When do you think this reccesion will end?

ACougar · #31 27th July 2009, 02:07 AM

Who would the US government turn to if it needed a bailout.

The answer is the market first and quantitative easing second.

The Four Deficits and what's being done about them.

1. Budget... expect quantitative easing and inflation to keep this in check. At some point (2040ish) we may have 50 trillion in debt, however in 2009 dollars it will be similar to what we owe now.

2. Savings... this is changing we've already gone from almost zero to 6.9%
The Business Desk with Paul Solman | Online NewsHour | PBS I predict that we will continue to see this rise.

3. Trade... When the value of the dollar drops enough this will correct itself. Our currency has been artificialy high against several countries currency like China, and cheap energy has encouraged us all to drive Escalades and Hummers for too long. Having all that wealth pumping through our own economy instead of the economies of other nations will go a long way.

4. Leadership... Give it a chance, I believe Obama has as good a chance as any of seeing us through this mess.

The video also glosses over the fact that we are at war today, two wars actually. For political reasons much of the cost of these wars remains hidden and played down... but in reality trillions of dollars have already been spent. Add to that trillions in tax cuts, primarily for the rich and it's easy to see how Clintons surplus became the massive deficits we see today.

It may take 6-8 years, however I believe that Obama will eventually balance the budget and begin paying down the deficit. Yes it will get worse before it get's better... not as bad as Japan (national debt is 175% of GDP.)

I'm not sure where the video is getting it's information on Medicare, however it doesn't explain how those costs are going to ballon to that degree. The video doesn't seem to take into account quantitative easing or the effects of inflation, balanced trade, higher savings rates, ect... that's a lot of holes.

No doubt, if nothing changes... the whole system would implode around 2020. We will see changes, hopefully they will be enough.

whereisthetruth · #32 27th July 2009, 10:25 PM

A Cougar. Why do you place so much faith on inflation to solve the nation's problems? Inflation does not PRODUCE ANYTHING! It is no different to adding a jug of water to the soup when another guest arrives for dinner.

The standard argument for inflation goes something like this:

"We are all in too much debt. So we will flood the market with more money so that with more money in all of our pockets we can easily pay off the debt."

That seems logical, but for a couple of really nasty 'however's. Firstly, as inflation kicks in, interest rates MUST RISE. Why? Because people only lend money to others if they can get a profit on it. And as inflation increases the competition for goods (loans are 'goods' in this sense), so the cost of those goods must increase, because in all markets EVERYTHING IS AUCTIONED, and interest rates are the measure of the price of money. In the recession of the early 1990's, that is exactly what governments tried to do - inflate away the debts. And look what happened to interest rates? Home loans were at 18%! Today, with the level of debt awash in the system, that strategy will grind the whole economy to a halt. The increase in cash will not be fast enough to be able to 'chase down' the interest rate spiral.

On your other point on inflation causing the dollar to devalue and that helping the US. That's fine when you are a net exporter, but disaster when you are a net IMPORTER. That is what the US is today. Ok, it means that there is an incentive to re-tool and begin manufacturing again because US goods will be cheaper on the world market. Sure. But all of the input costs to built up the manufacturing base (that has disappeared overseas) - oil, capital (the US has none!) and everything else that is imported, will be MORE EXPENSIVE, making it harder to build up the manufacturing base.

The other thing against inflation is that if it is done the way it is being done now - the government borrowing the money from the Fed and other investors through bond sales - the cost of those borrowings will bankrupt the government (actually, too late, already achieved that!)

On leadership. Contrary to the insanely popular assessment of Obama's leadership, I think he's a weak and populist leader. His vanity and insecurity is obvious. He is squarely in the pockets of the elites, as his continuation of the policies of Bush show.
What he should be doing is shutting down Goldman 'Sucks', and conducting a thorough audit and judicial investigation of the Federal Reserve. There has and continues to be gross criminal conduct going on in Wall St. and he should move to clamp down on it. But his inaction on this (other than the token jailing of Madoff) demonstrates that he has no intention what so ever of attempting to deal with this - the most critical of all the issues to do with the economic collapse.

No, without radical restructuring of the whole financial system and shutting down the Wall St. piracy campaign and the Federal Reserve system, there is no foreseeable solution to this crisis. It can and will continue to get worse, and worse, and worse. No green shoots.

I am absolutely stunned that the issue of the level of debt in the economy seems to be taken so lightly by commentators and so-called economists. Yet it is the debt that will strangle and kill the life out of the economy. Once the 'sugar high' of all the 'stimulus' that has been pumped into the economy to keep it afloat wears off, the reality of the crushing debt will begin to grind away until nobody will ever want to own debt ever again.

There is no way back to 'the good times'. 2006 was as good as it is gets for generations to come - if ever again.

What killed the US? IT'S THE DEBT! Get it? IT'S THE DEBT!

ACougar · #33 28th July 2009, 03:03 AM

Originally Posted by whereisthetruth

A Cougar. Why do you place so much faith on inflation to solve the nation's problems? Inflation does not PRODUCE ANYTHING! It is no different to adding a jug of water to the soup when another guest arrives for dinner.

Sadly that's what needs to happen when there are too many people and not enough soup.

"We are all in too much debt. So we will flood the market with more money so that with more money in all of our pockets we can easily pay off the debt."

Debt can also be purchased by the Federal Reserve which created money out of thin air. The Debt goes down and the value of the debt that remains goes down.

That seems logical, but for a couple of really nasty 'however's. Firstly, as inflation kicks in, interest rates MUST RISE. Why? Because people only lend money to others if they can get a profit on it.

I see China lending money, I see the Federal Reserve lending money, I see people puting thier money in the stock market and other investments in the hope that they will grow faster than the rate of inflation.

And as inflation increases the competition for goods (loans are 'goods' in this sense), so the cost of those goods must increase, because in all markets EVERYTHING IS AUCTIONED, and interest rates are the measure of the price of money. In the recession of the early 1990's, that is exactly what governments tried to do - inflate away the debts. And look what happened to interest rates?

Yes, the cost of goods will increase.

Home loans were at 18%! Today, with the level of debt awash in the system, that strategy will grind the whole economy to a halt. The increase in cash will not be fast enough to be able to 'chase down' the interest rate spiral.

There also has to be a shortage of money for home loans to go that high... I don't see that happening.

On your other point on inflation causing the dollar to devalue and that helping the US. That's fine when you are a net exporter, but disaster when you are a net IMPORTER. That is what the US is today.

Yes, if that doesn't change we are doomed.

Ok, it means that there is an incentive to re-tool and begin manufacturing again because US goods will be cheaper on the world market. Sure. But all of the input costs to built up the manufacturing base (that has disappeared overseas) - oil, capital (the US has none!) and everything else that is imported, will be MORE EXPENSIVE, making it harder to build up the manufacturing base.

That's why it's so important that this happen now, if we wait much longer it will not be possible.

The other thing against inflation is that if it is done the way it is being done now - the government borrowing the money from the Fed and other investors through bond sales - the cost of those borrowings will bankrupt the government (actually, too late, already achieved that!)

Being on a path to Bankruptcy and being Bankrupt are not the same thing. We will not know for a couple years if we've done enough early on to avoid disaster.

On leadership. Contrary to the insanely popular assessment of Obama's leadership, I think he's a weak and populist leader. His vanity and insecurity is obvious. He is squarely in the pockets of the elites, as his continuation of the policies of Bush show.

Yes, any President is still subject to the whims of the elite and if he doesn't want to go the way of Kennedy... he needs to move slowly and with great caution.

What he should be doing is shutting down Goldman 'Sucks', and conducting a thorough audit and judicial investigation of the Federal Reserve. There has and continues to be gross criminal conduct going on in Wall St. and he should move to clamp down on it. But his inaction on this (other than the token jailing of Madoff) demonstrates that he has no intention what so ever of attempting to deal with this - the most critical of all the issues to do with the economic collapse.

I don't think he can survive as a politician and do this right now.

No, without radical restructuring of the whole financial system and shutting down the Wall St. piracy campaign and the Federal Reserve system, there is no foreseeable solution to this crisis. It can and will continue to get worse, and worse, and worse. No green shoots.

Were in unchartered territory and the amount of variables in this equasion are staggering. I don't know what's going to happen, I think were probably ok for another 2-3 years and then either in deep trouble or slowly recovering for the next 4-6 years.

I am absolutely stunned that the issue of the level of debt in the economy seems to be taken so lightly by commentators and so-called economists. Yet it is the debt that will strangle and kill the life out of the economy. Once the 'sugar high' of all the 'stimulus' that has been pumped into the economy to keep it afloat wears off, the reality of the crushing debt will begin to grind away until nobody will ever want to own debt ever again.

Peole who own debt will find themselves losing money, but what alternative will there be? If they stick thier money in a mattress, it will be worth even less... When we see gold double or triple as people look to protect thier money I will be convinced the end is near.

There is no way back to 'the good times'. 2006 was as good as it is gets for generations to come - if ever again.

It was only so good for a select minority... for most Americans wages were stagnant and not keeping up with inflation.

What killed the US? IT'S THE DEBT! Get it? IT'S THE DEBT!

Could well be... I just don't hear the fat Lady singing yet.

whereisthetruth · #34 6th August 2009, 11:37 PM

Originally Posted by ACougar

Could well be... I just don't hear the fat Lady singing yet.

I think she's clearing her throat. There is a growing consensus among 'bearish' analysts that this coming October will be crunch time. At the moment corporations are doing all kinds of accounting gymnastics to make their interim reporting look positive in order to desperately keep their share price up. But judgement day cometh!

In order for there to be a recovery there needs to be an unambiguous improvement in:

Corporate profitability based on operating profits, not one-off accounting entries, or on shifting money around.
An increase in employment.
An overall decrease in debt-to-GDP without causing a contraction in the GDP, indicating that the cost of servicing debt is becoming less of a drain on productivity. Less money going to offshore creditors means more being spent internally on capital and production.
An increase in production in the REAL ECONOMY - that is, stuff being made and bought in the US without involving an increase in debt.

At present all of these trends are NEGATIVE. It may be that the rate of decline is slowing, but it needs to REVERSE for a significant period for there to be any basis for talk of a recovery. A short-term slowing of the negative trends does not indicate a recovery. During the Great Depression there were several short term rallies that fooled the majority into thinking that the economy had turned the corner, but the worst decline was after the initial rally. This is the case now. Fools are being sucked into pouring money into assets thinking that they are going to make a killing buying up bargains, but they will be wiped out if the market takes another leg down, which is highly likely within the next 2 months.

Quasicentennial · #35 12th August 2009, 10:40 AM

Recession hit the economy because of greed through destruction of forests and animals living in forests to get minerals and petrol. Upset the balance of mother nature and she would unleash climate changes of hell to the world. Typhoons, tornadoes, cyclones have made headline news like conglomerating wild beasts in bible prophecy. Fix nature by going green in everything we make and use, such as cars and computers, to end recession.

Sri · #36 12th August 2009, 10:35 PM

From listening to a few different economic peeps on the radio, end of 2009 and the beginning of 2010. I am not sure how creditable that is.

ACougar · #37 13th August 2009, 02:50 PM

That would be nice, however people don't change until thier convinced they have no choice but too change... at that point it may be too late for most people.

Originally Posted by Quasicentennial

Recession hit the economy because of greed through destruction of forests and animals living in forests to get minerals and petrol. Upset the balance of mother nature and she would unleash climate changes of hell to the world. Typhoons, tornadoes, cyclones have made headline news like conglomerating wild beasts in bible prophecy. Fix nature by going green in everything we make and use, such as cars and computers, to end recession.

ACougar · #38 13th August 2009, 02:55 PM

I don't think it's going to be easy to spot... inflation will start to climb, unemployment will stabilize and the stock market may climb back up close to where it was... things will continue to get worse in some areas of the country and sectors of the economy while we start to see improvment in other areas. The earliest we'll see clear proof that the recesion is ending will be mid to late 2010 (assuming things don't take another tumble because of an Iran conflict or one of the many other powder kegs out there.)

Originally Posted by Sri

From listening to a few different economic peeps on the radio, end of 2009 and the beginning of 2010. I am not sure how creditable that is.

whereisthetruth · #39 14th August 2009, 06:03 AM

Mmmm, now let's see... increase money supply through flooding the market with worthless paper, bailout corrupt institutions that caused the depression - and strip the middle class of it's wealth in order to pay huge bonuses in the process - this is what good leadership is all about hey? Nice one Obama.

ACougar · #40 15th August 2009, 02:46 AM

More like print out money to keep the system afoat while keeping corrupt institutions that have been fleecing the public for decades from collapsing. In the process all wealth will be diminished, not just the wealth of the middle class. At this point good leadership is about getting the things done that will enable us to survive today and possibly recove tomorrow. Obama is a product of a broken system, however he might still manage to pull it off.

Originally Posted by whereisthetruth

Mmmm, now let's see... increase money supply through flooding the market with worthless paper, bailout corrupt institutions that caused the depression - and strip the middle class of it's wealth in order to pay huge bonuses in the process - this is what good leadership is all about hey? Nice one Obama.