The Recession . . . .

[we vs us]

Sorry. Thought it might be time to update the FOTD-only thread on the economy below.  

Greenspan, writing in the Financial Times, says we're in the worst financial crisis since WW2:

quote: The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war. It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities.

Home price stabilisation will restore much-needed clarity to the marketplace because losses will be realised rather than prospective. The major source of contagion will be removed. Financial institutions will then recapitalise or go out of business. Trust in the solvency of remaining counterparties will be gradually restored and issuance of loans and securities will slowly return to normal. Although inventories of vacant single-family homes – those belonging to builders and investors – have recently peaked, until liquidation of these inventories proceeds in earnest, the level at which home prices will stabilise remains problematic.

Just thought you might like to know that it's pretty much official at this point.

Edit:  it occurred to me that, by saying "since the end of the second world war," what he's really saying is "since the Great Depression," which was still the economic situation when the US was entering the war.  Unless something obscure happened during the war years that I'm unaware of, I think that's what Greenspan -- in typical Greenspanese -- is saying.

[mrhaskellok]

I know it is pointless to say this now, but we screwed up with our pics for prez.  

As a OIF vet, I have no problem saying Paul was best suited for this coming financial crisis.  Our economy will trump everything.  

Best of luck to each of you as you learn to survive in times of economic hardship.

[FOTD]

So, we now are in a recession? We sure need it.

Bear Sterns was down %47 Friday and sold to JP Morgan for $2 a share from $57 in a nano second. (Can you say suicide?)  What major bank goes down? What investment bank goes down on top of BS?

We are at the tip of the iceberg in the mortgage meltdown. Layoffs in California are staggering.

But the Fed will lower their rate substantially again this week and that is the last of their life rafts.

This is the stuff depressions are made of...

http://agonist.org/numerian/20080316/this_is_the_stuff_depressions_are_made_of_or_cheerful_reading_for_a_sunday_morning#new

"It's getting hard to count all the markets that are in cardiac arrest"

In September, the devil told us "
All of our economic statistics are skewed, or "republicanized." And he was scorned.

At this point we don't need an ostrich running our economic recovery. A sociopath is never happier than when everybody else is miserable. It's the ultimate power trip.

READ:Through Bush-Colored Glasses http://www.nytimes.com/2008/03/16/opinion/16sun1.html?_r=1&oref=slogin

" Americans are ill-prepared for hard times. "

Wall Street fears for next Great Depression

http://www.independent.co.uk/news/business/news/wall-street-fears-for-next-great-depression-796428.html

"European financial markets were relatively unscathed by Wall Street's crisis but traders expect there to be a backlash when stock markets open tomorrow. "


FEAR=False Evidence Appearing Real
The evidence is real now. So, try not to fear. All things must pass. Just how long and how much suffering along the way?

[YoungTulsan]

A simple recession is healthy, as it clears out excess inventories created during the bubble, lets prices settle down to reality, sorts out the malinvestment, basically lets everything stabilize and come back with us in the real world.

The problem is, we've swept the problem under the rug too many times, shifted from one bubble to the next, bailed out foolish corporations instead of letting them suffer the consequences of their actions, and kept inflating for so long that prices are so far distorted we can't even guess where they'll land.  The simple recession never came.  We never let it happen, by hook or by crook.

If we end up having a simple recession, consider ourselves lucky.  Right now, the picture seems to be a chain reaction in events, dominoes falling.  The entire financial system is on the brink of chaos right now.  They are having a hard time getting enough liquidity into the system to make simple transactions that move forward the economy continue to take place.  People need to make new loans to keep the money system going, but they are having a hard time loaning money to a lot of people right now, because they are afraid (maybe more than necessary) of being burned.

Watch some of the things that happen and you will see there are folks out there that benefit rather handily from turmoil, collapse, and depression.  Already just today (on a Sunday, they want to get this done before the markets open) - JP Morgan has bought out Bear Stearns for pennies.  $2 a share for an institution that was priced at $150 a share less than a year ago.  This is dot-com bubble type stuff happening, except with real financial movers and shakers, not imaginary internet companies that had no customers and no product.  But look what happened, JP Morgan got a deal so good it should be criminal.  They get BSC AND the Federal Reserve is going to protect them from any problems that would arise from their subprime assets.  How lucky were they that there is turmoil in the markets?  So now, if those subprime loans the Fed are now backing up don't pay, they'll eat the losses by debasing our currency a teensy bit more.

The question is, how bad will the spiral downward be?  Each event leads into making the next one worse.  The Fed bailing out financial institutions, pumping more money into the system, that causes confidence in the dollar to go down, and causes the international markets to get rid of their dollars.  The dollar is already on an epic downward slope.  The lower it gets, the more it threatens to choke our economy out.  The bailouts, the printing money, it devalues the dollar.  We end up paying more for imports, most specifically oil.  Consumer spending will take a bigger hit as a result of $4 unleaded, $5 diesel, heating and cooling bills nearly doubling, etc.  That comes back and hurts the markets even more, because their earnings will be nothing with crippled consumer spending.

As the economy grinds to a halt, we are faced with two possibilities:  One possibility is the money supply drying up - This is what happened during the great depression.  A lot of people don't know that it is possible for money to vanish.  But thanks to the Federal Reserve System having control over all money, they have in place a system where all money is based on debt.  Therefore, the only way for there to BE money is when someone takes out a loan.  The bank doesn't have $200,000 on hand when you take out a loan for 200K against your house.  The 200K is merely entered into the system, backed by your house as collateral, and the money is thus created.  Then, as it is paid back, that money is now once again out of the system.  So, there becomes a huge problem when the value of the thing most loans are based on (houses) drops considerably.  And add to that the fact that new home construction is down over 50% in some areas.  There is less and less for NEW debt to be created upon, and thus less and less new money coming into the system unless some other scheme or tactic is come up with (The Fed has recently been coming up with new ways to flood the system with money).  But, when things grind to a halt, money dries up.  The end result is a deep depression.  What happened during the depression?  The government assumed much more control over peoples' lives.  Socialist programs were enacted like never before.  Libertarians be afraid!

The other possibility is hyperinflation.  This is the more likely of the two scenarios, since the Fed's policy seems to be whenever there is a problem, just inflate your way out of it.  Financial institutions are having shortfalls?  Just give them more money.  This new money of course debases the value of the money you and I currently have.  But this method seems to be preferred since it at least in the short term appears to keep the economy moving.  It also makes a few people on the top richer, but that's aside the point I am trying to make here.  We are entering an era where inflation isn't as harmless as it used to be.  Bernanke tried to make the excuse recently that (paraphrasing) "as long as everyone is buying and selling things in dollars, inflation doesn't really hurt anything" - The biggest problem we have now is with oil.  Oil is being traded in currencies other than the dollar now.  And the more people trade it in non-dollar currencies, the more our dollar is exposed against the rest of the world.  People shifting away from the dollar as the world reserve currency, and as the currency of choice for oil trade, this is where suddenly printing more dollars leads DIRECTLY to sharp increases in oil prices.  So in our case, hyperinflation could simply backfire into bringing the economy to a halt.  What has happened in the past with hyperinflation is that they end up bringing on a new currency.  This is what the people who fear a North American Union are afraid of - The deliberate destruction of the dollar in order to bring on the conditions in which the people will accept this new currency (The Amero)

So we are stuck between a rock and a hard place.  Hopefully, we navigate down the middle, with a painful but survivable recession that cleanses our system of many of the follies from the last few decades.  

Hopefully Tulsa weathers this storm quite well.  The lack of a housing bubble here is promising.  The energy sector is strong here, and as it thrives, so shall Tulsa.  But, the VALUE of oil/energy has to increase, not just the PRICE.  Remember, the prices mean next to nothing nothing when the markets distort everything and inflation runs amok.

To all the Bush naysayers: I agree.  He hasn't helped the economy.  Look a little deeper into the situation instead of just blaming Bush tho.  What the Federal Reserve does is much more powerful than Bush, the Congress, or the CEO of Exxon.  The Fed gets the power to define what money IS, it gets to distort the markets, it causes waves that reverberate for years if not decades.  Bush could do a lot of things, which he doesn't do, to help our economy - and for that, he is a failure.  He COULD make our nation stronger through trade agreements - Getting out of ones that work to our disadvantage and only help large corporations, and get our economy back to being based on production, value, and innovation, rather than consumption and perpetual growth (blowing stuff up just to rebuild it is a supported policy of Bush) -- There are much bigger fish to fry than George W. Bush tho.  Look to the very system that MAKES it a viable economic stimulus to blow things up and rebuild them, the debt based Federal Reserve.  What the Congress and Woodrow Wilson did in 1913 essentially gave control of the economy to a private banking system.  This banking system is NOT part of the government, and enjoys very little oversight.

Hoping for the best, preparing for the worst.

[inteller]

Oh the value of oil is definitely there.

The difference with now and the great depression is this time around we have buddies in the world that will bail us out.  Too many countries will suffer if we suffer.

[FOTD]

quote:Originally posted by inteller

Oh the value of oil is definitely there.

The difference with now and the great depression is this time around we have buddies in the world that will bail us out.  Too many countries will suffer if we suffer.

Then they better save our dollar....and I mean today!

[we vs us]

quote:Originally posted by inteller

Oh the value of oil is definitely there.

The difference with now and the great depression is this time around we have buddies in the world that will bail us out.  Too many countries will suffer if we suffer.

We've been getting bailed out for awhile now.  The Chinese have been buying dollars for years helping to keep us afloat, and sovereign wealth funds from India and the Middle East have been trying to prop us up during the latest unpleasantness.  Our problems are pretty stubborn, though.

[inteller]

foreign help can't solve the domestic housing crisis.  

The sub prime fiasco needs a natural correction.  A lot of people need to be foreclosed and evicted and move back into apartments.  the speculative housing construction industry needs to be pared down and the illegal workers that fed it need to go home.  Once those things happen you will see the US get back on its feet.  

We were never able to take advantage of our weak dollar because our export facing manufacturing sector has been destroyed by taking those jobs and shifting them to domestic house building.  That is what is largely killing us right now.

[waterboy]

What a change. Seems like just months ago that so many on this forum were dismissing an impending recession and terrorizing those who disagreed with citations and logic out the wazoo. Yet it looked so obvious if you had been through one before.

What's logical is that the big picture is simply too big to be comprehended by any one post, especially those who distill it into one or two sentences. YT, I like your effort but it just doesn't answer all the questions. I would ask you this. You seem unhappy that the Fed bank was made independent in 1913 by Wilson & co. Do you think it should be government operated? How well would that work? Do you trust that Bush & co. would have provided good oversight?  It would indeed be more likely to be manipulated for political ends and less likely to be truly responsive to the market wouldn't it? The "panics" that plagued the country in the latter half of the 19th century were damaging as well. Most folks agree that the buildup to WWII is what really brought us out of the great depression. Greenspan looks smarter all the time though he was as powerless as anyone else in changing the course of the economy.

Take heart. I've made it through a few of these recessions and I'm no genius. You drive the car longer, you give up cable, you talk earnestly with your mortgage holder and you vow to be more prudent in buying non essentials like 60" flat screens. You plant a garden, you borrow from family, you repair things rather than dispose of them and you start to question everything. I think FoTd has one thing right. We are a country of crisis managers. We never seem to plan for change. We talk a lot about things but only change when a crisis hits us square in the forehead. This crisis will change some basic assumptions Americans have about who we are and give our ego's a jolt.

[cannon_fodder]

This needs to happen.  I hope the pain doesn't hit the real people, but our current habits are not sustainable.  Nationally or individually.

You simply can not borrow more and more money to float our government and our lifestyles.  Credit and debt should not be positive measures of our economy.  A short term retraction to get spending in line with income is needed to reset our economy to sustainable levels.

And what has the response been from our Republican president and our Democratic Congress as well as many of our political candidates?  To assure the American people that the government will keep borrowing to buy votes and that they will bail our dumb asses out so we can keep blowing money we don't really have.  IDIOTS!

We deserve what we have coming.  It currently sucks and it will suck worse, but anyone watching has seen this going south for a while.  The funny part is, the physical economy is still strong - jobs are there, farms are healthy, most companies are in no danger.  The losses thus far are suffered by those who took speculative risks and should have braced for the possibility.

Unfortunately, they might drag the rest of us down too for a while.

Anyone know where to buy Krugerrands?

[mrhaskellok]

My wife and I have been suspecting of hard times for a couple years.  We made it our #1 goal to get completely out of debt, home and all.  That way if we lose our jobs, which is possible because we are both in the food service industry, we wont run out of money as fast.  

We are almost there and life is so much less stressful already.  Much more expendable income, which means we are saving much more.  

Again, best of luck to each of you as you try to figure out how to dodge this bullet.

[YoungTulsan]

quote:Originally posted by waterboy

What a change. Seems like just months ago that so many on this forum were dismissing an impending recession and terrorizing those who disagreed with citations and logic out the wazoo. Yet it looked so obvious if you had been through one before.

What's logical is that the big picture is simply too big to be comprehended by any one post, especially those who distill it into one or two sentences. YT, I like your effort but it just doesn't answer all the questions. I would ask you this. You seem unhappy that the Fed bank was made independent in 1913 by Wilson & co. Do you think it should be government operated? How well would that work? Do you trust that Bush & co. would have provided good oversight?  It would indeed be more likely to be manipulated for political ends and less likely to be truly responsive to the market wouldn't it? The "panics" that plagued the country in the latter half of the 19th century were damaging as well. Most folks agree that the buildup to WWII is what really brought us out of the great depression. Greenspan looks smarter all the time though he was as powerless as anyone else in changing the course of the economy.

Take heart. I've made it through a few of these recessions and I'm no genius. You drive the car longer, you give up cable, you talk earnestly with your mortgage holder and you vow to be more prudent in buying non essentials like 60" flat screens. You plant a garden, you borrow from family, you repair things rather than dispose of them and you start to question everything. I think FoTd has one thing right. We are a country of crisis managers. We never seem to plan for change. We talk a lot about things but only change when a crisis hits us square in the forehead. This crisis will change some basic assumptions Americans have about who we are and give our ego's a jolt.

I will give credence to your idea that perhaps a purely governmental currency system could be politically infected as well.  Notice I was critical not only of whom manages this system though, but the very way it is designed.  A financial system based on debt rewards consumption rather than value.  The fact that it gives them tools to create money based on nothing is the main problem.  The fact that they are allowed to fix prices is the other.  Money being created isn't by itself a huge problem, if it represents new value created by the extraction of resources, production of products, construction of structures, then the market will take on this new money without need for a correction.  These private bankers, as shown with the current bailouts, create the new money to serve their interests, to bail out their buddies.  The gap between reality and the new money created circulates through the system and effects everyone.

If the government controlled the money supply, with just a few ground rules, it could be inherently less corrupt than the Federal Reserve System is and has been.  While we don't actually need to carry around pieces of gold or silver, back the currency with hard assets.  Let money truly represent VALUE.  Let the market be free.

I disagree with the sentiment that people DESERVE to suffer.  Most people were not part of this scheme to begin with, or were merely pawns in a larger game.  Why does a hard working lower class individual living week to week trying to pay rent, bills, and have enough to eat deserve to suffer?  The Fed creates money based on nothing.  So it circulates through the system, and greedy corporations, bankers, and investors get to use this money how THEY chose.  The little guy working in the real world to survive doesn't get to use this money.  Bubbles are created.  These bubbles wouldn't exist without the Fed injecting AIR (worthless money) into a system that is supposed to be LIQUID.

[FOTD]

Boston Globe Editorial: NEARLY FIVE years since the start of the Iraq war, the Bush administration is still funding much of it through emergency appropriations, and only partially through the regular defense budget. This is one of several ways in which the administration has managed to hide the true cost of the war from the American people. Until Congress insists on a full and open accounting, the nation won't know how much of a drag it is on the economy.

A $3 trillion debacle

http://www.boston.com/bostonglobe/editorial_opinion/editorials/articles/2008/03/15/a_3_trillion_debacle/?p1=email_to_a_friend


Tent cities spring up in LA

http://www.youtube.com/watch?v=CnnOOo6tRs8

It's in the foreign media because ours are reserved for propaganda and lowbrow entertainment.

[rhymnrzn]

Proverbs 23:4

"Labour not to be rich: cease from thine own wisdom. (5)  Wilt thou set thine eyes upon that which is not? for riches certainly make themselves wings; they fly away as an eagle toward heaven."

[FOTD]

quote:Originally posted by rhymnrzn

Proverbs 23:4

"Labour not to be rich: cease from thine own wisdom. (5)  Wilt thou set thine eyes upon that which is not? for riches certainly make themselves wings; they fly away as an eagle toward heaven."

Now that thought process is more of what we need to solve the mess the fright wing has gotten us into.....