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Thread: How will the economic crisis develop?

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    How will the economic crisis develop?

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    Notion of fast U.S. recovery falls flat at parley
    At annual meeting, economists see little chance recession will end in `09



    The idea that the U.S. economy is going to recover in the next six months is given little credence at a gathering of top academic economists here over the weekend.

    A pickup sometime after June is still the Federal Reserve's quasi-official forecast. And leading institutional forecasters surveyed by the Blue Chip Economic Indicators are optimistic.

    But that forecast seemed woefully out of touch to many experts who spoke at the annual meeting of the American Economics Association.

    [SNIP]

    Despite all these efforts, the U.S. economy, hit by an oil shock, a credit crunch and the global downturn, seems to be on a steep slide.

    Some argue that the recession has just begun, despite the formal ruling by the business-cycle-dating committee that it began in December 2007.

    Alan Blinder, a former vice chairman of the Federal Reserve, said the recession began only in mid-September when Lehman Brothers collapsed.

    "We are in a horrible mess. I believe it is very young and it is going to be long and deep," he said.
    Even in the first quarter of 2010, the economy will likely be weak enough to need macro stimulus, he said.

    Martin Feldstein, the prominent Harvard University economist, said there was no longer any basis for believing the recovery could start in the third quarter.

    "I think we'll be lucky if by this time next year we see the economy hit the bottom and start turning up," Feldstein said.

    "In terms of the level of activity, the end of 2009 is going to look lower than it is today," he said.
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  2. #2
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    A turnaround in 6 months is laughably optimistic. A turnaround in a year is not far behind. We are in the second round of a 10 round fight. We are already seeing this mess feeding on itself and we are stuck in a self perpetuating downward spiral. What is going to stop it??

    Every recession we have ever had basically boiled down to an inventory adjustment event. The current situation had nothing to do with an inventory adjustment, it is a debt re-assessment. We have only ever had one of those. We called it the great depression.

    I can not recall any time in the history of the planet earth that a credit bubble burst and a depression did not follow, and this dwarfs any other credit bubble in history.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    I can not recall any time in the history of the planet earth that a credit bubble burst and a depression did not follow, and this dwarfs any other credit bubble in history.
    The Japan credit bubble caused a decade of trouble...

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    Quote Originally Posted by Steeeeve View Post
    The Japan credit bubble caused a decade of trouble...
    That was not a credit bubble. Certainly a real estate bubble, and several banks failed, but it was not the kind of systemic reassessment of risk that is typical with the bursting of a credit bubble.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    That was not a credit bubble. Certainly a real estate bubble, and several banks failed, but it was not the kind of systemic reassessment of risk that is typical with the bursting of a credit bubble.
    Well define credit I suppose. There was a lack of lending and interest rates at 0. I understand the differences though. Japan didn't have citizens with no job buying a 5,000 square foot house and claim they had a natural born right to that house (in other words a massive debt problem).

    In any event, this was like a credit burst and a depression did follow for them. I'd say it is clear that government intervention helped prolong it. Some people say the government didn't do enough but this is just a false positive (basically). For example if go out and spend $800 billion twice a year for the next 5 years and after 5 years the economy gets better you will no doubt here that 8 trillion dollars is what it took to get the economy moving again and if we had only spent that money in the first place wouldn't suffer for 5 years. This is, of course, crazy because it assumes the money helped in the first place. No causation was actually found.

    Look for this to happen here in the US with the phrase "well we can't do nothing!" or "we can't afford not to!" as a justification. For those that remember those two phrases, they are from the previous administration for justification of the Iraq war.

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    Quote Originally Posted by Steeeeve View Post
    Well define credit I suppose. There was a lack of lending and interest rates at 0. I understand the differences though. Japan didn't have citizens with no job buying a 5,000 square foot house and claim they had a natural born right to that house (in other words a massive debt problem).
    Neither did the USA. Rather, what we had was unscrupulous bankers and mortgage brokers sweet talking undereducated people into loans that they did not and could not comprehend.

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    Quote Originally Posted by chester View Post
    Neither did the USA. Rather, what we had was unscrupulous bankers and mortgage brokers sweet talking undereducated people into loans that they did not and could not comprehend.
    This is a bunch of lies. It doesn't take much education to know you can't afford a half million dollar home when you don't have a steady income. Daewoo posted a story a little while ago about a family who had no steady job yet got approved for a mega home and obviously couldn't afford it.

    Also, bankers have no reason to give a loan that they have no chance of getting back. I have no sympathy for the bank or the person that got the loan.

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    Quote Originally Posted by Steeeeve View Post
    This is a bunch of lies. It doesn't take much education to know you can't afford a half million dollar home when you don't have a steady income. Daewoo posted a story a little while ago about a family who had no steady job yet got approved for a mega home and obviously couldn't afford it.

    Also, bankers have no reason to give a loan that they have no chance of getting back. I have no sympathy for the bank or the person that got the loan.
    I know people who do not even have masters degrees who know that a mexican day laborer who makes $7 an hour when he can get it should not be buying a $340,000 house.

    I will certainly agree that there is plenty of blame to go around, but a lot of that certainly belongs on the shoulders of the folks who took those loans.

    My wife actually explained the housing mess pretty well the other day. She claims that she has mastered the art of talking to me and having menot hear a damn word she says. There is no "art" to it...it is actually my superhuman ability to ignore my wife. Anyway...she was saying that she can walk up to me when I am working on something, tell me a story, ask me to do things, and I will just keep working on whatever I am working on and go "uh huh...ok....yea....uh huh". This works until she asks me to do something confusing or particularly difficult, then I stop and go "Wait...what the hell did I just agree to???"

    The banks are having a "What the hell did we agree to" moment after several years of "uh huhing".
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    I know people who do not even have masters degrees who know that a mexican day laborer who makes $7 an hour when he can get it should not be buying a $340,000 house.

    I will certainly agree that there is plenty of blame to go around, but a lot of that certainly belongs on the shoulders of the folks who took those loans.

    My wife actually explained the housing mess pretty well the other day. She claims that she has mastered the art of talking to me and having menot hear a damn word she says. There is no "art" to it...it is actually my superhuman ability to ignore my wife. Anyway...she was saying that she can walk up to me when I am working on something, tell me a story, ask me to do things, and I will just keep working on whatever I am working on and go "uh huh...ok....yea....uh huh". This works until she asks me to do something confusing or particularly difficult, then I stop and go "Wait...what the hell did I just agree to???"

    The banks are having a "What the hell did we agree to" moment after several years of "uh huhing".
    And you only correct this problem by having people learn their lesson and the market adjust itself.

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    Quote Originally Posted by Steeeeve View Post
    And you only correct this problem by having people learn their lesson and the market adjust itself.
    NO...you correct the problem by throwing money at it until you have managed the bankrupt the entire nation and the government collapses under the crushing weight of all the debt they have taken on trying to save wall street from having to actually take their lumps. Sheesh, steeeve, what planet are you from? Market correction is for chumps.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    NO...you correct the problem by throwing money at it until you have managed the bankrupt the entire nation and the government collapses under the crushing weight of all the debt they have taken on trying to save wall street from having to actually take their lumps. Sheesh, steeeve, what planet are you from? Market correction is for chumps.
    I blame my schooling and specifically my accounting background...probably grad school too

    On the plus side it seems a majority of Americans think more debt fixes a problem with debt. This helps explain the position we are in.

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    Quote Originally Posted by Steeeeve View Post
    And you only correct this problem by having people learn their lesson and the market adjust itself.
    By having them do exactly what? Move into the streets?

    Sorry, but Social Darwinism died with Herbert Spencer.


    What do you think should be done to the greedy bankers and sleazy mortgage brokers who snared people into these contracts?

    I have an answer for that. The bankers and mortgage brokers should be required, at their own expense, to pay for a prospective homeowner's lawyer who would counsel them every step of the way.

    You do believe in leveling the playing field, don't you?

    Tell us Steeeve, are you rich, or are you simply a SHONDA for those who are?

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    Quote Originally Posted by chester View Post
    By having them do exactly what? Move into the streets?
    If you bought a home you couldn't afford you go into foreclosure. Foreclosures have been happening long before 2008 and it would be idiotic to say that no one should ever be allowed to foreclose.

    What do you think should be done to the greedy bankers and sleazy mortgage brokers who snared people into these contracts?
    Go bankrupt. And it isn't sleazy, it is stupid. A mortgage broker doesn't benefits from making bad loans.

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    Quote Originally Posted by Steeeeve View Post
    I blame my schooling and specifically my accounting background...probably grad school too

    On the plus side it seems a majority of Americans think more debt fixes a problem with debt. This helps explain the position we are in.
    If you are $100,000 in debt and cannot afford to make the payments on it, the OBVIOUS thing to do is to borrow another $100,000 and spend it on booze and hookers. THAT will make the problem go away.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by chester View Post
    By having them do exactly what? Move into the streets?

    Sorry, but Social Darwinism died with Herbert Spencer.
    Absolutely! So instead what we will do is loan modifications aimed at keeping people who cannot actually afford them in houses that they cannot possibly afford.

    What you are talking about there is essentially making slaves. Tie them to a home they have to keep paying on for the rest of their lives. Leave no way out. That way you OWN them. This is a GREAT idea. In fact, I am going to put it on my "great ideas" wall right next to "dumping arab children into thermal polymerization units so we can then pour them directly into our gas tanks".

    You are all heart.


    What do you think should be done to the greedy bankers and sleazy mortgage brokers who snared people into these contracts?
    They are going bankrupt...along with a lot of good mortgage brokers and bankers who worked hard to get people loans that they never should have had because the people REALLY wanted them.
    I have an answer for that. The bankers and mortgage brokers should be required, at their own expense, to pay for a prospective homeowner's lawyer who would counsel them every step of the way.
    This is absolutely retarded. First, there is no such thing as "at their own expense". The cost will just be built into the cost of the mortgage. Second, you would have to be a complete and utter ##### to accept the advice of an attorney who is being paid by somebody else. Third, there were no legal problems with these contracts. What those people needed was not the services of an attorney, it was the services of an ACCOUNTANT...preferably one with a folding chair and a roll of duck tape so they could tie these XXXXXX down, slap them around, and yell "HEY ##### YOU CANT AFFORD A $2800 HOUSE PAYMENT ON A $2900 MONTHLY SALARY".

    You cannot force people to NOT be XXXXXX. Trust me. I have tried. It cannot be done.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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