Is a recession going to be a self-fulfilling prophecy?

[Manedwolf]

Every time I flip past or browse past news, it's all -

Fears of recession

Possible recession

Consumers might close their wallets

Spending might be down

Coming possible recession

....and the Asian and European markets just took a major hit on those worries.

Is this going to turn out to be a self-fulfilling prophecy, that all this talk of recession is going to cause a recession? Is it doing that already? Too late?

[grislyatoms]

IMO, too late.

Coming off their reckless holiday spending sprees, folks are being bombarded with the "R" word and horror stories of foreclosures and rising energy prices.

I think it's inevitable. All I really wonder now is how long it will last.

[GeoJAP]

The mainstream media doesn't report how bad US finances are.  Businesses may be doing well now, and unemployment is low, but it will be very bad in the future when America can't afford to pay its debts and countries start to abandon the dollar.  Most Americans are clueless about what we are headed for.  It will hit us within the next 10 years.

http://www.newstarget.com/z019659.html

[Paddy]

We're likely already in recession.  The question is, will it turn into a full blown depression? It will be interesting to see what happens when the market opens tomorrow, especially given the negative news from foreign markets today.  If you're not already out of the stock market, it may be too late IMO.   

[Manedwolf]

I am really worried by this federal holiday today. World markets are tanking today, and that's not good.

Britain's benchmark FTSE-100 slumped 5.5 percent to 5,578.20, France's CAC-40 Index tumbled 6.8 percent to 4,744.15, and Germany's blue-chip DAX 30 plunged 7.2 percent to 6,790.19.

In Asia, India's benchmark stock index tumbled 7.4 percent, while Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent to 23,818.86, its biggest percentage drop since the Sept. 11, 2001, terror attacks.

Canadian stocks fell as well, with the S&P/TSX composite index on the Toronto Stock Exchange down 4 percent in early afternoon trading. In Brazil, stocks plunged 6.9 percent on the main index of Sao Paulo's Bovespa exchange.

If investors here are panicking and putting in SELL orders with their brokers or clicking on them online as a scheduled sell, it'll all show up at tomorrow's opening bell all at once. I hope the market shutdown software (the parameters that will halt trading to prevent a 1929) is in order.

[grislyatoms]

Actually, maybe I was little quick to judge. If oil prices stabilize, we might avoid a recession.

[Brad Johnson]

Is a recession going to be a self-fulfilling prophecy?

Absolutely.

Given the media's penchant for screaming "RECESSION" at every turn, it's no surprise that peoples' fiscal confidence is down.  It's that confidence, and that alone, that determines the economy.  No confidence equals no spending.  No spending equals slowdown.  So, the media screaming about a recession can, and in all probability will, result in a slowdown of the economy.  How far it goes is anyone's guess.

It's like a person who sits around thinking that no one likes them or wants to be around them.  They develop a sour attitude and stop taking care of themselves.  As a result no one likes them or wants to be around them.  Self-fulfilling prophecy.

Avoiding a downturn in the economy has exactly zero to do with what some item is priced.  Gas could be ten bucks a gallon and the economy still be in great shape as long as consumer confidence is high.  Our national economic health is totally dependent on consumer confidence.  And the media is putting every effort into beating that into submission.

Brad

[El Tejon]

Big Media certainly hopes so.

[geronimotwo]

Is this going to turn out to be a self-fulfilling prophecy, that all this talk of recession is going to cause a recession?

if you keep repeating it every day, if/when it does happen you can say you were right.

[Tallpine]

Well, with government and most of the private sector functioning solely on debt, how long do you expect the party to last? 

Of course, it seems that Republican administrations always have to end in a recession, at least according to the media.

[Brad Johnson]

Your attitude can be altered by, quite literally, thinking yourself (insert emotional state here).  It's a documented phenomena and used, with notable success, in treating mild depression and anxiety.

The opposite is also true.  Hear something long enough, especially from a source that tends to be views as an "authority" on information, and you begin to believe it on a deeper level.  In other words, repeat a lie long enough and it becomes the truth.

A quickie "Positive Is As Positive Does" From BabyBoomerExpress.com:

Think Yourself Happy

Can You Really Think Yourself Happy?

Believe it or not, it certainly is within your power to create positive thoughts allowing you to accomplish anything that you set out to do.  Can you really think yourself happy?  The answer is a qualified yes. Here are the ways in which positive thoughts can help you accomplish many things in life. It is widely recognised that 'thoughts become things'.

Positive thoughts produce positive results.  We can either bemoan and whine about our situation, or we can change it. We can be negative about an event or we can be enthusiastic. It's entirely your choice!

President Lincoln once said, "Most folks are about as happy as they make up their minds to be." If you really want to think yourself happy, you can, just make up your mind to do so. It may be difficult to think happy in a world filled with hatred and violence.  But it's not impossible.  One thought at a time, one day at a time. One person, one idea, one positive thought can change society.  How, then, can we make ourselves happy?  By being a constant reminder to others that there is an abundance of goodness in the world.

* Seek out and find positive people to associate with.
* Expose yourself to all the amazing books, music and movies that are available.
* Find the one important thing in your life that inspires you, and pursue it.
* Practice random acts of kindness and respect towards others.
* Live life as if every day is your last. Smile.
* Use positive thoughts and words wherever and whenever you can.
* Use visualization to view the positive aspects of life.
* Speak in a positive tone of voice.
* Rid your mind of negative thinking. Perhaps you could try yoga and exercise.
* Let your expectations reflect your positive attitude.
* Allow peace of mind to be your constant companion.
* Become your own best friend. Practice TLC (Tender Loving Care)

Here is a wonderful poem which explains how unhappiness can thwart our every desire.

If you think you are beaten you are;
If you think you dare not, you don't;
If you want to win but think you can't;
It's almost a cinch you won't.
If you think you'll lose you're lost;
For out of the world we find
Success begins with a fellow's will;
It's all in a state of mind.
Life's battles don't always go
To the stronger and faster man.

Happiness is not a genetic trait we are born with.  It can be ingrained in us by our parents and those we love.  Or we can cultivate it from scratch, and nurture it within. It is up to us to maintain it, share it with others, and build our lives around it.  Think happy, and you will be happy.

[French G.]

It is ordained and so shall it be! This train wreck ought to look special by summer and we can blame it all on Bush. Not incompetent central monetary policy, not a worthless currency, not an economy that has everything made for it overseas, none of these problems that have been brewing for years; no it is Bushco's fault, the eeeeVil henchmen stole all the money and took it to Dick Cheney's lair. Ought to play well on the campaign trail. 

[GeoJAP]

No spending equals slowdown.

That's the problem.  The spending.  We are living beyond our means and the bubble is going to pop.  Most Americans seem to have no clue about this, uinfortunately.  There is going to be a very hard landing soon.

[gunsmith]

The Clinton admin handed the GW admin a big fiscal mess, then we had 911 which hurt fiscally too and we bounced back from that.
The media is screaming about the sky falling, they also do this every October. It sells dead trees.
My prediction is massive fiscal problems if the Dems win.
GW will hand them a fine mess that we can blame on the Dems like the Dems did to GW.

[wooderson]

Not incompetent central monetary policy, not a worthless currency, not an economy that has everything made for it overseas, none of these problems that have been brewing for years; no it is Bushco's fault, the eeeeVil henchmen stole all the money and took it to Dick Cheney's lair.

Not to say that the first part isn't largely true - but which of these has Dubya taken steps to correct? He has been El Jefe since Jan. 2001, right?

[GeoJAP]

The Clinton admin handed the GW admin a big fiscal mess...

This is actually not true at all; it's completely false.  George Bush Sr began the process of balancing the budget (in part by raising taxes).  Bill Clinton continued what President Bush Sr started and completed the balancing of the budget. 

Once we had a balanced budget, it allowed Greenspan the flexibility to cut interest rates (since inflation was very low because the money supply was very stable because the government wasn't borrowing tons of money) which spurred massive investment which lead to the economic boom of the 1990's. 

George Bush Junior is running up huge deficits, and when combined with oil prices rising due to increased demand and the real estate bubble fallout, this will be our downfall.  Our national balance sheet is so sick that our currency is becoming worthless.  When the dollar falls in value, other countries will lose faith in it and also get sick of having their savings (which are in dollars) devalue.  They will divest themselves of dollars.  It is going to get really ugly at that point and multiple things will happen that we will have no control over. 

The sad thing is that most Americans are oblivious to all this, as is obvious by this thread.  You can see the writing on the wall, but no one is paying attention while they borrow more and consume everything in sight. 

[thebaldguy]

I know we have real economic problems in this country; the evidence is obvious with our outsourcing, mortgage problems, banking/financial problems, etc. These problems are real. In addition, many Americans personally have been living on credit and above their means, and we are all going to pay for it. We have seen hundreds of billions of dollars pumped into the credit markets by a government deep in debt. What if banks don't pay back the loans they got? What if people can't pay their loans?

This one could be pretty bad. I can remember recessions before, but remember in those days we had lots of manufacturing and production jobs back then. We don't export much anymore, and many of those jobs are now gone for many reasons including outsourcing. I think there will be problems regardless of if it's discussed. We certainly can't ignore these problems.

[drewtam]

I don't understand the pessimism about the American consumer. Do Americans carry debt? Of course, I bet most people on this board carry debt. I have a mortgage, small student loans, a new baby(medical), and two used cars (new to me). I carry more debt than most, and more than I feel comfortable with. But the loans that were made to me are not bad loans. I stick to a tight budget and make extra payments. My job is decent and stable. If I didn't have such a good credit score then I wouldn't have gotten the loans. The market is smart enough not to throw good money out with people unable to pay, or can't manage money.

Think of it in reverse terms, do you invest? Who do you invest in? Losers? No, you find companies with good credit history, and strong fundamentals. Show me some shred of nationwide evidence that people are "living above their means".

[GeoJAP]

Here's some more tid-bits to chew on.

The USA has a zero savings rate.  We save 0% of our income.  Europeans save 20% nationally while Japan saves 25%.  National savings is what allows investment to occur.  The only reason the USA economy functions at all is because other countries do our savings for us, hoarding dollars as their national reserves.

When those countries feel that the dollar is no longer the best currency out there and they sell their dollars, the standard of living in the USA will plummet because there will be no money for investment.  On top of that, when everyone sells their dollars, the dollar itself will be worth a fraction of its current value due to over-supply.  The only reason this has been allowed to persist as long as it has, is because the dollar, up to this point, has been stable.  But now we appear to other countries to not care about our own currency.  Other countries are losing faith that we care about our banking industry.

Americans need to wake up.  Our government is running huge deficits, the economy is being wracked with huge problems like increased oil cost and a real estate bubble. 

[drewtam]

Here's some more tid-bits to chew on.

The USA has a zero savings rate.  We save 0% of our income.  Europeans save 20% nationally while Japan saves 25%.  National savings is what allows investment to occur.  The only reason the USA economy functions at all is because other countries do our savings for us, hoarding dollars as their national reserves.
 

I am compelled to point out that is a myth. The "0% savings rate" does not include: 401K, IRAs, Capital Gains, Real Estate, and other investments. In real life, those are modern forms of savings. In turn, these investments directly fuel more economic growth.
To sum up:

In the end the saving rate, as it is currently calculated is a useless measure of household balance sheets. A much better measure of true savings is the net worth of households, a statistic calculated by the Federal Reserve. As of September 2006 (the latest data available) US households had $54 trillion more in assets than liabilities, an all-time high. Moreover, total net worth had increased by $3.5 trillion from the year before. If this $3.5 trillion increase in net worth were used as the appropriate measure of personal saving, the saving rate was 37% last year and has averaged 33% the past ten years, a far cry from the "negative saving rate" which so many pessimists decry.

http://time-blog.com/real_clear_politics/2007/02/personal_saving_rate_is_a_misl.html

(Emphasis added)

[GeoJAP]

This is the first time I've ever seen "spending" (on household items which are then labeled "assets") turned into "savings".  Also, your figure from 2006 would include the real estate bubble's increase in home value as an asset and "savings".  That is NOT savings. 

American household savings was negative in 2005.  The government's figure was even worse, at -2.9% savings. 

Here is a study from the Brooking's institute.  There are many more similar studies out there, just search.
http://www.brookings.edu/testimony/2006/0406macroeconomics_bosworth.aspx

I really hope you're right.  But the overwhelming volume of data does not support your assertions, or your redefining of "savings".  I really hope to God that what looks like is about to happen, doesn't happen.

[Archie]

So far, there have been no quarters of negative growth.  None lately, anyway.

Pretty much all the doom and gloom economic reports are coming from the media in an effort to blame the Republican party for a 'recession' - that is not yet happening - and push the election of Democratic candidates.

It happens every presidential election.

So, any 'recession' we have will last until either - the populace finally ignores the left controlled media and simply goes about their lives or - a Democrat is elected President.  Then we'll hear how wonderful things are.

[El Tejon]

GeoJAP, all the more reason to abolish the capital gains tax!

[K Frame]

"The USA has a zero savings rate.  We save 0% of our income.  Europeans save 20% nationally while Japan saves 25%."

Pikers, all.

I'm now putting between 38 and 40% of my paycheck into either pretax or post tax savings.

[Paddy]

US households had $54 trillion more in assets than liabilities, an all-time high. Moreover, total net worth had increased by $3.5 trillion from the year before. If this $3.5 trillion increase in net worth were used as the appropriate measure of personal saving, the saving rate was 37% last year and has averaged 33% the past ten years, a far cry from the "negative saving rate" which so many pessimists decry.

So, you think artificially high real estate values are the same as savings?   Gimme a break.