Pollyanna R. La Monica will be standing in a soupline, freezing his whiskers off, holding out his (empty) cup of coffee hoping a brother will spare a dime – and STILL he’ll be telling us why everything’s actually just fine after all.
Wake up, Pollyanna. It’s Great Depression Redux. Stop shilling for your corporate masters.
if the Comic Book Guy was in fact real, he should have used the only working fazer ever built to zap a few CEO’s from some of the problem companies, even if just for fun.
if he were real, his mom and pop comic book shop might be in trouble.
there will be an improvement in 2009, but only when comparing it to the latter half of 2008. that doesn’t say much…but an improvement nevertheless.
the question is when…i predict spring at the earliest. an improvement won;t manifest itself with retail sales>> gift cards will be swallowed by the still high cost of winter energy bills. inflation will be in check, but housing won’t be improving drastically, if any…and it is here where a true improvement will reside. if anything stocks will be better while cost of living will still be harder to manage.
until consumers have their home equity and credit card limits increased, don’t set your sights too high.
The economy will get worse for a while. What we have seen so far are just the manifestations of the Financial aspects of this sad story. The Main Street pain is starting, not ending.
There is a post I saw by a Jay Aren which explains (under the so-called Austrian School of Economics) why the slowdown may last for a while. Please see http://blog.mises.org/archives/008983.asp
“My understanding of the anti-savings glut argument is this:
1. The Fed lowered interest rates below the natural rate
2. With the “extra” dollars, U.S. consumers went on a buying spree that included significant purchases of Chinese goods
3. In addition, U.S. investors poured money into China
4. To offset these inflows of dollars in order to keep their currency cheap relative to the dollar, the Chinese gov’t printed [phony, newly-printed] RMB to purchase dollars from Chinese businesses.
5. The Chinese gov’t then used these dollars to buy U.S. bonds, thus in a round-about way helping the U.S. Fed in its low interest rate policy.”
[End of Jay Aren quote.]
I think Jay Aren has very succinctly and very well summarized the problem.
We are likely to have a very slow recovery (and even some further dips) because this description from Jay Aren seems to be the largest underlying systemic problem that has led us to our current mess.
And since this past practice is clearly not sustainable into the future, we are not likely to have another similar economy-generating practice take its place — at least not one that generates “wealth” at the same “high” level. Because this practice depends on more and more assumption of Debt. In present circumstances, that does not seem to be a realistic ‘assumption’.
The Chinese authorities only use — for buying U.S. Treasury bonds — those U.S. currency earnings that their own exporting companies have converted to Chinese (local) currency.
Of course the really, really bad thing — is that the Chinese authorities are using newly-printed “artificially-injected” Chinese fiat-money to buy the U.S. currency from the exporters.
Would they not do that extraneous money-printing, then the harm would never occur.
The Chinese are very smart at economics — even their President knows what puts and calls are — so you might think they would have learned from the Japanese debacle of the late 1980-s.
Many Chinese exporters would frequently need at least some U.S. and other currencies for purchasing raw materials (and some components and finished goods) from offshore, so they cannot be expected to turn ALL such earned U.S. and other foreign monies over to China’s CB.
These exporters need local (Chinese) currency for their many local expenses, payrolls, and services they buy locally. And with which they pay their taxes.
To get these latter needed Chinese-currency amounts, they turn over their “extra” foreign monies to their CB . And which now Chinese CB-held foreign monies eventually find their way back to the U.S. to be used to purchase American Treasury Bonds.
As a ‘ktibuk” pointed out on that site, most, if not all exporting countries were doing this. China knew that Japan has been similarly managing its own currency for decades.
This process is very harmful. That harm is hard to overestimate.
When China — as an example from the recent past (and Japan in the latter part of the 1980-s) — over-stimulates its own economy with artificial injections of fiat money, it harms itself. Not immediately, but as Austrian thinking has established, ALWAYS eventually.
As someone named Inquisitor wrote “…this policy of China’s is complementary to the Fed’s own monetary expansion policies”.
We all saw where the easy-money policy followed by Japan’s CB (Central Bank) in the 1980-s led. For awhile, we all thought that the Japanese were gods. Their businesses could do no wrong. They were taking over the world. They were buying all the movie studios along with Rockefeller Centre. For heaven’s sake, the land just under the Emperor’s palace was supposedly worth more than all of California! Tokyo was worth more than all of America!
Today, we all know this was Bubblenomics run amuck. Much of it thanks to Japan’s policy of expanding its own money supply artificially exactly like the Chinese are doing. The Japanese have been paying for this foolhardiness ever since.
This was madness back then. But what choice did the Japanese have? Could they let their currency rise? That would cause the YEN to appreciate against the U.S. dollar. That might price them out of their largest market. That might even make it more difficult to export automobiles to the American domestic market. Maybe the American Big 3 would still BE the BIG 3!
http://findarticles.com/p/articles/mi_m1282/is_n23_v41/ai_8185735
As others above have pointed out, the other thing that this process facilitates (and for sure, makes it look like there is a REAL SAVINGS GLUT coming from somewhere) is the addiction to debt in America. Our government and businesses and consumers have the best of all worlds (seemingly).
We borrow, so therefore someone MUST be lending, right?
Well, yes. It is us and our FED. Once the merry-go-round starts up, it is hard to get off.
We buy from China, as an example. (We can use Arab oil money for this example also.) They recycle some of the money back to our Treasuries. Our interest rates stay low. We borrow more, and buy more. And so forth.
The madness only stops when the ball bearings on the merry-go-round get red-hot and melt and seize up, because we have been running the system non-stop for so long. That is an analogy, but I think we all can see that at some point, someone will not be as inclined to recycle their U.S. money into just Treasury bonds. They will buy commodities, gold, companies, stocks, derivatives, and bonds, and OTHER currencies.
But there is also financial exhaustion on our side. Our consumers and institutions start to avoid taking on more debt, because there is less bang for the (next borrowed) buck.
When this ‘revulsion’ sets in, it does so suddenly and seemingly everywhere at once. It is not just a credit crunch from the side that provides the credit. The revulsion and repudiation comes also from the side that has been until now, the borrower.
Check out the fact that our consumers all over the Western (developed) world will buy far less on credit this holiday season than for many prior holiday seasons. That will be the confirmation of the end of this ride we have all been on for so, so, TOO long. A ride that is no longer viable. It will take at least 10 years to fix our merry-go-round, I am afraid.