Thread: News depicts economy far worse now than Great Depression

Yes, it's not a Depression right now. However, before the Depression, economic theory was, more or less, if the rich keep getting richer and conglomerates get bigger, and the stock market keeps growing the economy will keep growing. This is why Hoover was considered one of the best Secretaries of Commerce (the Commerce building is named for Hoover, ), and one of the worst Presidents (er, labor, finance and other factors besides bigger and better corporate profits are important to consider when president). I think the press is over-reacting now, but before the Depression the press (and President Hoover) had no clue what was about to kick them in the rear and roll over them.

Originally Posted by Silverbird

... before the Depression, economic theory was, more or less, if the rich keep getting richer and conglomerates get bigger, and the stock market keeps growing the economy will keep growing. ...

...(er, labor, finance and other factors besides bigger and better corporate profits are important to consider when president). ...

...before the Depression the press (and President Hoover) had no clue what was about to kick them in the rear and roll over them.

Um...sounds like 2000-2008....

Originally Posted by luv2read

Um...sounds like 2000-2008....

Well, during the Depression we had over 25% unemployment and that was primarily a statistic based on the cities (no one knew really what was going on in the countryside except it was a big dusty mess) and even with the cities it was an underestimation. When the stock market went belly up, housing loans could be called in for any reason whatsoever and the banks needed the cash so guess what happened? The housing mess now isn't even close to what happened then, they called in ALL the loans and kicked everyone out who didn't have the money, and went belly up anyway (this is the reason why your parents and grandparents want nothing to do with house loans). We aren't in such dire straits that we all would be willing to go out and take dangerous jobs like building dams on a large scale. For instance, the oil industry still has problems getting enough people to work on rigs (the History Channel is going to have a series on it-the oil companies want to showcase the cool "dangerous jobs"). And those are only a couple of the circumstances that aren't here right now at the extent they were in the 20's.

Recession? I think so. Stagflation? Possible if oil and food prices keep going up and the dollar takes another hike down the hill. But not Depression, if we were there we definately wouldn't be talking to one another on computers because we'd be unemployed with no money for electricity.

my dad was born in 1927 and he laughs at people who equate this current situation to the Grea Depression.

OMG!!! I can only afford basic cable!!!11 It's a Depression!!!!!

Originally Posted by Asylum

my dad was born in 1927 and he laughs at people who equate this current situation to the Grea Depression.

OMG!!! I can only afford basic cable!!!11 It's a Depression!!!!!

It's a lifestyle threatening situation!!

http://www.bloomberg.com/apps/news?p...o&refer=energy

According to the latest Reuters/University of Michigan survey, respondents expect inflation one year out to climb to a 27-year high of 5.2 percent in May.
There are even some economists who see the wisdom of the masses. Mark Zandi, chief economist for Moody's Economy.com and one of the savviest students of the economy, ...in an interview last week: ``Energy and food prices, which together account for one-fourth of the CPI, will rise nearly 20 percent annualized in the third quarter. Top-line CPI inflation looks destined to top 7 percent annualized in the third quarter. It is very possible that third-quarter inflation will be the strongest since the third quarter of 1981.'' ...

The fact is, if inflation can climb to 7 percent, it can go to double digits. All that needs to happen is for energy prices to jump to an even higher level. Any number of things could cause that: A supply disruption, a flare-up in tensions between Israel and Iran, or a heavy storm in the Gulf of Mexico immediately come to mind.

The impact of such events on the overall economy would be catastrophic. The Federal Reserve would be forced to crack down just as Volcker did three decades ago. How bad could it be? The central bank would probably have to increase the federal funds rate to the point where interest rates adjusted for inflation are positive. The federal funds rate might have to climb well above 6 percent.

There is another problem that might be as bad: ... Higher prices lift tax rates on capital. ... Corporate-tax policy penalizes firms in a number of ways when inflation is high.

The scale of these effects can be enormous. For corporate taxes, a study ...for the National Bureau of Economic Research with former Federal Reserve economist Darrel Cohen and Columbia University economist Glenn Hubbard found that an increase in expected inflation to 8 percent from 2 percent would raise the cost of capital for companies by about 10 percent.

Such a massive increase might depress investment this year even with the efforts of Congress to stimulate investment with temporary expensing, ... If companies look ahead to a world with higher inflation, they won't want to have as many machines, and might begin making fewer purchases this year. ..

The odds continue to favor a weak but not terrible economy this year, with high but not raging inflation. ..My guess is that the central bank will reacquaint itself with these risks in the coming months. If it doesn't, we may have to relive the early 1980s all over again.

So looks like it could be StagFlation?

http://business.smh.com.au/business/...0729-3mlu.html

[The risk of a Great Depression-style global debt-deflation cycle is one in three, according to an investment bank economist.

Beyond an anticipated cyclical slowdown in the next six months, Morgan Stanley economist Gerard Minack has raised the possibility of a substantial structural risk caused by lower asset pricing, high household debt levels, and a cash shortage.

"I think that for many Anglo economies the risk of a pronounced deleveraging-deflation cycle is higher now than it has been since the Great Depression," Mr Minack said in a note to clients.

"What makes this cycle different - and elevates the risk of a major unravelling - is the extremes that those trends have now reached. He's not alone in his views that the slowdown we're seeing may not be of a cyclical, garden variety.

The International Monetary Fund released a report overnight warning that global markets remain fragile and face systemic stress one year after the subprime market crisis first emerged in the US.

The financial organisation noted there is no bottom in sight for the falls of the US housing market...

Looking ahead, the IMF expects global growth to stall, declining from 5% in 2007 to 4.1% in 2008 and 3.9% in 2009 amid an environment of "negative interaction between banking system adjustment and the real economy."

My take is those able to hang onto good wads of cash through the downturn will do very well when this hits bottom and finally starts turning around for real. Excess emergency savings could be partly freed up to put back into the market for the long haul, once no longer needed as much (for emergencies).

Until then....bear market rallies anyone? I'm doing better staying in G right now with real $ than I am doing the trend-following thing (uptrend appears too short this time), but some indicators are still on an uptrend so the autotracker experiment will continue for the moment.

this is really scary. I wish I had been more prepared and more of a saver for a lot longer. I was in spending mode for a long time like a lot of other people I guess.

Originally Posted by catinhat95

this is really scary. I wish I had been more prepared and more of a saver for a lot longer. I was in spending mode for a long time like a lot of other people I guess.

Standard recommendations are to #1-pay down/off debt, esp. credit card/auto loan debt first-1 at a time systematically, then get 3-6 months living expense savings in the bank (I include estimates for medical and auto repair based on past year's total expenditures, averaged into next 12 months budge), then put major $ towards retirement (unless you get a match from employer-ALWAYS put enough into retirement to at least get the match from employer)-anything beyond that-see #1, rinse, repeat.

Back in 95 when they shut down the government for-what, 1 week, 2 weeks? (somebody help me out-I'm getting Alzheimers here), a lot of people didn't have the savings to cover having even 1 paycheck temporarily skipped and found themselves in crisis, they were that unprepared for the unexpected. It's never too late to get with the program, cuz wherever you go, there y'are. No time like the present to get started. Good luck, it does take committment and effort, but it can be done.

Originally Posted by alevin

Back in 95 when they shut down the government for-what, 1 week, 2 weeks? (somebody help me out-I'm getting Alzheimers here), a lot of people didn't have the savings to cover having even 1 paycheck temporarily skipped and found themselves in crisis, they were that unprepared for the unexpected. It's never too late to get with the program, cuz wherever you go, there y'are. No time like the present to get started. Good luck, it does take committment and effort, but it can be done.

Back in October of 1995 the Bureau of Prisons experienced a National lockdown
over inmate behavior (fires,riots) concerning the changing of the Cocaine
& Crack Laws. In November there was talks about RIF's (Reduction In Forces)
and a Budget Impass. By December, (merry xmas) all non essential personel
told to stay home without pay. Essential personel (like myself) were
told we had to come to work without pay. Two weeks or 1 biweekly
check was affected. But to wait for the next biweekly check seemed
like a eternity. Arrangements were being made with mortgage and
utility companies. (at the suggestion of OPM and the Bureau of Prisons).
When the checks began to flow, everyone at home got paid retroactively
and came back to work. The staff who stayed at work for the duration,
would have rathered stay home like the rest of the Federal Employees
did. But "duty" called and someone had to mind the store !