[lvmensch]

Originally Posted by Katie the heartbreaker

+1 I appreciate the thoughtful rebuttal. I would say I hope you are right until the bottom line of your post. We do not need more debt, increasing wealth gaps, asset price inflation , more homelessness, etc. I believe the current system is a failure and I do wish that a more beneficial one could be implemented. That is not what I believe is happening. I surely would take the current system over something much worse.

I think you are blowing an economic hiccup into a myocardial infarction. We are going to have a wild ride for a couple of weeks to a couple of months. But nothing that indicates a massive melt down. And we are in Las Vegas which is ultra sensitive to the flow of travelers.

And there are counter indications. For real estate note that listings appear somewhat retarded for this point in the year and interest rates are extraordinarily low. Even those with big expensive homes should be looking at a refi. We just did one last year and think we will do it again this summer. Even on a year old mortgage we see the possibility of cutting the payment over 25%.

So hang on for a while and see how all this breaks. We may well be in fat city by fall. Or have gone over the cliff...

[Katie the heartbreaker]

Originally Posted by lvmensch

I think you are blowing an economic hiccup into a myocardial infarction. We are going to have a wild ride for a couple of weeks to a couple of months. But nothing that indicates a massive melt down. And we are in Las Vegas which is ultra sensitive to the flow of travelers.

And there are counter indications. For real estate note that listings appear somewhat retarded for this point in the year and interest rates are extraordinarily low. Even those with big expensive homes should be looking at a refi. We just did one last year and think we will do it again this summer. Even on a year old mortgage we see the possibility of cutting the payment over 25%.

So hang on for a while and see how all this breaks. We may well be in fat city by fall. Or have gone over the cliff...

If this was just a virus with a 2% kill rate, I would tend to agree with you. It is the bursting of the everything bubble that is the problem. I just got word that the fed went all in and dropped rates to to zero. A huge QE has been started and we are not even in a recession yet. Stocks and housing could now start rising again breaking all time highs over and over again. If this happens, everyone will think the fed saved the day again and this is over. It is not. We have structural problems in the economy that need to be fixed. I personally think we are too far gone for that. As far as real estate bulls in this thread, they may continue to be right for the time being. I don't know. I am looking at the bigger picture, not short term noise.

[luckydogg]

Originally Posted by Katie the heartbreaker

+1 I appreciate the thoughtful rebuttal. I would say I hope you are right until the bottom line of your post. We do not need more debt, increasing wealth gaps, asset price inflation , more homelessness, etc. I believe the current system is a failure and I do wish that a more beneficial one could be implemented. That is not what I believe is happening. I surely would take the current system over something much worse.

Thank you - I figured if I am going to be on lockdown might as well make myself useful!

And I agree with you we definitely do not need more debt, increasing wealth gaps, and all those other things. However when it comes to debt our politicians and central banks can't say "no". Nobody looks at the long term effects of their actions, all they care about is getting through the latest crisis, knowing that when the SHTF they'll be long gone or out of office and won't be the one left to clean up the mess. I think the only Fed chair that did the unpopular but "right" thing was Paul Volker, by raising interest rates in the middle of runaway inflation. At least he was able to normalize rates, where now I am not even sure that's possible. Negative interest rates? It's already happening in other parts of the world, and many economists don't even know what to make of it.... scary stuff.

Edit: Literally 2 minutes after I posted this I see the Fed just announced an emergency rate cut to zero and massive bond buying. No surprise there....

[CD2017]

Originally Posted by Katie the heartbreaker

If this was just a virus with a 2% kill rate, I would tend to agree with you. It is the bursting of the everything bubble that is the problem. I just got word that the fed went all in and dropped rates to to zero. A huge QE has been started and we are not even in a recession yet. Stocks and housing could now start rising again breaking all time highs over and over again. If this happens, everyone will think the fed saved the day again and this is over. It is not. We have structural problems in the economy that need to be fixed. I personally think we are too far gone for that. As far as real estate bulls in this thread, they may continue to be right for the time being. I don't know. I am looking at the bigger picture, not short term noise.

I haven't agreed with many of your recent posts about the pending apocalypse, but I do agree with this last statement. We have learned very little since 2008.

[Katie the heartbreaker]

Originally Posted by rhuff80

I haven't agreed with many of your recent posts about the pending apocalypse, but I do agree with this last statement. We have learned very little since 2008.

I just realized I am the only one here with the doomsday prepper views. To say I am in the minority is an understatement. The only thing I can say for sure is we are heading for a crash worse than 2008. I am 100% certain on that. Could it be bailed out again and things go on as normal for another 10 years? I do not think so, but I admit I could be wrong on that. If that does happen, then my entire premise will be wrong and I will permanently stop posting about economics because of it. This is the one time that I truly do hope I am wrong and look like an idiot.

[RationalExpectations]

Originally Posted by Katie the heartbreaker

I am a tough girl, so you could of quoted my post since you are obviously referring to me.

Actually, I wasn't. I was referring to the guy in the video.

Originally Posted by Katie the heartbreaker

As far as forecasting the economy, the libertarian conservative's will be proven to be right. These are your preppers who have been warning of this for over 10 years and have been laughed at throughout the everything bubble. I disagree with their political views, but otherwise am in full agreement on where we are headed.

Forecasting is quite difficult -- especially about the future. Heck, we have a hard enough time figuring out the relationship among events in the past.

I know this isn't the economics forum, but bear with me as I post the views of some prominent -- and very smart -- macroeconomists both in the USA and Europe. Historically speaking, economists individually don't have a very good track record forecasting the future. Collectively - averaging their forecasts - is somewhat better.

Here is the question put to them this past week:

"Do you agree or disagree with the following statements, and, if so, how strongly and with what degree of confidence:"

• Even if the mortality of COVID-19 proves to be limited (similar to the number of flu deaths in a regular season), it is likely to cause a major recession.
• The economic effects of COVID-19 coming from reduced spending will be larger than those coming from disruptions to supply chains and illness-related workforce reductions.
• In addition, we asked our European panel about the readiness of Eurozone policy institutions to respond effectively:
• The economic policy institutions of the Eurozone are well equipped to ameliorate the potential economic damage from COVID-19.

Of the panel of 43 US experts, 36 participated in this survey; of the 46 European experts, 38 participated – for a total of 74 expert reactions to the statements above.

Likelihood of a major recession

On the first statement on whether there will be a major recession, weighted by each expert’s confidence in their response, 19% of the US panel strongly agreed, 44% agreed, 31% were uncertain, and 8% disagreed.
Among the European panel (again weighted by each expert’s confidence in their response), there was a bigger majority agreeing that a major recession is likely: 48% strongly agreed, 34% agreed, 13% were uncertain, and 4% disagreed.

More details on the experts’ views come through in the short comments that they are able to include when they participate in the survey. These indicate a broad consensus across both panels that there will be a sharp downturn in the economy, but less agreement on how prolonged the dip is likely to be.

For example, Anil Kashyap at the University of Chicago said:

"a sharp slowdown is likely, whether it will be persistent enough to rise to the level of a recession is not clear yet."

Jean-Pierre Danthine of the Paris School of Economics, who, like Kashyap, said he was uncertain, said:

"Two quarters of negative growth, yes; major recession: very uncertain, depends notably on policy reactions."

One of the minority of experts who disagreed that a major recession is likely, Kenneth Judd at Stanford said:

If it is like ordinary flu, then economy should quickly recover. COVID-19 only threatens old and feeble economic expansions.

Elena Carletti of Bocconi University said:

The contagion rate worries more than the mortality rate itself as it shuts down the whole economy to contain effects on the health system.

Patrick Honohan of Trinity College Dublin said:

‘Even if death rate is low, it will be because containment has been effective and that will adversely affect aggregate supply and demand.’

Richard Schmalensee of MIT said:

‘”Major” might be a bit too strong, but the precautionary measures being taken in many countries will have a significant disruptive effect.’

Other experts point to what might be called "fear factors."


Larry Samuelson at Yale said:

‘The COVID-19 wreaks more havoc through panic and disruption than death. To avoid recession, we could view COVID-19 as we do the flu.’

Nicholas Bloom at Stanford said:

‘Huge supply, demand and uncertainty shock. Vix [an indicator of expectations of market volatility] is almost as 50.’

Darrell Duffie at Stanford said:

‘We see initial signs of a recession in debt and equity pricing, and in fiscal and monetary policy responses.’

Xavier Freixas of Universitat Pompeu Fabra said:

‘Contemporary interconnectedness between industries and countries turns a gridlock in one industry into a complete recession’.

Christian Leuz at the University of Chicago said:

‘The severity of the downturn likely differs by country, but in many countries the knock-on effects are already quite severe’.

Albert Alesina at Harvard said:

‘If what is happening in Italy happens broadly, it will be major recession’.

Supply and demand shocks


On the second statement about the demand-side effects of COVID-19 on the economy being more significant than the supply shock, 44% of the US panel agreed, 52% were uncertain, and 3% disagreed.
The results were similar for the European panel. Like the US panel, weighted by each expert’s confidence in their response, 4% strongly agreed, 43% agreed, 41% were uncertain, and 12% disagreed.


The absence of agreement among the experts on the relative importance of supply and demand shocks is reflected in the comments.

Pol Antras at Harvard said:

‘Both will be at play. For some sectors (services) demand will be key; but supply disruptions will be serious in manufacturing.’

Karl Whelan at University College Dublin said:

This is both a major supply and demand shock. It is hard to see any circumstances in which measured GDP does not decline significantly.’

John Vickers at Oxford said:

‘Hard to disentangle supply and demand effects. And beware financial consequences – credit crunch, loan defaults, effects on insurers, etc.’

Of those who agree that demand-side effects will dominate supply-side effects, David Autor at MIT said:

‘Supply chains are mostly about goods production, but manufacturing is under 20% of GDP. Services are a larger share of GDP and may be more exposed.’

Austan Goolsbee at the University of Chicago said:

‘Especially in rich countries where services dominate the economy, social distancing and withdrawal will be the toughest part.’

Robert Shimer at the University of Chicago said:

‘Supply chain disruptions look to be short-lived. Income loss for hourly workers and those in travel, entertainment, etc. will matter more.’

Barry Eichengreen at Berkeley said:

‘As someone who’s estimated lots of models designed to distinguish supply and demand shocks, good luck identifying them.’

Christian Leuz of Chicago said:

‘Obviously hard to separate supply and demand, but the question is essentially asking whether there is a big multiplier from the shock: my answer is yes.’

European institutions

The third statement, put only to the European panel, on the readiness of the economic policy institutions of the Eurozone to respond to the potential damage from COVID-19, weighted by each expert’s confidence in their response, only 14% agreed that they are well equipped, 17% were uncertain, 48% disagreed, and 21% strongly disagreed.

Among the over two-thirds majority who disagreed or strongly disagreed, several comment on the inability to coordinate a fiscal response.

John Vickers of Oxford said:

‘Lack of fiscal coordination. And financial sector measures could have adverse fiscal consequences in some scenarios.’

Karl Whelan at University College Dublin said:

‘The absence of a common fiscal instrument (e.g. eurobonds) makes it difficult to have a large coordinated fiscal response.’

Olivier Blanchard of the Peterson Institute of Economics concludes: ‘Not without a change in fiscal attitudes and rules – which may come, under pressure.’

Others assume that it will not be Eurozone institutions that come to the rescue. Charles Wyplosz of the Graduate Institute, Geneva says:

‘Besides the European Central Bank, which will play second fiddle, the really important actions will be at the national level, coordinated hopefully.’

Joachim Voth of the University of Zurich comments:

Just like in 2007-08, Europe is out for lunch when it matters. The one viable actor in times of crisis is the nation state.’

At the end of the day, none of these leading & award-winning economists agree with the person in the video.

[tijlover]

I don't ascribe to Psychic's, but a friend of mine does, and her Psychic, with a very high rate of predictions, predicted, a year ago, a pandemic would quickly appear, and? It would disappear just as quickly.

If that's any consolation!

[RationalExpectations]

Originally Posted by Katie the heartbreaker

The main premise has always been that nothing was ever fixed from the 2008 crisis, just papered over.

I do not believe your premise. My personal conversations both with Hank Paulson and Timothy Geithner are convincing to me. The seeds of the Great Recession date back to the first Clinton Administration.

[RationalExpectations]

Originally Posted by rhuff80

We have learned very little since 2008.

I disagree. We have learned volumes since 2008: nearly countless PhD dissertations and publications in peer-reviewed academic journals.

[RationalExpectations]

Originally Posted by Katie the heartbreaker

I just realized I am the only one here with the doomsday prepper views. To say I am in the minority is an understatement. The only thing I can say for sure is we are heading for a crash worse than 2008. I am 100% certain on that.

This stuff is so complicated, I don't see how anyone alive can be 100% certain.