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There are similarities like the spike in energy prices and tight credit markets but many things are different. In the early 80's there was very high inflation and the government drove the interest rates sky high trying to combat inflation (the prime hit 21% and I was lucky to get a 13% mortgage!). Changes in bank regulation and the S&L crisis really made conditions difficult. Unemployment went over 10%.
This possible recession is different (like all are) but does not seem near as severe from my point of view.
Don't be fooled by a government that is trying to sugar coat a real problem until after the election. T-bills are artificially low. Wait until the bond bubble bursts. 21% mortgage rates might not be enough. Either that, or credit isn't made on income alone anymore, but on a substantial amount of collateral (home, auto, even CC bills) to GUARANTEE payment of the principal.
As far as I know this is completely false, the credit markets were much more developed in say the 90s then they were in the 20s. So what data justifies this assertion?
Anyhow, nobody knows what this recession is going to bring (some just pretend to). Past recessions have each been caused by different issues, the issues this time are yet again different. Anyhow, the media always over-reacts to world events. The fact is that economic forecasting works about as well as weather forecasts - the predictions are decent in the short term but completely unreliable in the long term. I find it sorta of funny to watch the bobbleheads try to predict something that cannot be predicted.
History books, from my recollection, were littered with how credit was EZ in the 20's just like it is today (or *was* in relation to the mortgage market), and many blame this credit bubble for our woes then, and now.
I'm guessing that you are in the camp of "the media causes a recession". I won't try to change your mind and certainly won't be putting a tin foil hat on my head. I'll just agree to disagree on this one. In my humble opinion, external factors such as propoganda, government intervention, price fixing, etc are irrelevant in the long term. The free market will stabilize and usurp these trivial factors through black markets and alternative currencies (e.g. gold/silver). But, we Americans have become accustomed to blaming someone for our problems. The problem is the average consumer who overextended theirselves. We need only to look in the mirror to find out who is causing this economic turmoil. At least, those who are of the so called middle class that has every gadget under the sun and lives a lifestyle that is beyond their abilities to pay for them. Since the avg American CC debt is 8000+, it's safe to say the average American is responsible.
History books, from my recollection, were littered with how credit was EZ in the 20's just like it is today (or *was* in relation to the mortgage market), and many blame this credit bubble for our woes then, and now.
I'm outside my expertise... but I was taught that the EZ credit in the 1920's was Stock Market Related. You had people that bought Stocks on Credit, had amassed huge paper profits and overnight, lost it all.
My Grandparents would often bring up stories from the 20's 30's and 40's. My Grandmother was certain that I was on the road to financial ruin when she learned I had applied for a credit card. She was very old school to the point if she didn't have the cash in her purse, she couldn't afford it.
My Grandfather took me through the old neighborhood when I was around 10. He pointed out several homes on his block where the owner's had lost them due to "Speculating" in the Stock Market. These were school teachers, a butcher and a plumber who all thought they were living on easy street.
I do remember being overjoyed to get my first home mortgage for only 12% fixed for 15 years... and I got the low rate only because I put down 25%.
I think what some people miss is that money is only worth what it can buy.
The great depression had dozens of causes many of which have been addressed but we live in a different world today so it is very hard to draw exact parallels. Some of the issues are the same (management of the money supply, the health of banking, falling consumer demand, high debt levels) but the economy today is much stronger and more flexible than then with more safeguards so a depression is not anticipated by any expert.
The great depression had dozens of causes many of which have been addressed but we live in a different world today so it is very hard to draw exact parallels. Some of the issues are the same (management of the money supply, the health of banking, falling consumer demand, high debt levels) but the economy today is much stronger and more flexible than then with more safeguards so a depression is not anticipated by any expert.
The "different world" comment was not unlike that made of dot bomb investors when dumping their money into worthless stock. Or specuvestors dumping money into overvalued real estate. They said the same things you're saying. It's a different world than before, that P/E ratios don't matter or what happened in Japan's real estate market couldn't possibly happen in the good ol' US of A.
Both Jim Rogers and Peter Schiff have forecasted a depression. Both are economic geniuses (aka experts) and have made a killing betting against financials, subprime and homebuilders, and have successfully predicted the credit crisis, subprime massacre, and are predicting the same exact thing occurring with auto loan and credit card debt. They've also predicted an even worse outcome than the GD if government is naive enough to believe that it can buy its way out (e.g. New Deal part deux).
It's very possible our kids won't understand the meaning of unsecured debt. They'll think it was a joke that organizations were insane enough to lend money to people with income alone as proof of ability to repay.
The "different world" comment was not unlike that made of dot bomb investors when dumping their money into worthless stock. Or specuvestors dumping money into overvalued real estate. They said the same things you're saying. It's a different world than before, that P/E ratios don't matter or what happened in Japan's real estate market couldn't possibly happen in the good ol' US of A.
Both Jim Rogers and Peter Schiff have forecasted a depression. Both are economic geniuses (aka experts) and have made a killing betting against financials, subprime and homebuilders, and have successfully predicted the credit crisis, subprime massacre, and are predicting the same exact thing occurring with auto loan and credit card debt. They've also predicted an even worse outcome than the GD if government is naive enough to believe that it can buy its way out (e.g. New Deal part deux).
It's very possible our kids won't understand the meaning of unsecured debt. They'll think it was a joke that organizations were insane enough to lend money to people with income alone as proof of ability to repay.
My comment is a lot different than those made by whatever others you are referring to; I did not say anything about speculation, stock or real estate values, imply things would happen or not, but simply made a true observation that the world is much different than eighty years ago. Tagging my comment with a stupid observation about PE’s shows you are ranting not reading.
I did not deny that there are real problems in our economy, issues in world markets, or people predicting recession… I did say no expert was predicting a depression and would like to see a credible quote from someone doing that.
There are plenty of issues that can be discussed in a rational many without throwing accusations at each other.
My comment is a lot different than those made by whatever others you are referring to; I did not say anything about speculation, stock or real estate values, imply things would happen or not, but simply made a true observation that the world is much different than eighty years ago. Tagging my comment with a stupid observation about PE’s shows you are ranting not reading.
I did not deny that there are real problems in our economy, issues in world markets, or people predicting recession… I did say no expert was predicting a depression and would like to see a credible quote from someone doing that.
There are plenty of issues that can be discussed in a rational many without throwing accusations at each other.
My bad. Didn't mean to throw accusations.
As far as quotes concerning experts' opinions, here's a YT with a few quotables in it.
I agree with the statement that unless your older than 45 you will not remember 82' I affected me almost put me in the bunkrupt court...lost my home, which in turn distroyed my marriage, i was a casualty, let go unemployed, had to retrain and start over,
lesson learned...0 debit load, i mean i carry no debts, i saved for 10 years bought a new house, continued to flip and fix homes pound on every extra 10bucks on the morgatage, i pay off my emergency credit card, when i use it.
I have cash in my pocket all the time...
and i have 10000 in a shoe box just incase the banks get a run....
this time i will not be affected, i can and do grow veggies, my taxes are 2000.00 a yr property that is, and i have started to make my home green with solar and wind...
good luck to all in hi debt, this is going to hurt.
wheelofjustus, I so agree. I am 50 and didn't have any particular crisis go on in the 80's recession, but knowing that I should keep myself debt free and always keep savings/cash on hand was ingrained in my brain. It has kept me calm in a sea of national financial trouble time and time again.
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