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I don't like to bet on bad things happening, but what the fed has been doing has been freaking a lot of people out. I have a generally bad feeling about what the end result will be. There is a great deal of mistrust that did not exist 10 years ago. Yes, there have always been people saying America will collapse. I don't see that happening. I could see a long term decline that possibly serves as a drag on the world.
We are in unfamiliar territory. The fed has no more ammunition. What you see is about all you're going to get going forward. Corporate profits have been wonderful since they laid waste to their workforce, slashed wages and bennies, done everything they could to unload expenses while engaging in profitable stock buy backs. How much more value can they squeeze out when they've tossed everything out but the kitchen sink in an effort to compete?
The Fed has been doing NOTHING month after month after month. The only thing the Fed has done is to discuss the time when interest rates will eventually be increased from zero. There are lots of very positive signs for our economy: corporate profits, stock prices, low unemployment, a strong dollar. The Fed has openly discussed the reason for delaying interest rate increases. They are still concerned about unemployment. Although the rates of unemployment are theoretically very low, there are lots of people who are underemployed or have dropped out of the workforce. The Fed wants to see increases in salaries as an additional sign that unemployment is easing. The Fed has also been clear that it wants to see an increase in inflation to about 2%. Finally the Fed has been watching the world economy which has in many places been moving in and out of recession. There is no Fed action, no freak out, and the discussions have been very open.
The Fed is considering when to apply the brakes. The Fed is not looking for additional steps to stimulate the economy. If needed the Fed could revert to QE which is now in place in many other countries.
There will always be crazies and paranoids, and this time will always be different. When there actually was something to be concerned over (2003-04), these bozos didn't see it. They were too busy recycling their same old stopped-clock nonsense. So it goes...
There are plenty of those sorts of individuals right now. Many of them post on this forum but there are also quite a few professional investors and money managers who have concerns. Even J. Yellen has warned about high stock valuations. Personally, I think the economy is quite strong and businesses are doing well. I expect to see considerable volatility due to the crazies but an overall positive trend. I am not planning on trying to figure out how to make some additional money by guessing what the crazies will do. I plan to stay the course. In the event of a substantial correction, I will buy.
The stock market is not the economy. The stock market did wonderful during many periods of the great depression.
What if they threw a curveball at ya... Deflation. Nobody seems to appreciate how royally this can screw up a financial system built on debt.
In the 20th century, there were two main examples of deflation's effect on economies:
- The Great Depression of the 1930s,
- Japan's "lost decades," early 1990s
Both involved an asset bubble, which was supported by unsustainable debt and eventually led to a stock market crash. Lower prices and higher taxes can result in less cash flow and profits for companies who then are inclined to reduce or postpone hiring and initiate layoffs, wage stagnation. Deleveraging created a drop in consumption and investment to free up cash to pay off debt.
We don't know. Historically, recessions occur every 7 years, so one is supposed to be due this year. We're just now in the second quarter. Revisions show that there was negative growth in the first quarter. If we don't see positive growth in this second quarter, then we will be in a recession according to the standard definition of a recession.
The bigger problem is that we don't know if we have any effective safeguards in place to avert a market calamity we witnessed in 2007-08'. Some say Dodd-Frank comes short. Has the financial industry learned from its mistakes? Who knows? Right now, there's a housing bubble, but it's not boosted by predatory lending like the last one did. It's an investor/renter boom now. Bartenders aren't getting mortgages to live in new McMansions anymore.
The Fed has been doing NOTHING month after month after month. The only thing the Fed has done is to discuss the time when interest rates will eventually be increased from zero. There are lots of very positive signs for our economy: corporate profits, stock prices, low unemployment, a strong dollar. The Fed has openly discussed the reason for delaying interest rate increases. They are still concerned about unemployment. Although the rates of unemployment are theoretically very low, there are lots of people who are underemployed or have dropped out of the workforce. The Fed wants to see increases in salaries as an additional sign that unemployment is easing. The Fed has also been clear that it wants to see an increase in inflation to about 2%. Finally the Fed has been watching the world economy which has in many places been moving in and out of recession. There is no Fed action, no freak out, and the discussions have been very open.
The Fed is considering when to apply the brakes. The Fed is not looking for additional steps to stimulate the economy. If needed the Fed could revert to QE which is now in place in many other countries.
And the news this morning says that the CPI made the biggest jump in 2 years.
Last edited by knowledgeiskey; 05-22-2015 at 08:33 AM..
the cpi is a price tracking index not an actual cost of living index. but even so the cpi is still far below average inflation rates as well as below the feds target most of the time..
Can you give us a time? And when the time passes without your predicted collapse, instead of issuing new predictions you should find some way of gaining a bit of sense?
I agree. Not saying another bad recession won't happen, but you have to take all these doomsday predictions with a grain of salt. A lot of people just throw them out there knowing nobody will care if/when they're wrong, but if they're right they'll have something to hang their hat on and sell books with. I've been seeing it since 2009. First it was shadow foreclosures that were supposed to eventually decimate the market/economy. That worked itself out fine and now they've moved on to other things. Buy my book I'll tell you how to survive the horrible collapse that's about to happen!
we had 2 major crashes in the last century and may be two periods of big down turns .. for all the predicting of the next one that goes on that is a terrible track record
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