Author Topic: Is a recession going to be a self-fulfilling prophecy?  (Read 10664 times)

Headless Thompson Gunner

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #25 on: January 22, 2008, 03:20:01 PM »
Human nature tends towards pessimism and anxiety about the future.  Couple that with the media's desire to stoke recession fears before every presidential election, and it makes for a nasty combination.

The fundamentals of the economy are mostly sound.  A few problems here and there, but we're generally in good shape.  We've had some spectacular growth in both the stock market and in real estate over the past half dozen years.  That sort of growth cannot continue indefinitely.  So we'll probably see a reduction in the rate of growth compared with the near past.  Maybe it'll actually turn to mild negative growth for a few quarters.  How much rediction will largely depend upon the willingness of the finance industry to lend.  Bernanke's interest rate cut should help that.

All the while the media will do its best to make us think the sky is falling.  It won't be.

Personally, I hope stocks and real estate continue to fall.  The fools will panic and sell "before it's too late", and I'll eat up the bargains.    grin

These forums need a greedy capitalist smileyface.

Headless Thompson Gunner

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #26 on: January 22, 2008, 03:32:00 PM »
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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.


Real estate is an investment and an asset.  Sometimes it's priced artificially high, sometimes artificially low, sometimes accurate.  It's still an asset that generally appreciates over the long term.  It's still a way to accumulate wealth, still a form of savings.  It's one of the more interesting forms of savings too, in that it provides an immediate utility value at the same time.


Tallpine

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #27 on: January 23, 2008, 07:18:16 AM »
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The fundamentals of the economy are mostly sound.

How do you figure that, considering we are becoming less and less a manufacturing and producing nation, and more and more a nation selling services and imported goods to each other Huh?

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taurusowner

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #28 on: January 23, 2008, 11:40:19 AM »
I would say, yes is is going to be a self-fulfilling prophecy, designed with political ends in mind.  The Media has been talking up the "bad economy" in an effort to make the current Republican administration look bad.  And more importantly, when and if a Democrat wins, they are setting themselves up to make the Democrat look like a great economic savior.

Paddy

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #29 on: January 23, 2008, 11:47:05 AM »
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The Media has been talking up the "bad economy" in an effort to make the current Republican administration look bad.

Lord knows the current Republican administration hasn't done anything to make themselves 'look' bad.  It's all the media's fault.

GeoJAP

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #30 on: January 23, 2008, 12:41:14 PM »
Real estate is an investment and an asset.  Sometimes it's priced artificially high, sometimes artificially low, sometimes accurate.  It's still an asset that generally appreciates over the long term.  It's still a way to accumulate wealth, still a form of savings.  It's one of the more interesting forms of savings too, in that it provides an immediate utility value at the same time.

The thing that you are missing is that the type of savings to which economists are referring is the kind of savings inside banks.  That banks can then lend, in the form of loans, to borrowers.  This drives investment in an economy.  If there is no savings, there is no investment because no loans can be made. 

That is what is important here.  No savings = no investment in the economy.  Home appreciation does not apply here.

Manedwolf

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #31 on: January 23, 2008, 12:44:53 PM »
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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.


Real estate is an investment and an asset.  Sometimes it's priced artificially high, sometimes artificially low, sometimes accurate.  It's still an asset that generally appreciates over the long term.  It's still a way to accumulate wealth, still a form of savings.  It's one of the more interesting forms of savings too, in that it provides an immediate utility value at the same time.

Not when people use their house as a bank, cashing out the equity in the form of high-interest loans to buy instantly depreciating, worthless-in-five-years items like big flatpanel TVs.


GeoJAP

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #32 on: January 23, 2008, 12:48:44 PM »
The fundamentals of the economy are mostly sound.  A few problems here and there, but we're generally in good shape.

Could you please explain what will happen when the dollar valuation against other curriencies drops even further, far enough so that other countries decide to divest themselves of most of their dollars?

At the moment, this is what is scaring the bejesus out of anyone who knows anything about economics.  The answer is basically a meltdown.  I hope it won't happen.  But our leaders (coupled with other minor disasters like energy costs, the real estate collapse and banking crisis) are basically doing everything they can to keep pushing us in that direction, so it looks unavoidable at this point.  

charby

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #33 on: January 23, 2008, 12:57:01 PM »
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The Media has been talking up the "bad economy" in an effort to make the current Republican administration look bad.

Lord knows the current Republican administration hasn't done anything to make themselves 'look' bad.  It's all the media's fault.

Well a lot of the main stream media and bloggers haven't highlighted very much of the current administration either. Bush and admin has screwed up a lot and so has a lot of other past presidents, but I'm at my wits in end with all the Bush blaming, hating and etc.

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Paddy

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #34 on: January 23, 2008, 02:37:58 PM »
I want a recession.  Now that I have some silver and gold, I want everyone buying silver and gold to drive up the price.  Then I'll sell, and buy back into an undervalued stock market.

Headless Thompson Gunner

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #35 on: January 23, 2008, 03:35:10 PM »
The fundamentals of the economy are mostly sound.  A few problems here and there, but we're generally in good shape.

Could you please explain what will happen when the dollar valuation against other curriencies drops even further, far enough so that other countries decide to divest themselves of most of their dollars?

At the moment, this is what is scaring the bejesus out of anyone who knows anything about economics.  The answer is basically a meltdown.  I hope it won't happen.  But our leaders (coupled with other minor disasters like energy costs, the real estate collapse and banking crisis) are basically doing everything they can to keep pushing us in that direction, so it looks unavoidable at this point. 

What will happen when foreign holders of dollars divest themselves?  Those dollars will end up buying dollar-denominated (i.e. American) investments, assets, and infrastructure.  American investments are the strongest, safest, most predictable place to park your wealth.  Our financial markets are the envy of the world, our government protects property rights like none other, our business acumen is second to none.  These things are valuable, very valuable, and they can be purchased (rather, they can be invested in).

Essentially we're trading small investment stakes in our extremely valuable economy for the foreign oil and manufactured goods we import.  The dollars are merely a clearinghouse.  We benefit in the short term from the oil and cheap labor products, and we benefit in the long term from the investments.  Ultimately it improves our infrastructure, grows our capital assets, makes our workers more efficient, grows our economy, and raises our standard of living. 

Basic macroeconomics.  But you knew all that already, you're someone "who knows anything about economics".  Right?

I wasn't talking about macroeconomics earlier.  When I said "the fundamentals of the economy are mostly sound", I was in fact referring to the fundamentals of the economy being mostly sound. 

GDP is growing, some months strongly, some months not so strongly.  Unemployment is low.  Inflation is up, primarily due to oil prices, and thus would come back down if oil comes back down.  Housing is rough in the short term.  So is the finance industry.  Bernanke's recent rate cut should alleviate both of those problems within a couple years.  The recent behavior of the stock market shows that lots of people are ready to bargain hunt, so I doubt either the stock market or the real estate market will fall precipitously.  Unemployment is low.  Consumer confidence is falling, but foreign exports are growing rapidly.

Most objective forecasts of the economy call for low to zero GDP growth for a brief span.  Thus no actual recession.  It'll still be fun to watch politicians and the media howl about "the big, devastating recession".

Paddy

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #36 on: January 23, 2008, 03:57:15 PM »
That's the biggest load of bullhockey I've heard since "Mission Accomplished"

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Ultimately it improves our infrastructure, grows our capital assets, makes our workers more efficient, grows our economy, and raises our standard of living.

Our infrastructure is obsolete and crumbling due to lack of investment; our capital assets consist of largely overvalued real estate, because the assets of production have been shipped overseas along with our worker's jobs because third world slave labor is cheaper, Our economy is completely dependent on foreign goods and oil, and our standard of living has been declining since the early 80's.

What lala land do you live in, again?

Headless Thompson Gunner

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #37 on: January 23, 2008, 04:06:51 PM »
That's the biggest load of bullhockey I've heard since "Mission Accomplished"
I'm sure you think it is. 

Leave it to a populist, a populist from California (right?) no less, to always doubt the economy.

Paddy

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #38 on: January 23, 2008, 04:43:26 PM »

What lala land do you live in, again?
I could ask the same of you.  I know it doesn't sit well with your populist sensibilities, but that's the way it is.  You just need to look around you.  Or maybe you need to get out of California.

I live in a land where you've never been.  A land of an expanding, prosperous middle class.  In a time when one man working could raise a family and pay a mortgage.  Each year was better than the last.  The purple USDA stamp on meat in the supermarket was an absolute guarantee of quality.  The air was clean and the water was pure.  A man's word and a handshake were a binding contract (Dad was a roofing contractor.  He gave a bid, shook hands, and was paid at the end of the job. No BS, no written incomprehensible contracts.  He cleaned up the worksite everyday before he left).

A land where you didn't have to think "Buy American", because everything you bought was American made, by Americans and for Americans.  Big, heavy cars with V-8 engines and thick chrome made in Detroit with real Pittsburgh steel.

A land where you didn't have to keep your doors locked all the time for fear some psychopath would break in.  Where neighbors knew and helped each other.

A land where loyalty to your employer was reciprocated; you could spend your entire career with one company if you wanted.

I could go on and on, but I'm sure these concepts are foreign to you

Headless Thompson Gunner

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #39 on: January 23, 2008, 05:25:59 PM »

What lala land do you live in, again?
I could ask the same of you.  I know it doesn't sit well with your populist sensibilities, but that's the way it is.  You just need to look around you.  Or maybe you need to get out of California.

I live in a land where you've never been.  A land of an expanding, prosperous middle class.  In a time when one man working could raise a family and pay a mortgage.  Each year was better than the last.  The purple USDA stamp on meat in the supermarket was an absolute guarantee of quality.  The air was clean and the water was pure.  A man's word and a handshake were a binding contract (Dad was a roofing contractor.  He gave a bid, shook hands, and was paid at the end of the job. No BS, no written incomprehensible contracts.  He cleaned up the worksite everyday before he left).

A land where you didn't have to think "Buy American", because everything you bought was American made, by Americans and for Americans.  Big, heavy cars with V-8 engines and thick chrome made in Detroit with real Pittsburgh steel.

A land where you didn't have to keep your doors locked all the time for fear some psychopath would break in.  Where neighbors knew and helped each other.

A land where loyalty to your employer was reciprocated; you could spend your entire career with one company if you wanted.

I could go on and on, but I'm sure these concepts are foreign to you
See, that's where you're wrong.  All these things exist today.  In abundance.  At least they do here in Indiana.

I'm a working man.  I can pay a mortgage and support a family.  Don'y have a family yet, but I'm working on it.  Going to get married in October.  In Rome.  Why Rome?  Because I can.  Could you have held your wedding in Rome back in your day?

Never had any problems with air or water or food.  Buy from the local farmers market every summer.  No USDA stamps, don't need 'em.

Never had a handshake deal go bad.  We sign contracts, but we also tell each other what's in the contract first, making the contract a formality.  Never had a verbal description mismatch the text, but if it did the culprit would lose of business.

I trust my neighbors.  I trust my employer.  I trust our customers.  They all seem to trust me.  Only psychopaths I've ever seen were on the news.

I could buy an American V8 muscle car if I wanted.  Not my taste, though.  I think my next auto is going to be a Miata, which is a strange combination of Japanese and British.  Thankfully I have the choice. 

This year is definitely better than last year, which was better still than the year before.  I can't wait for next year.

If you look around and see a world that's falling apart, then perhaps you should move.  Or perhaps you should clean up your neighborhood.  Those things you think don't exist any more, do exist.  In abundance.  At least they do in Indiana. 

You're in California, right?  Maybe that's your problem.  I've only spent a few weeks in California, but it was definitely a surreal Twighlight Zone kind of experience.  I was glad to leave and get back to the real world.

Or maybe you're just a grouchy pessimist.

charby

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #40 on: January 23, 2008, 05:52:41 PM »
I want a recession.  Now that I have some silver and gold, I want everyone buying silver and gold to drive up the price.  Then I'll sell, and buy back into an undervalued stock market.

Every investors dream.... 

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charby

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #41 on: January 23, 2008, 05:57:56 PM »
That's the biggest load of bullhockey I've heard since "Mission Accomplished"

Quote
Ultimately it improves our infrastructure, grows our capital assets, makes our workers more efficient, grows our economy, and raises our standard of living.

Our infrastructure is obsolete and crumbling due to lack of investment; our capital assets consist of largely overvalued real estate, because the assets of production have been shipped overseas along with our worker's jobs because third world slave labor is cheaper, Our economy is completely dependent on foreign goods and oil, and our standard of living has been declining since the early 80's.

What lala land do you live in, again?

Show me infrastructure that pays decent dividens and I'll invest. I dropped $5k in some real estate funds that have paid consistantly 10-12% returns over the past 40 years. I want more $$$.

-C
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GeoJAP

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #42 on: January 24, 2008, 04:22:53 AM »
What will happen when foreign holders of dollars divest themselves?  Those dollars will end up buying dollar-denominated (i.e. American) investments, assets, and infrastructure.  American investments are the strongest, safest, most predictable place to park your wealth.  Our financial markets are the envy of the world, our government protects property rights like none other, our business acumen is second to none.  These things are valuable, very valuable, and they can be purchased (rather, they can be invested in).

None of this is true anymore, unfortunately.  You need to read some financial periodicals and get up to date, rather than regurgitate patriotic statements that I see have no factual basis behind them.  Just because YOU think this, doesn't mean the rest of the world does. 

Also, your statement about what will happen when foreigners divest themselves of their dollar reserves is a fantasy.  How do dollars buy dollar-denominated investments?  What are you talking about?  It is a person who buys something, last I checked, so dollars can't buy a dollar-denominated investment.  That is like saying a Ford car will buy a Ford factory.  It makes no sense. 

What will happen is that the dollar will become worthless.  There will be a glut of dollars for sale on the world market with no buyers.  Hyperinflation will result along with the associated turmoil.  See 1920s Germany and 1990s Argentina for reference. 

I agree with you that the economy is currently not doing too terribly bad.  Businesses are generally able to make a profit and continue operations, unemployment is relatively low still, and income is doing well.  There is higher than normal inflation, the banking sector is taking a beating and many overvalued real estate markets are seeing a correction.

It's certainly no disaster, YET.  If certain things happen however, it will become a disaster.  The finances of the USA are fundamentally flawed.  We depend on foreign governments for the solvency of the US economy, because they do our savings and investment in the USA for us.  The world's economy is transacted in dollars (but more and more transactions are now done in Euros).  There are many things happening which is driving down the value of the dollar, which the rest of the world does not appreciate.  There is nothing that says they have to have their currency reserves in dollars, and they could just as easily change to Euros or something.  That would cause the US economy to crash (and the rest of the world's economy to crach as well if it is done too quickly).  It is already happening slowly, countries are divesting themselves of dollars at a more rapid rate all the time now.

Headless Thompson Gunner

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #43 on: January 24, 2008, 08:52:21 AM »
Okie dokie. 

Well, you're right.  I don't understand anything about anything.  I mean, c'mon, I even said that dollars are self-willed creatures that would go out and buy things all on their own.  (That's obviously what I meant, wasn't it?)

I see now that your conspiracy theories of imminent financial collapse make so much more sense.  Thanks for straightening me out.  From now on I'll only express the proper Chicken Little attitudes.  I'll even throw in some fearmongering about hyperinflation from time to time, just for good measure.

Seems to be all anyone on this board ever wants to hear...

GeoJAP

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #44 on: January 24, 2008, 09:49:29 AM »
HTGunner, I really hope I'm wrong and it doesn't happen. 

But the fact is that nothing is happening that will pull us away from the edge.  Everything we are doing (lowering interest rates to stave off market corrections, incurring more national debt, decreasing the value of the dollar) is pushing us closer and closer. 

The really bad thing in all this is that once hyperinflation sets in, history has shown us that fascist ultra-nationalist governments usually rise to power. 

Headless Thompson Gunner

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #45 on: January 24, 2008, 01:16:09 PM »
Of course.  It isn't just our economy that's going to collapse.  Our government is going to collapse, too.  And nothing is happening that might stop these calamities.

LAK

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Re: Is a recession going to be a self-fulfilling prophecy?
« Reply #46 on: January 25, 2008, 02:40:07 AM »
Recession? How about a Greater Depression that will make the 1930s look like the roaring 20s?
Quote
The federal government's total liabilities and unfunded commitments for future payments related to Social Security and Medicare are now estimated at $53 trillion, in current dollar terms, up from $20 trillion in 2, Walker said
http://www.govexec.com/dailyfed/1207/121707cdpm1.htm
Quote
The Outstanding Public Debt as of 25 Jan 2008 at 12:33:31 PM GMT is:

$9,194,530,939,010.92
[that's nine trillion dollars folks]

The estimated population of the United States is 304,176,748
so each citizen's share of this debt is $30,227.59.

The National Debt has continued to increase an average of
$1.43 billion per day since September 29, 2006!
http://www.brillig.com/debt_clock/

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