When do you think this reccesion will end?

ACougar · #21 27th June 2009, 06:12 PM

I believe we'll see it stabilize 1st quarter of 2010, however I don't believe there will be a big recovery. Inflation will start to become a problem and it will basicly keep the economy from being able to make any kind of strong recovery. Steps that would normally be taken to combat inflation will no be feasable as the economy will still be too fragile to support higher interest rates or big cuts in government spending.

If in the next 5-10 years (before the system has fully recovered) we encounter another major crisis... energy scares/shortages caused by Iranian war, a massive environmental or health crisis, or another massive economic collapse, the entire global economic system will be at risk and we could see huge chunks of 1st world nations forced into 3rd world living conditions while current 3rd world nations see massive starvation and unrest.

The prudent thing to do will be to insure that you have a garden (even if's only a container garden,) a minimum of least 30 days food and water for your family, and at least a couple firearms.

whereisthetruth · #22 11th July 2009, 07:39 PM

Unfortunately the latter of your scenarios seems to be the more likely. For true stabilization to take place there needs to be an HONEST accounting of the situation, and the debt needs to be either paid off or defaulted. At the present the collapse is accelerating because nobody in the halls of power wants to 'come clean' and admit that the system itself is totally bankrupt.

The more that the world tries to prop up the 'big end of town' at the expense of the general population, the more that the real economic activity that is the only way out of this crisis going to be destroyed. Farms are not growing food because they cannot pay their debts. The same for many areas of the REAL economy. Real production of essentials is collapsing under a burden of debt that is going to grind the economy to a halt unless action is taken NOW that will hurt the big guys to save the majority.

Unfortunately, the crooks are in charge, and they will make sure that this never happens. So it's all aboard the third world express for 99% of the population.

ACougar · #23 12th July 2009, 03:20 AM

A lot has to do with the speed collapse/restructuring takes place. There are so many variables that can kick in, it's really hard to predict what's going to happen. Inflation is one of those things that can grind away debt, especially if the government keeps interest rates low. I believe that it's posible that under the right conditions small and medium sized farms could become competative and profitable.

Studies like this give me hope: http://bss.sfsu.edu/raquelrp/pub/2000_aug_pub.html. If the Cubans can do it, we can do it.

cheese007 · #24 12th July 2009, 03:34 AM

Honestly? Eventually, no idea when, but it will.

whereisthetruth · #25 17th July 2009, 05:31 PM

What intrigues me is the apparent lack of alarm at the level of debt in the system. That is the single biggest issue in this crisis. The debt worldwide that has accumulated over the last 40 years is so staggering that it cannot possibly be paid off in less than a generation, even with inflation.

Remember, inflation does not pay off debt! Inflation doesn't increase production, only capital does. it's simply a form of increased competition for the same amount of goods and services (or for even fewer!). When inflation kicks in, so do interest rates, so borrowers get hit harder! Credit card interest rates are already nudging 30%. What would happen if inflation forced them up to 40% or 50% or more?

So any recovery must first be preceded by a VERY SHARP contraction resulting either from the debt being cancelled (bankruptcy) which will be very painful for creditors, and a forced disciplinary measure for borrowers, or by a prolonged period of forced savings to repay the debt which will be painful for debtors and for producers. Either way, there is no way that things can 'return to normal' any time soon.

We don't even know what 'normal' is, so how can we return to it?

ACougar · #26 17th July 2009, 08:13 PM

It's going to have to get ugly at some point. Inflation get's rid of debt at the same pace that it get's rid of wealth.

Right now if the United States government were a person who made 100K a year, he would be spending 120K a year (80K a year on operations, and 40K a year servicing his debt) and be roughly 750K in debt. Now if we see 150% inflation over 5 years... he should be pulling in 250K, and spend 200K on operations and roughly 40K servicing the debt. His debt will be roughly 3 years of income (fairly typical) assuming he can avoid piling a lot more debt on. I believe he can do this becuase he has the ability to simply monitize his debt (print money and spend it, driving down the value of his money.)

Yes, $150% inflation over 5 or 10 years would do a lot of damage... but it's the only way I see to bring the debt back under control. Might as well begin preparing yourself to see $1 become worth roughly 40cents.

I'm no economist, however I don't see any other way. As for interest rates, I currently pay 8.something on my credit card, yes inflation would force that up. Money is going to need to find a place where it can grow, or it's going to shrink dramaticly. If we see 15% inflation for 8-9 years, and I stuff my money in a mattress... I'm going to lose 15% a year, if I earn 5% back on my money... at least I'm only losing 10% a year. If I brave the stock market and earn at least 15% a year... at least it's not shrinking. My guess is that the problem with massive infusions of cash into the economy, high inflation and capital desperatly trying to maintain it's value, is going to be bringing inflation back under control once it's done it's job.

Originally Posted by whereisthetruth

What intrigues me is the apparent lack of alarm at the level of debt in the system. That is the single biggest issue in this crisis. The debt worldwide that has accumulated over the last 40 years is so staggering that it cannot possibly be paid off in less than a generation, even with inflation.

Remember, inflation does not pay off debt! Inflation doesn't increase production, only capital does. it's simply a form of increased competition for the same amount of goods and services (or for even fewer!). When inflation kicks in, so do interest rates, so borrowers get hit harder! Credit card interest rates are already nudging 30%. What would happen if inflation forced them up to 40% or 50% or more?

So any recovery must first be preceded by a VERY SHARP contraction resulting either from the debt being cancelled (bankruptcy) which will be very painful for creditors, and a forced disciplinary measure for borrowers, or by a prolonged period of forced savings to repay the debt which will be painful for debtors and for producers. Either way, there is no way that things can 'return to normal' any time soon.

We don't even know what 'normal' is, so how can we return to it?

whereisthetruth · #27 24th July 2009, 10:02 AM

Originally Posted by ACougar

Yes, $150% inflation over 5 or 10 years would do a lot of damage... but it's the only way I see to bring the debt back under control. Might as well begin preparing yourself to see $1 become worth roughly 40cents.

If you want to see how good a job inflation does in paying off debt ask President Mogabe (Zimbabwe). Inflation is a two edged sword. Yes it notionally increases income and reduces the face value of debt. But the other edge is that the value of the currency is slaughtered, and everything you import goes up in price. Also, because interest rates are based on the future value of money, they MUST rise in accord with the devaluation of the future value of the existing money. In a debt-heavy economy this is like pouring fuel on the fire.

There is NO way that any kind of monetary trickery can make the coming depression go away.

My bet is that the US will start a world war before the rest of the world puts up their hands and says NO to the US borrowing any more. The US is a spoilt 2 year old, and will go on a temper tantrum as soon as some adult says NO!

DeathMagus · #28 24th July 2009, 03:22 PM

Slowly, I hope. Let's do this right.

ACougar · #29 25th July 2009, 01:47 AM

If the Federal discount rate stays at .5% while inflation shoots up to 9% a year, I'm not really certain how the prime rate will react. I suspect the prime rate will not keep place with inflation as long as the Federal reserve continues to pump money into the system. In July of last year the prime rate was 5% and inflation was 5.6%. Most likely IMO, interest rates and inflation rates will run roughly parallel.

I'm not sure comparing Zimbabwe to the United States makes sense for a number of reasons... first Zimbabwe isn't the worlds largest economy and cornerstone f the world economy, second Zimbabwe doesn't have enormous reserves of wealth... US household & nonprofit net worth alone is almost 60 Trillion dollars.

One of the biggest problems with the US is that it has been bleeding wealth like crazy for a very long time. If it could balance our trade and use that money to spur job growth in the US our economic situation would turn around instantly... we'd have almost full employment and we wouldn't be running budget deficits.

We don't need a world war, we already have enough to keep us busy in that department for the next decade. As long as world resources remain relativly stable and plentiful... the only conflict the US will be directly involved in will be Iraq and the AfPak war.

Originally Posted by whereisthetruth

If you want to see how good a job inflation does in paying off debt ask President Mogabe (Zimbabwe). Inflation is a two edged sword. Yes it notionally increases income and reduces the face value of debt. But the other edge is that the value of the currency is slaughtered, and everything you import goes up in price. Also, because interest rates are based on the future value of money, they MUST rise in accord with the devaluation of the future value of the existing money. In a debt-heavy economy this is like pouring fuel on the fire.

There is NO way that any kind of monetary trickery can make the coming depression go away.

My bet is that the US will start a world war before the rest of the world puts up their hands and says NO to the US borrowing any more. The US is a spoilt 2 year old, and will go on a temper tantrum as soon as some adult says NO!

whereisthetruth · #30 26th July 2009, 07:43 AM

I think it is almost useless telling anyone in the modern western world the truth about what the state of the economy is. Just as Jesus was ignored or laughed at when he gave bad news straight and plain, the same applies now with anything that upsets people.

Get this folks! The current recession is BARELY BEGINNING! Unemployment in the next 2 years will probably DOUBLE OR WORSE from current levels! We will see massive riots in the streets and a police forces totally swamped. We will see massive shutdowns of factories, banks, shopping malls all over the country. Many people will despair of life itself!

The back-log of massive debt in the economy that has been building up for the last 40 years or more lies rotting beneath the so-called prosperity of this generation's imagination, and is in the EARLY stages of being driven to the surface - and the banks and large corporations have been fighting tooth and nail to prevent the truth from coming out! But out it will come!

This video - called I.O.U.S.A. is a MUST WATCH! Don't be foolish and think that 'negativity' is wrong just because you don't like the message! Watch it and then explain to me in detail why you disagree with it's message.