Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Is anyone else as tired of hearing the word "bubble" as I am?
Yes.
Bubble generally means speculation in assets financed by credit. That's not the case currently with either the bond market or the real estate market.
A correction in stock prices could mean in the neighborhood of 10%-20%, while crash could be 20%-50%. In any case, as mentioned, a correction, even a crash, is no big deal, it happens.
Haven't heard the word "collapse" in a while, which I define as the economy's inability to provide the basics such as food, water, shelter, and electricity to the bulk of the population. No, that does not include electronic toys, luxury cars, and McMansions.
Also I don't believe in hyperinflation.
The US economy is not suffering from a crisis of production; on the contrary, if anything there is a surplus of capacity. The problem is stupid overconsumption, and even that problem is being addressed somewhat with the so-called sequester.
Interest rates are kept low to help those who borrowed above their means in the mid-2000s to stay afloat and to stimulate those with cash to keep investing in real assets.
Underlying that, interest rates will probably stay low until average labor costs in the countries of early industrialization more or less equalize with average labor costs in the newly industrializing countries. They will probably meet somewhere in the middle.
Not really sure, but that process could take another two, three, five, 10, maybe even 20 or more years, just ask Japan.
Yes, of course, there is always the possibility of any number black swan events along the way.
2010 was three years ago. A lot has changed in three years. The real question: is Dimon's comment still relevant?
How do you define a "crash"? 10% correction? 30% correction? 50% correction?
Obviously the market can't go straight up and there will be pullbacks. But anyone salivating about a 2008-style meltdown is probably going to be disappointed. I don't see the same irrational exuberance that led to the 2000 dot com bust and the 2008 economic crisis. There are so many bears still screaming about the next crash or the end of QE, many of them probably reeling because they were shorting the market before the big runup.
Fundamentally, most companies have a healthier balance sheet now than before the crash. Most have been right-sized. Many have been conservative in their growth forecasts. It's easy to listen to some fool throw a dart at a board, but it takes a lot more effort to follow earnings releases and production forecasts. The forecasts by Ford or GE's CEO hold more weight than some doomsayer trying to sell a book.
Bottom line is that no one really knows. Another crash will probably happen. I thought it would have all totally crashed by now, but I was wrong. I still feel that our economy is inherently unstable and could be crashed at any time...but I don't know the timing of it.
Several people correctly warned of both the dot com bubble and the colapse of the housing bubble, what makes now different?
Bubble generally means speculation in assets financed by credit. That's not the case currently with either the bond market or the real estate market.
A correction in stock prices could mean in the neighborhood of 10%-20%, while crash could be 20%-50%. In any case, as mentioned, a correction, even a crash, is no big deal, it happens.
It may not be a big deal in the grand scheme of things, but every major crash involves individuals who are devistated and some never recover and to them it is a very big deal.
Quote:
Originally Posted by bale002
Haven't heard the word "collapse" in a while, which I define as the economy's inability to provide the basics such as food, water, shelter, and electricity to the bulk of the population. No, that does not include electronic toys, luxury cars, and McMansions.
Also I don't believe in hyperinflation.
I do not think your definition is what most people associate with financial colapse. Generally it is whenever growth turns negetive and results in spikes in unemployment which devistates the lives of large numbers of individuals.
Quote:
Originally Posted by bale002
The US economy is not suffering from a crisis of production; on the contrary, if anything there is a surplus of capacity. The problem is stupid overconsumption, and even that problem is being addressed somewhat with the so-called sequester.
Interest rates are kept low to help those who borrowed above their means in the mid-2000s to stay afloat and to stimulate those with cash to keep investing in real assets.
Underlying that, interest rates will probably stay low until average labor costs in the countries of early industrialization more or less equalize with average labor costs in the newly industrializing countries. They will probably meet somewhere in the middle.
Not really sure, but that process could take another two, three, five, 10, maybe even 20 or more years, just ask Japan.
Yes, of course, there is always the possibility of any number black swan events along the way.
Good Luck!
The economy cannot suffer from overconsumption, that is an oxymoron. The economy is suffering from great losses of good jobs due to outsourcing.
The current low interest rates do little to help common people, because most common people are not doing much borrowing outside of their mortgage which for the most part people established prior to 2008 and credit cards which at current 18-30% rates could hardly be defined as low. Low interest rates are in place to support the financial industry. As far as Japan, they are going on 40 years of failed economic policy with little hope of improvement going forward as they are now so desperate they are going to begin money printing to cope with their lack of growth.
Is anyone else as tired of hearing the word "bubble" as I am?
Seriously! It's become a sort of magic-wand term that people use in an attempt to avoid having to explain how something actually happened. There wasn't a dot-com bubble. The world of IT continued to expand through the turn of the millenium as it had in the years before and did in the years after. There was a spate of fraud and boardroom criminality that was compounded by a crisis of confidence in the polices of a new administration, but no dot-com bubble existed or burst. There was no housing bubble either. Residential real estate markets responded exactly as they should have to a drop of some 335 basis point in 30-year fixed mortgage rates between mid-2000 and mid-2003. What caused the ultimate crisis was predatory practices in and around Wall Street and a refusal to interfere with any of that in Washington.
The economy cannot suffer from overconsumption, that is an oxymoron. The economy is suffering from great losses of good jobs due to outsourcing.
The current low interest rates do little to help common people, because most common people are not doing much borrowing outside of their mortgage which for the most part people established prior to 2008 and credit cards which at current 18-30% rates could hardly be defined as low. Low interest rates are in place to support the financial industry. As far as Japan, they are going on 40 years of failed economic policy with little hope of improvement going forward as they are now so desperate they are going to begin money printing to cope with their lack of growth.
Actually we agree on the definition of overconsumption, you describe bits and pieces of it quite nicely in the ensuing paragraph, thanks for dovetailing. I know a lot of functional morons, including oxy.
I also agree that the economy on US soil is suffering, or has suffered, from great losses of good jobs due to outsourcing.
The difference is that I don't pine morally about it, simply because it won't do any good to myself nor to anyone else and I don't have the power to change the reality.
If I had been the policymaker, I would have ensured that the pace of globalization remained slow and avoided the stupid overconsumption of the mid-2000s which helped financed the too rapid pace and also paid for the noose around the neck of average workers in the countries of early industrialization like the US.
In any case, I expect some of those jobs, or analogous ones, to return to US soil going forward when and where it makes sense, over the next two to 20 or more years, to a small extent it is already happening, but I do not expect average workers on US soil to enjoy the same competitive advantages that they had over average workers in largely pre-industrial countries in, say, the 1950s-1990s period, and, again, waxing nostalgic about it doesn't do any good.
This of course will not stop assorted demagogues and charlatans from trying to wring some short-term profit out of pretending that they do. Those are nice suits that Peter Schiff wears, eh? It may be that P.T. Barnum (actually David Hannum) seriously underestimated the number of suckers born every minute.
It's definitely true that corporate balance sheets are a lot stronger...but government balance sheets are much weaker, not just in the U.S. but throughout the developed world.
Governments can also much more easily carry what appear to be weak balance sheets than corporations can. That's why we had such volumes of traffic moving through asset-swap facilities and so forth back in the worst of the bad old days.
The US economy is not suffering from a crisis of production; on the contrary, if anything there is a surplus of capacity.
The collapse in household and business demand that proceeded from all those chickens coming home to roost in the face of years worth of miserable laissez-faire economic policy caused capacity utilization to decline. It is expensive in terms of both time and money either to add to or subtract from industrial capacity. The wiser course is typically and currently to wait it out as demand recovers.
Quote:
Originally Posted by bale002
The problem is stupid overconsumption, and even that problem is being addressed somewhat with the so-called sequester.
The actual problem is underconsumption, and the sequester is only making matters worse.
Quote:
Originally Posted by bale002
Interest rates are kept low to help those who borrowed above their means in the mid-2000s to stay afloat...
Blame the victim. The whole liturgy of "borrowed beyond their means" is a faithless caricature of actual events.
Quote:
Originally Posted by bale002
Underlying that, interest rates will probably stay low until average labor costs in the countries of early industrialization more or less equalize with average labor costs in the newly industrializing countries. They will probably meet somewhere in the middle.
Actually, a great many factors go into decisions on where to produce, but there will continue to be a tendency for work that can be migrated to concentrate in areas where compensation for workers actually capable of doing the work is the lowest. There would not be a wage rate for such work anywhere else since no significant amount of the work would be done there anymore. What's the going wage rate at textile mills in New England, for example? At steel mills in Pittsburgh?
Quote:
Originally Posted by bale002
Not really sure, but that process could take another two, three, five, 10, maybe even 20 or more years, just ask Japan.
Why would anyone ask Japan? Is this some reference to "Lost Decade" disinformation mythology?
Quote:
Originally Posted by bale002
Yes, of course, there is always the possibility of any number black swan events along the way.
FYI, use of the term "black swan" suggests more that one has been hoodwinked than that he or she has been educated. It's a little like "bubble" or "misery index". Serious people don't seriously go there.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
