6 ms·
This Isn't a Recession, It's a Collapse
- stuffthatmatter 17y agoIt doesn't help that: State Tax Revenues at Record Low http://www.nytimes.com/2009/07/18/us/18states.html?_r=1 http://www.nytimes.com/2009/07/18/us/18states.html?_r=1
- deleted 17y ago[deleted]
- petercooper 17y agoNot if the suggested printing of money and state bailout occurs. Inflation is sure to result somewhere down the line and then it'd be the total opposite.
- 9oliYQjP 17y agoI think the deflationary pressures from the economic collapse are largely offsetting inflationary pressures. I'm not an American, but that's why I'm not too concerned about the fiscal stimulus your country has enacted. I suspect we'll see a lot of see-sawing of monthly inflation in positive and negative directions for the next year. Say what you will about the massive numbers been thrown around by these bailouts; they're a fraction of the numbers they're trying to offset. Moreover, China will prevent the U.S. federal government from keeping the taps open too long. Because of this, I'm not buying into the notion that we'll see explosive inflation in the next few years.
- stuffthatmatter 17y agoActually I believe: There is inflation in things you need (gas, food, energy, utilities) and deflation in things you want (luxury items, car, house)
- 9oliYQjP 17y agoAt least here in Canada, the following was just reported by the government: http://www.statcan.gc.ca/subjects-sujets/cpi-ipc/cpi-ipc-eng.htm http://www.statcan.gc.ca/subjects-sujets/cpi-ipc/cpi-ipc-eng... DEFLATION: -Shelter -Clothing, footwear -Transportation INFLATION: -Food -Household furnishings/equipment -Health and personal care -Recreation, education, reading -Alcohol and tobacco So it's not as clear cut (at least here in Canada over the last year) as necessities seeing their prices go up with luxury items seeing them fall.
- nostrademons 17y agoRents have gone down significantly here in California since the start of the year. That's a necessity... For that matter, gas prices were like 50% higher before this crisis began...
- dan_the_welder 17y agoOk, this is the kind of nuanced information I have been craving instead of the yes/no black/white gibberish on the news.
- stuffthatmatter 17y agoAgreed. Once unemployment hits 25%, we'll be in the great depression territory (we might be there already) Broader Unemployment Rate Hit 16.5% in June http://blogs.wsj.com/economics/2009/07/02/broader-unemployment-rate-hit-165-in-june/ http://blogs.wsj.com/economics/2009/07/02/broader-unemployme...
- deleted 17y ago[deleted]
- BrentRitterbeck 17y agoI have a background in finance. I know about the current methodologies for counting unemployment and any other economic indicator. I think you can only safely say we are in Great Depression territory when you start to see food lines.
- stuffthatmatter 17y agoactually it's already happening: Southwest Florida food pantries in need as supplies run low http://www.naplesnews.com/news/2009/jul/02/southwest-florida-food-pantries-need-supplies-run-/ http://www.naplesnews.com/news/2009/jul/02/southwest-florida... Sacramento police are shutting down a new homeless tent city http://www.capradio.org/articles/articledetail.aspx?articleid=6850 http://www.capradio.org/articles/articledetail.aspx?articlei...
- BrentRitterbeck 17y agoThere's always evidence to support a view if you are willing to look hard enough, but one or two instances are not enough to support the claim that we are in a situation similar to the Great Depression. For those who take things a little too literally, perhaps I should have wrote: "... when you start to see food lines all over the country/world."
- stuffthatmatter 17y ago
- BrentRitterbeck 17y agoThis is no where near the level of severity of the Great Depression. The Great Depression saw over a quarter of the population unemployed and a large destruction of perfectly healthy companies, a quantity of which we have come nowhere near. EDIT: On top of the Crash of 1929, agricultural conditions in the Midwest of the United States greatly added to the problems.
- sutro 17y agoShadowstats puts the current unemployment rate at over 20%: http://www.shadowstats.com/alternate_data http://www.shadowstats.com/alternate_data. We don't yet know which is worse. The worst of the current downturn may be yet to come.
- BrentRitterbeck 17y agoUnemployment will likely go higher from here. I'll give you that as history has shown that it is likely for unemployment to rise even after the worst is over, but we're certainly on the upswing now. I wouldn't be surprised if the NBER comes out sometime later this year and says that the recession officially ended in the Q2.
- moe 17y agoI'll give you that as history has shown that it is likely for unemployment to rise even after the worst is over, but we're certainly on the upswing now. This constant focus on "jobs" worries me quite bit. It's not just you but politicians worldwide seem to operate that way. More jobs in the short term trump stability in the longterm. This results in painfully wrong tradeoffs being made left and right (billions pumped into dead auto-companies) which only drives up the bill that someone has to pay later. IMHO jobs are not the main metric we should be looking at anymore. At least not without differentiation. I'm not from the US but as I'm told many americans already need multiple jobs to stay afloat. Over here in germany we have millions of people in subsidized "jobs" that don't quite deserve to be called that (mostly to keep them out of the unemployment statistics, afaik). All of that is is probably looking even less rosy in other countries. I think much more interesting topics would be the overall concentration of wealth (e.g. along the lines of an improved gini coefficient) and the size of the "middle class" which seems to be shrinking everywhere. These are ofcourse just examples but I think this is the area where we should be looking for metrics, because the gap between "low-skilled" and "high-skilled" (or low/high income, low/high education) workers is widening so rapidly.
- thras 17y agoThe people who spent on credit were the bright ones. There is no way that we are going to get out of this without substantial debt moratoriums. Debt servicing is just too big a fraction of the economy. The debt moratoriums will be either explicit or implicit (massive inflation). Creditors will lose out and debtors will win big. Assets are probably overvalued, so there will be some deflation there.
- mpk 17y agoArticles like this have me nodding 'yes, yes, yup, sure, yes' while I'm reading them. But by now it's just too easy to write them. What I'd like in such articles is some root-cause analysis and at least a few pointers on how to proceed.
- stuffthatmatter 17y agoAgreed, but I bet the masses still believes we're in recovery, because that's what the news media have them believe. Look at all the 'recovery' headlines on the major financial news portals and you'll see. Geithner Sees Evidence of a Financial Recovery http://www.nytimes.com/2009/07/17/business/economy/17geithner.html http://www.nytimes.com/2009/07/17/business/economy/17geithne... Summers Says U.S. ‘Close to a Level Path’ to Recovery http://www.bloomberg.com/apps/news?pid=20601103&sid=antmIqObw4yY http://www.bloomberg.com/apps/news?pid=20601103&sid=antm... Fed's Hoenig says U.S. recovery to be very slow http://www.reuters.com/article/ousiv/idUSTRE56D6CK20090714 http://www.reuters.com/article/ousiv/idUSTRE56D6CK20090714
- BrentRitterbeck 17y agoI consume financial and economic news like it's going out of style. The majority of the press is still reluctant to claim we are now in recovery. I'm convinced that the only person the media will believe about being in a recovery is Roubini, and he didn't get his moniker for nothing.
- marcusbooster 17y agoI don't think anyone is claiming recovery until the jobs start coming back, which they haven't.
- iigs 17y agoNot to be too dismissive of the causes of the problem, but I think when you get to problems of this size and complexity there's rarely "a" root cause -- you're either stuck with one phrase low intellectual effort summaries ("greed", "stupid people") or endless finger-pointing and circular reasoning (the crap the cable news channels and talk radio like to fill hour upon hour with). I'm proceeding by living my life. I took a loss on my house when I sold it, not primarily because of economic concern, but largely because it was time to move elsewhere (having kids etc). I have a manageable debt, mitigation strategies if that debt becomes undesirable, am not against taking on more if it becomes more desirable. My intent is to diversify into markets that may go contrary to the general economy (particularly petroleum). I don't think anybody knows what to do. The events of the time remind me of yesteryear's disasters -- the pundits don't have anything to say, but the tape is rolling so they're talking.
- tybris 17y agoAt least the banks are back in business, which is unfortunately essential to recovery. First order of business is to force them to severely lower their margins. Mortgage rates need to be heavily regulated to prevent further disasters on the housing market. Wall street needs to be regulated into oblivion. As long as they can afford to give out a single bonus they can handle more regulation to stabilize the system. To be honest, I think the recovery will be surprisingly fast. Economic cycles are not what they used to be. At this point in history our economic infrastructure has become so sophisticated that within no time you will have an dramatic amount of new business starting to carry the weight of the economy. It's like a forest fire. First there is the pain, then there is the barren wasteland, but then you see the new light opens up the seeds and the ashes of the old forest feed the young trees. A new forest appears in no time.
- stuffthatmatter 17y ago"To be honest, I think the recovery will be surprisingly fast" How? Our manufacturing sector has been taken apart in the last 20 years. A large amount of baby boomers are retiring now, cashing out 401k/IRA/social security/medicare.
- BrentRitterbeck 17y agoOur manufacturing sector has been taken apart in the last 20 years. I'm American, and I'll say that this is a typical American thing to say. We live in a world economy now. Certain parts of the world specialize in certain sectors. We can come out of a recession without depending on manufacturing. What you're saying is the equivalent of saying that a place like Silicon Valley can never escape a recession because they don't have a huge manufacturing base like, say, Pittsburgh.
- stuffthatmatter 17y agoSure I agree...we manufacture debt, and the other countries buy them. Until they don't, since the whole world's making less money. Yes, we make game/tv/movie/porn/internet. But notice that Asia is notorious at pirating them.
- ErrantX 17y agoI think collapse is a very strong term. The way see it is that the recession is going to be long, very long. But it wont be a collapse. We will see state after state, company after company, country after country hit crisis and be bailed out. The crucial thing is this will happen in sequence rather than all at once. We survived a major banks crisis earlier this year and can probably survive another similar crisis without the world going to ruin. Im predicting 10 years to recover from this myself. Any other predictions?
- BrentRitterbeck 17y agoI've been calling 9K on the DJIA by September 1 since March. Also, as I said somewhere else in this thread, I wouldn't be surprised if the NBER says later this year that Q2 was the official end of the recession.
- stuffthatmatter 17y ago"We will see state after state, company after company, country after country hit crisis and be bailed out." Who's gonna pay back the bailout?
- vaksel 17y agoour great great grand children
- stuffthatmatter 17y agoWhat makes you think they'll want to? :)
- elai 17y agoThey'll have no choice but to. Do you have that choice today?
- stuffthatmatter 17y ago
- brent 17y agoThe author clearly cannot even define depression, recession, or collapse... Let alone comment on what state we are in... Useless. Amateur Hour.
- kiba 17y agoIn an economy, there is alway work to do since we live in a world of scarcity. So eventually, the economy should pick up in employment after reallocating resources. However, if a market persists in unemployment rate long after a recession than there are forces preventing pricing changes and the reallocation of resources. Such forces are often government regulation or bailout, maybe perhaps stubborn unions or cartels.
- stuffthatmatter 17y agoIncorrect. With global demand dropping sharply, there's actually not enough work to do. We cranked up the credit machine the past few years to make sure there were enough work to do. Again, too much supply, not enough demand.
- eru 17y agoLower prices.
- stuffthatmatter 17y agoWhat? no. You see more realtors after housing prices dropped? You see more car salespeople after car prices dropped?
- eru 17y agoI was replying primarily to > Again, too much supply, not enough demand. And adjusting prices is the orthodox mechanism to match supply and demand. Anyway, in a physical sense there is enough work to do. We haven't reached Mars, yet. Diseases afflict the world's population. And where is my yacht?
- larryfreeman 17y agoTo be clear, we just went through a Panic. This is what happens. We recovered from the Panic and now we are going through a Recession. There's no collapse as far as I can see but like any panic, it sure felt like we were close to a collapse. State governments were completely unable to cope with the sudden, significant decrease in funds: California and NY are in big trouble. But it's not a collapse. People should start reading about the other major panics that the US experienced instead of just reacting to the current one. Turns out it's not as bad as what we went through before. But it is bad. The Housing Bubble will unfortunately go down in history with Tulipmania, the South Sea Bubble, and the the Great Panic of 1873. We'll recover but unfortunately, it's going to be slow treading and state services will be cut significantly even while federal services will likely expand.
- robotrout 17y agoI wish I shared your optimism that we will recover. As the saying goes, "We'll survive by doing each others laundry". That saying, of course, is meant to be a joke. The US can't just do it's own laundry to survive. We can't just sell latte's to each other, either. We have to actually produce more than we consume. So, we either have to produce a lot more, or consume a lot less. I don't see us producing more, do you? I used to comfort myself that we had evolved as a nation, from doers into investors, and that we still brought value to the world by providing the capital needed for the rest of the world to grow, and so we were indeed, earning our bread. My faith in this viewpoint has been shaken, however. All is not bread and circuses for non-US folks either. If the US consumer quits buying, I think that's a big deal to everybody.
- larryfreeman 17y agoWe've been through much worse than this. The economy is complex enough and our entrepreneurs talented enough that we will rise above this. The economy gets better under two circumstances in my view: (1) Large opportunities are available for businesses to invest and make money. (2) People start spending money again because consumer confidence improves. BTW, the goal is not to produce more than we consume. That, in my view, is a formula for failure. The goal is to create a more stable supply and demand curve. If consumers don't spend enough money, then the problems get worse as a business's gross revenue decreases. If we stop panicking, spend their money, stop with the bail outs, provide tax incentives for entrepeneurs, and most importantly, provide an opportunity for business to make money as well as compete with existing giants, then the recession will start easing into recovery.
- eru 17y ago> The sawdust of debt, and the monetization of assets rather than the production of goods, continually came to define the internal composition of the system. Ah, those lovely Americans. Always clamouring for the lost paradise of an industrial economy.
- stuffthatmatter 17y agoBecuase we're proved that a economy based on financial engineering and construction and selling each other houses has worked so well?
- eru 17y agoPerhaps. But re-industrialization might not be the answer. Looking at GDP figures, Germany was hit much harder by the global downturn so far than the US. And we do produce things you can touch with your hands here. (Ironically, a few years ago Germans were worried about the heavy reliance on industry. Pundits worried about how Germany might close the gap to more modern service economies in the UK and US. They imagined a ladder of value adding that starts with agriculture, goes to industry, and then to services.)
- stuffthatmatter 17y agoyou got a point; I think a good mix of industrial/agriculture/service industry is a stable base for any economy.