NationStates Jolt Archive

Yay for somewhat alarmist thread titles!

http://money.cnn.com/2008/01/13/markets/bc.wallstreet.weekahead.ap/index.htm?postversion=2008011317
Wall Street to look for recession clues

Investors next week will be searching economic reports, bank earnings and consumer spending data to see how fast and furious a downturn will be.

NEW YORK (AP) -- This week's flood of readings on inflation, retail sales and earnings is just what a data-hungry Wall Street has been anxious for.

But it could be a case of the old saying, be careful what you ask for, because you might actually get it. Evidence that consumers and companies are cash-strapped could mean the economy is on a fast track toward recession - or already in the midst of one.

"I think we're going to look back on fourth-quarter earnings and instead of thinking the recession is coming, if there is one, it already started," said JPMorgan equities analyst Thomas J. Lee.

[...]

So, this is starting to look like crunchtime. If the whole housing market slump and credit collapse are strong enough to cause a recession, then it would have to do so very soon.

So what do you think about this? What sort of responses (http://www.economist.com/opinion/displaystory.cfm?story_id=10430273) would you like to see from the White House and the Fed? Inflation peaked quite heavily in November, so if numbers turn out higher than comfortable, would you be willing to risk more inflation and a change in future expectations (which would compromise the ability of the Fed to combat price rises in the future) to get another interest rate cut?

How do you think this will affect the US and the presidential election? And what about the rest of the world?

Meh, our economy goes up and down. One decade we have a Recession and the next Inflation, yea, it's like a wave in the ocean.

Sometimes I wonder if our economy would be more stable if we were still on the Gold Standard. Gold is doing VERY well right now.

Meh, our economy goes up and down. One decade we have a Recession and the next Inflation, yea, it's like a wave in the ocean.

Sometimes I wonder if our economy would be more stable if we were still on the Gold Standard. Gold is doing VERY well right now.

This isn't just a normal recession though. The US is on the brink of an economic catastrophe. Money is leaving the US, and foreign capital is now floating the economy. I don't know if you're aware, but the US draws in $4 billion every day just to avert economic meltdown.

honestly I'm between jobs at the moment so I had best take anything I can get right now

well I wouldn't say it will be that bad, just some inflation nothing the mighty pound can't handle (http://goldnews.bullionvault.com/files/Dgold1.png)

This isn't just a normal recession though. The US is on the brink of an economic catastrophe. Money is leaving the US, and foreign capital is now floating the economy. I don't know if you're aware, but the US draws in $4 billion every day just to avert economic meltdown.

no big deal, your like the lovable stoner son who needs money for pot

here have some more *writes cheque*

This isn't just a normal recession though. The US is on the brink of an economic catastrophe.
No it's not.

There is no credible evidence I have seen that the trade- or budget imbalance is unsustainable. The US economy is quite capable of growing quickly enough in the future to pay back any debts made at the moment.

That being said, a cut in consumer spending might actually be good for the US, because it'll reduce imports a bit and address the trade balance.

With our manufacturing sector in clear decline, there is nothing to sustain the current economy let alone allowing it to grow in the future.
Check which century this is.

No it's not.

There is no credible evidence I have seen that the trade- or budget imbalance is unsustainable. The US economy is quite capable of growing quickly enough in the future to pay back any debts made at the moment.

That being said, a cut in consumer spending might actually be good for the US, because it'll reduce imports a bit and address the trade balance.

If the US stopped paying all its expenditures today and kept the level of taxes the same, it would still take 4 years to repay debt. And if you watch the US economy, it happens to be outsourcing a good deal of its jobs right now. The economy will not grow quickly enough to repay its debts, unless Congress starts tariffing the shit out of imports. With our manufacturing sector in clear decline, there is nothing to sustain the current economy let alone allowing it to grow in the future.

The first step toward recovery is admitting you have a problem.


Unfortunately, most Americans don't even do THAT. Who wants to bet Wall Street won't find anything wrong?

Check which century this is.

I love how we're having a debate over two threads. If you're referring to a nation built on a service economy, those don't survive unless they have a physical economic base.

Who wants to bet Wall Street won't find anything wrong?
Actually, if there is something wrong and they don't find it, they lose billions of dollars. I think even if you're cynical about everything else, you can trust that people on Wall Street try to avoid that.

I love how we're having a debate over two threads.
They're two different debates. One is about the funding of a government program, the other is about the structure of the US economy.

If you're referring to a nation built on a service economy, those don't survive unless they have a physical economic base.
I'm referring to an economy that is based on having a huge and very wealthy population. That means money will continue to go there because it's a worthwhile investment. As you said, services are one good option, because most of them can't be made overseas and imported. But I'm not clear what you mean by a "physical economic base".

The point is that I haven't seen any evidence that actually confirms your doomsday theory. No one is forecasting an economic collapse in the US, long-term growth is expected to continue growing at entirely reasonable rates. As a percentage of GDP, neither the budget deficit nor the trade deficit are actually out of the ordinary (though the latter is on the large side). Australia for example has a higher current account deficit than the US, but no one here is getting their panties in a twist because in the late eighties and early nineties there was a long and hard debate in which economists won against politicians. Since then Australian politics has no longer regarded the current account as an important policy target, but rather as the response of consumers to their preferences and the comparison between domestic and foreign discount rates. The US would do well to do likewise.

I think that they are heading towards a recession, maybe not a huge one if they handle it properly and start preparing now, but a recession none-the-less. Although, they won't prepare for it so it may well get bad for them.

That CNN article is an example of how the financial press is a lagging indicator. Folks at my job have been "looking for recession clues" since at least the 2nd quarter, and that's not even our job!

A recession is good for the non-incumbent (remember Bush 41 railing at Greenspan in the closing months of 1992?) but since there's no incumbent that doesn't say much. You'd think it would favor the Democratic candidate, but any Republican candidate is going to position themselves as far away from Bush as possible unless Bush's approval ratings change drastically in the coming months. You'd think a recession would favor Edwards as an economic populist, but that doesn't seem to be the case so far.

I'd like to see the Fed at least hold the line on interest rates for now, since playing around with 0.25% bobbles won't do anything to help consumers. I think the most effective way to combat rising foreclosure levels is to give Community Development Banks a hand -- maybe allow them to borrow money at a lower rate? I think they already get that...shows you what I know about banking regulations. Anyway, I don't think the housing slump is going to lend itself (no pun intended) to a one-size-fits-all FHA-size answer.

And I'd like to see the White House shut the hell up about the economy. Telling people everything's OK, just keep shopping is frickin' insulting, and no incumbent is going to say anything else, so the best I can hope for is shutting the hell up.

I tend to be more confident that there is some degree of decoupling that will prevent a global recession. The US may slide in to one, but I don't think it will spread worldwide like it did in 2001. China and India have roughly doubled their GDP since then, and they have a stronger domestic market as well as more diversified trade partners, so they may be able to offset some of the negatives in the US enough to prevent global growth from being seriously slowed.

However, I can't say for sure what will happen because it's just too early to make such a decision; if China suffers a slowdown due to some deflation of equity markets or in the wake of the Olympics, it may be enough to cause a cascade in to global recession. All things equal, however, it will not be very severe, at least not compared to 2001 (the dot-com bubble erased something like 1/6 of US on-paper wealth, as opposed to the housing bubble, which was far smaller in its impact objectively, although due to proliferation of more abstract financial instruments may actually be more widespread).

Bernenke is a moron if the fed lowers the rates. Will only increase inflation and lead to more sub prime bullshit.

A prime example of a recession ending suddenly was that of the Great Depression in which war fueled an up surge in economic growth in the face of a terrible recession. So all we need now is a war against Iran and Pakistan and then the good old of U.S.A shall be fine again.

*Nods*

I tend to be more confident that there is some degree of decoupling that will prevent a global recession. The US may slide in to one, but I don't think it will spread worldwide like it did in 2001. China and India have roughly doubled their GDP since then, and they have a stronger domestic market as well as more diversified trade partners, so they may be able to offset some of the negatives in the US enough to prevent global growth from being seriously slowed.

However, I can't say for sure what will happen because it's just too early to make such a decision.

China, at least, has a good piece of its economy tied up in the US, what with them making all our stuff, not to count their basement full of US Treasury bonds. I agree that the BRIC domestic markets are a lot bigger than they were 7 years ago, but we still buy lots of their stuff overall.

China, at least, has a good piece of its economy tied up in the US, what with them making all our stuff, not to count their basement full of US Treasury bonds. I agree that the BRIC domestic markets are a lot bigger than they were 7 years ago, but we still buy lots of their stuff overall.

That's actually another part of what I'm wondering: how much of our trade with China is discretionary versus necessary?

Given the amount of imports from lower end retailers, I would think a chunk of Chinese trade would be pretty inflexible, if only because increased sales at lower-end retailers is a trend during a recession. However, this would be compensated by decreased trade with higher-end suppliers, which would primarily be the developed markets and Japan, so it wouldn't so much offset negative growth as shift the burden.

That's actually another part of what I'm wondering: how much of our trade with China is discretionary versus necessary?

Given the amount of imports from lower end retailers, I would think a chunk of Chinese trade would be pretty inflexible, if only because increased sales at lower-end retailers is a trend during a recession. However, this would be compensated by decreased trade with higher-end suppliers, which would primarily be the developed markets and Japan, so it wouldn't so much offset negative growth as shift the burden.

That's a good question -- I think more of our higher-end imports are coming from China than they were 7 years ago, too, so that changes the equation.

This isn't just a normal recession though. The US is on the brink of an economic catastrophe. Money is leaving the US, and foreign capital is now floating the economy. I don't know if you're aware, but the US draws in $4 billion every day just to avert economic meltdown.

Somebodies a scare monger. Oh Teh Noes wez all gon diez!!!! Provide some evidence or you are making that up.

Meh. I think the recession is already here. Part of that two tiered economy. In my company, our company founders say the economy is great. The party zealots say the economy is great(Bush is god and Clinton is the devil types) but the rest of us think its bad or going down.

Paulsen was giving comments about the stimulus proposal and he said we had to be careful to not damage the real economy which in reality is good.

So what is the real economy?

Meh, our economy goes up and down. One decade we have a Recession and the next Inflation, yea, it's like a wave in the ocean.

Exactly. Imagine if weathermen were like economists.

"Come October, we will see temperatures drop to BELOW FREEZING. It is entirely possible that the ground will be covered with a rain-like precipitation, known as "snow." If folks want to survive, I'd recommend investing in something called a "coat," which is like a T-shirt but longer and warmer."

That's actually another part of what I'm wondering: how much of our trade with China is discretionary versus necessary?
http://www.economist.com/finance/displaystory.cfm?story_id=10429271

http://www.economist.com/images/20080105/CFN913.gif

I think our problems revolve around savings, which in turn have to do with the devaluation of currency (after all, M2 has risen 59% in George W's presidency) and the weakening of the dollar's function as a store of value. Sooner or later, we will have to pay for all of our consumption by losing a great deal of future wealth.

Seems highly likely that the US will enter a recession this year, but I think it'll come out at the end of the year robust and growing again.
This time round, the strength and growth of Asian nations (not just China, also India) will alleviate international economic pressure from the US' drop. This will mean that a worldwide recession is unlikely (so a downturn and stockmarket correction is likely).


What worries me is that oil might hit $200 /barrel by the end of the year. There have been some futures bought at that price. That will definitely affect/screw the world economy.

The world already ended. You're just in denial.

OK, maybe not that bad, but the U.S. dollar has plummeted (note recent parity with Canadian dollar), precious metal prices are up, the stock market is wobbly at best, housing is tightening, there's rumor of eventual war with Iran, Iraq is still in turmoil (though hopefully will continue improvement), most of the presidential candidates from both parties are likely to break their oath of office in one way or another within 5 minutes of taking office if elected, and the usual conspiracies are afloat that we face martial law before the election cycle is complete.

If anything, we're in more trouble now than we were during the 'roaring twenties" before the Great Depression. Of course, there's no guarantee that it'll go the same way. Back in 1913 when the federal Reserve Act was signed, the idea was to prevent recessions by giving the feds the authority to control the economy. Didn't work so good in my grandparents time, but maybe they're smarter now. <dark humorless laughter>

For more consideration:
http://www.upi.com/NewsTrack/Business/2008/01/13/report_spending_down_across_the_board/1739/

Back in 1913 when the federal Reserve Act was signed, the idea was to prevent recessions by giving the feds the authority to control the economy. Didn't work so good in my grandparents time, but maybe they're smarter now. <dark humorless laughter>

Yea......we're screwed. I'm going to London.

Eh, the economy is cyclical. It goes up and down, it goes into recessions, and it comes out (often) stronger. Unless said recession ends up causing a depression, its nothing to worry about, just an excuse to buy stocks cheaply.

If anything, we're in more trouble now than we were during the 'roaring twenties" before the Great Depression.
Except that today we know a lot more about how the economy works, we've got a much better regulatory system and are probably less likely to react by passing big tariffs as law.

Eh, the economy is cyclical. It goes up and down, it goes into recessions, and it comes out (often) stronger. Unless said recession ends up causing a depression, its nothing to worry about, just an excuse to buy stocks cheaply.
It's a bit of a worry though for those people who will lose their jobs. Generally unemployment shoots up quickly but then only goes down very slowly. So if there's gonna be a recession, I think it's pretty big news. Even more so since this is an election year.

recessions are always comming or just left. but watering down the currency to bail out the corporate mafia IS just plain dumb. and that IS what has been going on in the u.s. (who'se treasury department was long ago subcontracted to something called the federal reserve, which is actually a banking cartelle, but one made, by a totally insane fiscal legal system, in all but name, everything to do with money other then the i.r.s. itself)

but aside from the fed, at some point in time, who knows when, there is a real possibility of universally international economic depression! brought on possibly by corporacratic unsound fiscal policy bringing the whole friccasied world down with it.

alarmist? well being all that dramatic about it could always be called that. and MAYBE it isn't ENTIRELY inevitable. but it isn't all that improbable either.

when? who knowns? but it COULD happen. it could even happen soon.

if and when it does, people who don't seem to understand this now, will wake up and realise beans are not made out of little green pieces of paper.

which might raise the average intelligence level of those who survive.

but all that remains to be seen too.

unsustainable means unsustainable though. however and whenever the unsustainable ceases to be sustained, unsustainable does mean that inevitably somehow, somewhen, it will.

=^^=
.../\...

How does the old joke go? 'Economists have predicted nine out of the last five recessions'. Obviously we are going to have an economic slowdown in 2008, but it will affect every country. But a lot of economic forecasts still suggest growth in developed countries of between 1 and 2 percent. So we've not reached recessions stage yet and if it does come to a recession we won't know for sure until we're in it anyway.

alarmist?
Not so much as that it doesn't make any sense.

There are constant naysayers who predict the imminent end of the world.

There is no major cause for alarm - the economy isnt booming, but it isnt about to come to a disastrous crash either. It is doing just fine with minor wobbles, which is normal after foolishness like the CDO debacle.

By the way, to everyone crying out that manufacturing in the US is dead, please note that manufacturing output has been increasing. Manufacturing productivity has been growing at a rapid rate, which is why the number of jobs in manufacturing has been declining - jobs are not being cut because output has been falling. Heavy industry has been in a 'decline' as a percentage of the economy because the rest of the economy has been growing at such a rapid rate that it has outpaced the still growing manufacturing sectors. Manufacturing is not dead or dying - it is still healthy and robust.

Yay for somewhat alarmist thread titles!

http://money.cnn.com/2008/01/13/markets/bc.wallstreet.weekahead.ap/index.htm?postversion=2008011317


So, this is starting to look like crunchtime. If the whole housing market slump and credit collapse are strong enough to cause a recession, then it would have to do so very soon.

So what do you think about this? What sort of responses (http://www.economist.com/opinion/displaystory.cfm?story_id=10430273) would you like to see from the White House and the Fed? Inflation peaked quite heavily in November, so if numbers turn out higher than comfortable, would you be willing to risk more inflation and a change in future expectations (which would compromise the ability of the Fed to combat price rises in the future) to get another interest rate cut?

How do you think this will affect the US and the presidential election? And what about the rest of the world?

I would like to see an easing of enforcement of immigration laws to promote wealthy folks to more easily move to the USA. This will help to bring in new foreign capital.

As long as it comes when Gordon Brown is in power, I'll be laughing.

I haven't the first idea about economics in truth, but I imagine a recession won't be good for a poor student?:p

Along with all of the other indicators inflation is now at the highest level it has been in 17 years. The economic picture does not look good for the United States. I do believe that we will be back into the swing of things in 2009 around the 2nd quarter. Once the markets have adjusted to the current problems will flatten and the economy will begin a good cycle of growth. When Citibank needs to get billions of dollars in capital from overseas we are in serious trouble. A lot of this has to do with the Middle East and our collusion with the Saudi Royal Family. We need restraint in spending and we also need to create reasons for multinationals to invest in America. I know how people rail against corporations, but we need them for tax revenue and economic stimuli. This is not to say that there needs to be regulation to make sure we don't have Enron, WorldCom, and Global Crossing again. It means that we mus allow them to grow so the economy can grow as well.