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recession or depression - what do you think?

Posted by gibby3000 (My Page) on
Tue, Feb 10, 09 at 18:50

Do you think this is just another recession that won't get too much worse and be over within a year or so or do you think it's another great depression that will get much worse and last for years?

I think it's the latter.


Follow-Up Postings:

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RE: recession or depression - what do you think?

I think we are teetering on the edge, but being an optimist, I believe that things will get turned around...It is just anyone's guess though as to how long it might be before that happens.


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RE: recession or depression - what do you think?

This is not a garden-variety downturn. For at least 2 reasons: (1) The housing bubble triggered it. Houses are not as liquid as stocks, and the bubble affects Main Street much harder. (2) The bank failures was triggered by loosening of regulations that allowed bankers to speculate with our money and invest in instruments that are "opaque," which means there are no rules for determining their value. A banking system is built on TRUST, because banks lend to each other all the time, and in ordinary times have confidence in their abilities to repay their loans. That trust is gone now, and banks are holding on to money, because nobody knows who has the so-called "toxic assets" or how much (or little) they are worth. Fixing this is going to take a lot of money and time. The government is stepping in and in effect nationalizing some banks -- of course they are not using that word, but that's what they are doing. In the meantime, there have been predictions of some more BIG failures like the AIG, Fannie Mae and Freddie Mack failures.

It's a BIG MESS. I think it could take 10 years to resolve completely, but I hope it will settle sooner. Most highly respected economists, irrespective of political persuasion, have urged for a really large rescue package to be put in place FAST. Obama did not get what he wanted because the Senate Republicans blocked the more generous package put forth by Congress. So the jury is still out. If Obama had had a filibuster-proof Senate, he would have got what he wants and what the expert economists say he needs. We shall see.

Things are just beginning to look different right now. They won't bounce back any time soon. I think they will get worse, a lot worse. The rules of the game have changed.


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RE: recession or depression - what do you think?

I think a lot depends on factors difficult to predict.

From a purely economic stance, I believe we can turn the bus around within 3-5 years provided this stimulus package is large enough. IMO, too small a stimulus is much worse, in the long-term, than too large a plan.

From the consumer standpoint, I'm more pessimistic.

The longer the current 'crisis' mindset continues the more likely people will make, more or less, permanent lifestyle changes. As with many lifestyle changes a seismic change in spending habits can have the same effect on people as, say, becoming a born again Christian or a person who's recently stopped smoking/drinking. No offense intended (I'm a Christian)...just example. The newly converted are freqeuently zealous with their convictions.

Saving is, again IMO, even more addictive than serial shopping. As people tighten their budgets in reaction to current fear & begin saving more there will come an, "Ah Ha!" moment when some (many?) will decide $100K+ in the bank means more to them than a new pair of jeans or the latest electronic gadget. That's why stimulus packages targeted at lower to mid-income brackets are the most successful...those are the people more likely to spend the cash & get money flowing. People with more assets to begin with...will be far less inclined to spend stimulus checks. They'll just add the money to their already growing nest eggs.

Personally, I believe that if we get some confidence restored in the financial sector & stem the flood of layoffs within the next 12 months there will be little change in people's behaviors. They will quickly revert to old spending habits. If, however, we're talking about my prediction of 3-5 years before a turnaround in the financials then I strongly believe we'll have to reinvent ourselves economically in this country. That's long enough for people to make serious & lasting lifestyle choice changes.

Regardless of the success, or failure, of the current stimulus package there will be a long-lasting change in credit availability. Some of this is good. Some...not so much. As with all bubbles and subsequent corrections the pendalum will swing too far in the opposite direction before reaching equilibrium.

Recession or Depression? I don't believe we're going to see unemployment rates in the 25%+ range...not even close. Although I also believe 10%-15% is likely. That's a deep recession but certainly no 1930s style Depression. People are suffering. Our local food bank's needs are quadruple what they were 3 years ago. I live in an afluent area where you wouldn't expect to see need. On Thanksgiving '08, DH & I served dinner to those less fortunate. Sure, I read the papers but was still surprised to see that most of the people in line were working families with young children needing to be fed. We had enough food to send everybody home with a doggie-bag of leftovers including two pieces of fresh fruit for each child; but those same families needed food again by Saturday. If you can afford it...please drop off a donation to your local food pantry. They surely need the support.

/tricia


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RE: recession or depression - what do you think?

I agree with the previous poster -- a lot depends on the lifestyle changes people make. But old habits are hard to change -- so it's the younger generation that will set the tone. If they are exposed to a prolonged period of deprivation, they will spend less for a long time, some for a lifetime.


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RE: recession or depression - what do you think?

"I don't believe we're going to see unemployment rates in the 25%+ range...not even close."

Maybe in pockets.
But the Pittsburgh area is running at 5.5%! And the housing market is on an even keel here.


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RE: recession or depression - what do you think?

Hmm, in the 1920's they didn't have:
Social Security
Medicare
FDIC
Fed Reserve had just begun, very little political power
Unemployment benefits

An interesting PBS documentary on the "black winds" that scoured the Plains in the Dust Bowl disaster in the 1930's, is worth watching if you have the opportunity. They used actual film of the enormous clouds of black dust - all valuable topsoil - rising hundreds of feet in the air, for miles across, that destroyed the livelihood of thousands of hardscrabble farmers, literally burying entire towns. Hundreds of people died from the particulates accumulating in their lungs. It took a catastrophic disaster to get politicians and city voters (gee, this all sounds so familiar) to take conservation seriously and finally pass the Soil Conservation Act in 1935.

I'm a Baby Boomer. We may see certain evidences of Depression-like behavior in our parents, but it's literally beyond the scope of our imagination to envision how bad the decade of the '30's was - not only in the US, but abroad as well. Between the rural catastrophes and the ramp-up into WWII's industrialization, the US reality shifted from the stand-alone, small-town farmer to the big-city, interlocking service-oriented worker bee.

Speaking in generalities now - In that same way, as decades of prosperity and entitlement have passed, I don't see most of the Millenias I know exhibiting the kind of panic some have evidenced here. They tend to react with frustration and anger at being deprived of what they see as their basic standard of living, when and if such deprivation happens. A lot of them have the attitude of, "well, if I have to, I'll go back home and live with my parents."

Having grown up in the "too much is not enough" atmosphere of the '80's, they are impacted by the current financial uncertainties, but I really don't see them as hunkering down and turning into rabid savers. For one thing, they're a lot more accepting of student loans, which means many start their working life already in debt. The only exception to this is when they are saving for a house - THEN they go into savings mode. But otherwise, their behavior in these times is only a faint echo of how their grandparents and parents respond.


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RE: recession or depression - what do you think?

Our kids are in their 30s. They are all 3 hunkering down, spending far less, & saving. From what they tell us so are their friends. They are trading kids clothes & toys around rather than anybody needing to make purchases. Nobody's lost a job although our DS did have to relocate to keep his job.

/t


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RE: recession or depression - what do you think?

I think we are in the midst of an ordinary recession and bear market that the lunatics in Washington are trying very hard to turn into a full-blown depression, because doing so will give them the justification for seizing power over every aspect of our lives.


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RE: recession or depression - what do you think?

An interesting PBS documentary on the "black winds" that scoured the Plains in the Dust Bowl disaster in the 1930's, is worth watching if you have the opportunity.
I saw that recently and was amazed by the actual footage that was shown. That had to be a horrid, scary time for so many.


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RE: recession or depression - what do you think?

I wish I saw more people around here hunkering down and trading kids clothes and toys. What I'm seeing around here is more of the same carp that got people into this mess. I'm ready to run away screaming.

One of my neighbors told me a while back that they are basically living paycheck with no savings. Then why the heck are they eating out all of the time, buying all the electronic games for the family. I can't invite her kids over to watch a movie with us because the kids have already seen them all at the movie theater. If the kids have a day out of school, they are headed over to Chuckie Cheese or Incredible Pizza.

Another acquaintance is employed by a company that is having financial difficulty. I'm not sure that her job is all that secure. Her dh had worked for the same company and got laid off a few months ago. Now he is working security someplace. She has made several comments about people not having enough money. I see her spend, spend, spend on unnecessary things.

I wonder what's going to happen to these people when this market gets worse and some of these people lose their jobs. I think there are going to have to be people who hit absolute rock bottom before they change their spend and saving habits.


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RE: recession or depression - what do you think?

I'm sick about what's happening in our town (a collar suburb of Chicago) - every 2 or 3 blocks I'm seeing yellow auction signs plastered to front of these homes that are in reasonably good condition (at least from the outside) and no one's buying.

How bad is it - the public aid office is filled not just with people that have always perennially been on PA but people in the trades & formerly middle class people who have lost their health insurance & run out of unemployment benefits and many of these people still have a spouse working full or part-time but they still can't meet the mortgage payments or fully put food on the table. And if you don't get there early enough to see a social worker they're turning people away and telling them come back another time.

I've got a guy coming tommorrow to take out a cast iron sink in my basement to take to the salvage yard to sell - he'll if he's lucky maybe get five bucks for it as the price of scrap metal has dropped by half.

I'm trying to be an optimist, we've had our fair share of financial hard times in the past but we've always been resourceful and lived on much less then most. I'm really concerned about people that are not used to being poor. Maybe it will toughen them up and rethink some of their habits (recyling or lack off, discretionary spending, house choices etc) but if you've never been exposed (or been able to have a financial cushion in place) this it will be a difficult road ahead.

I just read on another forum about a town in Ohio that is losing it primary employer - the town has an action plan to pool together resources to help out it's citizens - including victory type gardens on the local college campus to supply local food pantries. It's very inspiring and would hope that we will continue to see more of this type of thinking.


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RE: recession or depression - what do you think?

Ours sons are 29, 26 & 22. They have cut up their credit cards and pay only cash for items needed. Notice I said needed. They have chosen to bank as much as they can. Any many, many, many of their friends are doing the same thing. They are not buying brand new cars but pre-owned cars which are considerably cheaper. Many are saving for a 20% down payment for a house.

So I see the era of spend, spend, spend coming to an end and a more frugal attitude emerging. JMHO.

Enjoy the journey.
eal51 in western CT


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RE: recession or depression - what do you think?

I agree with triciae - whatever this is, is going to be painful. Unemployment over 10% but certainly not more than 20%. Markets aren't going to grow for a while. This is a huge readjustment after two decades of living beyond our means - now people have to pull back, pay off their loans and save before much spending is going to happen. I don't mean just personal borrowing - the markets were all based on borrowed funds, so they all have to re-adjust.

I'm as guilty as anyone although my debt may not be as large as others. I've stopped using my credit card. We've seen our house lose about $150,000 in value - maybe more, maybe less - but about that much of our down payment was from stock market gains that were also pretty ephemeral. So, whether we lose the value in the stock market or in the house value, it all evens out in the end.

As for trading clothes and toys, I thought everyone did that. Until this year, I never bought my son (he's 5) new clothes from a store (but now stores are selling clothes for as little as in consignment shops).


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RE: recession or depression - what do you think?

haus proud-"It's a BIG MESS. I think it could take 10 years to resolve completely, but I hope it will settle sooner. "

Ditto.


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RE: recession or depression - what do you think?

Here in Northern CA, college grad couples tend to earn more than average. So my nephew and niece, for example, who are both now married as of last year, have their own houses, own an investment property together with their father, and each have three cars and a comfortable lifestyle. Their idea of cutting back is staying with the five year old Lexus or Accord for another couple of years.

My niece's best friend spent $100K for a Harvard masters degree, but it bumped her from Clorox to LucasArts and into a six-figure salary at Schwab's marketing division, which enables her to pay for a fabulous Art Deco apartment in Berkeley with a good lifestyle while still being able to pay off her student debt.

Another couple is living more on the edge, but they're okay as long as both can keep their jobs. Another couple went from an unhappy experience with the local zoo to being department head at a small college in Maine, so they're buying a house and settling in.

In fact, the only couple in their large social group who's being extra careful with their money does so because they have a new baby in addition to the wife's college-age daughter from a previous marriage.

These Millenia aren't spending lavishly, but they still go to Trader Joe's and can fly across country to attend weddings of their close friends. I usually see them all at least once or twice a year, and some of them almost monthly, so it's always interesting to catch up on what's happening with them.

The title of this thread reminded me of some old saying - I probably have it wrong, but it goes something like:

A recession is when you're afraid you might lose your job.

A depression is when you've just lost it.


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RE: recession or depression - what do you think?

It's a "repression" I think we are currently in a recession that is nearing depression. This problem is impacting the entire world. The latest propaganda news I've heard is there is a 7% unemployment rate so there is a 93% of people still employed. That 7% is based on the people who have filed for or, are receiving unemployment. What about the folks who's unemployment ran out and still have no job or, the folks forced into retirement before they were financially ready. I do agree, this will get worse before it gets better. As folks have said, the young people are cutting back as well as the older people. It is a snowball slowly running down hill and I expect it to suddenly pick up momentum. There's not much being exported from this country any more. What is being exported, the volume has been cut back, due to cut backs in other countries. Our imports will eventually drop off and add to the worldwide "repression". It's all been a house of cards for some time now. I compare all this to the late 70's which took some time to stabilize and then start improving. I know people who say they would scrub toilets just to have a job who would never have dreamed a job like that existed and, many have several college degrees. Then the economy took another dip in the 90's. I think we'll see a recovery of sorts but not where we were in 2000 (which wasn't that great anyhow) and we'll have to do business a lot differently. Just in my every day existence, I've been trying to "buy American". For the things I need or want, it's nearly impossible!!! I think that has to change before we can see much improvement. I think the credit crunch will cure a lot of people of the "I want it and I want it now" mentality.


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RE: recession or depression - what do you think?

Buying American is virtually impossible with manufacturing, commerce, economy gone global. I don't pay any mind to trying to do that.

What's truly disturbing is the HUGE, MASS CONSUMPTION that apparently is required to drive the economy on. Geeze, there's simply no way business and spending and purchase of goods can keep going on and getting bigger and Bigger and BIGGER and BIGGER ad infinitum. I can't eat that much, I have no room to keep that much stuff, I'm not going to trash my car, clothes, furniture, appliances, HOUSE every couple years and buy anew. Mass production has become a bad thing.

Well, maybe when we go colonize other planets ...


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RE: recession or depression - what do you think?

With kids graduating from high school and colleges every year, new marriages and families started every year, immigrants (legal or illegal) these people need to live somewhere. Building has got to continue eventually. They all consume something even if it's just food and toilet paper. Most products I see any more proves we are in a throw-away world where it's cheaper to replace than repair. I guess mass production helps keep the junk flowing. The problem is, the consumer is bottom line oriented. When I worked as a technical consultant for AT&T in the 90's, quality was the last thing anyone was looking for. Quality meant higher prices and the customer base who wanted that was too small to orient the products to. Consumers wanted "cheap" and corners had to be cut to produce less expensive items. That's why the companies also looked off shore for less expensive manufacturing. The same with big business buying the equipment...Verizon for example....they didn't want higher priced high quality stuff, they wanted the least expensive equipment so they could compete with lower prices....thus stuff being mass produced became less reliable and cheaper and everyone jumped on the competition wagon. Look how Mercedes jumped in with their "wanna be" Mercedes car for $30,000.00 so lower income people could strut around and brag about their Mercedes thereby putting them into a "visual" higher status of some sort....what junk it turned out to be but, they did and continue to sell them. (Somewhat the same story as why we have white bread today) But I doubt we see much change in the manufacture of junk. People want things and if they can't afford the real thing (and getting a loan for one is impossible), they will continue to demand the cheap look alikes and wannabes that wear out fast and must be mass produced to keep up with it. Of course, that is a good short term thing. If everyone hoards their money, then it won't be worth anything anyhow beacause everyone will have it with nothing to spend it on when the companies fold up.


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RE: recession or depression - what do you think?

I see some today calling it the "great recession" and some economists thinking it will last 3-4 years.


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RE: recession or depression - what do you think?

If Obama had had a filibuster-proof Senate, he would have got what he wants and what the expert economists say he needs. We shall see.

Show me an economist that tells you that any of the following could be defined as immediate economic stimulus and I'll show you someone who is either on the take or simply a political mouthpiece:

$66B - Education
$7B - Modernizing federal building and facilities
$4.9B - Neighborhood Stabilization
$2.4B - Carbon capture demo projects
$2B - Child care subsidies
$1B - Amtrak
$650M - Digital TV conversion coupons
$500M - New cars
$50M - National Endowment of the Arts
$40M - Global warming research

Yes, these are from the House plan. I would love to take examples from the "compromise" plan but as of 1 AM ET, it doesn't appear to have been released on the public. I guess that's too much to expect considering it's supposed to go for a vote in 8 hours.

With that in mind, prior to 9 AM today, it will be a "recession". After 9 AM today, it will be a "depression".


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RE: recession or depression - what do you think?

$66B - Education

This is very vague but if it includes school facilities/buildings construction, then yes, it probably does. I know in the DC area, every county and DC has dozens of projects that are on hold for lack of funds - these included installing A/C, roof replacement, electrical upgrades, as well as building entire new schools. Obviously doing all this work involves hiring lots of people - architects, landscape architects, construction industry.

Also, one major complaint about NCLB is that it is a unfunded mandate, forcing states and counties to spend money on NCLB instead of other line items and schools also had to sacrifice other subjects and activities to fund NCLB.

$7B - Modernizing federal building and facilities

Ditto for federal buildings. There is a new Census building now, but if other federal buildings are anything like the old Census building (built in the 1930s), there is a definite need.

$4.9B - Neighborhood Stabilization
Too vague to know

$2.4B - Carbon capture demo projects
Yeah, I have to agree with you here. I think this could have long-term effects on the economy if the goal is new technologies (leading to new industries), but it shouldn't be in the stimulus package.

$2B - Child care subsidies
Lots of people are withdrawing people from child care centers for lack of funds and they're closing. So this could help a lot to prevent centers from going under.

$1B - Amtrak
Amtrak has always needed help upgrading tracks and trains- again there are probably ready-to-go projects.

$650M - Digital TV conversion coupons
Definitely. The current program ran out of money so this would be used almost immediately.

$500M - New cars
Well, a lot of people (including economists) said that if the feds purchased a lot of cars, that would help the US auto industry.

$50M - National Endowment of the Arts
Too vague. I would almost say this amount is so small, keep it in anyway.

$40M - Global warming research
See carbon-capture.


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RE: recession or depression - what do you think?

Shadow 700, if the fund is distributed into the right hands with ownership and accountability, all of the items you listed can produce short and long term results.


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RE: recession or depression - what do you think?

The long and short of it is that any $1 spent as part of an "emergency" stimulus should be guaranteed to stimulate the economy by about $1 or more. Anything that doesn't do that is "spending", not "stimulus". This "spending" should be properly debated - not rushed through in the dark of night.

Having intimate knowledge of large construction projects, including the new Census building, I can tell you that for every $1 spent, at best about only $.15 goes into the economy. Even then, it is not until mid-project that economic effect starts to be felt. Thus, calling any such spending "emergency stimulus" is a flat out LIE.

Nothing on the list I gave has any chance of dollar-for-dollar economic stimulus. In fact, several are NEGATIVE. (Almost all of the $650M for digital conversion coupons will end up in China's economy. Amtrak has never operated at a profit in 38 years, so any dollar that is spent there will end up costing us more in the end.)

This excess spending will saddle an already weakened and over-leveraged dollar and will help drive this country out of a recession into a depression.


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RE: azmom

Shadow 700, if the fund is distributed into the right hands with ownership and accountability, all of the items you listed can produce short and long term results.

Long term? Maybe.

Short term? 3 - 6 months? The range that would justify the "emergency" nature of this bill? Please, lay out step-by-step how any of those programs will end up stimulating the economy in that time frame.

Again, I am not questioning the programs themselves (though, in the interest of full disclosure, I do not agree with them). I am questioning the rush. If the funds are not going to affect the economy in 3 - 6 months, why can't we take a few days to review the bill?


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RE: recession or depression - what do you think?

So can anyone speculate on what a "Post Consumerism Crash" economy would look like? After the recovery (whenever that might be) is it 'earn less spend less' or 'earn the same spend less' or 'earn less spend more'?

To ask it a different way, what type of economy would have avoided the current situation? Even if you subtract the housing bubble, we were still Buy-Buy-Buy as dadoes said. Could we have gotten to this point with continued expansion of a non-housing credit bubble alone?


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RE: recession or depression - what do you think?

I doubt that there will be NO spending that some analysts will find debatable as to whether it is stimulative.

The word "boondoggle" comes to mind. I read a long time ago that the word was coined in the 1930s to describe the work of men who were employed by the federal government to walk around federal buildings in DC with floating balloons designed to chase pigeons off the ledges.

Did these guys perform a useful function? Possibly. Pigeon droppings can be harmful and unsightly. Did employing these men stimulate the economy? Probably. They had money to put food on the table and to pay the rent, so the grocer stayed in business, the landlord paid the mortgage, etc., etc. And so it goes. Every tax dollar spent is "stimulative" in one sense or another, either now or later. Is later stimulation a good idea? Definitely, unless you believe that a small jump-start will be self-sustaining. Most economists do not.

Is it a good idea to stimulate the economy with subsidies for renewal energy projects? There is no question that we despirately need to improve access to alternative energy, energy that reduces our carbon footprint and reduces our dependence on foreign oil. Such initiatives will serve both to stimulate the economy and to give us a desperately needed energy policy.

Much of what has made us a great nation in the 20th century -- the muicipal college I attended tuition-free in my youth (I am now 73 years old) and many, many other institutions and programs were created in FDR's New Deal. I think that is a wonderful legacy.

The deep economic crisis we now face may be less severe than the one in the 1930s. That's probably because not all the regulatory controls put in place in the 1930s were dismantled in the last 8 years -- just some of them. But like Harry S. Truman said a long time ago, If your neighbor is out of work, it's a recession. If you're out of work, it's a Depression.

Clinging to an economic-political philosophy that fails to take fully into account the suffering of more and more people who face abject poverty does great harm to the social fabric of our society. This is not a time for political ideology.


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RE: recession or depression - what do you think?

Much of what has made us a great nation in the 20th century -- the muicipal college I attended tuition-free in my youth (I am now 73 years old) and many, many other institutions and programs were created in FDR's New Deal. I think that is a wonderful legacy.

The New Deal bloated the Federal Government and turned a severe depression that would have ended in the mid '30s (like the rest of the world) into "The Great Depression" (really only felt in the US) which lasted into the early '40s.

I won't argue the good that came out of it, but there was a significant cost to liberty and freedoms that this country was founded on.

The difference between now and then is we actually had something backing the debt that was incurred. Now, we are leveraging dollars that have been borrowed several times over.


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RE: recession or depression - what do you think?

The New Deal bloated the Federal Government and turned a severe depression that would have ended in the mid '30s (like the rest of the world) into "The Great Depression" (really only felt in the US) which lasted into the early '40s.

I won't argue the good that came out of it, but there was a significant cost to liberty and freedoms that this country was founded on.

Could you please explain this statement?

Also, what would you do to address the current economy? I agree there needs to be more debate. Bush harangued Congress into passing TARP and it didn't do much. Now I see Obama doing much the same as Bush, except with different policies. Again - very little discussion because he, like Bush, says there is no time.


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RE: recession or depression - what do you think?

We are in uncharted waters. No one knows if the stimulus package will work as intended. But it's the only hope we have. In the meantime, things could get a lot worse because nobody knows the total scope of the "toxic assets" that big banks are holding, and no one is telling. I do not think we've seen the end of the tremors in the financial industry. If things get a lot worse, we could see gold selling for $5K an ounce.

In the long run, things will get better, but in the long run, we will all die.


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RE: recession or depression - what do you think?

It will get worse. There are other shoes to drop. I agree with haus proud. The stimulus package is a cr@p shoot.

/tricia


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RE: recession or depression - what do you think?

DH is the eternal optimist - can do - anything is possible. He works with many different types of businesses throughout the US and globally. He called me today before he left on an international business trip and said "keep hoarding cash - we haven't seen the eye of this storm yet". When he is not optimistic I am really concerned. His company is about to lay off between 15-30% of their work force since the companies he serves are seeing their business plummet. I think we're about to spend nearly $800 billion and see about as much benefit as we did with the stimulus checks in 2008 and the first wave of TARP spending - nada. Then things are really going to get ugly and the sorry legacy of all this spending is going to impact a generation of people very ill equipped to deal with it. At some point you can no longer move back in with the folks and have them support you.


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RE: recession or depression - what do you think?

My daughter bought a house in Phoenix a few months ago ... please don't recommend that she move back home!

Her possibility of lay-off is a bit slim - she counsels people after they've been laid off.

Recent promotion - slight increase in pay, substantial increase in workload, including troubleshooting, resultant stress and being on call at odd hours. Result... lower pay-per-hour than before!
_________________________

Sort of nice to be retired.

ole joyful

P.S. Anybody want to buy some good Canadian oil/gas stocks?

Gold stocks?

Bank stocks? They're reported to be about the strongest in the indutrialized world... and they've been hit by the U.S. problem.

The Canadian Dollar has taken quite a slide in recent months, some say due to artificially inflated U.S. Dollar. If the U.S. Dollar deflates some, it might be a good idea to own some asssets denominated in Euros, Swiss Francs, Canadian Dollars, etc.

Have a great winter, everyone!

o j


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RE: recession or depression - what do you think?

OJ's investing suggestions are interesting -- if you have some spare change you can do without. Currency shifts are always hard to predict and speculative. Even in this climate, when some predictions seem like no-brainers, there could be some bad surprises.

So don't take chances like that except with money you can afford to lose.


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RE: recession or depression - what do you think?

Stimulus: Which is it?

1) "A stich in time saves nine."
2) "Haste makes waste."


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RE: recession or depression - what do you think?

Neither. It's not in time. It's late. Very late. the economy is in a free fall and will probably continue falling for a while. Banks will fail and/or be nationalized, Wall Street will get very upset and stocks will continue to drop.

Haste? The only haste has been in doing the wrong thing -- giving money to banks without proper oversight. That happened before the last election.

Keep your seat belt on. We're in for a rough ride.


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RE: recession or depression - what do you think?

Could you please explain this statement?

Sure. The Founding Fathers believed in a free market economy with specific, minimal government intervention. Most of their inspiration came from the works of Adam Smith, whose theories can be summed up in the four freedoms:

The freedom to try.
The freedom to buy.
The freedom to sell.
The freedom to fail.

Compare those freedoms with most of the legislation of the New Deal; the "National Industrial Recovery Act" and "Agricultural Adjustment Act", for example.

Also, what would you do to address the current economy?

While I would seriously question the government taking any major role in the recovery, any budgetary items that went to "emergency economic stimulus" would be required to:

(a) specify step-by-step how the item would stimulate the economy
(b) describe the method used to determine the performance of the item
(c) provide 3, 6, 9, 12, 18 and 24 month guidance on performance of the item

Since every item has a cost-benefit ratio and a way to track how it's performing, continued funding for sed items can be judged as time goes on.

There's a lot more I could say, but it basically comes down to this: At all levels, governmental, organizational, and personal, many have refused to live within their means. The Ponzi scheme is falling apart. The solution is simple: At most, spend what you have. If the government wants to be taken seriously, it needs to lead by example and not shout "do as I say" as it fires up the printing presses into overdrive, because it is exactly that thinking that got us into this mess.


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RE: recession or depression - what do you think?

And what is the solution for a nation that relies on over-comsumption to underwrite 70% of its economy?


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RE: recession or depression - what do you think?

This is not the time to look for blame. There's plenty of it to go around. The economy is in a downward spiral that is feeding on itself. The banks have to be fixed or we will be in total collapse, and the unemployment rate will rise to more than low double digits.

The private sector has messed things up and is not able to fix things without govt intervension. Uncle Sam is the source of last resort to jump start the economy. And of course there are no guarantees that it will work. Economics is a lot more complicated than rocket science -- it involves human behavior, and nobody can predict that with much precision because it is irrational and erratic.


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RE: recession or depression - what do you think?

I think the solution is that we need to accept a major correction and adjustment to our standard of living. Our society has to get over the desire to make more money and have more stuff by doing less work and producing less of real value. People want to get rich quick by suing someone else over something that was due to their own incompetence. People want to buy a house when they have no means to afford it. People want to have fourteen children when they have no means to support them. Companies want to be bailed out though they've mismanaged their business into a state that it should cease to exist - yet they think they should get the $ even though they don't produce anything of enough value to be profitable. Employees want to get paid more and more and have easier jobs requiring less education and competence. Companies even put programs in place to pay people who don't work at all because they're not needed. People want better health insurance coverage at less cost though they are taking little to no responsibility for their health and in turn the cost of health care. People expect massive bonuses even if their results are dismal.

This is ridiculous and not sustainable so all kinds of house of cards schemes have come into existence to try to "get something for nothing" - some cooked up by private enterprise and some cooked up by the people we elect to public office. This simply cannot go on any longer. Yet the government continues to think they are going to step in and somehow "buy" a continuation of something that really needs to stop. I think people are foolish if they think this escalating lifestyle can continue indefinitely - what goes up must come down as they say. If we are no longer willing and able to produce something of competitive value in the global marketplace then we are going to have to accept that our standard of living cannot continue to remain as far above the rest of the world as it has historically. Many great societies rise and fall - they all do don't they?

Meanwhile we have Congress conducting business as usual. Galavanting around to all kinds of boondoggle events - paid for by taxpayers and by "foundations" funded by every lobbyist imaginable. This is as they point the finger at corporate America - pot calling the kettle black if you ask me. I'd recommend staying in Washington with nose to the grindstone and figure out how to eliminate some of the horrendous bloat and waste that is epidemic within the federal government. Nothing has changed - we still have the same sophisticated form of corruption running the country. Only now the amount of money being spent to reward campaign contributors is unprecedented and the ramifications to our future and that of future generations is frightening.

Think it's bad now? I don't think we've seen anything yet - I think everyone is delusional who believes this is going to all go away anytime soon and without significant pain. Maybe spending a few trillion now will soften the blow or delay the agony but we are going to have to pay with a significant change in our standard of living at some point.


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RE: recession or depression - what do you think?

"Maybe spending a few trillion now will soften the blow or delay the agony but we are going to have to pay with a significant change in our standard of living at some point."

This change is underway now. Some people just don't realize it yet. And it's more than just a change in our standard of living, it's a change in the entire US business model.

Just wait for the annual federal budget that's due to come out in a couple of weeks. I think we'll be seeing the start of some controls.


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RE: recession or depression - what do you think?

The private sector has messed things up and is not able to fix things without govt intervension. Uncle Sam is the source of last resort to jump start the economy.

The private sector has the freedom to "mess up" - see the fourth freedom above. The solution is not shielding them from the pain of failure.

For example, let's look at one of the automakers. You have a mismanaged company paired with burden of those with a massive entitlement complex (UAW). Rightly, this company should fail. It should close up shop and have everyone lose their jobs. In short order, someone would buy up the assets, and free of the ridiculous obligations set up by the prior management, would start a new company that is streamlined. Jobs created, lesson learned.

Now with the government stepping in there is no reason for either party to negotiate anything less than exactly what they want ... they know that they are "too big to fail" and that we, the taxpayer, will ultimately pick up the tab. Result: A poorly run company, hemorrhaging money, dragging down the economy - every dollar we front them is one less dollar that can be doing real "work" in the economy.

And of course there are no guarantees that it will work.

History has shown that it probably won't ... in fact, government spending and coercion usually makes the situation worse. The Great Depression wouldn't have "Great" without the government. By contrast, look at the post-war depression of the early 20s. The actions of President Harding - basically getting the government out of the way of business - is credited for keeping it from being a lot worse.

Why government spending doesn't work is fairly simple to understand. Failure and success are mirror images of each other and this is why the freedom to fail is so important. The government simply cannot protect people from failure without also "protecting" people from success as the cost will be hoisted upon them. For example, the government's money is not theirs, it ours. When they dole out funds to large companies to support poor management, there is a cost. Each dollar that goes to them, comes from us, which means it ultimately is taken from the corner pizza store, the local market, and your favorite clothing retailer. They will feel the brunt of the slowdown and instead of 10,000 jobs lost at a single mis-managed company, 12,000 jobs will be lost from small, well-run organizations. We've, in essence, rewarded incompetence.

Economics is a lot more complicated than rocket science -- it involves human behavior, and nobody can predict that with much precision because it is irrational and erratic.

That's what they want you to think. "Oh, big scary economy, too much for your puny brain to comprehend." Just don't ask them to run TurboTax.

We are not talking about predicting a specific stock or even the indicators. We are talking about overall economic health, which is a completely different animal.

For example, take my local bank. It's a small organization with only a few branches, but very heavy on personal touch. When we bought our home a few years ago, the loan officer came to our settlement to make sure everything went smoothly and to deliver the funds. Do you know how many mortgages they've sold in their history?

Zero.

This means they do their homework because they know that they are on the hook, so they make smart mortgage decisions. How do you think they are doing today, in this environment? Business might be off due to the slowdown, but they won't be needing a bailout.

They chose to make smart financial decisions and limit risk, hence, have stayed economically healthy.

By letting those organization and people that have chosen a path to failure to actually fail, our economy will turn around a lot faster and be a lot stronger sooner than by nursing the dead weight along.


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RE: recession or depression - what do you think?

Chosing to believe that government is inherently evil and cannot fix anything, would have led to the US doing nothing in the S&L scandals of the 1980's (hello? Anybody remember McCain and the Keating 5?? Or one of the Bush relatives making out like a...well, a bandit?).

Sure, just let the S&Ls collapse, let people lose their savings. After all, if government is so bad, why even have the FDIC and other government-backed insurance programs? Eliminate them! Make those financial institutions stand on their own, or fail independently - just like the 1920's.

Although of course, then the government wouldn't have created the Resolution Trust Corp. - nor would the taxpayer have ended up making a profit in the end. Oh yeah, and the taxpayer made a profit off the original Chrysler bailout too.

Yes, this time around might be different. We shall see. One of the strengths of the US is its flexibility and adaptability. The Founding Fathers kept slaves, too, but that doesn't mean that 230 years later we think we should emulate them in such manner.

Why do you think they created the Electoral College? It was BECAUSE they actually didn't trust the judgment of the 'common man'. And of course, the 'common man' meant: white, Anglo-Saxon male landowners. Women and minorities need not apply, thanks.

Our strength has been the courage to change over time. We are a big country, we do not do it gracefully or easily. To quote people like Adam Smith and consider him 100% relevant to today's economy is like saying Charles Darwin was 100% correct on evolutionary science. It's nonsense. They were relevant to their times, but so much more complexity (from new data) has been entered into the equation, that if these two great men were alive today, they might well be coming up with all sorts of corollaries and modifications to their original theories.

Institutions change, whether they're political, social, or economic. Change on great scale is always frightening, and there are always people who want to "go back" to a time when things seemed straightforward and simple.

We left "Father Knows Best" and "Leave it to Beaver" a long time ago. The past may be a more comfortable place - especially if you're going to pick and choose which parts of it you like - but we can't and shouldn't try to live in it.


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RE: recession or depression - what do you think?

shadow, You say "For example, let's look at one of the automakers. You have a mismanaged company paired with burden of those with a massive entitlement complex (UAW). Rightly, this company should fail. It should close up shop and have everyone lose their jobs. In short order, someone would buy up the assets, and free of the ridiculous obligations set up by the prior management, would start a new company that is streamlined. Jobs created, lesson learned." QUESTION FOR YOU - WHO IS GOING TO STEP UP? WHO WANTS TO BUY 50+ YR OLD FACTORIES WITH OLD EQUIPMENT?

I don't think you'll be able to come up with an answer --- thus the need for govt intervention.


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RE: recession or depression - what do you think?

Chosing to believe that government is inherently evil and cannot fix anything, would have led to the US doing nothing in the S&L scandals of the 1980'...

I guess that's where the whole "specific, minimal government intervention" thing that you completely ignored comes into play. Given that the Founding Fathers talked about government assistance in the cases of illegal force, fraud, and monopolies, for example, could it be that they were a little more on the ball than you give them credit for?

Why do you think they created the Electoral College? It was BECAUSE they actually didn't trust the judgment of the 'common man'. And of course, the 'common man' meant: white, Anglo-Saxon male landowners. Women and minorities need not apply, thanks.

First and foremost, the College forces candidates to spread their attention to a much larger area than if they just pandered to large population centers. Additionally, during any given cycle, it is possible that low population areas would end up being "battleground states" and receive more attention than they EVER would if it were strict popular vote.

Second, the College does a much better job at keeping fraud from affecting the outcome of an election. The only time this whole Electoral College / Direct Popular vote come into question is when the vote is close. As such, even minor changes in the popular vote could send a different candidate to the White House. Let's assume that Illinois, home to the phrase "Vote early, vote often", submitted thousands of fraudulent votes. Under the College, they've diluted the vote of just those in their state. However, under a popular vote they've diluted the votes of everyone in the country.

Third, it comes to our favorite election subject, recounts. The Electoral College isolates recounts to those states where the outcome is in question. Take a scenario where in each state the popular vote was split 60/40 for one candidate or the other. Not a single state has its outcome in question. However, the national popular vote is within a few hundred thousand - a statistical tie. Each state would have to do a recount because even the smallest change across a few states could affect the outcome. You end up with a situation that is 50 times worse than the Minnesota Senate race, which, by the way, is STILL not resolved. Of course, you still need to account for the fact that the Federal government has no jurisdiction to force a state to do a recount.

Finally, about half our states have laws to prevent or punish faithless electors. I guess those states didn't get the message about not trusting the judgment of the common man.

The past may be a more comfortable place - especially if you're going to pick and choose which parts of it you like - but we can't and shouldn't try to live in it.

Who said that the past was all hugs and puppies? Not I. If anything, we should learn from the past, lest we be forced to repeat their mistakes.


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re: auto companies

QUESTION FOR YOU - WHO IS GOING TO STEP UP? WHO WANTS TO BUY 50+ YR OLD FACTORIES WITH OLD EQUIPMENT?

I don't think you'll be able to come up with an answer --- thus the need for govt intervention.

Either the assets of the company are enough that a profit can be made using them and, as such, would be ripe for purchase

or

they are so crappy that there is no hope for success and the US government will waste billions of dollars in these failed enterprises with nothing additional to show for it.


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RE: recession or depression - what do you think?

I can't contribute to the arguments of what does/doesn't stimulate the economy, but I make a nice side income selling collectible figurines on ebay (can't share anymore details, because I'd gain some competitors, ha-ha). I may have noticed some slight slowing of the market, but nothing major. I'm noticing I sell more stuff on the weekends, around paydays, but my stuff still moves.

People are still spending! I think my stuff is so discretionary, that I wouldn't buy it if I lost my job or my hubby lost his, but so far so good. Just my .02.


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RE: recession or depression - what do you think?

If one ignores the immense quantity of human suffering that this monumental economic collapse is causing, and focuses only on the principle of "moral hazard," i.e., let the guys foolish enough to take imprudent risks pay for their mistakes, then it makes sense to DO NOTHING, and let things right themselves in due course.

But I would be loathe to consigning a whole generation to the ensuing destitution. Besides, the disruptions in the social fabric that would inevitably follow -- outbursts of violence as more and more middle class persons lose their jobs and suffer unacceptable declines in their standard of living -- would make the concerns of purist economic theory totally irrelevant.


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RE: recession or depression - what do you think?

let the guys foolish enough to take imprudent risks pay for their mistakes, then it makes sense to DO NOTHING, and let things right themselves in due course.

While I have no problem with that, it ignores a major factor in recovery: charity. The US donates about $300B a year to charity. In tough times, I can think of things much worse than having to help one another to get through it.

But I would be loathe to consigning a whole generation to the ensuing destitution.

But that is exactly what you are doing if we don't deal with the "economic collapse" right now.

With the plans that are in place, the current US debt will be approximately $120,000 per tax return. As there are NO signs to pay this down in the near future, it will balloon via trillion dollar deficit spending in the next few years. Roll that forward a generation or two and you've signed them off into tax slavery.

I would give up all I have and live a hard and destitute life to ensure that my children and children's children do not live in a world of governmental tyranny.

And that's exactly what it will be: tyranny.

Our country was founded on the belief that the power must lie with one's self; with the people. As you take steps away from yourself (family -> municipality -> state -> national) the power should diminish.

Over the last 80 years, the power has been taken from us and placed at the state and national levels ... for our own good, of course. By definition, this is tyranny.


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RE: recession or depression - what do you think?

Obviously, shadow 700 and I are from opposite ends of the political spectrum -- I a left-of-Obama liberal and he . . . well, I prefer not to speak for him. Our political-economic-social persuasions color not only our mindset, but also what we accept as fact.


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RE: recession or depression - what do you think?

Thanks for a great discussion on this thread with many valid points. In the 1930's we didn't have:

1) Credit cards
2) Credit card debt
3) Trillion $ deficit
4) Global manufacturing
5) Lines of housing equity
6) Payment to private companies to print our money

THE ONLY WAY OUT OF THIS MESS IS TO REGAIN OUR PLACE AS A WORLD PLAYER IN MANUFACTURING.

Since the stimulus plan has not broached that issue - we are headed for depression which will occur by the end of 2009.


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RE: recession or depression - what do you think?

I fear xminion is right, but i hope he's wrong. Our waning manufacturing activity during the past several decades is the big obstacle to recovery that may become more and more evident in the coming months. We need to rely more on our own steel mills, and that means making them competitive versus foreign ones. At least we still have Catapillar and Deere. But it's upsetting to hear the GE is spinning off its appliance division. Who will buy it -- Toyota??

In the past 2 decades at least, it's been possible for manufacturers to go to the ends of the earth in search of cheap labor to be "competitive." But there is a limit to that strategy. I was shocked to see applesauce on supermarket shelves made with apples from Brazil, Asia and who knows where else. Amazing!! I thought America is one of the big apple growing nations. Why not American or Canadian apples? The reason -- take advantage of near slave labor conditions in other countries, so that, even with the cost of transporting the stuff thousands of miles, it's cheaper than using American apples. If this strategy is carried to its ultimate limit, of course, we will put so many Americans out of work that we can no longer afford to buy the goods that American companies have so cleverly and proudly produced at rock bottom cost.

The only way out of this conundrum is to re-invent ourselves. Any ideas of how this might happen??


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