US Has Been In Recession Since December 2007

The National Bureau of Economic Research said Monday that the US has been in a recession since December 2007. The NBER is a private, nonprofit research organization of academic economists who determine business cycles. The stock market took a dip on the news that reached double-digit percentages for some tech stocks.

Comments

Recession

[smittyoneeach]

Recession pshaw!
The NumBER's a flaw.
A portfolio of duds
Requires the suds:
Burma Shave

Re:Recession

[Anonymous Coward]

If people spent money they had
The economy would not be so bad.
Our god's Mr. Gekko,
The White House a wreck. Oh,
Responsibility! You're merely a fad!

The Magic 8 ball told me that a long time ago

[klashn]

It's about time they came up with that revelation. What matters now is that we get out of it by shopping our asses off this Christmas!

Re:The Magic 8 ball told me that a long time ago

[erroneus]

"They" have known the economy was in trouble for at LEAST a year and likely longer. But they knew one thing for sure -- if they announced or reported it as such, the economy's floor would have dropped out. So instead, the news and other outlets have been dropping hints and skirting the big picture by talking about failing elements of the economy hoping everyone will start to form their own conclusions. And every time the word recession was asked far beyond a year ago, the only answer was "not yet" and they kept hoping things would get better.

The Bush economic stimulus package worked to some degree. Many people horded it -- stuck it in the bank. Other people paid bills with it. But the over-all result was measurably positive... and the government did not commit trillions to making that effect. If that notorious $700bn were committed in the same way, we would see a HUGE rebound in the economy... instead, the money is given to banks to encourage them to do things they are unwilling to do... and what's worse, the government isn't getting the money back!

Re:The Magic 8 ball told me that a long time ago

[Roland Piquepaille]

This year, like the previous year, and the year before that, I will definitely NOT shop my ass off for Christmas, nor will I stuff my face silly on Christmas, only to feel bloated the next day and have to diet so I can stomach New Year's eve binge (which, in case you didn't guess, I never do either).

Christmas, like Halloween, father/mother/grandma/grandpa days, are commercial inventions, fake joy and fake happiness destined to make you shell out your hard-earned money and, since the great Bank Robbery^H^H^H^Hbailout plan, supposedly help the economy recover.

Well, I paid my loans, I don't live on credit, I spend my money cautiously, even when there's no "crisis", so I fail to see why I must buy Christmas junk to support those who don't.

Re:The Magic 8 ball told me that a long time ago

[cthulu_mt]

Well, I paid my loans, I don't live on credit, I spend my money cautiously, even when there's no "crisis"

You, sir, are a sucker.

Re:The Magic 8 ball told me that a long time ago

[Geoffrey.landis]

"They" have known the economy was in trouble for at LEAST a year and likely longer. But they knew one thing for sure -- if they announced or reported it as such, the economy's floor would have dropped out. So instead, the news and other outlets have been dropping hints and skirting the big picture by talking about failing elements of the economy hoping everyone will start to form their own conclusions. And every time the word recession was asked far beyond a year ago, the only answer was "not yet" and they kept hoping things would get better.

The Bush economic stimulus package worked to some degree. ...

Huh? The April hand-out? As far as I've heard, it had almost no effect at all.

(it was too small and too untargeted to have any significant effect on the economy-- it essentially was a very small tax cut, primarily at the lower income levels. Might have prevented one or two bankrupcies, if it happened to hit somebody right on the razor's edge, but wasn't enough to save anybody's house.)

Re:The Magic 8 ball told me that a long time ago

[geminidomino]

Yes, and we should be so hurt that an industry that benefits from peoples' being careless enough to live under mountains of debt should not like us.

"Deadbeats" indeed.

Re:The Magic 8 ball told me that a long time ago

[D Ninja]

Christmas, like Halloween, father/mother/grandma/grandpa days, are commercial inventions, fake joy and fake happiness destined to make you shell out your hard-earned money

Well, I agree with you that all those holidays have been made commercial (the recent death due to Black Friday shows only how much), there *is* actually a true meaning behind Christmas. Whether you celebrate it (or even believe in it) is up to you. But, some people (myself included) appreciate the holiday for that reason and try not to let the commercialism of the season get them down.

Re:The Magic 8 ball told me that a long time ago

[Eli Gottlieb]

Yeah, there is a real meaning behind "Christmas": the entire population of the temperate Northern Hemisphere deluding themselves into thinking that cold and lack of daylight are somehow jolly!

In case nobody's told you, your savior was born in April or May.

Re:The Magic 8 ball told me that a long time ago

[Anonymous Coward]

Even if GP wasn't referring to it, some of us like to celebrate the secular meaning of Christmas: peace on Earth and goodwill toward men. While I think we should practice these ideals EVERY day, it's nice to have a holiday that celebrates and reminds people of these things explicitly.

You don't have to get behind that; nobody's forcing you. But you shouldn't try to disparage those of us that DO find happiness through it. It's just not the Christmas spirit =)

Re:The Magic 8 ball told me that a long time ago

[cayenne8]

"You do realize that holidays like Thanksgiving, Christmas and Halloween have long histories **before** they were commercialized, right?"

Don't forget Mardi Gras that comes shortly after those....

Oh wait, you mean Mardi Gras isn't a NATIONAL holiday yet?!?!?

Goodness...if I lived in another state, I think I'd get to working on that one....

:-)

Re:The Magic 8 ball told me that a long time ago

[blincoln]

Of course, the real meaning has never been "Christmas was the Christ's birthday". Christmas is a celebration of His birth, but was never intended to celebrate the anniversary of His birth.

"God rest ye merry gentlemen, let nothing you dismay. Remember Christ our Savior was born on Christmas day. To save us all from Satan's power when we were gone astray."

You were saying?

Re:The Magic 8 ball told me that a long time ago

[Ihmhi]

According to the CIA World Factbook entry on the United States, the total population of people 15+ in the states is 242,677,893. Let's assume for the sake of discussion that each and every one of these people had a job and was eligible for an even cut of the $700bn dollars. That would work out to only $2,884.48, give or take a few cents for postmarking the checks. What's that, one or two mortgage payments? Maybe 2-3 months rent?

Re:The Magic 8 ball told me that a long time ago

[Golias]

Yeah, there is a real meaning behind "Christmas": the entire population of the temperate Northern Hemisphere deluding themselves into thinking that cold and lack of daylight are somehow jolly!

In case nobody's told you, your savior was born in April or May.

Christmas is the day of the Mass of Christ, not Jesus's birthday. The Catholic Church chose the day to coincide with an existing holy period in pagan Europe, since people were already in the habit of celebrating that week. Nobody knows (or particularly cares) what the exact date was. Christian scriptures only hint at the year by recording stuff like who was king at the time.

Re:The Magic 8 ball told me that a long time ago

[Nursie]

Why is this a troll post?
Mod parent insightful.

I'm also a sucker. I similarly stayed out of debt, didn't take part in the dangerously overinflated housing market, used credit cards responsibly and generally lived within my means. Not that it was painful, I've got reasonable means as a software engineer. But I didn't join in the great-big-debt-party with everyone else.

Why am I a sucker? Because the government will now tax me to prop up people that did get too far in, that did take that dumbass high multiple on a house, that did get into debt. We can't have the people of the country actually paying for their actions, no. Rest assured, I really am a sucker for thinking that keeping my own finances in order was an advantage.

Re:The Magic 8 ball told me that a long time ago

[Sj0]

Per person it's 2884.48. For a family of 4, that works out to $11.5k, almost half the poverty line in the USA. For a lot of families, that sort of money would be enough to get high interest debts out of the way, increasing available income, and digging a lot of people out of the hole they've dug themselves into.

Re:The Magic 8 ball told me that a long time ago

[Sj0]

When it's so easy to game the numbers, why not redefine the numbers?

It's like looking at the people with $500k sub-prime mortgages and concluding they must be rich.

They're not rich at all. The sort of house you live in was once a good indicator of wealth, but then the metrics changed and you could get a massive mortgage by lying about your income, and suddenly the indicator become meaningless.

Similarly, the US government in the past 8 years has spent at a greater (inflation adjusted) rate than any time since WWII. That's a significant portion of the economy dominated by the federal Government borrowing money. It may not be the intended effect, but this has the effect of "gaming" the system in that increases in federal spending and borrowing offset a private-sector recession. Since this isn't Soviet Russia, the public sector can't simply offset the private sector like that.

Re:The Magic 8 ball told me that a long time ago

[wpiman]

I agree with your math, but it is the $700 billion figure is not accurate. Try $8.3 trillion thus far. That would move your figure to around $30,000 a head.

A few thoughts

[daveschroeder]

A long-standing rule of thumb for "recession" is that it is defined as contraction in the GDP for at least two consecutive quarters (six months).

More info.

By that long-accepted definition of recession, the US is not even yet in a recession. The US GDP decreased for the first time in recent history only in the third (most recent) quarter, by 0.3%. In the second quarter -- earlier this year -- real GDP increased 2.8%.

But how long has the media been ceaselessly hammering it into our heads that we're in a recession, tolling the bells of doom and gloom? How many times have we heard the phrase, "In these tough economic times" inserted into nearly everything we see or hear? How long has the drumbeat of the "recession" been played, when we had nothing but positive growth reports, even in the midst of the sub-prime crisis?

Worse still, many people actually believe that whatever recession we'll end up having is exclusively the fault of only the current President, and can't look back to anything before the year 2000 for any blame whatsoever. The egregious irresponsibility of the sub-prime lending has a long and sordid history.

It is this kind of partisan willful ignorance on the part of many that has enabled the political agenda among some to drive the notion that the US is in a severe recession caused by the ineptness and reckless irresponsibility of the Bush administration, when the US had nothing but growth in the GDP until only a month ago. If you asked most people how long they thought the economy had been shrinking for negative, they'd probably say things like, "A year? Two years?"

Wrong.

Last quarter. And we just found out about it.

So we've heard talk, day after day, night after night, an incessant drilling into our heads that we're in a deep and severe recession -- one that may even now rival the Great Depression! -- creating panic and fear, causing people to pull investments and hold onto their wallets, change purchasing plans, in turn creating bleak forecasts for manufacturers and other business, which causes job loss, and then -- voilà!:

Is it any surprise we're going to have a recession on our hands?

Capitalistic systems only work when the participants have faith in the system -- when that faith collapses, for whatever reason, you get a recession. And that's a normal and accepted part of the cycle.

Re:A few thoughts

[Sj0]

The inflation adjusted debt accrual rate for the US government in the past 8 years has been about 380 billion dollars per year. This is equal to 3.4% of the total size of the economy.

Ignoring inflationary measures by the US government, the GDP has shrunk, not grown, for quite some time.

Re:A few thoughts

[eldavojohn]

It is this kind of partisan willful ignorance on the part of many that has enabled the political agenda among some to drive the notion that the US is in a severe recession caused by the ineptness and reckless irresponsibility of the Bush administration, when the US had nothing but growth in the GDP until only a month ago. If you asked most people how long they thought the economy had been shrinking for negative, they'd probably say things like, "A year? Two years?"

Why do you jump to the defense of Bush? Where did anyone attack Bush for this? Is it in the article? Are you responding to ... to what exactly? Yeah, when shit hits the fan, people tend to blame those in charge ... but where is he being blamed?

From the article:

The Bush administration won approval from Congress on Oct. 3 for a $700 billion rescue package for the financial system. Bush said in an interview with ABC's "World News" to be aired Monday that he would support additional intervention if necessary to end the recession.

Note: you are one of the last hard core republicans with your eyes shut and your fingers in your ears screaming "I CAN'T HEAR YOU" as my relatives that don't have high paying jobs are having to pawn stuff and as my friend's fathers become unemployed.

Capitalistic systems only work when the participants have faith in the system -- when that faith collapses, for whatever reason, you get a recession. And that's a normal and accepted part of the cycle.

You must think you're a lot smarter than the economists like Alan Greenspan because they've been going on and on this whole time thinking we could forever avoid another shrinking of the economy. And the people who all said we needed that package to reverse/save us from this recession? They must be idiots if it's only "a normal and accepted part of the cycle." Who exactly has accepted this, by the way? I would like to know so I can better manage my 401k in the future (half my retirement funds are now gone).

Re:A few thoughts

[rodney dill]

The 'Rule of Thumb' definition aside, the NBER decides for itself when a recession occurs or not. James Joyner at OTB has a pretty good post on it. At best the GDP increase provides mixed signals, as the economy isn't doing great. I do agree that all the gloom and doom may be premature. (and could become self fulfilling.)

Re:A few thoughts

[Majik Sheff]

As long as there is a Republican president in the white house, the press will do everything in their power to convince the populace that we are all doomed.

As soon as Obama takes office, prepare for the heralds to sing: The recession is over! We are winning in Iraq! Global warming has reversed!

As far as the "recession" goes, if history is any indicator we only have a few months of it left anyway. All we need now is a few executives being charged with various crimes to appease the masses and life will go on.

Re:A few thoughts

[rodney dill]

As soon as Obama takes office, prepare for the heralds to sing: The recession is over! We are winning in Iraq! Global warming has reversed!

Obam-ho-tep.... Obam-ho-tep.... Obam-ho-tep.... Obam-ho-tep.... Obam-ho-tep....

Re:A few thoughts

[daveschroeder]

Recessions are a normal part of the capitalist business cycle. Recessions wash out excesses in the system by shaking out inefficient companies, thus clearing the way for new competitors, and they work to keep supply and demand in sync over the long term.

[...] recessions are considered a normal part of a capitalist economy [...]

Etc.

As for your assumptions about Bush:

1. I didn't vote for Bush.

2. I voted for Obama.

So it's kind of funny you just called me "one of the last hard core republicans" when I'm anything but. What I don't like is hypocrisy and the one-sidedness of always only blaming one political party or one President -- whether it's Clinton and the Democrats or Bush and the Republicans -- for whatever ill is at hand. For the current economic situation, we had unprecedented political opportunism: it was politically expedient and beneficial for some liberals to push the notion that we're in really bad shape, even rolling out the Great Depression talk, and that Bush (and all the other things you hate about Bush, like the war!) is to blame for it.

There are so many contributing factors that it would be ridiculous to assert that economic decisions made in the current administration in the last 8 years have nothing to do with it. But at the same time, it's equally ridiculous to put blinders on to the incredible irresponsibility and shortsightedness of the decisions with regard to sub-prime lending in the name of getting people into homes. We never fully paid the piper for the internet bubble collapsing, and a lot of that, on a large scale, was parlayed into a booming housing market (and artificially created, so some extent, because of changes encouraged in lending practices).

Re:A few thoughts

[1lus10n]

(half my retirement funds are now gone).

Like most things in your post thats wrong. Stop believing in the Obama campaign as the source of all your financial info. The correct statements would be pick one:

My retirement fund is now worth half what it was

This recession has actually caused my retirement fund to shrink

Or my personal fave:
What the hell ! You mean we can't buy big houses, SUV's and rack up credit debt endlessly ?!?! What do you mean we have to 'compete' for jobs ? Whats this crap ?? Dont choo kno I'm an American !!!

Its time to sort the wheat from the chaff. Man the fuck up. (and spread that to your friends, and their parents too - the great depression was FAR FAR FAR worse than this and they were not whining as much as people now either.)

Re:A few thoughts

[falcon5768]

Actually if we are going by great depressions comparisons, if this truly IS another one, then we have MUCH worse coming down the bend.

The great depressions didn't just become "great" overnight. It took YEARS and YEARS and 2 presidents before it turned around.

Re:A few thoughts

[daveschroeder]

Why, then, did President Bush sign H.R. 5140, the Economic Stimulus Act of 2008 on February 13?

Because there are lot of other indicators that you might be heading for a recession -- like decreasing growth, for example.

But the definition of a recession is two quarters of negative growth, which we haven't had yet. By another definition, we haven't even had a declaration of being in a recession by one of the bodies that makes such declarations until yesterday.

So then why have we heard constant talk about how the US is in a recession for over a year now?

Answer: political opportunism, plain and simple. If you can make people believe we're in a recession and that the party of the current president caused it, in the midst of a presidential campaign, that bodes very well for the opposing party.

No matter your politics, you should consider that incredibly irresponsible. Aside from very real economic issues, we've also had nothing but recession...recession...RECESSION -- with the implication being that it's Bush's fault, and sometimes that being explicitly stated, depending on the pundit at hand -- hammered into our collective heads for nearly the entire campaign cycle.

When McCain said, "The fundamentals of our economy are strong," (emphasis mine) he was -- and still is -- 100% correct.

Unfortunately, it was better for some liberals to push the idea of a recession, which will now end up becoming a self-fulfilling prophesy. How long do you have to hear things are terrible before you believe they are, and start making changes in your own life? And then start feeling the effects of millions of other people making those changes, and people losing jobs, and businesses closing, and this vicious cycle causing a downward spiral?

Disclaimer:

1. I didn't vote for Bush.

2. I voted for Obama.

So assuming I'm a die-hard Republican because I'm saying something you likely disagree with isn't going to work.

Re:A few thoughts

[qazsedcft]

A long-standing rule of thumb for "recession" is that it is defined as contraction in the GDP for at least two consecutive quarters (six months).

Yes, but when measuring this economists always take the so called "real GDP". In other words, GDP adjusted for inflation, using the official CPI figure. What they don't tell you is that the CPI is completely disconnected from reality - a figure manipulated by government economists so that inflation-adjusted payments and benefits can be as low as possible. CPI has absolutely nothing to do with real inflation and "real GDP" has absolutely nothing to do with real economic growth.

Re:A few thoughts

[morgan_greywolf]

It is this kind of partisan willful ignorance on the part of many that has enabled the political agenda among some to drive the notion that the US is in a severe recession caused by the ineptness and reckless irresponsibility of the Bush administration, when the US had nothing but growth in the GDP until only a month ago. If you asked most people how long they thought the economy had been shrinking for negative, they'd probably say things like, "A year? Two years?"

Megadittos.

Here's the thing. What you just said isn't true. One column I read regularly is that of Robert J. Samuelson. He's been writing about economic issues since 1977 and his column is carried several major newspapers such as the Washington Post, Newsweek, the L.A. Times and the Boston Globe. Hardly a non-mainstream guy. Go ahead, read what Samuelson has to say about the recession and its causes. Hell, read this article about the banking collapse. Many of the contributing factors were already in place well before W took office.

Now, I'm no ardent Bush supporter, and I'm definitely not a conservative in the mainstream sense of the word. But I have to agree with Samuelson because if you do the research yourself, you'll find his logic is sound.

This is what the mainstream media has touted, not that it's all Bush's fault. To sit there and play victim is exactly what Republicans and conservatives tend to do when they lose elections. It's predictable.

Reality is something else entirely.

Re:A few thoughts

[daveschroeder]

Gas prices didn't cause the sub-prime crisis.

Giving risky loans to people less likely to be able to repay them is what caused the crisis.

But wow, congratulations on even more twisted logic that I could have imagined...

Re:A few thoughts

[johnsonav]

You haven't actually lost anything until you decide to sell at the lower value. The market will come back, it always does.

That's great, unless I'm 65 and expected to live on the money I get from selling my house, moving to an apartment, and liquidating my investments. The stock market, had I got in 10 years ago and invested in a safe S&P 500 index fund, has done absolutely nothing. Zero return in ten years. Ten years is pretty close to "long term" in my book.

"day traders" are responsible for all the major flux in the markets, and at all times. they should be put to the wall

Day traders are responsible for the unprecedented and unequaled liquidity in the US stock markets. They are the reason you can *always* sell or buy a stock. AIG and other bailout recipients have problems because they held onto assets, like CDS, that now are completely illiquid. They can't sell at any price. What they need is a CDS market filled with day traders who are willing to speculate on those assets and are willing to buy them at *some* price. Without speculating day traders, there is no market for you "long term" investors.

Re:A few thoughts

[mbone]

I hate to say it, but you are living in cloud-coo-coo land. Of course we are in a recession, and have been for some time. In my business, I deal with corporations, both large and small. All are hurting, all are cutting spending, and this is a major topic of conversation at literally every meeting I go to. To think that this is driven by the media is to be deluded.

The "Mandate of Heaven effect," by which the party in power gets blamed for a bad economy, and praised for good results, regardless of what they had to do with it, is another matter. I agree with you in principle, but it seems clear to me that the current administration had plenty to do with what's going on in practice.

Re:A few thoughts

[Eunuchswear]

Worse still, many people actually believe that whatever recession we'll end up having is exclusively the fault of only the current President, and can't look back to anything before the year 2000 for any blame whatsoever. The egregious irresponsibility of the sub-prime lending has a long and sordid history.

It doesn't matter how many times you repeat this stupid lie, it's still a lie. (A reasonable summary of Cards bullshit: http://adastrum.kansascity.com/?q=node/408).

Re:A few thoughts

[Sj0]

Nice anecdote. I'm past suprise in finding a liberal offering up information intended to generate an emotional reaction rather than inform. Jobs have been lost in every year and under all economic circumstances.

Yeah, CURSE those GODLESS LIBERALS.

They're always looking for an EMOTIONAL reaction, because they want to MOVE TO SOCIALISM. They want to OUTLAW religion. They want to make abortions MANDATORY.

Worst of all, these liberals want to hand Osama bin Laden the keys to the castle so he can attack America again, because the "Blame America First" crowd gets off on that sort of thing.

(I'm sorry, I'm revelling in the irony. It's politics, and a lefty attacking a righty over appeals to emotion is just as ignorant as a righty attacking a lefty)

Re:A few thoughts

[smoker2]

A pyramid scheme only works when the people involved have faith in the system. Also, when a pyramid scheme collapses it is only the ones at the top who get to make for the hills with all the cash. Perpetuating a system that is designed specifically to move money to the top then allows them to fuck off with it leaving everybody else in the shit is not acceptable in a supposedly democratic state. Boom and Bust benefits only those at the top. Occasionally a few others might catch the wave and get out before it breaks but they really are in the minority.

I have great difficulty taking seriously, any system that regards continuous growth as a given state of affairs. Nothing is infinite, so that growth has to come from some other part of the budget. As we have recently seen, what happens is growth is fuelled by debt, which ultimately collapses, resetting the "growth" clock which then allows future "growth". Increasing the money supply is not growth if it is borrowed from somewhere else. Especially if it is borrowed from me, then pissed up the wall leaving me worse off.

In short, capitalistic systems going through boom and bust are only normal and accepted by those who have a vested interest in allowing them to collapse. Real growth requires that you hold on to what you've got and build, not place your bets, follow the lady.
Or do you deny the markets are a gamble ?

When the bank puts my mortgage up because they're short of money, how is that my fault ? Do we allow the addicted gambler to forcibly take funds from people just to cover his debts ? That is one abusive relationship.

Re:A few thoughts

[yakmans_dad]

Question Recession: How is that defined? Answer In general usage, the word recession connotes a marked slippage in economic activity. While gross domestic product (GDP) is the broadest measure of economic activity, the often-cited identification of a recession with two consecutive quarters of negative GDP growth is not an official designation. The designation of a recession is the province of a committee of experts at the National Bureau of Economic Research (NBER), a private non-profit research organization that focuses on understanding the U.S. economy. The NBER recession is a monthly concept that takes account of a number of monthly indicatorsâ"such as employment, personal income, and industrial productionâ"as well as quarterly GDP growth. Therefore, while negative GDP growth and recessions closely track each other, the consideration by the NBER of the monthly indicators, especially employment, means that the identification of a recession with two consecutive quarters of negative GDP growth does not always hold. For information on recession, or business-cycle, dating, see: http://www.nber.org/cycles/jan08bcdc_memo.html.

Re:A few thoughts

[timeOday]

And beyond that, to mean anything at all you must use the per capita inflation-adjusted GDP, which takes almost another 1% off the GDP growth rate.

Re:A few thoughts

[sdpuppy]

Actually if we are going by great depressions comparisons, if this truly IS another one, then we have MUCH worse coming down the bend.

The great depressions didn't just become "great" overnight. It took YEARS and YEARS and 2 presidents before it turned around.

What if we're in a "lousy" depression?

(couldn't resist :-))

Re:A few thoughts

[sdpuppy]

That's great, unless I'm 65 and expected to live on the money I get from selling my house, moving to an apartment, and liquidating my investments. The stock market, had I got in 10 years ago and invested in a safe S&P 500 index fund, has done absolutely nothing. Zero return in ten years. Ten years is pretty close to "long term" in my book.

Which is why all the retirement lit I've seen strongly recommends redistributing assets as you get closer to retirement - the closer you are, the more your should be in "cash". Generally you should have 5 year "buffer". There are even funds that do that automatically in 401K's. So actually if you're 55, you don't have 10 more years in the market, its more like 5. Except now with the market tipsy turvy, not a good idea to sell low, which is why you have this 5 year "buffer". Of course if our problems continue after 5 years...and will things even recover to what was before after that time... Well I agree, it sucks.

Should'a sold a couple years ago so I wouldn't have to keep going up hill both ways.

Now get off my lawn!!!!

Re:A few thoughts

[Sj0]

I personally don't like the idea of metrics you can substantially alter by simply borrowing a few hundred billion dollars from China.

There are some people who think you can replace economic growth in the private sector with economic growth in the public sector and it's the same thing. That may be true in Soviet Russia, but in the free world, pork financed with debt is an inflationary measure that doesn't increase the actual size of the economy.

My personal metrics don't really change. In my personal finances I don't pretend debt = income, I'm not about to let the federal government pretend the same.

Re:A few thoughts

[PK Tech Guy]

We've had negative growth in 2 of the last 4 quarters. http://www.bea.gov/briefrm/gdp.htm From TFA: "The GDP contracted by 0.2 percent at an annual rate in the fourth quarter of 2007, but that that drop was followed growth in the first two quarters of this year, partially boosted by the distribution of millions of economic stimulus payments. However, employment, one of the measurements tracked by the NBER, has been falling since January."

Re:A few thoughts

[nschubach]

I hate to point out the obvious (at least to me):

The stock market ... safe S&P 500 index fund

There's no such thing as safe when you're dealing with the market. You may beat the trend by diversifying, but it's far from "safe." If you wanted to be safe, you'd be purchasing real estate and other tangible assets as well. Money can vanish overnight. Most land will still be there tomorrow, in ten years, and even 100 years. If you do it wisely, you could even retire by owning farmland, selling off parcels of land each year, or even renting if you want to go that route. Hire a farmer to plant and harvest it and you'll get a nice check each year. Pay off your taxes and you still have a very good quantity of money left over. My parents have been doing this for years. They take the money they get from the farms and turn it over on more land.

Re:A few thoughts

[Sj0]

Just that the GDP growth was entirely funded by federal debt. We're in a time of nearly unprecedented (inflation adjusted)debt growth. Nixon managed to shrink the inflation adjusted size of the debt. Ford let it go nuts. Carter managed to shrink it. Reagan let it explode. Bush let it explode. Clinton tried to reduce the hemmoraging, but George W. Bush and the two congresses have spent more than any president since World War II.

Real GDP growth ceases to be a meaningful number when such a large part of it is just the congress throwing money they borrowed from China around.

Re:A few thoughts

[Reality Master 101]

I pity people who think that the government is responsible for managing the overall economy. That's called socialism. It's supposed to be a -free- market.

No. Socialism is the government *running* certain industries (and no, "high taxes" are not socialism, despite what the moron wing of my Republican party believes).

The government is responsible for managing the *overall* economy through laws and regulation and monetary policy. It is not responsible for picking winners and losers -- *that's* socialism.

And a totally free market without any government intervention would be completely stupid. Even rabid Libertarians (at least the ones who have a clue what an economy actually is) don't want that. That means no government-enforced contracts. That means no control of monopolies. That means no control of corporate corruption and collusion. A completely free market basically becomes an end-game of Monopoly -- control all the money and resources, "Standard Oil"-style. A functioning free market depends on their being a market, where new players can enter and old players can leave on a regular basis.

Re:A few thoughts

[actionbastard]

"2. I voted for Obama."

My condolences.

Re:A few thoughts

[An dochasac]

"A long-standing rule of thumb for "recession" is that it is defined as contraction in the GDP for at least two consecutive quarters (six months).

That it is, a "rule of thumb", the offical definition of a recession is when the National Bureau of Economic Research (NBER) business cycle dating committee agrees that there is (was) a recession, and they have now agreed to that. This is the definition which also showed that the Bush1.0 Gulf War 1.0 recession ended more than a year before newly elected Bill Clinton was elected and took credit for the recovery. And the "y2k" recession began before Bush2.0 was elected to take the blame. (That being said, his and the fed's management of that recession and the 9/11 "recession" has certainly created more long-term damage to the economy than either Clinton or the two Bush's could ever do on their own.) NBER's claim that we've been in a recession is akin to your doctor pointing out that you have a hangnail after you've been beheaded. For a look at some real scary statistics, at the St. Louis Fed's Net Free or Borrowed Reserves of Depository Institutions numbers going back to 1950 or Excess Reserve of Depository Institutions going back to 1925. or The Adjusted Monetary Base going back to 1910. Or any of several other monetary statistics that are several black swan SD's away from their multigenerational mean.

Bush's Treasury chairman Paulson and Bernanke have engineered a truly astounding experiment in monetary policy topped only by Robert Mugabe's 10^21% hyperinflationary monetary policies. The economy has enough inertia that we will see 1-5 years of deflation or disinflation as the "imagined" debt money supply virtually disappears, leaving too many goods chasing too few dollars. But the medium/long term effect is inflation, because only currency printing presses and inflation can reduce a debt brought on by a mad government and personal debt fueled spending spree that powered the economy for at least a decade.

Re:A few thoughts

[nschubach]

They invested in real estate backed by a banker with a virtually unlimited wallet and no moral standing. The bank was handing out credit and money to people that couldn't afford it. When investing in land (especially if you plan on living on it) you better go over the costs yourself instead of believing the bank selling you the mortgage that is "cheaper than renting!" If you make an educated investment in real estate that you know you can afford, it can be a very lucrative ordeal. Your S&P fund is putting money in someone else hands. You have no idea if they will spend YOUR money on carrots or cats. You only have their performance and faith in their systems. When you lose their faith due to mal-investment many others will too, sell off, and the value of that investment drops like a rock.

Real estate can be VERY safe if you do the research and run the figures. In a way, real estate is like the market. If you go into it thinking you will make millions easily and quickly you are looking to be ripped off and disappointed. However, if you go into it right, it's an asset that can't vanish because of loss of faith. It's still there, waiting to be used or sold.

Re:A few thoughts

[bendodge]

How about the New York Times? Is that good enough?

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Note the date on the article: September 30, 1999

Re:A few thoughts

[AK Marc]

Giving risky loans to people less likely to be able to repay them is what caused the crisis.

Lies spread by those wanting to continually blame the poor and minorities. I see the shit on here about how it's blacks that caused it because of Clinton's push for loans to minorities. Yet the simple fact is that risky loans to people less likely to repay them has been going on for centuries. It wasn't a problem. It isn't a problem. It has never been a problem. Those with higher risk, pay higher interest, covering others in the "pool." There are only two reasons why this would fail. Either the rich white bankers failed to properly assess risk (and thus failed in their primary job) or they lied. There can be no other cause. For if they had properly assessed and recorded risk, there would be no issue. To blame it on the people that got the loans is stupid. Yeah, they are the ones not repaying, but that's been the case for centuries as well (ok, millenia, but who's counting). This particular crisis seems to be caused by bankers not assessing the crap economy causing a spike in defaults by all and large amounts of lies told in repackaging loans to sell to others. Were there other factors? Sure, but it comes down to one thing, the people that are supposed to gauge risk failed at it. And now people are going back and blaming the poor to divert blame from what caused the real crisis, the bankers themselves.

Re:A few thoughts

[CowTipperGore]

I'll grant that we can argue the semantics of whether or not the US is officially in a recession. However, I will take issue with your agreement that "the fundamentals of our economy are strong".

First, lack of a formally declared recession does not mean that the economy is strong or fundamentally sound. In reading your numerous posts in this discussion, I see you arguing the definition of a recession and how you believe the media and politicians have used FUD, but I find nothing to actually support a sound economy. In fact, even a layman's understanding of economics and the US economy would show real problems with the base upon which the US has lived for decades.

Real domestic production - e.g. manufacturing - has declined significantly, yet the economy continued to grow on the back of massive debt at all levels (individual consumers, businesses, and government) and the real estate market. While the real estate market certainly generated some ancillary real growth via construction, most of the so-called growth was simply magic money created by the financial industry. Now we see a lot of that supposed equity evaporating, which has further exacerbated the massive levels of debt undertaken.

Given that the US economy has in just the last three or four decades shifted from producer to consumer and financed it with massive debt, how can you suggest that the fundamentals are strong?

Re:A few thoughts

[DragonWriter]

But the definition of a recession is two quarters of negative growth, which we haven't had yet.

No, its not.

That's a common rule of thumb regarding recessions, not "the definition of a recession".

See the NBER FAQ and the NBER's announcement of the current recession for further discussion on why this popular rule of thumb is not used by the NBER.

(Also note that the BEA GDI measure, which is a different measurement mechanism than the BEA GDP measurement, but which attempts measure a quantity which is by definition identical to the GDP, did show two consecutive quarters of decline in Q4 '07 and Q1 '08, one quarter of weak growth in Q2 '08, and decline again in Q3 '08.)

So then why have we heard constant talk about how the US is in a recession for over a year now?

Because other economists who look at the same indicators that the NBER Business Cycle Dating Committee looks at, but that do project (which NBER doesn't) and which do give educated, informed opinions of current conditions rather than waiting until a rock solid peak date can be announced (unlike NBER's BCDC which won't announce a recession until not only is the recession itself clear, but they've got a pretty firm peak date, which is why they've never revised a dating since the BCDC was formed) look at the indicators and say, looking at this, its pretty likely we are currently heading for or in a recession.

Answer: political opportunism, plain and simple. If you can make people believe we're in a recession and that the party of the current president caused it, in the midst of a presidential campaign, that bodes very well for the opposing party.

It wasn't just Democrats (much less partisan Democrats) that were stating that it appeared we were in a recession.

It was pretty much anyone who had half a clue about the economy.

When McCain said, "The fundamentals of our economy are strong," (emphasis mine) he was -- and still is -- 100% correct.

There might be some bizarre definition of "fundamentals" under which that is correct (certainly, the McCain campaign trotted out a few after he was widely criticized), but under any normal, reasonable definition, it was completely false.

How long do you have to hear things are terrible before you believe they are, and start making changes in your own life?

One of the indicators the NBER BCDC considered in declaring the recession is that every month since December 2007 showed declining employment.

My guess is that that's a bigger factor in popular perceptions of the economy, since people feel it directly, than media talk. People know when they are out of a job, or people they know are out of jobs.

And then start feeling the effects of millions of other people making those changes, and people losing jobs, and businesses closing, and this vicious cycle causing a downward spiral?

Except that the people losing their jobs, the business closing, etc., all were going on before the recession talk started and caused the talk, not the other way around.

Disclaimer:

1. I didn't vote for Bush.

2. I voted for Obama.

Anyone can claim that, and its absolutely unprovable. Acting as if that adds weight to your argument is rather silly.

So assuming I'm a die-hard Republican because I'm saying something you likely disagree with isn't going to work.

What your saying is downright ignorant on its key points (definition of recession, order of events in the recent economic downturn, etc.), regardless of your actual, much less your claimed, political affiliation.

Re:A few thoughts

[ShakaUVM]

>>The Community Reinvestment Act had nothing to do with the subprime crisis

Don't believe the hype. I've read that article before (or a close enough cousin to it), and found it to be not just wrong, but deceptively so.

To wit, it's points are:
1) The CRA is a well-respected law that's been on the books since 1977.
That's a whopper. What it doesn't say is that it was a limited program until the Clinton administration rewrote and expanded it in 1995. (http://en.wikipedia.org/wiki/Community_Reinvestment_Act)

Claiming that it's been "on the books since 1977" is deceptive. The CRA as we know it was started in 1995 under the Clinton Administration.

2) CRA doesn't require loans to be made, to minorities or anyone else.
Hugely deceptive. Banks make loans, and the CRA requires loan making to follow diversity targets (including neighborhood, income, and race) which include forcing banks to make loans to low-income populations that they would prefer to avoid. This means the CRA forces banks to make bad loans.

(I mean, sure, technically, a bank could just choose not to make any loans at all, but then the CRA would be shutting down banks from lending entirely, which would be worse. I think that's how they're trying to weasel out of that claim.)

The CRA requires banks to write reports on how they're achieving diversity targets with their loans, and exposes banks to lawsuits if they do not meet diversity targets. Let me rephrase: If banks do not make loans to poor people they would not otherwise give a loan to, they will be sued by someone -- like Obama, who sued Citibank for not issuing enough bad loans.

3) CRA only applies to federally-regulated banks and thrifts whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC).
Sure. Maybe a zillion non-CRA bad loans were made. What difference does it make?

This does not excuse the CRA forcing banks to make bad loans.

4) Federally-regulated banks, which are covered by CRA, have operated under more supervision, and therefore the failure rate for mortgages made by those institutions has been significantly lower
Deceptive again. What difference does bad loans made by others make?

Even before the housing meltdown, CRA loans had much higher default rates, and lower profitability than other loans. Here's a report from the Fed in 2000: http://www.clevelandfed.org/research/Commentary/2000/1100.htm

CRA default rates are much higher than normal mortgage default rates, and securitized CRA loans, pioneered by Wachovia and Bear Stearns (sound familiar?) are some of the premiere poison assets that congress then wanted to bail out.

Why did we get securitization in the first place? Because banks could meet their CRA targets by making a bad loan and then passing it off to someone else. Why did these securitized loans have higher default rates? Because banks issuing the loans didn't have to bear the risk for them any more. why did securitized loans have a high credit rating? Because banks normally bore the risk of the loans they issued, so the default rate was lower. It sounds like a circular argument, but the base engine for the entire mess was the CRA.

CRA only applies to designated low-income neighborhoods
Why, yes. Yes, it does. And it tries to do away with traditional checks on bad loans, like "low income" and "credit history" in the loans it forces banks to make. Like I said, bad loans made elsewhere are irrelevant... unless one claims (and with some evidence, too) that the subprime craze was triggered by the CRA forcing banks into bad loans, and thus pioneering vehicles to deal with such loans, which were then used in non-low-income neighborhoods, since they were an easy source of money.

Re:A few thoughts

[DragonWriter]

The government cannot create wealth.

The government is no less able to create wealth than any other group of people acting together is.

It's impossible.

Repetition doesn't make a false claim true.

The government doesn't actually do anything productive, thus can't create wealth.

Repeating the same claim a third time, and then saying that it supports a different phrasing of the same claim, still doesn't make it any less false.

The government can (and does) engage directly in productive industry, producing goods and services that are sold on the open market, or that are given away creating private property, or that or the public is allowed to make use of, including for productive purposes (e.g., in the latter case, roads.) All of these are productive and create wealth, as much as anything done by private industry.

All they can do is appropriate money from one part of the economy and give it to another.

Sure, that's one thing they can do. And if they appropriate money from a part of the economy in which the velocity of money in the domestic economy is lower, and direct it to one in which in which the velocity of money in the domestic economy is higher, they increase overall economic activity and, as a natural result, cause the creation of wealth (whether they actually "create wealth" by so doing is a semantic game that I'm not interested in playing.)

They either do that through taxation, appropriating from income sources

Taxation does not necessarily "appropriate from income sources", though it might usually.

through inflation, appropriating by reducing the value of all money

Inflation may be an effect of policy, but it is not a direct policy. I think the act you are looking for here is monetization -- issuing more money (usually used in the context of monetization of the debt, and the principal evil that independent central banks exist to prevent governments from doing.) Printing money is not the same thing as inflation, it is an act which is likely, in normal circumstance, to produce some degree of inflation.

through debt, appropriating by taking money from future generations

Borrowing appropriates money from volunteers (often foreign) in the present. Paying off debt, if it happens at all, is a future spending decision, which appropriates from a then-present source depending on where the money to pay it off is appropriated from.

In recent times, the debt has been increasing at such an insane rate that it is an inflationary measure.

Debt itself is not inflationary; expanding the supply of money in the domestic economy faster than the expansion of goods and services for the money to buy is inflationary no matter where the money is coming from.

Why do you think the US dollar has been hit so hard against all other currencies?

The debt has continued expanding this year, and the dollar has rebounded strongly against other major currencies. I don't think the debt is the explanation for changes in the value of the dollar vs. other currencies, in general. And declines in exchange value vs. other currency isn't the same thing as inflation, anyhow; in an ideal world, they would be equivalent, and one wouldn't need to use PPP adjustment to make meaningful cross-economy comparisons, but inflation is decline in the value of the currency vs. goods and services purchased in the economy, not versus other currencies.

thank goodness slashdot covers this.

[nimbius]

step aside intel 45 nanometer chipset, cloaking materials, telepathic controllers, and internet technology....its time for an economic recession story from the National Bureau of Economic Research.

you nerds can thank us later after you're done spending your way to patriotastic victory over the stock plunge and housing crisis.

Re:thank goodness slashdot covers this.

[elrous0]

Actually, I think we need a "Why aren't there enough women in IT/games and what can we do?" story to make it a typical slashdot day.

Not a recession

[PinkyDead]

Sure they are more accurate but they are mixing up precise esoteric terms with the 'generally understood' terms.

People understand what the general term means in terms of their daily lives and for them "recession" is bad. What started in 2007 it wasn't "bad" for the ordinary Joe - in fact a recovery might have occurred and we'd never have known about it. Now that it's the 2 quarters of negative growth thing, it's a real recession.

i thought the economy was bad enough

[circletimessquare]

but when these economists start retroactively applying the recession to previous time periods, thats just cruel and unusual punishment

why do we tolerate these economists? why don't we just lock them in a dungeon somewhere? what did we ever do to them to make them hurt our economy so bad?

maybe if some of us form a posse and tar and feather some economists these jerks will relent and make the economy good again

Monkey Economics

[Baldrson]

Monkeying with the key metrics -- like "unemployment" (ignoring those no longer actively seeking work) and "cost of living" under continual "revision" for political purposes since at least 1983 (when "cost of living" replaced house prices with "imputed rent") -- has left us without the information we need to realistically address economic policy.

It's sort of like a junkie being asked diagnostic questions like "Where does it hurt?" by a doctor who is prescribing him opiates.

Re:Monkey Economics

[plague3106]

Monkeying with the key metrics -- like "unemployment" (ignoring those no longer actively seeking work)

Huh? Are you claiming we should count housewives as unemployed? Being unemployed is only a problem for those that would otherwise work.. but there are plenty of people that AREN'T going to be working. How exactly does including those people help us figure out how much untapped talent we have?

Re:Monkey Economics

[Baldrson]

"Housewives"? Are you seriously suggesting that "housewives" make up a significant demographic group outside the 1950s or TV series fantasy? It has been a long time since only one income could reliably support middle class subsistence. Certainly there are plenty of people who aren't going to be working, but that is more a product of malinvestment than the few people who realistically have a choice to not work.

Re:Monkey Economics

[Anonymous Coward]

This article from 2004 indicates there are about 9.8m stay-at-home moms and dads. This does not appear to count households without children and a stay-at-home spouse. While not a large group, it is still a significant number that could screw up unemployment statistics.

Re:Monkey Economics

[Artifakt]

I'm trying to find a polite way to say this.
1. You just put a lot of words somebody didn't speak into their mouth, then debated that straw-man and not what they said. Frankly, you owe Baldrson (78598) an apology.
2. The old metrics have been changed to deliberately lie to the general public. That's a fact, both that the rules the government uses to define 'unemployment', 'cost of living', 'inflation' and other factors have all been changed, and that the intent was to mislead people. (To verify the second point, you need merely note that the use of the M3 was dropped entirely, but if that's not enough for you, there's the section in the IRS code where 'a well trained and educated workforce' is now listed as a form of intellectual property subject to capitalization or amortization right alongside patents and copyrights - that's right, if you are an employee, you now can be sold or written off (at least as the IRS sees it), and your estimated value to the company (different from what you actually get paid) is included in their stock valuation. If that's not a deliberate lie to prop up stock prices, what is it, a full revocation of the 14th amendment?
3. The old metric for unemployment didn't deliberately count 'housewives'. What it did count was people who had stopped contacting official government unemployment offices, (presumably because they weren't getting any help there), but weren't showing up on the official employment rolls (because if they were, they'd be having income tax and social security withholding, so we'd know they weren't unemployed) and so were working under the table, usually for less than minimum wage, or as migrant workers, or squatting (where they were farming the land they didn't own, not just living on it).
      The old metric tried to take these into account, which often took some judgment calls, and some politicians argued that the methods of deciding who would work if a legal job was offered and who wouldn't really work anyway were flawed. Some of them even argued that we would end up counting a few women who dropped out just because they got married (housewives!). Maybe, but the number of people who would work legally and yet don't see any point in asking at the government office after twenty weeks of being told there's nothing available is certainly greater than zero, which is how it's counted now. There's something very crooked involved in saying 'We don't have a completely accurate number, so we're going to count the whole thing as zero. There - problem is gone, there are no unemployed (or homeless, or people without medical care, etc.) in America", and similar tricks.

Re:Monkey Economics

[FirstOne]

"Monkeying with the key metrics -- like "unemployment" (ignoring those no longer actively seeking work) and "cost of living" under continual "revision" for political purposes since at least 1983 (when "cost of living" replaced house prices with "imputed rent") -- has left us without the information we need to realistically address economic policy.

It's sort of like a junkie being asked diagnostic questions like
"Where does it hurt?" by a doctor who is prescribing him opiates."

You hit the nail on the head.
Manipulating economic stats has become a new art form.

For a dose of reality go to this web site.

Some of us saw this coming a long time ago. How to Fake Unemployment Numbers..

GDP has similar faults, like firing US workers, and importing more foreign goods increases US GDP !!

There is an alternate way of measuring GDP, (total US wages and salaries paid), but reporting that number (~6.85T$ in 2008 dollars) would crush the life out of the Markets.

For much of the 90's and 00's both the markets and the world economy have been living in a fantasy land.

Re:Monkey Economics

[mysticgoat]

Prior to 1980, estimates of unemployment in the USA were developed from broadly based assessments, including reports of agencies that were running soup kitchens, developing census data, doing public health work, and so on. In the Reagan years, the procedure was tightened up: only those people who were demanding Unemployment Insurance benefits were counted as unemployed-- which was justified as being more accurate, but was actually adopted because it made for much better looking statistics. Persons who had exhausted their UI or who never filed for it (because they knew they would not qualify for one reason or another, or the amount they would receive was too little to make the hassle worthwhile) were no longer considered to be unemployed since they were not "looking for work". Among others, this included a huge number of Vietnam vets who were homeless and jobless because their untreated PTSD left them fit for little more than collecting bottles for the refunds.

Currently, Federal USA unemployment estimates drop when people find work, but they also drop when people have been unable to find work before their UI expires, or who have to move to a different state and find the problems of re-applying for UI benefits to be insurmountable, and so on. Another instance: suppose you voluntarily leave a job where you had only earned four day's pay in the last month because they kept calling you to stay home without pay... you left voluntarily, so you don't qualify for UI. Suppose management decides to downsize your department by making conditions so unbearable (sexist, racist, religious persecution, what have you) that half the staff quits. These are voluntary exits, so nobody qualifies for UI (and the employer isn't dinged about it). Yeah, such persecution is illegal... but considering the length and cost of successfully pressing a case, the employer can be pretty damn certain that he can get away with all but the most egregious malbehavior.

There is currently no way to estimate the size of the unemployment problem in the USA. It is larger than the figures the government releases, but we don't know how much larger. Just like we don't have any idea how many people are homeless... nobody is counting such things any more. We might be sitting on a powder keg of civil unrest like the conditions in the black ghettos in the mid 1960s-- we just don't know.

Not really a surprise.

[Sj0]

Since the only growing industries seem to have been weapons and war, it's only natural that when you take the influence of government debt out of the picture, the economy has been shrinking for a long time.

There are some people who think you can replace economic growth in the private sector with economic growth in the public sector and it's the same thing. That may be true in Soviet Russia, but in the free world, pork financed with debt is an inflationary measure that doesn't increase the actual size of the economy.

What's worse, this 3.4% growth in the economy financed by debt is going to cause a cascade plunge. Right now we're like a family using debt to pay off debt (the growth in the national debt is equal to the money spent maintaining the current debt). What always happens in cases like these is the debt supply runs out, and the family goes bankrupt. If you think we're seeing hard times today, just wait. Paying back this 10 trillion is going to send the US back to the stone age by comparison.

No matter how deluded, the poster has a point

[SmallFurryCreature]

The system as it existed worked on faith. Not facts. Faith that an industry that produces nothing and adds no value can be the most significant industry nonetheless and make EVERYTHING else secondary. It is not the first time.

During the internet bubble, real businesses that produced real goods that real people bought with real money were considered to be worthless. The future was in... well pets.com and what not. Pipe dreams, ad based revenue. It became hard for ordinary businesses to even find investment because they didn't promise the sky.

Of course, you can't say that the financial industry is much the same, that all these speculators add nothing, are fluff. But that is what happened, we had the financial industry fluffing itself up by selling itself its own products over and over again. This whole mortage reselling would be similar to Ford and Chrysler (apologies if they are the same) buying each others cars over and over and counting that as total production. The financial industry obtained a far larger share of the total market then it really is supposed to have. It worked because everyone believed it, believed that Wall Street really is important. It isn't.

Then it collapsed, people did indeed loose fate. Somewhere someone burst the bubble. What we got now is not so much a reccesion, as a re-appreasal. We now got to decide what exactly the role of the financial industry is supposed to be. Is it a service industry to the rest of the industry (exactly like say a cleaning company is a service industry) or is everyone else in the service of the financial industry.

Do we want banks to be just banks, lend our money to others for a profit that they partly keep and partly give to us or speculators, driving up prices, investing only in their own profit margins rather then investing long term in other industries.

A few economists, even as high up as the world bank are daring to question the system right now. That perhaps we should see the bank again as it once was, a service to society rather then the controller of the entire economy. No longer should the financial industry have a 40% share of the economy but rather something closer to 4%, back to REAL industry that actually produces value being the motor again, not shoveling money around.

Frankly I been watching the developments with great intrest. Right now I think a LOT of goverments are showing their true colors, bailing out banks that were never trustworthy, never played by the rules to help out the rich who put their money in their high risk accounts at the cost of the working mans taxes.

Re:No matter how deluded, the poster has a point

[speroni]

The other thing is, even the "real" production is useless crap that has designed obsolescence.

They talk on the news about how holiday spending is going to be low and how much its going to hurt the economy. Do we really want an economy based on the sales of what amounts to Christmas toys?

Did you know that when the Core Inflation rate is calculated they disregard things like milk, bread and fuel? You know the stuff that people...need.

Re:No matter how deluded, the poster has a point

[jcarkeys]

The system as it existed^W exists works on faith.

Our entire economy, since we've moved from the gold standard in the 70's to a pure fiat based monetary system is still entirely, 100% based on faith. Your money has no value other than what other people think it's worth.

Re:No matter how deluded, the poster has a point

[dc29A]

Of course, you can't say that the financial industry is much the same, that all these speculators add nothing, are fluff. But that is what happened, we had the financial industry fluffing itself up by selling itself its own products over and over again. This whole mortage reselling would be similar to Ford and Chrysler (apologies if they are the same) buying each others cars over and over and counting that as total production. The financial industry obtained a far larger share of the total market then it really is supposed to have. It worked because everyone believed it, believed that Wall Street really is important. It isn't.

Then it collapsed, people did indeed loose fate. Somewhere someone burst the bubble. What we got now is not so much a reccesion, as a re-appreasal. We now got to decide what exactly the role of the financial industry is supposed to be. Is it a service industry to the rest of the industry (exactly like say a cleaning company is a service industry) or is everyone else in the service of the financial industry.

It is a mistake to assume that the current financial clusterfuck is because of bad mortgages or a bubble burst (we didn't have any serious issues with the Dot Com bubble). The bad mortgages are nothing but the trigger to two serious underlying problems:

(1) Most people in western countries live beyond their means.
(2) But most importantly: Credit Default Swaps.

The current financial situation is due mostly to [banks/investment firms/everyone and their dogs] betting on the failure of different entities. This is all due because of Credit Default Swaps are totally unregulated and they are a speculator's wet dream. The current house of CDS cards of about 50+ trillion $ (yes, trillion) is crumbling. First wave was MBIA and other bond insurers being downgraded by rating firms. This immediately triggered a metric fuckton of CDS collateral calls. Bear Stearns and Merill go under (well, saved last minute). Freddie and Fannie get bailed out, this immediately calls for another round of collateral calls. This second wave caused the collapse of Lehman, the nationalization of AIG and the massive cash infusion into Citi. If either big auto makers goes down, prepare for the worse. Oh and Goldman Sachs has started to write down bad assets too, no bank is safe.

This all thanks to speculators betting on companies with their unregulated toys: the Credit Default Swaps. It has nothing to do with believing or not in a system or losing faith in Wall Street. It's all about making a bunch of really bad bets without having cash on hand to cover the losses. And now that the bets are lost, it's time to pay. But t here is no money ...

Re:No matter how deluded, the poster has a point

[Attila Dimedici]

The gold standard monetary system is also based 100% on faith. Gold only has the value that other people think it has. To me I would be willing to do about an hours worth of work for a pound of gold (unless of course someone thinks it is worth more than that, and will give me more than that for it). The idea that gold has significant intrinsic value is bullshit.

Re:No matter how deluded, the poster has a point

[johnsonav]

Gold only has the value that other people think it has.

While that is true, the real argument for the gold standard is its fairly constant and predictably increasing supply. All the gold that will ever exist on earth is already here, and we find a little more every year. The main difference is that the government can't just make more gold when politically expedient, like they can with paper money. However, that's also its largest negative according to most economists. The current bailouts would be impossible with gold coins.

Re:No matter how deluded, the poster has a point

[Abcd1234]

All the gold that will ever exist on earth is already here, and we find a little more every year.

And thus it places a hard cap on the size of your economy, and creates a real possibility of deflation, which is far *far* worse than inflation. Yay gold standard!

Re:No matter how deluded, the poster has a point

[Abcd1234]

That's not deflation. The fact you believe it is suggests to me that you don't really know what you're talking about.

Deflation is the increase in value of an individual unit of currency, *not* a decrease of the purchase price of goods. The latter is simply a secondary effect resulting from the former.

An increase in the value of currency is bad over the long term because:

1) It encourages investors to invest in currency instead of things that generate economic growth (homes, small businesses, etc).

2) It hurts borrowers because the amount of debt for a given loan *increases* during deflation, as the value of an individual dollar goes up, while the absolute value, in terms of units of currency, of loans remain fixed. This discourages leveraging, which, in proper ratios, is a very good thing for the economy (think home and small business loans).

3) Wage inelasticity means that employers are harmed because they cannot reduce wages to compensate for deflation (people don't like seeing their wages go down), while being forced to reduce the price of their goods or services.

I'm sure there are many other issues, but these are just the first couple that come to mind.

Re:No matter how deluded, the poster has a point

[johnsonav]

If the dollar was backed by gold, we would not NEED "faith" in America or the American economy.

Right. The value of the dollar would then be backed by the limited and fairly stable supply of gold. They're not making any more of it. And that would work fine if the economy was a static and unchanging system. Price levels would remain constant.

But, the economy is not static or unchanging. New products are constantly coming to market, increasing our standard of living, and generally making life more pleasant and productive. Each year there are more and more new products. Just look at the average kitchen today versus one from the 1960's.

The problem with a static money supply is that the same amount of dollars are chasing an ever increasing supply of goods. Econ 101 says, through supply and demand, that the price of all those goods (including stocks, real-estate and other investments) will fall. So, over time, because of the falling prices of everything, the best investment is to simply hide your gold under your mattress, confident that tomorrow you'll be able to buy more with it than you were today. Deflation

Without that money in circulation, in investments or spent, it becomes impossible for businesses to raise money for future investments, governments collect less tax, and the economy stagnates. The current monetary policy is not the best. But, a strict gold standard would be even worse.

"Exceeded double-digit percentages ..."

[Ihlosi]

So they dropped triple-digit percentages? Did any of them drop more than 100%? I thought the whole point of shares was that you couldn't lose more than what your investment was?

Re:Really ?

[h4rm0ny]

So basically, you like to take your name off things when you're going to make a personal attack. Guess they call it AC for a reason.

Umm, rational markets?

[fuzzyfuzzyfungus]

So, I'm assuming that the outfit that decided that present conditions constitute "recession" rather than something else is working from publicly available information, not some super-secret oracle. In that case, why would the markets react to their giving a label to a set of phenomena that were already present(and thus presumably reacted to)?

FFS you "rational actors", you'd better get your act together or I'm going to have to start paying attention to behavioral economists!

Re:Umm, rational markets?

[Sj0]

What's good for a person and what's "good for the economy" are often completely at odds.

According to politicians, the patriot will be completely overextended with debt, barely making all his or her payments, one paycheque away from oblivion.

According to common sense, the non-idiot will try to have as little debt as possible, using it only for major capital expenses rather than trying to live off of it.

According to politicians, the patriot will spend every penny, so the money he or she makes will have maximum exposure to the economy.

According to common sense, the non-idiot will try to have savings, so if something happens they can just coast on savings until the crisis is averted.(Politicians hate that idea. How can they pander to people who aren't on the verge of collapse?)

According to politicians, the patriot will buy a new laptop, car, and house TODAY using credit. They don't have to pay until 2011 anyway, so DO IT! DO IT NOW!

According to common sense, buying things with cash will save considerable amounts of money. First, the interest accrued on debt never takes place. Second, the fees involved with taking out debt never take place. Third, it's easier to get deals and bargain with cash in hand resulting in lower prices.

The rational actor is unpatriotic. Their actions are contrary to maximizing economic growth in the short term.

On the other hand, my personal belief and experience is that debt works differently than economists think. It increases the volatility in the economy. Individual actors add massive amounts of money to the economy, but are suddenly extremely limited in their ability to participate in the economy.

Consider two people: A person with debt, and a person without debt.

The person with debt adds 10k to the economy by buying a new Toyota Yaris. The economy recieves his 10k. For the next year, as he pays back the debt, his ability to participate in the economy is reduced by $900/month, and he is effectively locked out of making any further contribution to the economy. The economy spikes in Q1, but is minimal in Q2, Q3, Q4.

The person without debt doesn't buy that car, but is capable of spending $900/month on the economy. Economic output is constant in Q1, Q2, Q3, Q4.

Now think about this: Many people have 50 year, $500,000 mortgages as a result of the housing bubble. With the economic spike done and over with, what remains?

Too much thinking going on here...

[joeasian]

- "We don't believe we're going to have a recession though." [Vice President Dick Cheney, 1/30/08]
- "I think the experts will tell you we're not in a recession." [President Bush, 2/10/08]
- "The answer is, I don't think we are in a recession right now." [Council of Economic Advisers Chairman Edward Lazear, 2/11/08]
- "First of all, we're not in a recession." [President Bush, 4/22/08]
- "The data are pretty clear that we are not in a recession." [Council of Economic Advisers Chairman Edward Lazear, 5/7/08]
- "I don't think we are" in a recession. [Director of the National Economic Council Keith Hennesy, 6/3/08]
- "I think we have avoided a recession." [White House Budget Director Jim Nussle, 7/31/08]
- "I don't think anybody could tell you right now if we're in a recession or not" [Dana Perino, 10/7/08]

Re:Too much thinking going on here...

[Real1tyCzech]

...and they are *all* 100% correct.

A recession is two consecutive negative growth quarters in terms of GDP.

This hasn't happened yet.

The quarter before last our GDP rose. This last quarter was the first quarter it fell...by a marginal .3%.

That's one quarter. Do the math. of course, you'd rather we re-write the definition instead of calling it what it is, right? "Tough economic times" hardly generates the fear and uncertainty that "RECESSION" causes, right? ...and without FEAR and UNCERTAINTY...how can we drive the population into a frothing mob demanding "change" in regards to that which they know next to *nothing* (other than what we've told them..RECESSION!) about.

How very cute...

Re:Too much thinking going on here...

[shma]

...and they are *all* 100% correct.

A recession is two consecutive negative growth quarters in terms of GDP.

Let me just quote wikipedia for you here.

A recession is a contraction phase of the business cycle, or "a period of reduced economic activity....Some business & investment glossaries add to the general definition a rule of thumb that recessions are often indicated by two consecutive quarters of negative growth (or contraction) of gross domestic product (GDP)

You know what a rule of thumb is right? It's not a law handed down by God, but a rough guide. This is economics, not science. Even if you were to abide strictly by the 2 quarters definition, I bet you couldn't give me a reason why it's 2 quarters and not 3 or 1.

Recession? Meh.

[blcamp]

I refuse to participate in any recession.

As long as I work and earn, I will save and spend just as I always did. My family's economy won't be dictated to by some namby-pamby report by a bunch of gloom and doom busybodies.

Seriously.

If you practice fiscal responsibility (something the U.S. government seems unwilling to do, hence the current mess), work hard and consistently, keep your skills updated and always marketable, you'll stay out of trouble... or at least be nimble enough to make whatever moves are necessary to get out of trouble very quickly.

Some folks want to wail and gnash their teeth at the falling sky. Hey, whatever floats their boat.

Re:Recession? Meh.

[characterZer0]

The whole problem is that a whole lot of people, from Wall Street bankers to low wage workers, have not been practicing fiscal responsibility, and show no inclination to start doing so.

Re:Recession? Meh.

[Abcd1234]

Says the guy on a tech forum who probably has some sort of higher degree or otherwise advanced and specialized skillset. Meanwhile, the average Joe out there faces the real possibility of layoffs, and with a contracting job market, long-term unemployment on the horizon.

*You* may not choose to participate in the recession, but there are millions who will likely have no choice in the matter.

Re:Recession? Meh.

[mysticgoat]

A recession is not something you can refuse to participate in. You are participating in it.

Your skills are now less saleable than they were 2 years ago. Even though you keep up. There are fewer employers out there who need your skills, and more qualified competition for your kind of work... and for the job you currently have. You need to worry about whether you have to run harder just to stay in place. Forget about that plan to ask for a raise next year. Correct your insolent behavior toward the administrative assistants, because you may have to stay with this job for a lot longer than you thought, and you might well need to have an AA do you a favor at some point.

There are an increased number of poor people around you. Some of them are not nice, and many get less nice as they get more desperate. You are going to have to deal with that.

With increasing poverty comes an increase in disease. If you have kids in public schools, you need to expect them to catch more colds this winter, because their classmates will be sicker more often. Your kids are at higher risk of strep throat, scarlet fever, infectious hepatitis, head lice, etc. Deal with it. Or deal with the cost of private schooling.

You and your family will find shopping trips are less enjoyable. You have worries over whether the fruit you are putting in the shopping cart was just handled by that filthy bag lady down the aisle. Where you used to be cheered by happy, smiling faces, you now see worried frowns, depression, anxieties on the faces in the crowds. You've got to find ways to deal with your emotions when your S.O. or your kids are spoken to by some destitute spare change artist.

There is less variety in the stores, because the stores cannot afford to stock as wide a range of items. There are fewer luxury items available.

Some of these effects you can manage by moving into a gated community, buying an arsenal of personal defense weapons, planning outings and vacations so that you and your family are always well cushioned against the harsh realities of those who are directly hit by the recession... but all of that kind of crap is a response to the recession, isn't it?

Recession means that your world has gotten suckier than it used to be. Deal with it.

Re:Recession? Meh.

[mpfife]

I used to think like you do - but I have realized to far too sad truth. We've rounded a moral hazard corner that is about to dramatically shape future policy.

I also lived within my means. I was going to buy a house 2-3 years ago, but didn't because I saw the writing on the wall. I figured when the collapse came, I could buy a house at probably less than half of current prices. I saved and lived frugally and hoped to be rewarded for that foresight. But that hasn't happened.

Instead, I now have over $2000 of new national debt in my name, housing prices have been propped up artificially, and that much more of my taxes are going into the toilet for others irresponsibility instead of doing real work for roads, schools, new companies, etc. And with a moratorium on foreclosures, it makes me wish I had gone out an lived stupidly.

And now we're about to do it again for automakers who haven't been competitive in years. Bloated with poor products, union handcuffs, and an apathy worthy of the name 'fat lazy American', we're about to enter a world of US automakers that are just as wonderful as our airline industry that goes bankrupt every 5-10 years and a lovely cycle of restructuring and dollar stocks. GM is now worth less than Nestle.

Everyone likes to talk about Obama's plans just like the 'new deal' but it's not the same. When you lose 10 years of investing in 6 months - the 'long term' is starting to showing its true colors. We're using new debt to pay off old debt and this can't go on. We're in uncharted waters. What's the answer? I don't know - I think we've done the best we can. We'd have had a real 1929 this year if the govt hadn't stepped in. But it's not sustainable. I personally am thinking long and hard how to get my long-term investments out of the US. As it is, we'll likely find ourselves in the same 'lost decade' Japan did when it's housing bubble burst. 10 years of no real growth while we pay off debt (yes, we're being much more proactive, but it's very likely the pattern we'll follow). Meanwhile everyone else walks out your investment doors and when you are open for business again - it's all moved on. I'm thinking China is looking better now - which has a national *savings* rate of over 50% as a better bet with people that know how to make money and keep it with real products.

A final note for those of you that like pointing fingers - point them all at ourselves on this one equally. Yes, the loan companies were out of control - but you know what - so were all of us. This wasn't Enron sitting on a hill - this was each of us living beyond our means.

Tell average Joe that he's losing *his* job because *you* run up so much debt and had to be bailed out. Because that's the hard truth.

Some of my own

[Samschnooks]

Part of the GDP calculation is "C (Consumption) is private consumption in the economy. This includes most personal expenditures of households such as food, rent, medical expenses and so on but does not include new housing."

If that consumption is financed by mortgage debt and the housing boom - which is not included in GDP calculations, I have to wonder about these numbers that economists throw around. Sure we technically haven't been in recession because the numbers are skewed that way. What if we did include new housing? We'd be showing a huge decrease in output. Why aren't we including housing in the GDP number? Many of these measurements are created based on consensus and for political reasons. They are not based on any physical laws.

If healthcare was included in the inflation calculations, we would have double digit inflation. But that wouldn't be good for the Government and corp America because all the benefits that they pay (Social Security, Veterans benefits, etc... ) would have to increase dramatically.

How does it go again? Figures don't lie but liars can figure?

Re:Not a Joe thing.

[Artifakt]

For a lot of Joes, the economy hasn't been right since about the 5th to 7th year of that long period where minimum wage froze. For other Joes, it really hit about the time they were asked to pay for the whole 'End of the Cold War Peace Dividend' - for example the incredibly filthy trick played on the Airline Pilots Unions. (Don't know why banning the strike and busting the union led to the shortages of pilots, technicians and even air traffic controllers we see today? Then why are you commenting on economics?). People have been getting screwed over since Cain couldn't get a jury trial. This time, it's just about everybody reading this thread.

Tin Foil Hat

[mlwmohawk]

Not to stir the conspiracy pot, but I find it odd that we've been in a recession for a year, but we only hear about it a month after an election. One could postulate that the administration worked very hard to keep this announcement quiet in order to not look worse.

Up until a few months ago, the republicans have been saying the economy is strong and NOT in a recession. OK, so now they lose, and we find out the truth.

It could be innocent timing, but given the record of this administration I suspect it was known for some time.

At least we will have plenty of money.

[mtraskos35826]

This is all a lie! You can't trust statistics or facts. Where there is money, there is wealth.... at least so I am told. Just look at the government's own numbers for the number of dollars in the economy (http://research.stlouisfed.org/fred2/series/BASE Federal Reserve) - they have created $650billion more dollars in the last three months effectively increasing the total number of dollars in the economy by only 61%. Wealth has nothing to do with the goods in the economy, only the number of pieces of paper exchanged as currency.
I say the only way to create more stuff is to let the government print more money. Just think how much better everyone will be.... you know.... when everyone is a millionaire.

Bottom line - we boned.

Re:Really ?

[Sj0]

You know, that h4rm0ny is a real dick.

Now to click AC. Oh shi-

Market Correction - not a recessions

[fast turtle]

We're still seeing the effects of the blasted internet bubble when stocks went sky-high on nothing but pipe dreams. Well it aint going to be a recession until the market drops below 1995 levels, where it finally broke the 4000 mark on Feb 23, 1995 according to http://www.djindexes.com/mdsidx/index.cfm?event=showavgstats

Re:Really ?

[MrMr]

That is one of the great benefits of internet, people have the opportunity to critize, discuss and have some fun without fear of persecution.
I suppose you are in favour of bravely writing your name on the ballot every time you vote as well?

This is good news

[eclectic4]

As many "experts" have explained, right about the time we finally admit to the recession it usually is the start of the recovery.

Predictions

[darth dickinson]

The news media has accurately predicted 23 of the last 2 recessions.

Humbug!

[ObsessiveMathsFreak]

For the last few years, I have taken the stance that Christmas could do with a good Humbuggering, and have taken to actually saying, literally, "Humbug" whenever people start with the "Merry..." , "Happy,..." etcs and general ostentatious jolliness on December 1st!

For many years prior, my lack of delirious excitement and palpable enthusiasm, as well as overt cynicism about the commercialization and general over-selling of the holiday, had me labeled "miserable", "hopeless", "a grump" and in recent years "the grinch". The way I see it, "Humbug" is just giving the crowd what they want, and it has the added advantage that people no longer expect, nay, demand my mandatory jolliness throughout the "season".

I actually enjoy Christmas, but the way I see it, the holidays are from the 23rd to the 31st of December. None of this all winter madness. The bastards are not getting once once ounce of holiday cheer out of me outside of those dates, and inside of them, I'm spending most of the time asleep.

So in conclusion; Christmas!? HUMBUG!!!

Re:Humbug!

[cayenne8]

Man...I can only guess that you are the LIFE of every party you go to.

:)

Seriously...isn't any excuse to be happy and have fun a worthwhile one? Life it too short to spend it being 'down' or cynical, or asleep. Frankly, I look at probably Halloween as the start of my fun time season. The heat has broken (was nice to actually put on a sweater a couple weeks ago)...and there are reasons to hang with family and friends for food and parties through T-Day, Xmas, New Years and right on into Mardi Gras. Take a break after that to recoup, the start looking forward to vacations, Jazzfest and other things that pop out during the warm weather days.

I really hope you aren't as miserable as your post sounds...man, really life is WAY too short....take advantage of any chance you can to get out and enjoy it. I'm not even saying you have to celebrate Xmas itself, but, no reason to not have fun with othere just to make a 'point' ya know? Doing that hurts no one but yourself.

Re:Humbug!

[dwarg]

I applaud your efforts. Also, it is impressive you can separate the Christmas madness that starts after Thanksgiving from the actual holidays of Dec. 23rd to 31st.

Personally, I have given up on the distinction. I HATE the holidays. I hate the insipid music, the rampant consumerism, the insufferable group think, the over indulgences, the peer-pressure induced family traditions, the bell ringing beggars in front of the stores that think somehow now, instead of the rest of the year, is the time to help those less fortunate than ourselves.

I hate them all; every mindless, consumption-driven holiday that the populous slides into as a Pavlovian response to the day on the calendar. I find them similar to hazing rituals that one generation went through so now they can't wait to inflict it upon the next. A sort of "Pay it Backwards" system of traditions our ancestors use to shackle us to their own superstitions from beyond the grave.

The indignity of the whole thing sends me into a blind frothing rage and causes me to cry out.

RISE UP! Oh, oppressed people ground under the jackboots of Santa Claus. We will be cleansed in the blood of carolers and bell-ringers. FIGHT ON! FIGHT ON! Free our righteous minds from the tyranny of low low prices, today only, on plasma screens and blue-ray DVD players. We will snuff the multi-colored lights from the trees and eaves and find sanctuary in the darkness once again my brothers and sisters. FOR I AM THE WRATH OF GOD!!!!... who is with me?

--
I'm really a glass half full kind of guy.

Re:Humbug!

[ObsessiveMathsFreak]

RISE UP! Oh, oppressed people ground under the jackboots of Santa Claus. We will be cleansed in the blood of carolers and bell-ringers. FIGHT ON! FIGHT ON! Free our righteous minds from the tyranny of low low prices, today only, on plasma screens and blue-ray DVD players. We will snuff the multi-colored lights from the trees and eaves and find sanctuary in the darkness once again my brothers and sisters. FOR I AM THE WRATH OF GOD!!!!... who is with me?

Didn't you read my post?! I am not getting involved in any holiday activities, festivities, celebrations or indulgences of any kind; no matter how tempting they may be!

Re:Can someone explain where the money went?

[KovaaK]

I am incredibly far from knowing anything about economics and the housing market in general, but I'd like to see if the gist of what I picked up is more or less right, so I'll give it a shot...

There wasn't any money actually lost - it's that banks were trading CDSs and assuming that they had great value, when now everyone realized that they have absolutely no value. It seems like the bailout is giving those banks the money they thought they had so that they can continue business as usual.

Someone please correct me if (where) I'm wrong or oversimplifying something.

Defining middle class

[alexhmit01]

I don't think you know anyone with children. I have two small ones, and have a group of friends with small children. Lots of single income families. Sure they are married with 2 kids in a 2 bedroom condo, and they are driving used cars, but they get by on one income. The reality is, child care is expensive, and unless both earners have professional careers or a successful business, it's hard to net out ahead of child care costs. A 20k-25k second income, after the tax bite, and paying for childcare for 2-3 children, quickly goes negative.

Middle class subsistence? You've got to be kidding. A small 50s era starter home or small apartment, one or two used cars, and careful grocery shopping, you absolutely can do it... That's what middle class subsistence WAS, now if you think middle class subsistence is 2 cars 4 years old, a 4 bedroom house of 3000 square feet and a yard, 400 channels of Cable/Satellite, high speed Internet, multiple computers, meat EVERY NIGHT, then yeah, you can't do it on one income.

I like that latter life, and my wife and I both have masters degrees, and both work. But I don't pretend that it's subsistence, and trying to have the lifestyle that I remember as a child (when I was 8 or 9) and doing it with toddlers means more leverage to have things earlier in life. Plenty of families get by on a single income... but they live modest lives in inexpensive areas.

Re:Can someone explain where the money went?

[Kelbear]

The value of money is subjective, so when the market as a whole starts to view something to be of lesser value, suddenly the value of that something is lower.

There is some intrinsic value in something like gold, which is shiny, heavy, and with good conductive properties, but mostly it's because people treat gold as a store of value. If other people don't want your gold buillon, you've just got a lump of shiny,heavy,conductive metal rather than the ability to buy hundred of thousands of dollars worth of products you want to have.

Same goes for the green paper, same goes for the stock number, and it even applies to houses. They're valuable in that they provide a place to live, but the housing bubble came from the growth of value far beyond the intrinsic value of the house as a place of living. It's not a business that grows and earns interest, it's just a place to live that people might want to buy in the future when you move out. Some return is possible because of increasing demand to live in that spot as population grows, but people believed in endless /high/ returns on a simple home.

Then they leveraged that imagined value to borrow and they used borrowed money as leverage to get more imagined value, which they used to borrow more, etc...and the numbers all went up. The imagined value got passed around through everone's hands while numbers soared, until eventually people started to wonder when to pull out before others realize these things aren't really worth that much...then the crash comes.

Now banks found that their asset's imagined value has collapsed, now they don't have the surplus of money they thought they had, so they cling to their reserves and fear lending it out so they can stay solvent when a client asks to make a withdrawal.

Tight times decreases loans, without loans, businesses have difficulty growing and functioning, and the crunch on everyone's savings has them reducing their spending, so businesses get fewer customers, reducing their purchases from supplier businesses, it all just loops continually throughout the economy. It's hard to see the exact end result or when it will all end.

Derivatives and Naked Shorting, not Subprime

[spun]

Subprime lending has very little to do with the current recession. The default rate is only slightly higher than average. The real problems have to do with derivatives, naked shorting and other financial shenanigans that Washington has refused to regulate. When we repackage debt, and insurance on said debt, and resell both dozens of times over, even a slight increase in defaults will knock over the whole house of cards. When we allow people to sell stocks they don't even own, and haven't even borrowed as in regular shorting, nothing but chaos can ensue.

In short, it is not the poor, who were simply patsies, who caused this mess. It was, as always, the greedy rich. Blaming the poor and those who try to help them get a fair shake is simply despicable.

Re:Derivatives and Naked Shorting, not Subprime

[Jaeph]

There's plenty of blame all around.

When someone signs a contract, it is their responsibility to carry through on that contract, and their fault if they don't. Poor/rich...I really don't care.

So from the banks that loaned vastly more than they should, all the way down to the "poor schmoe" who bought into a mortgage that he couldn't afford...they all are to blame.

What I don't like is that all of them are now coming to me asking for money. I didn't do nothing, but apparently a democracy means that reckless can take take what they want from rest of us.

-Jeff

Re:Derivatives and Naked Shorting, not Subprime

[TheSync]

Subprime lending has very little to do with the current recession. The default rate is only slightly higher than average. The real problems have to do with derivatives, naked shorting and other financial shenanigans that Washington has refused to regulate.

You are correct that mortgage default rates are not particularly higher now than they were during the 2001 "pseudo-recession". But there are two problems:

1) if you defaulted a few years ago, the bank could sell your house and would break even or possibly make money. Today, the bank would sell your house and lose money because real etstate prices are dropping like a rock.
2) Altogether, the US has lost $4 to $5 trillion in perceived real estate wealth with tremendous "negative wealth effect" problems.

Had real estate prices continued to rise, complex asset based securities would have been fine (they were created to reduce early pay-off and random default risk, as well as to get around regulations on bank capital requirements). Perhaps better regulation could have been done on those financial products, but even without them, the real estate bubble burst would have been devastating.

Re:Derivatives and Naked Shorting, not Subprime

[cayenne8]

"Subprime lending has very little to do with the current recession....In short, it is not the poor, who were simply patsies, who caused this mess. It was, as always, the greedy rich. Blaming the poor and those who try to help them get a fair shake is simply despicable."

While I agree largely that much of this was from those weird, unregulated repackaging of debt...you're saying that the 100's of thousands of defaulted home loans, the severe (in some areas) devaluation of property, has nothing to do with the possible pending recession?

I know it takes two to make a contract (ie for a mortguage), the lender should never have been giving out loans to risky people to begin with (and yes, I do believe CRA and that type of push by government and private groups did have a lot to do with it). The 'poor' buyers have responsibility too. If they were stupid to read and understand exactly what someone was trying to sell them...well, everyone in the US has a right to be stupid, but, responsibility for ones actions, even stupid ones, should and do fall upon that same individual. I truly feel for anyone losing their home, but, it is a fact of life that this happens....and if the only way someone could afford to own a home, was to essentially take a crap shoot gamble on a loan that COULD go too high, well, you gotta take the consequences of the gamble. I feel however, there is HUGE fault with the banks and brokers for giving these gambling opportunities in the first place. I'm sorry...but, there is not an inherit human right to own a home, it has to be earned, and you should only get what you can afford.

I can see some silver lining in all this. First, housing values are correcting from the insanely overvaluation they had in recent years. They will be now affordable to good credit and good credit risk purchasers.

And housing loans will once again be a bit harder to get in order to make sure that only risk worthy people get them. Go back to the old way...20% down, good credit score...steady job/income...you get a home loan....one that is within your budget to pay.

Sucker

[copponex]

Yes, you are a sucker. But because you believe that welfare and the bailout are the main reason the government is taking your money.

Military spending eclipses any other program by 2 to 1. So, first, you should be complaining about the defense shield program, which won't work, the Iraq war, which didn't work, and all of the other investments in destruction that enrich corporations and their owners, and do nothing for the people that pay those taxes. To put it in perspective, you'd have to have a 500 billion dollar bailout every single year added together with health care, welfare, and other social services in order to match military spending. If we paid the average per capita that other nations do, we'd spend around 180 billion instead of 1000 billion.

If you didn't want higher taxes, I hope you didn't support the war. Taxes will go back to normal levels, because someone has to pay for the three billion dollars that are flushed down the toilet in Iraq every week, on top of all of the other idiotic military spending programs that are never criticized. Even talking about military spending is anti-American, but criticizing taxes that improve the lives of the taxed is considered patriotic. How's that for some cognitive dissonance.

So, in conclusion, I'll repeat something I heard quite a bit in 2003. If you don't want your taxes spent on programs that you don't want, just remember, this is America: love it or leave it.

Re:Sucker

[Poppa]

Bah. Your numbers are wacked. Defense spending is 20% of the federal budget. Medicare/Medicaid/Social Security take up over 40% of the budget.
http://en.wikipedia.org/wiki/United_States_federal_budget

How much did 9/11 cost this country? Hundreds of billions. Bush prevented another attack during his Administration against all odds. Biden predicted there will be another attack if Barry would get elected to President. How much do you think that will cost us?

War costs will continue since Barry will be moving troops from Iraq to Afghanistan/Pakistan.

Your Democratic Congress has approved bailouts since coming into power that have eclipsed the war costs.

So, how's that Democratic Congress for the last 2 years been working out for you?

And, maybe you can explain why the most liberal states (which have no war costs) are having the most trouble with their budgets?