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Housing bubble's burst could cost 1 million jobs and cause a recession, experts say : North County Times - Californian 11-13-2005 (http://www.nctimes.com/articles/2005/11/13/business/news/20_51_4611_12_05.txt - broken link)
Yes, it's the debt that's driving this. People unable to pay their subprime mortgages kicked this off, and of course the banks that gave out those loans were most affected. It's becoming like dominoes falling.
Personal and government debt brought about by out-of-control spending, spending money that doesn't exist. Gambling the entire future away.
Subprime mortgages have been around for a long time. You might have sources that "saw" this coming 2-3 years ago. I heard it five years ago, and that was the beginning of the mess that stands today.
While the seeds were sown in 1999, with deregulation of the financial system, the policies that followed added fertilizer to it, while offering shade for rampant growth. One such policy went in effect in 2004, when five giant private financial institutions (none of them exist on their own today) were given relaxed rules to go out and go wild. The relaxed rules involved mindless leveraging, which led likes of Bear Stearns, Lehman Brothers and Goldman Sachs to take advantage of the "freedom" given to them by Paulson... going ridiculously high to over 30:1 leveraging. Are you going to tell me we can't blame it?
Idiocity has to stop. Free Market shouldn't be confused with Casino Capitalism... except that the money being gambled with belongs to someone else.
Crooks got us here. People willing to push no income no asset loans by the butt load got us here. People finding refuge from a busted dot-com bubble got us here. Speculators on wall street jacked up fuel prices which normally rise anyway with new home ownership growth. Two economic downturns in 2000 and 2003 pretty much guaranteed no one wanted to tighten up the belt buckle while the going was good. Now it's busted and now we still have to tighten the belt buckle but now times suck while having to do it. Instead of doing that we are going to try and prop up an economy that was way over priced. Some how the government and it's 17% share of our GDP is going to keep the other 73% afloat in all it's omnipotence.
Quote:
Krugman: But my eye was caught by the following chilling passage (yes, things are so bad that the summarized musings of central bankers can keep you up at night): “All participants anticipated that unemployment would remain substantially above its longer-run sustainable rate at the end of 2011, even absent further economic shocks; a few indicated that more than five to six years would be needed for the economy to converge to a longer-run path characterized by sustainable rates of output growth and unemployment and by an appropriate rate of inflation.”
Our people are losing that faith, not only in government itself but in the ability as citizens to serve as the ultimate rulers and shapers of our democracy. As a people we know our past and we are proud of it. Our progress has been part of the living history of America, even the world. We always believed that we were part of a great movement of humanity itself called democracy, involved in the search for freedom, and that belief has always strengthened us in our purpose. But just as we are losing our confidence in the future, we are also beginning to close the door on our past.
In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God, too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we've discovered that owning things and consuming things does not satisfy our longing for meaning. We've learned that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose.
The symptoms of this crisis of the American spirit are all around us. For the first time in the history of our country a majority of our people believe that the next five years will be worse than the past five years. Two-thirds of our people do not even vote. The productivity of American workers is actually dropping, and the willingness of Americans to save for the future has fallen below that of all other people in the Western world.
As you know, there is a growing disrespect for government and for churches and for schools, the news media, and other institutions. This is not a message of happiness or reassurance, but it is the truth and it is a warning.
Last edited by BigJon3475; 02-20-2009 at 04:38 AM..
Originally posted by Bideshi
Worse because it is accelerating and will become a Greater Depression. This will be the worst economic crisis in US history and will threaten the very existence of the US as we know it. A hard rain is going to fall...
Well thank you Chicken Little!
I was born in 1981, so I can't relate to the last BIG recession, but from what I've heard it was worse than this one, with the gas lines, high inflation, unemployment and interest rates. But then my aunt tells me that banks weren't failing back then either. And this doesn't hold a candle to the Great Depression, when people were actually starving. That doesn't mean I'm not worried about the future, and if we are on the brink of getting into a depression, but we still need some perspective.
My question for Depression people: What exactly is the difference between a severe recession and a Depression? Is it just choice of words, or do you have a set criteria?
I think there is some terminology confusion here.. In the 70s we did not have a recession, growth was just incredibly slow. Even worse was inflation, which continued to spike, especially in the late 70s. Those two forces combined create stagflation, and stagflation and other factors crippled economic growth.
In the early 80s, Jimmy Carter and the Federal Reserve pushed to curve inflation using monetary policy (spiking interests rates). The problem was, inflation does not just fix itself overnight, and the early 80s recession was a direct result of the adjustment. Unemployment reached 10%+ and things were looking bad.. However, we bounced back in 1984, with unemployment and inflation dropping rapidly (hence Reagan's second landslide). Because of so called 'Reaganomics' unemployment rates eventually dropped to post-war era levels, and inflation was finally normalized.
In the late 80s, however, we had more problems with the S&L companies (sound familiar?) who did NOT benefit from the reduced inflation (less physical currency). And there was also an issue with the first computerized stock exchanges, leading to stock market crash of Black Monday. However, the economy quickly recovered under H.W. Bush. The problem that later occured was the Gulf War. It put way too much strain on our deficet, and caused massive budget issues.
The current crisis is worse because it is not just one or two causes, but everything piling on at once, a chain reaction if you will...
I don't believe we are in a recession but we are heading for a direction that will bring some memories of one.
The recession of the late 60's, early 70's, late 70's and early 80's, late 80's and early 90's. They were all hinged on different factors. We saw in the late 80's savings and loans collapses.
In the Great Depression, when banks closed up and people lost their money, the Glass-Steagall Act of 1933 was created.. It provides deposit insurance, which guarantees the safety of checking and savings deposits in member banks.
So, rest assure if you have your money with a bank, you are protected up to 200K until 2010, at which time, it goes back down to $100K.
There was no unemployment back in the day of the Great Depression.
There were Soup Lines.
Gasoline tokens
Jobs were hard to findl
People ate bread and milk.
Those people who lived on farms in the 30's and grew their own food were in a much better position than those folks in the city.
Today, there is FDIC insurance on savings with banks
Today, there is unemployment
Today, the govt has come to the rescue to help banks and businesses.
We are in for hard times as the economy adjusts. No need to panic. The stock market is going down only because the people lack confidance in their government and the economy.
The economy will all turn around in time. It might take up to 5 years but it will turn around.
I don't think we are as bad off as we were then, but if things don't improve, and sooner rather than later, then that might change.
What do you think?
It's not as bad, not yet anyway. The unemployment hasn't maxed out yet, and the inflation is just starting. To match the 1970's-1980's, both of those have to reach double digits, and the interest rates have got to also reach double digits. Those recessions didn't have all these people losing their life savings though. That makes this one a little bit "special", and more similar to the Great Depression, but only in that way.
I don't think this is really a case of a sick economy so much as it is of being stolen from.
Is this recession worse than the recession of the 70s-80s?
Much worse. There's very little resemblance. This one is likely to persist for at least two-three more years (quite possibly longer) and we've already "officially" been in it for 14 months and the bottom still isn't in sight. Many millions of people have lost a tremendous amount of their life's savings and will have little opportunity to regain them. The 70s and 80s recessions were nothing in comparison to this one.
Much worse. There's very little resemblance. This one is likely to persist for at least two-three more years (quite possibly longer) and we've already "officially" been in it for 14 months and the bottom still isn't in sight. Many millions of people have lost a tremendous amount of their life's savings and will have little opportunity to regain them. The 70s and 80s recessions were nothing in comparison to this one.
This is why this one is worse. Millions of these people are the baby boomers who are getting ready to retire. Large amounts of their retirements are gone. Social Security is running out of money. Medicare is not solvent. Increases in the cost of health care are exceeding inflation. It is a perfect storm that will devastate our older citizens. Some will be able to work, but many cannot, and even though they provided for their retirements and did what they should have done to secure them, they are gone.
I am getting ready to move my elderly mother-in-law from an assisted living complex to a really inadequate nursing home because most of her money has been lost in the last several months, and we are not getting the income we were counting on to provide the assisted living place. Even in the cheap retirement home, my wife and I are going to have to subsidize the cost with our money since so much of hers has disappeared, and we are not young. We will be retired soon, and HER retirement is taking our money. The money we have saved has taken a hit. I think we will survive, but what about people who have lost everything through the crooks that stole their investments? At least I have some money left. On AOL today there was an article about a 91 year old who lost everything that he had invested with Madoff. The guy is looking for a job at age 91!
Last edited by JamesAbilene; 02-20-2009 at 04:45 PM..
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Is this recession worse than the recession of the 70s-80s?
