We are very likely in another depression

[StageLeft]

Originally posted by: ProfJohn
^ if true then we are setting ourselves up for a good recovery.

Right now everyone is sitting back and saving their pennies worried about their jobs, but once we start to recover they will go out and spending like mad and that will really give the economy a big jolt.
GDP growth by quarter
Look at the 1982-83 period.

Went from -1.5% to 0% to 5% to 8-9% for an entire year. That is an insane level of growth.

During Clinton's whole term he had only 5 quarters of growth over 6% and Bush only had 1 while Reagan had 5 at +7% in a row. If congress doesn't screw things up we could see a repeat in another year or two.

What in God's name are you talking about? Spending like mad with what? What money, ProfJohn? The US for the first time, I believe in history, a couple of years ago had a negative savings rate. NO MONEY. Now that people's fantasy assets have dwindled they don't even have equity in their homes. You think people who've been burned as many will be in the next couple of years are going to spend their money? First of all many won't have it and second of all they will face a paradigm shift in how they handle their household budgets.

If you read the article it rightly says that the shift to savings will slow a recovery.

Special K thanks, hopefully I can remember that!

 

[BoberFett]

Originally posted by: GTKeeper
Give me a fucking break.

The 1987 crisis, the 1998 crisis and today's crisis can all be attributed to complex financial instruments, i.e Derivatives and more specifically off-balance sheet exposures. That is about as 'free market' as it gets since its unregulated at all.

What are people's thoughts on US banks being essentially insolvent at this point?

Complex financial instruments that can only exist in a fractional reserve banking system set up by... say it with me... government.

 

[Thump553]

Originally posted by: ProfJohn
Even with all the bad recent news the economy is about the same shape it was in 1982. That recession was the last 'bad' recession that we faced, but it was nothing compared to the late 70s era.

When we hit bottom it may look like a 70s era recession, but that is a LONG LONG ways from a depression. When unemployment doubles then we can start talking about a recession.

I tend to agree with PJ, with some major cavaets:

1) The US economy is shedding jobs at an alarming rate right now, and the effect of those job losses don't really kick in until those people run out of money and the (chain of) bankruptcies and foreclosures start.

2) The housing market is probably down for a substantial number of years at this point.

3) Who knows what other "toxic assets" those investment banker morons have squirrelled away for us.

I lived through the bad times of the 70's and 80's in the Rust Belt and it seemed worse then than it is now, but that might be more a reflection of my personal situation being less unsecure (not the same as more secure) now. At least we don't have the 70's inflation destroying your savings faster than you can accumulate them.

The potential for a depression is here-especially if we follow the GOP Hebert Hooverites in Congress-but I don't think we are there yet.

 

[Dissipate]

Originally posted by: LegendKiller
The savings rate has skyrocketed while debt has shrunk. The numbers look pretty promising.

That's about 30 years too late for the baby boomers. The numbers do NOT look promising.

 

[ohnoes]

Originally posted by: BoberFett

Unless you can show me how in a free market a bank could lend more money than it has, I'm going to stick with Not A Free Market Problem.

The banks were selling the loans to wall st. at a crazy rate, so where they could only make 5 loans before, they can now make 20 loans or however many more w/o any increases in deposits or assets.

 

[Jaskalas]

Originally posted by: Atreus21
It's difficult to imagine that.

Not debunking your article. Just saying it's hard to imagine something like that happening. I mean, people are still driving cars to work.

Be patient, 2008 was only the beginning of this tale.

Originally posted by: dphantom
We are no where near the recession levels of the late 70's/early 80's let alone the Great Depression. Not saying we could not be heading for a depression but give me a break, when people can still afford ipods in record numbers, we are still well off.

If you read the article you'd realize that 2008?s losses alone were equal to half the Great Depression.

A 20% hole driven into the household balance sheet
The missing piece in most analysis regarding the efficacy of government policy in
terms of rejuvenating a new cycle of borrowing and spending is the extent of
trauma that has taken place on the household balance sheet since the housing
bubble popped in 2006 and the equity bull market reversed course in 2007. We
estimate that the cumulative loss of household net worth as of the end of 2008
was $13 trillion. In other words, a 20% hole has been driven into the household
balance sheet, which has not happened since the 1930s. So far, the loss of
wealth in the household sector has been half as much in the Great Depression,
but if we are anywhere near the ballpark on our 660 call on the S&P 500 and a
further 15% downside to home prices, then by the end of 2009 the total hit to net
worth will approximate $20 trillion, or 40% from the 2007 peak, which indeed
would rival the severe hit to household balance sheet incurred in the 1930s.

 

[piasabird]

A lot of people that get wage cuts were basically overpaid to begin with.

 

[wwswimming]

Originally posted by: FerociousThis is a good read. He's one of the few that predicted this mess back in 2006. No one can predict the future but I forsee many years of economic (and market) stagnation ahead.

actually, there's a lot of people who grew to expect this situation in the 2003-2004 time-frame.

an economy that has little manufacturing, built on people using their houses as ATM's, is fairly obviously limited by an eventual peak in housing prices.

in the next few years, we will also find out what happens when the rest of the world decides to stop loaning us money.

an economic contraction on the order of the 1930's Depression obviously has a precedent.

an un-attended Fed auction ? i'm not sure if there is a precedent, in the US. anybody know ?

 

[BoberFett]

Originally posted by: ohnoes

Originally posted by: BoberFett

Unless you can show me how in a free market a bank could lend more money than it has, I'm going to stick with Not A Free Market Problem.

The banks were selling the loans to wall st. at a crazy rate, so where they could only make 5 loans before, they can now make 20 loans or however many more w/o any increases in deposits or assets.

If that were the case then the problem would have stopped at Wall Street when the stock market dropped by 40%. Investors would have lost their shorts and we'd have moved on. The problem is that it wasn't limited to Wall Street due to fractional banking and the Fed. Banks were buying each other's worthless paper with money created out of thin air.

There were failures in the system all around and to lay the blame at the feet of the free market is simply ignorant.

 

[MovingTarget]

Originally posted by: BoberFett

Originally posted by: GTKeeper
Give me a fucking break.

The 1987 crisis, the 1998 crisis and today's crisis can all be attributed to complex financial instruments, i.e Derivatives and more specifically off-balance sheet exposures. That is about as 'free market' as it gets since its unregulated at all.

What are people's thoughts on US banks being essentially insolvent at this point?

Complex financial instruments that can only exist in a fractional reserve banking system set up by... say it with me... government.

Talk about the point going over one's head. The government didn't mandate that people deal with these instruments. They were created by the financial institutions and not given any oversight by the government. They turned a blind eye.

As far as the fractional reserve system goes, even though it is set up by the government, that doesn't mean that it is the one at fault. Even before that system was set in place, you still had banks doing business on their own fractional reserve systems without any oversight, just like these complex financial instruments. The fractional reserve lending model had its roots, like most modern banking and accounting principles, outside of government. Hence, why you used to have runs on banks that people thought were unsound. History has had many examples of runs on banks for as long as we have had them irrespective of the governments.

This is what banks DO. They take deposits and then lend them out to try and make a profit. Nothing was stopping them from borrowing from elsewhere to lend out more than they physically had in bank notes, or whatever. Anyone who knows how the modern banking system developed would know this is the case. The gvt did step in later and regulate these practices, even encouraging them within certain limits, which both promoted growth and somewhat limited the damage a default would cause (see FDIC, etc.).

Perhaps you would like to go to a true free market where you had dramatic cycles every few years of booms, busts, panics, etc. without having any long-term stability OR growth. A true free market, i.e. Laissez-faire capitalism, has proven to be a disaster time and time again. You have to have oversight and regulation. If you do not see that, then you are delusional about both the government and the markets.

 

[GTKeeper]

Originally posted by: BoberFett

Originally posted by: GTKeeper
Give me a fucking break.

The 1987 crisis, the 1998 crisis and today's crisis can all be attributed to complex financial instruments, i.e Derivatives and more specifically off-balance sheet exposures. That is about as 'free market' as it gets since its unregulated at all.

What are people's thoughts on US banks being essentially insolvent at this point?

Complex financial instruments that can only exist in a fractional reserve banking system set up by... say it with me... government.

You must be one of those gold guys. I bet Schiff is your idol.

 

[GTKeeper]

Originally posted by: MovingTarget

Originally posted by: BoberFett

Originally posted by: GTKeeper
Give me a fucking break.

The 1987 crisis, the 1998 crisis and today's crisis can all be attributed to complex financial instruments, i.e Derivatives and more specifically off-balance sheet exposures. That is about as 'free market' as it gets since its unregulated at all.

What are people's thoughts on US banks being essentially insolvent at this point?

Complex financial instruments that can only exist in a fractional reserve banking system set up by... say it with me... government.

Talk about the point going over one's head. The government didn't mandate that people deal with these instruments. They were created by the financial institutions and not given any oversight by the government. They turned a blind eye.

As far as the fractional reserve system goes, even though it is set up by the government, that doesn't mean that it is the one at fault. Even before that system was set in place, you still had banks doing business on their own fractional reserve systems without any oversight, just like these complex financial instruments. The fractional reserve lending model had its roots, like most modern banking and accounting principles, outside of government. Hence, why you used to have runs on banks that people thought were unsound. History has had many examples of runs on banks for as long as we have had them irrespective of the governments.

This is what banks DO. They take deposits and then lend them out to try and make a profit. Nothing was stopping them from borrowing from elsewhere to lend out more than they physically had in bank notes, or whatever. Anyone who knows how the modern banking system developed would know this is the case. The gvt did step in later and regulate these practices, even encouraging them within certain limits, which both promoted growth and somewhat limited the damage a default would cause (see FDIC, etc.).

Perhaps you would like to go to a true free market where you had dramatic cycles every few years of booms, busts, panics, etc. without having any long-term stability OR growth. A true free market, i.e. Laissez-faire capitalism, has proven to be a disaster time and time again. You have to have oversight and regulation. If you do not see that, then you are delusional about both the government and the markets.

You nailed it. I love all these free market ideologues. They are all pretty fucking stupid.

 

[WHAMPOM]

Originally posted by: Atreus21
It's difficult to imagine that.

Not debunking your article. Just saying it's hard to imagine something like that happening. I mean, people are still driving cars to work.

50,000 less each week, about right huh??

 

[BoberFett]

Originally posted by: GTKeeper

Originally posted by: MovingTarget

Originally posted by: BoberFett

Originally posted by: GTKeeper
Give me a fucking break.

The 1987 crisis, the 1998 crisis and today's crisis can all be attributed to complex financial instruments, i.e Derivatives and more specifically off-balance sheet exposures. That is about as 'free market' as it gets since its unregulated at all.

What are people's thoughts on US banks being essentially insolvent at this point?

Complex financial instruments that can only exist in a fractional reserve banking system set up by... say it with me... government.

Talk about the point going over one's head. The government didn't mandate that people deal with these instruments. They were created by the financial institutions and not given any oversight by the government. They turned a blind eye.

As far as the fractional reserve system goes, even though it is set up by the government, that doesn't mean that it is the one at fault. Even before that system was set in place, you still had banks doing business on their own fractional reserve systems without any oversight, just like these complex financial instruments. The fractional reserve lending model had its roots, like most modern banking and accounting principles, outside of government. Hence, why you used to have runs on banks that people thought were unsound. History has had many examples of runs on banks for as long as we have had them irrespective of the governments.

This is what banks DO. They take deposits and then lend them out to try and make a profit. Nothing was stopping them from borrowing from elsewhere to lend out more than they physically had in bank notes, or whatever. Anyone who knows how the modern banking system developed would know this is the case. The gvt did step in later and regulate these practices, even encouraging them within certain limits, which both promoted growth and somewhat limited the damage a default would cause (see FDIC, etc.).

Perhaps you would like to go to a true free market where you had dramatic cycles every few years of booms, busts, panics, etc. without having any long-term stability OR growth. A true free market, i.e. Laissez-faire capitalism, has proven to be a disaster time and time again. You have to have oversight and regulation. If you do not see that, then you are delusional about both the government and the markets.

You nailed it. I love all these free market ideologues. They are all pretty fucking stupid.

Yeah, we're just stupid. It takes a genius like you to believe that one government driven bubble after another is more healthy than a regular cyclical economy.

How is your 401k doing? Pretty healthy? You can thank the government and it's beloved Federal Reserve for creating a neverending bubble. Well, until it popped anyway.

 

[MovingTarget]

Originally posted by: BoberFett

Originally posted by: GTKeeper

Originally posted by: MovingTarget

Originally posted by: BoberFett

Originally posted by: GTKeeper
Give me a fucking break.

The 1987 crisis, the 1998 crisis and today's crisis can all be attributed to complex financial instruments, i.e Derivatives and more specifically off-balance sheet exposures. That is about as 'free market' as it gets since its unregulated at all.

What are people's thoughts on US banks being essentially insolvent at this point?

Complex financial instruments that can only exist in a fractional reserve banking system set up by... say it with me... government.

Talk about the point going over one's head. The government didn't mandate that people deal with these instruments. They were created by the financial institutions and not given any oversight by the government. They turned a blind eye.

As far as the fractional reserve system goes, even though it is set up by the government, that doesn't mean that it is the one at fault. Even before that system was set in place, you still had banks doing business on their own fractional reserve systems without any oversight, just like these complex financial instruments. The fractional reserve lending model had its roots, like most modern banking and accounting principles, outside of government. Hence, why you used to have runs on banks that people thought were unsound. History has had many examples of runs on banks for as long as we have had them irrespective of the governments.

This is what banks DO. They take deposits and then lend them out to try and make a profit. Nothing was stopping them from borrowing from elsewhere to lend out more than they physically had in bank notes, or whatever. Anyone who knows how the modern banking system developed would know this is the case. The gvt did step in later and regulate these practices, even encouraging them within certain limits, which both promoted growth and somewhat limited the damage a default would cause (see FDIC, etc.).

Perhaps you would like to go to a true free market where you had dramatic cycles every few years of booms, busts, panics, etc. without having any long-term stability OR growth. A true free market, i.e. Laissez-faire capitalism, has proven to be a disaster time and time again. You have to have oversight and regulation. If you do not see that, then you are delusional about both the government and the markets.

You nailed it. I love all these free market ideologues. They are all pretty fucking stupid.

Yeah, we're just stupid. It takes a genius like you to believe that one government driven bubble after another is more healthy than a regular cyclical economy.

How is your 401k doing? Pretty healthy? You can thank the government and it's beloved Federal Reserve for creating a neverending bubble. Well, until it popped anyway.

Do you like being able to put your money in a bank and have a steady yield with relatively little risk? Do you like knowing that it will still be there in the next four years as there are protections against the bank runs of old? If not, I bet your mattress is pretty lumpy with Benjamins. A neverending bubble is much preferable than the kind of economic booms/busts of the 19th century. We have already tried the unregulated free market economy. It was an unmitigated disaster over the long run. We shouldn't be taking steps backward. The Fed may be faulty, but not having it would be a real mistake at this point...

 

[Bowfinger]

Originally posted by: Ferocious
So says Merrill Lynch's chief economist for North America.

This is a good read. He's one of the few that predicted this mess back in 2006. No one can predict the future but I forsee many years of economic (and market) stagnation ahead.

click

Bump for a really good read. After browsing some of the other threads with all their pop-economics posturing, I thought others might like some real meat too.

Thanks Ferocious.

 

[child of wonder]

Thankfully my bank is still growing and expanding. Just yesterday I was given a $200,000 budget to expand our blade and SAN infrastructure because we're bringing on more application servers and purchasing another bank. Our bank makes most of its money from ag loans.

 

[Zebo]

Originally posted by: Bowfinger

Originally posted by: Ferocious
So says Merrill Lynch's chief economist for North America.

This is a good read. He's one of the few that predicted this mess back in 2006. No one can predict the future but I forsee many years of economic (and market) stagnation ahead.

click

Bump for a really good read. After browsing some of the other threads with all their pop-economics posturing, I thought others might like some real meat too.

Thanks Ferocious.

Co-sign



OP please update link to: http://www.blah3.com/dave_depression_jan_09.pdf

 

[Zebo]

Originally posted by: Elias824
When I see unemployment head over 10% ill start to worry about a depression. Here in my home state of Utah (Mormon jokes welcome) Were at a whopping 3.7% unemployment

Unemployment IS 17% if you use pre-1994 collection methodology when they stopped counting those looking for more than a year.

Please see Statistician John Williams' shadowstats.com for more info.

 

[StageLeft]

Looking more and more like it all the time. A definition of a depression is not hard and fast, but one I've heard floated when it was just an academic exercise with no real meaning to the real world (i.e. nobody thought we'd see one) was 10% drop in GDP occurring, I think. Not sure if that was for a year or whatever, but Japan is there now, as of Q4 last year, give or take a bit. Who knows how far down the US will go, but one thing's for sure we are all on a sinking ship.

 

[Muse]

Originally posted by: Ferocious
So says Merrill Lynch's chief economist for North America.

This is a good read. He's one of the few that predicted this mess back in 2006. No one can predict the future but I forsee many years of economic (and market) stagnation ahead.

click

I'm getting an error message when I try to hit that link:

Error
Error creating user object or logging in.

Error: INVALID_ENCRYPTION_USED (7995408)

 

[Muse]

Originally posted by: Elias824
When I see unemployment head over 10% ill start to worry about a depression. Here in my home state of Utah (Mormon jokes welcome) Were at a whopping 3.7% unemployment

We're very close to 10% here in CA and it's rising fast. Don't know any Mormon jokes. I've wondered for years how they can keep a straight face when they talk about recessions. This is the scariest yet because there's an undercurrent of panic. Yes, people are still driving. Could the bottom fall out of this economy? IMO, yes.

 

[wwswimming]

Originally posted by: dphantom

Originally posted by: Red Dawn
Well I'm depressed now

As for buying an Ipod, I think I'll hold off for awhile.

Good idea. Personally, I am building up savings, buying nothing so I guess I am the cause of our current econmic problems.

Personally, i've been training myself to eat earthworms, so i share
some responsibility also.

 

[Muse]

Originally posted by: GTKeeper

Originally posted by: BoberFett

Originally posted by: MovingTarget

Originally posted by: BoberFett

Originally posted by: MovingTarget
Well, it is possible. For quite a while the middle class had been saying that it "felt" like we were in a recession, while the resident free-marketers kept citing the stock market to say that things were just dandy. The very same is likely to be happening now.

Aside from the official definition of "depression", what would the the signs that this is going on to the average person? I don't think we can compare a modern-day depression to ones of the past simply because of the way society, government, and infrastructure have changed. How would we know?

Yeah revisionism!

Free marketeers haven't been saying any such things. It's the LegendKillers and Evans of this forum who have been saying everything is fine. They denounce the free market fervently.

Lies and deceit, typical leftist.

Do you remember when the dow was still above 10k when the economists in the media were saying that things were fine? That we were still growing? I do. Many average Americans had been feeling the squeeze LONG before now. Wages had been stagnant, debt was mounting, prices rising, and many couldn't keep up anymore. Yet, the talking heads kept saying that since GDP was growing and the stock market was still doing well that the rest of America had been doing well. This clearly wasn't the case.

What about 14k? The middle class has been experiencing this downturn before the insulated wall street fatcats caught wind of it. I don't denounce the free market when it works like it is supposed to, but I do denounce the leaders of the free market (and their parrots) when they are completely divorced from reality. We are now seeing the effects of that. Leftist? Hardly. Experience trumps idealogy in this case...

That thing that just flew over your head? That was the point. Too bad you missed it.

The free market was in no way responsible for the stock market bubble and its irrational exuberance. That was due to market intervention by the government. The opposite of free market.

Unless you can show me how in a free market a bank could lend more money than it has, I'm going to stick with Not A Free Market Problem.

Give me a fucking break.

The 1987 crisis, the 1998 crisis and today's crisis can all be attributed to complex financial instruments, i.e Derivatives and more specifically off-balance sheet exposures. That is about as 'free market' as it gets since its unregulated at all.

What are people's thoughts on US banks being essentially insolvent at this point?

I agree that leverage is a principal, maybe the principal cause of all this. Some Wall St. institutions were leveraging at 30/1. When the markets started precipitously leaking as the summer ended and went into fall, institutions had to cover their margin calls and the effect was an unrecoverable market downward spiral. "Not a Fee Market Problem?" Get a clue. You are going to see very tight financial markets regulation in your immediate and indefinite future.

 

[Muse]

Originally posted by: wwswimming

Originally posted by: dphantom

Originally posted by: Red Dawn
Well I'm depressed now

As for buying an Ipod, I think I'll hold off for awhile.

Good idea. Personally, I am building up savings, buying nothing so I guess I am the cause of our current econmic problems.

Personally, i've been training myself to eat earthworms, so i share
some responsibility also.

I've been a principal cause of the depression/recession whatever you want to call it for a long time. I'm not into worms, but I know ways to save money that are truly subversive (no, I'm not a criminal).