Depression versus Recession?
Despite most of the economics profession declaring the recession over — I think they are premature — I got into an interesting debate with Mish last night over the state of the economy.
I have been calling this the “Great Recession,” and suggested the worst of it is over, and we are now in a not-so-great, ordinary recession. Mish believes we are in something far worse: A Depression (See Depression Debate – Is this a Depression?)
In an email exchange, Mish expanded his thinking:
“I believe we are in a depression.
Prior to the “Great Depression” the word recession did not even exist. I do not know where the dividing line is, I just know we are over it.
If that sounds strange, note the NBER does not have a formal definition for recession. Some people get together and decide when it started and when it ended, based on many factors of unknown and probably varying weight. Recessions are not based on two quarters of negative growth as many people think.
To say we are in a depression one needs to look at a lot of factors and I certainly mentioned them. Note that we can have “a depression” even if it does not match “the great depression”.
There are just too many parallels to things that happened in the 30’s in regards to housing, credit, the stock market, jobs, treasury yields, etc etc etc that “recessions” since then did not have.
Treasury yields and consumer spending might easily be deciding factors. The Fed’s reaction is another difference. This is certainly not like the stagflations in the 70’s and 80’s at all. And it differs from the 2001 recession in that consumers threw in the towel.
So it’s not just a case of being more severe, there are numerous parallels in play that do not match prior recessions.”
I have a few minor quibbles with some of his comments, but for the most part, we essentially agree that 1) This was a very severe economic downturn; 2) Some things are very parallel to 1929-39 era.
Our disagreements? Well, the NBER includes a definition of a recession every time they formally announce one. Here is the December 2008 Business Cycle Dating Committee statement:
“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.”
On the other hand, I know of no widely recognized definition of what a Depression is.
Let’s look beyond that. While we can find some obvious parallels between the Great Depression and the Great Recession, there are also some enormous differences. Looking at the current contraction versus the 1930s, we note several very significant factors that distinguish the two eras: The safety net of unemployment insurance, FDIC bank deposit guarantees, Medicaid, food stamps, Social Security, etc. that exist today. The USA safety net may not be ideal, but it is far better than what existed during the 1930s. That alone has made this contraction quantitatively different in terms of Human misery than the 1930s.
OK, this recession is far less miserable than the 1930s. What of the economic data, the specifics from that era?
Consider:
• From its 1929 peak to the ultimate low in 1932, the Dow Jones Industrial Average fell 89% versus 43% for the 2008 collapse — literally, the Depression was 2X worse;
• In the 1920s and ’30s, Mortgages were interest only, 3 (or 5) year financings, with a balloon payment at the end. No balloon payment, or rollover of credit, you lost the house.
• Credit disappeared after the crash — and defaults skyrocketed. Foreclosures may be high today at a rate of 1 per 81 homes with a mortgage, but they are nowhere near the 1 in 4 homes with a mortgage that defaulted or could not roll over their loans;
• I haven’t come across reliable data as to how much home sales dropped and prices fell, but with a 25% foreclosure rate and credit nonexistent, it is probable that, like the stock market, it was far worse than the current housing collapse;
• Manufacturing output took production in the 1930s back to the lowest levels since 1901, almost a third of a century earlier;
• Consider the steel industry: Production dropped 75% drop from its pre-crash peak (1929), cascading from more than 63 million net tons of ingot iron in 1929 to barely 15 million tons produced in 1932.
• Bethlehem Steel, which had been at 90% capacity in ‘29, was operating at 13% of capacity by 1932. Other than securitizing mortgages, underwriting derivatives and/or credit default swaps, can you name any major company or industry that saw this sort of collapse today?
• Any measure of unemployment — U3 at ~10% or U6 ~17% — is far below the 1930’s one in four adult males unable to fund work. (See chart below)
• Producer prices (PPI index) didn’t fall single digits — it utterly collapsed in the 1930s, far worse than today.
During the Great Depression, the U.S. economy simply collapsed into shambles. Lenders faced heavy investment losses, communities were unable to collect property taxes, the construction industry was all but frozen. Unemployment rates ran over 25 percent. Industrial capacity plummeted. Municipalities were badly in need of funds. The automobile industry ground to a full halt. During the worst of the Depression, one in five homes was in danger of
foreclosure.
Even the worst of the complex difficulties of the 2008–2009 credit crunch and housing recession were mere sun showers compared to the financial hurricane of the Depression era: Banks have f ailed, but the FDIC’s guarantees have prevented widespread panic. Unemployment has risen, but f ar below the worst levels of the 1930s. And the two million or so foreclosures over recent years are f ar less, on a percentage basis, than the nearly 20 percent foreclosure rate in the 1930s.
In short, while the broad economy circa early 2009 is ugly, it remains far healthier than during the Great Depression — by just about every measure, and in many cases, by orders of magnitudes.
Have a look at this chart. It shows not just underemployment (full time workers who could only find part time jobs) but shows that at the peak, over 35% of workers were unemployed.
>
September 9th, 2009 at 8:26 pm
Great points but I would add that this is not in the past. We’re still in the middle of this story. You used the term “WAS a very severe economic downturn”. The Fed is now backstopping everything in sight in order to keep up the appearances that we’re turning the corner and prosperity is “around the corner”. This is ludicrous. It’s merely a shell game in which the powers that be are backstopping everything with money they don’t have. Common sense alone tells me that this cannot continue forever. We’re barely a year into the true full-blown crisis. This story will have several chapters (years) to it before its done. Therefore, I wouldn’t use the the past tense in describing it.
September 9th, 2009 at 8:40 pm
Barry,
I think I agree with Manny. There is always the danger of being too eager to accept the gloom and doom scenario for too long. But even though I knew there was some reason I didn’t want to be in stocks, I didn’t feel that things really “came apart” until last September when Dumb and Dumber told us the world would end without massive IB bailouts. So, since history doesn’t repeat, but may rhyme, could it be we are still to early to posit an outcome? Is it 1930 instead of 1938?
September 9th, 2009 at 8:45 pm
And along about 1930, were people rapidly paying off debt the way Americans have been this summer and early fall? If we weren’t a consumer economy then, but are now, then how can the populace becoming more tight fisted by the month bode well for the near future? I know sometimes I can’t string enough synapses together to make a cogent thought, but this seems a bit of a problem to me…
September 9th, 2009 at 8:47 pm
No question we would be calling it a depression w/o the extraordinary government intervention/backstopping. The mere fact that all the post great depression backstops are taxed (FDIC, unemployment, food stamps) is also proof that this is not just a recession.
September 9th, 2009 at 8:50 pm
I’ll 2nd, 3rd, & 4th what Manny just said…
We’re just getting started here… And not to get off track, but we haven’t even suffered a significant “crisis” yet (natural disaster, pandemic, cultural revolt, nuclear or other terrorist attack)…
This is VERY MUCH on “pins & needles” as we speak…
It may play out not only through the present business cycle (which many are using as a measure to say we’ve turned a corner), but through a few GENERATIONS of business cycles…
To put it into perspective… I would doubt the equity indices break out to new all time highs until well past 2030, or beyond (as that is my optimistic view)…
The last six months is like some kind of crazy dream… Denial comes in an actually very clever form… That is, the UNWILLINGNESS to use the word “Depression”…
It’s as if Ben Bernanke said… “No Depression… No! I studied that and we won’t have it”… So he made some moves… We’re in the first innings of those moves, but the end result will be a Depression just the same… So in 2,090 or something there will be another Ben Bernanke who, after TWO FAILED attempts, will convince everyone he is clever enough to avoid the 3rd Great Depression…
Thus completes the cycle of life… of which incompetence is a lively component…
September 9th, 2009 at 8:53 pm
The minute the Fed even hints they’re taking one toe out of the game, this thing falls apart again, probably sooner. Some “unexpected” event may even force the Fe’ds hand and hasten this…….
September 9th, 2009 at 9:00 pm
You simply cannot credibly compare 1932 to 2009.
Now, maybe in 2012 things get much worse, but for now, the 1930s are far far worse then the past 2 years.
September 9th, 2009 at 9:01 pm
We’ve escaped thus far. The depression scenario would require a faltering recovery and/or more financial turmoil like last year in financial firms in the near term. I think the highest probability of financial bankruptcies going forward are more likely in Europe– ones that might represent systemic risk. But these bankruptcies are likely to be contained by governments. Yes, it might be scary to markets and hurt fragile confidence but not create a depression. We may have escaped calamity this time, but the next downturn (perhaps later next decade) after governments have racked-up 150 to 200% of GDP in debt, might be the one that overwhelms regulators and leaves governments in no position of “stimulating” , “backstopping” or “bailing out” anybody.
One other possible depression scenario is that current government stimuli fade, the economy fades into next year and there is no political will for more simulus. Then the next downturn might be one that sets in motion a slow decay and the financial turmoil/bankruptcies that cascade things down. Financial turmoil from Europe or elsewhere might act as an accelerant. It’s hard to see a true calamity however like the 1930s.
I think we’ve escaped for now but 10 years from now, it might be the big one!
September 9th, 2009 at 9:15 pm
But none of what Barry provided really refutes Mish’s point. In fact, Mish addressed all of that – just because this isn’t like the “Great” Depression doesn’t mean it’s not still a Depression.
Turn it around and look at it from the opposite angle – compare this to every other recession since the 1930s. Where would you rank it?
I’m a lean to Mish’s side – that Recession/Depression is not a difference in degree, but kind. This one was started by financial system crises and characterized by the spiral of deleveraging participants.
~~~
BR: You can phrase it however you like — “Just because its a great recession doesn’t make it a depression.”
There is no definition of depression, so what are we really debating?
September 9th, 2009 at 9:21 pm
Honestly BR,
we just gave the World AIDS and the first thing on everyone’s mind in Washington is how to get our next hard on.
The system has failed and is collapsing, without massive public spending, there is no economy, how long do you expect it to survive?
How long will our many “friends we pissed off over the years” go along with the FED ponzi scheme and the idea that we can print and do whatever we want because we have the Dollar.
September 9th, 2009 at 9:22 pm
As I’ve mentionend numerous times….
The good thing now is that we’re a debtor nation and not a creditor nation. It’s easy to kill imports and remedy your trade deficit. It’s a lot harder to make someone import the crap you make (see: China) when they’ve stopped buying.
Also, we have a fiat currency and will “eventually” be able to hyperinflate our debts away (years from now) if the populace allows for it. But, remember, Japan has been trying to inflate for decades but it’s actually unpopular….there’s a bunch of old people there with savings who don’t mind deflation….
Also, as a nation, we have surplus food and plenty of houses to shelter people…and the cable has already been laid to all the homes…so we’ve even got cable TV. This won’t be a problem at all….
September 9th, 2009 at 9:23 pm
The point is that you can easily compare 2009 to 1930. Pulling a bunch of stats out of the absolute bottom of the depression and saying “we haven’t gone that far yet” is a pretty poor argument.
Here’s Bob Hoye responding to a similar argument from Allan Metzler:
Metzler is considered to be one of the leading experts on monetary policy, but his approach seems naïve, or he is making a desperate tout. This year (2009) is the first year after a classic crash and unemployment has been around 9 percent. The number for the first year after the 1929 crash was 8.7%, and it wasn’t until the fourth year after the crash that unemployment reached 24.9%.
There could be some difference in the calculation, but those flogging this as evidence of no depression should be more thorough in their research and have more regard for logic. Metzler has not been the only one to use this argument and if it was in a term paper it would be marked “D”.
Aside from that, all I really see from BR here is the argument that our wise, benevolent overseers have everything under control with programs like Medicare, unemployment insurance, food stamps, and the FDIC, all of which are totally dependent on the government’s continued ability to issue massive amounts of debt. Color me less than reassured.
I’m pretty amazed that even as late as 2009 so many people think we’ve got it figured out so much better than those dummies in the 30s. What if our current course is just putting in place the elements for an even more catastrophic crash when all of the government’s various props have to be removed?
September 9th, 2009 at 9:26 pm
http://newsfrom1930.blogspot.com
Some of “the shrewdest market traders” now see “definite turning point” in stocks. Conclusion isn’t based on “chart theories such as double or triple tops” but on fundamentals. Believe long side will be the safe one from now on, and “standard stocks can be bought with assurance of profit. The corporations, the country, and the people are very rich, richer than after any previous panic, … industry and the market are in a strong position to stage a comeback.”
-Wall Street Journal, September 9, 1930
September 9th, 2009 at 9:27 pm
Alright… It appears USELESS to argue against the likes of “dbneal” who now think in terms of the next downturn requiring a “faltering recovery”…
…as if a RECOVERY actually exists now! There is no quarterly number that points to a RECOVERY in any terms other than mass monetization of debt… So you opened up a new credit card account and promptly took a cash advance to pay your bills on the other cards you service for the next 6 months… Swell! You’ve recovered…
So if one thinks that is a RECOVERY, so be it… All I see on the horizon is demand destruction across the board, and the little demand that there happens to be is based on giveaways that we’re borrowing to create…
During the housing bubble, they talked about home equity being used as an ATM machine… Well now, the United States of America is being used as an ATM machine…
Time compresses… and time is going to compress on the situation we find ourselves in now…
It’ll happen faster than most people think…
September 9th, 2009 at 9:31 pm
Oh no… not that soufflé argument again!
That’s funny, unemployment in 1930 is quite similar to today’s. Aren’t we closer to 1930 than to 1935?
I don’t think they thought they were in a depression yet in 1930. But then again, I think they didn’t use the word recession as much as the word depression in those days.
I think we’re in a recession, heading slowly into a depression.
September 9th, 2009 at 9:36 pm
Now, maybe in 2012 things get much worse, but for now, the 1930s are far far worse then the past 2 years.
———
Probably worse for the elderly… poorhouses anyone?
September 9th, 2009 at 9:40 pm
@Andy T
“Also, as a nation, we have surplus food and plenty of houses to shelter people…and the cable has already been laid to all the homes…so we’ve even got cable TV. This won’t be a problem at all…”
Andy – You and I agree about many things, but I’m going to take the CAUTIONARY stance on your expressed viewpoint…
IMO – As a nation, we are a bunch of arrogant, self interested, fractioned entities… We cannot come together for ANYTHING… Within months of the 9/11 attack (and some solidarity), everyone was back at each others throats… Support for Iraq was divided all along… In 2008, many demanded CHANGE, got it, and now don’t like it…
Even cable TV won’t help us… Why? because the airwaves are infiltrated by FOX vs. MSNBC… Wingnuts like Beck & Limbaugh vs. wingnuts like Maddow & Olberman… In the end, it makes things WORSE, not BETTER…
The only saving grace is SPORTS… But that needs $$ too… Sponsors have to pay up, and if nobody has the budgets (because Americans don’t have any money), well, there goes your programming…
We’re milliseconds away from losing what we rely on as ENTERTAINMENT to keep the Romans happy with their bread and circuses…
I’m not going to say it will fall apart so fast, but be careful… It’s dicier than you imagine…
September 9th, 2009 at 9:43 pm
I would echo E’s remark: “just because this isn’t like the “Great” Depression doesn’t mean it’s not still a Depression.”
All you’ve “proven” or made a case for is that it hasn’t been as bad as the GREAT Depression. That’s why it’s called Great. And since this has been much worse than any recession since then, it’s reasonable to differentiate it by calling it a depression. Of course that word has been practically outlawed by some kind of societal consensus, demonstrating once again the human capacity for mass denial.
And it ain’t over yet either, by the way. No way to tell what the next few years hold, but there’s plenty of reason to believe that we’re far from being out of the woods and the debt deleveraging process could still kick our butts big time once again. So we’ll just have to wait on a final verdict I guess.
~~~
BR: That’s half the argument — the other half is, “What makes this a depression?”
No one seems to be able to answer that . . .
September 9th, 2009 at 9:44 pm
cv-
cycling and F1
i know you are into football.
but, you know what i’m talking about
September 9th, 2009 at 9:44 pm
I already dubbed it “The Benign Depression” yesterday. I stand by it today.
September 9th, 2009 at 9:46 pm
And since this has been much worse than any recession since then, it’s reasonable to differentiate it by calling it a depression. Of course that word has been practically outlawed by some kind of societal consensus
We have Keynesian and monetarist economic policymakers now, which means we don’t suffer depressions anymore.
September 9th, 2009 at 9:48 pm
Also, as a nation, we have surplus food and plenty of houses to shelter people
———————
They had surplus of food in the 1930s. They dumped it to try and keep prices up. They had plenty of houses also. Only the banks refused to renegotiate mortgages so forced people out of them.
September 9th, 2009 at 9:49 pm
@danm: Maybe we’ll pay people to destroy homes and condos in The Benign Depression?
September 9th, 2009 at 9:49 pm
http://www.ritholtz.com/blog/2009/09/depression-versus-recession/comment-page-1/#comment-213724
Hey Graphite, that sounds like Harry!
September 9th, 2009 at 9:53 pm
@Onlooker: Reincarnation?
September 9th, 2009 at 9:53 pm
I would also echo and reinforce those who’ve opined that it’s much too early to be making this judgment and evaluation. It’s an exercise in hubris that the fates will use to kick our butts. The quotes from 1930 don’t necessarily mean the same will happen to us, but they sure do demonstrate just how wrong prognosticators can get things. The parallels are indeed amazing and eerie.
September 9th, 2009 at 9:55 pm
BR – Great post. It is nice to see intelligent differences of opinion from two of my most frequented bloggers. I agree with many of your points. I tend to agree with Mannwich this is not over and the worst is most likely to come. I wouldn’t label myself a perma-bear as I’ve been called lately. Instead I go with realist (a cliche no doubt). There is a need to deleverage and rid the system of the phony accounting and financial gimmicks – packaged life insurance anyone?
September 9th, 2009 at 9:57 pm
@Wes
Oh I know what you’re talking about… It’s what’s kept the modern day Romans (Italians) occupied for about the past 3-4 decades while they sailed along devaluing their currency (that, and scantily clad TV models)…
But think of one thing… The Italians were able to devalue the Lira because they were able to maintain an export coefficient of high quality products that came from the Earth (that, and that most of the culture was content with what Americans would consider a 3rd world living standard)…
Americans can do it too… We have the same basic ingredients… But I have not seen NEAR the culture shift that would be required to be happy with it…
I hope it happens… Personally, I’ve already re-shaped my life to exist with that standard (which, frankly, I find more appealing)…
September 9th, 2009 at 9:57 pm
I work with 4 guys – all in the mid 50’s who have been told that their services will no longer be needed come June of next year. Any job they would be applying for in the field requires computer skills that they just don’t have and frankly I don’t see them acquiring before then. The financial problems caused by the credit mess are happening to coincide w/major changes in the social landscape -it’s way to early to be calling no depression.
September 9th, 2009 at 9:59 pm
@five: And that story is playing out all over the country. Also, I’d hate to be a college kid buried up his/her eyeballs in debt coming out looking for a job. Good luck with that. Should start practicing, “would you like whipped cream on that mocha latte”?
September 9th, 2009 at 10:03 pm
The Italians were able to devalue the Lira because they were able to maintain an export coefficient of high quality products that came from the Earth
—————
The key word is export.
The US is a net importer. The whole system needs to get restructured for an exporting US.
I can see some resistance to this. Like Canada doing everything in its power to keep its dollar low.
September 9th, 2009 at 10:03 pm
Graphite Says:
Some of “the shrewdest market traders” now see “definite turning point” in stocks. Conclusion isn’t based on “chart theories such as double or triple tops” but on fundamentals. Believe long side will be the safe one from now on, and “standard stocks can be bought with assurance of profit. The corporations, the country, and the people are very rich, richer than after any previous panic, … industry and the market are in a strong position to stage a comeback.”
-Wall Street Journal, September 9, 1930
And following the theme of this. Today in CNBC:
“We view this as a significant turning point and maybe the early stages of a longer-term bull market,” Nunes told CNBC and said he expects the S&P 500 to reach 1,200 by year-end.
Ah parallels …
September 9th, 2009 at 10:06 pm
“I hope it happens… Personally, I’ve already re-shaped my life to exist with that standard (which, frankly, I find more appealing)…”
Me too amigo, me too.
September 9th, 2009 at 10:06 pm
BR,
Very professional I think how you handled this and nice post.
I do agree with some others above that I’m interested by your use of was severe in describing your views. Still think the larger story is unfolding. Certainly one can say today that it’s less severe relative to where we were but time will tell the rest of the story.
Regarding some of the less miserables
1. Is it accurate to compare the % decline btwn now and then considering in real money (gold) the DOW has in fact dropped as much as during the depression or should this be ignored for a certain reason?
2. Is there something more behind this chart?
http://4.bp.blogspot.com/_pCDyiFUv9XU/Sp0z6F0YKHI/AAAAAAAAF_U/MNZEDruzvBQ/s1600-h/manufacturing+sector+output.png
http://4.bp.blogspot.com/_pCDyiFUv9XU/Sp0z5saWhyI/AAAAAAAAF_M/z1RajJidz3Y/s1600-h/manufacturing+sector+output+yoy+%25+change.png
when I look at those charts I’d have to consider it’s at least possible that output sets us back as many years as it did during the depression. Perhaps something underlying the charts is making me miss it.
3. I have never looked but was PPI measured the same way then as it is now?
perhaps the two of you just need to come up with a new term for this b/c: recession, or even great recession depression, or great depression, all come up a bit short for various reasons in describing what this is.
I think this was thing that jumped out at me in your post though:
In short, while the broad economy circa early 2009 is ugly, it remains far healthier than during the Great Depression — by just about every measure, and in many cases, by orders of magnitudes.
How much of that is because of our economy versus the rest of the world, specifically some emerging markets?
September 9th, 2009 at 10:07 pm
The financial problems caused by the credit mess are happening to coincide w/major changes in the social landscape -it’s way to early to be calling no depression.
—————
Right now companies are cutting costs and earnings are firming up because people are still spending. Lifestyles are sticky. Hope is still there. It takes time for people to catch on and make the changes. A couple of years maybe but it will come.
September 9th, 2009 at 10:09 pm
I’m in the “it’s far from over camp”. The great Depression was a global phenomena so to percieve it correctly you need to look at global data. Which a couple of guys are doing over at vox.
http://www.voxeu.org/index.php?q=node/3421
Barry shows very well that things were far worse in America during the great depression. At that time Amercica was in China’s role, excessive industrial capacity, creditor nation, no social security etc and Europe was in America’s role. Debtor nation etc…
Things apparently weren’t as bad in Europe during the Great Depression as they were in America.
So I guess the questions are what will happen in China, now that their biggest customers are broke, and how will it effect the world as a whole?
I don’t buy that they will suddenly develop a domestic economy and a social security network. But these are thing they should be furiously working on
September 9th, 2009 at 10:09 pm
Mannwich
And there’s no shaking that student loan debt off in BK either. It’s a collar they’ll wear till they work it off. Ah, debt servitude, the new American dream. Just wonderful.
September 9th, 2009 at 10:12 pm
danm said: “Right now companies are cutting costs and earnings are firming up because people are still spending. Lifestyles are sticky. Hope is still there. It takes time for people to catch on and make the changes. A couple of years maybe but it will come.”
Excellent point. I’ve had similar thoughts recently while enjoying a nice green shoots summer for Mannwich. People will refuse to make drastic changes to their lifestyles until the bitter end when they are FORCED to do so. We are in a period of suspended animation that will play out in what will seem like slow motion for the next few years, in the very least.
September 9th, 2009 at 10:12 pm
i like graphite’s post @ 9:26-
truly- we don’t know what is in store- you can be an optimist as in graphites posted quote- but it won’t change what will transpire-
and it is true- in 1930- no-one had a clue that a crushing downward spiral lasting years was going to occur- so we can talk about all the wishful thinking- that this is a recession like other recessions- just a bit worse-
but the business cycle won’t change things-
there are no jobs to go back to- unless it is minimum wage or slightly better-
what brought the USA out of the depression was WWII-
where is the demand for goods going to come from now?
nowhere
September 9th, 2009 at 10:19 pm
“Better than expected” starting to wilt in the fall?
http://www.bloomberg.com/apps/news?pid=20601087&sid=aBaOuollwwzc
September 9th, 2009 at 10:20 pm
Maybe this becomes a depression — if anyone can define what that is, it would be a huge help — but I see this as a wicked bad recession, nothing more (yet).
September 9th, 2009 at 10:20 pm
Bubble, bubble, toil in trouble……..
http://www.bloomberg.com/apps/news?pid=20601087&sid=aexssVkY2XiM
September 9th, 2009 at 10:20 pm
manny and danm
what you guys are talking about is social mood and how it floats to extremes. Many people right now that have been looking for a reversal seem to think; what will the event be to cause it?
All that is going to happen is social mood will reach an extreme of optimism and will reverse.
But how can this happen?
You just saw the opposite of it in March.
And in the data, you had a 3% bullish reading in sentiment on stocks at the lows in March.
September 9th, 2009 at 10:25 pm
cv: I was being a bit snarky but not too much. I think one of the “pictures” of the GD was people starving…dustbowl, etc….
Right now, life’s big annoyance for most is when their cell phone goes out or their AAPL ipod batter dies yet again. Yes, we’re “spoiled,” no doubt. But when I think about what it ‘really’ takes to live, this nation can supply the basic necessities for its people. Whereas, in the GD, there were people who were really without food, shelter…
I’ve read some stories of people going hungry in some places and I’ve seen the ‘tent cities’ but we’re nowhere near the GD levels yet, and I’m not sure we will get there.
September 9th, 2009 at 10:27 pm
if anyone can define what that is, it would be a huge help —
——-
In Wikipedia they say 10% decline in GDP, and recession lasting more than 3 years.
They don’t say if GDP flat (not losing 10% ) because of trillions of government injections negates the whole thing. Obviously we’re not 3 years in yet.
September 9th, 2009 at 10:27 pm
I agree, Barry. I wouldn’t call it a “Depression” per se (although I like “Benign Depression”), but I think getting into trying to label this (and other things) misses The Big Picture. That’s all.
September 9th, 2009 at 10:29 pm
I think it would be interesting to compare what happened in Europe around the time of great depression. Its possible what happens in US will be a parallel to what happened to Europe as economic power was drained from the continent and shifted towards the new world.
September 9th, 2009 at 10:31 pm
@BR
I hate myself when I do this, but in this thread, I’m getting myself too bogged down into individual talking points (based on how my perspective related to those talking points on a “head to head” basis)…
But BR, this is directed at YOU in a macro perspective… I pretend no claims to being RIGHT (nor wish to be)…
Based on reading BR vs. MISH, I’d have to STRONGLY lean towards what I perceive to be the Mish argument… I’ve posted enough comments in this thread alone for one to try and piece together a synthesis of my viewpoint, but I’m going to argue yet another one here…
BR – My impression is that someone like you would, say, have MORE TO LOSE, than the average Joe if this turns out to be a “wim-dam-doodle” of a DECESSION…
To be fair, others may have LESS TO LOSE, so it is easier for them to to hold their own viewpoints (and therefore, be more cavalier with regards to their expressions)…
It comes down to behavioral sociological dynamics… In a time of compression, the “have nots” want the “haves” to be brought down, whereas, in a time of expansion, the “haves” want the “have nots” to upgrade…
So BR, if the WORST were to happen, a lifestyle such as yours, of jet-setting to Vail, signing book autographs, and “weekending” in East Egg with the Ferrari/Porsche/Bentley set would lose either its aura, or desirability… Whereas, some some creep “unabomber type”, might see zero net change in his status… As Bob Dylan put it “When you got nothing, you got nothing to lose”…
I don’t know you as a private person, therefore I can’t judge your capacity to, say, “dumb it down”… Perhaps you have a high aptitude for that (but “kicking it in Maine, in a canoe & some fishing with Kotok & the boys” doesn’t exactly cut it as ROUGHING IT if you know what I mean)… On that end, I’d rather hear you got some poison ivy (like ben earlier this summer, or like I’ve been scratching on for the past 2 weeks because you were doing some weeding in your yard, and not PAYING an unwashed illegal alien to do so)… Or something of that nature…
Anyway, the bottom line is this… Not that you need any CAUTIONARY words from the likes of me, but I’d take extra care to see if any thoughts I had, (what I personally stood to gain or lose) based on whatever the macroeconomic outcome might be, were shaded one way or another because I happened to be situated on a particular “x”/”y” point of the overall matrix…
~~~
BR: Valid points, and I have often wondered about the bias inherent in overpaid Wall St economists and analysts who only see the world through the lens of their own pocketbooks.
However, I am much more associated with the bearish than bullish camps — the Dow 6,800 forecast, Cult of the Bear, the anti-Bailout positioning, etc. — so in a perverse way, one can argue the worse this gets, the better it is for me personally.
Regardless, I calls it as I sees it.
September 9th, 2009 at 10:33 pm
I’m also uncomfortable talking about this like it’s in the rear-view mirror. Common sense tells me we should be careful with that but what do I know? I’m not “buying the dips” here.
September 9th, 2009 at 10:35 pm
There are some major differences between then and now. Some factors help, some hurt.
1st are the safety nets, it translates that the pain and suffering will not be as bad. The flip side is that since there is not as much pain and suffering things sill take longer to resolve. It’s just spread out over a longer time period.
2nd information and technology. The 1873 “recession”, the 1901 panic, and 1929 for all intensive purposes operated in a vacuum. Information was slow to arrive, in general reactions were taken without enough information. Now we have almost too much and at the same time not enough information on critical components.
It is still way too early to tell where we go. My best hope is that we go sideways for a few years. This still doesn’t prevent you from making money, it just makes it harder, and might involve direct investment, or even better direct involvement.
September 9th, 2009 at 10:44 pm
andy-
the dustbowl was a sever drought-
irrelevant to the GD- except maybe for dramatic effect- but yes- you are right- people have their iphones and other conveniences-
but they do in poor countries as well- cell phones are worldwide- does not mean you cannot be poor and on government assistance and not have a cell phone-
but if this country cannot create jobs that pay a living wage- then more and more people will be on the government “meal plan” and subsisting on jobs that pay marginal wages-
that is a recipe for a country to slip down the economic ladder-
i am starting to wonder if the Fed is not engineering a slow crash of the dollar- so in the end our products become competitive and production in this country resumes-
jobs
September 9th, 2009 at 10:46 pm
Besides this “DEPRECESSION” (my term for it) may now be facing a debtors revolt and banks that are quietly negotiating down debts & interest to cardholders. They don’t typically do that in regular recessions.
http://contraryriches.blogspot.com/2009/09/debtors-revolution-how-banks-are-shhhh.html
September 9th, 2009 at 10:48 pm
manny-
i agree-
much more to come
September 9th, 2009 at 10:55 pm
Despite all of the changes, it appears the more stays the same. We are at year 1 at minimum 3 year cycle. It’s why a won’t expose more than 5% unless I see a clear signal. nothing is yelling at me right now.
September 9th, 2009 at 11:01 pm
A friend defines the difference in a Tshirt he is selling…”A recession is when your neighbor loses his job…a depression is when you lose your job…and recovery is when Obama loses his job”…..lol, funny, but not accurate.
Besides calling it a Deprecession, my definition of what is a depression is as follows by Wikipedia:
In economics, a depression is a sustained, long downturn in one or more economies. It is more severe than a recession, which is seen as a normal downturn in the business cycle.
Considered a rare and extreme form of recession, a depression is characterized by abnormal increases in unemployment, restriction of credit, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuations, mostly devaluations. Price deflation or hyperinflation are also common elements of a depression.
Another proposed definition of depression includes two general rules: 1) a decline in real GDP exceeding 10%, and 2) a recession lasting 3 or more years.
September 9th, 2009 at 11:02 pm
There should be a name for the bursting of a credit bubble, during which monetary policy is ineffective. Because that’s what we’re in, and it’s different than a run-of-the-mill recession. The Fed’s balloon has a hole in it.
September 9th, 2009 at 11:03 pm
Thank you, Barry. At least you understand that the severity of the “crisis” was greatly exaggerated. And thank you for going on record that we are not even close to the Great Depression in “magnitudes” as you said.
I think you are being a bit conservative though. We are already well out of the recession (May/June marked the end) and we are seeing some growth. It must be painful for many who come here looking for doom or gloom from you but get intelligent thoughts on the improving economy. It helps support my position, although I am much more optimistic.
September 9th, 2009 at 11:04 pm
http://www.shtfplan.com/forecasting/gerald-celente-like-nothing-weve-ever-seen-in-our-life-time-glen-beck-show-february-10-2009_02112009
“What America has succeeded in creating is not an economy impervious to shocks, but merely one which enables their consequences to be postponed to a later date.” -Peter Schiff
~~
past that, this: “2nd information and technology. The 1873 “recession”, the 1901 panic, and 1929 for all intensive purposes operated in a vacuum. Information was slow to arrive, in general reactions were taken without enough information. Now we have almost too much and at the same time not enough information on critical components.”
needs to Die a painful Death.
we had Transcontinental Telegraph service by the mid-1850’s.
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=invention+of+the+Telegraph
September 9th, 2009 at 11:05 pm
Regarding the markets, tomorrow could see a really sharp rally. Consolidation is nearing completion and is like a coiled spring ready to jump. Tomorrow may get the catalyst from economic numbers.
September 9th, 2009 at 11:08 pm
I agree with posters commenting that this is far from being over.
I had a similar debate with someone and they pointed out all the safety nets in place that were not available in the 1930’s and I countered saying while this is true, it does NOT solve the structural problem which is too much debt.
So instead of 10 years of horrible economic numbers, the USA will have 20 years of just bad economic numbers, like Japan, if we continue with the foolish policies of rewarding bad behavior and bailing out failed companies.
September 9th, 2009 at 11:08 pm
I’m think’n we’re in a “Compression”.
(A little past a Recession but not quite at a Depression. )
September 9th, 2009 at 11:10 pm
this is a great post, a systematic chillout from the depression talk….but none of it matters
because apparently, it’s been dictated that the stock market should go up every single day until everyone who needs to raise equity capital has been given a chance to do so.
I dont know who exactly is in charge, but certainly, this is the program. Dougie Kass counted 11 different secondaries announced just last night.
when the last homebuilder or REIT has done their offering, maybe the powers that be will allow for a correction.
I once thought the earth was round, but the 2009 rally has shaken all of my scientific beliefs to their very core
September 9th, 2009 at 11:15 pm
TheReformedBroker: Dougie Kass is another one who was lucky enough to call a bottom but has looked foolish trying to call the top – really foolish.
The market will continue to rise because the economy is improving daily. No conspiracy, no weird science, just good ol fashioned improvement in the numbers.
September 9th, 2009 at 11:19 pm
@Todd
“My best hope is that we go sideways for a few years.”
I had to chuckle when I read that… NO OFFENSE TO YOU WHATSOEVER, TODD… Just my initial thought when I considered the likelihood…
My thoughts?
NO FUCKING WAY!… Why?
Because if we have embarked on the road (as it seems we have), that our economic fortunes rest in the hands of the likes of Ben Bernanke, Larry Summers, TG… I’m not even going to bring Obama into this argument (let’s just assume he appointed people who act in different pools & eddies than “O” himself is capable of understanding)…
Well look… It’s ABUNDANTLY apparent, that the raping of America is in full force as we speak… I’m not even SUGGESTING partisanship here because it got started WAY before poor O came into office (he’s just the latest “Curly” to the original “Shemp”)…
So…SIDEWAYS?…
It’s clear to me that there is no PROFIT in “sideways”… Instead, there is full engineering going on to create an intensifying series of BOOM/BUST cycles (within macro wavelengths), for Goldman & JPM to profit off of…
“Bully for you…Chilly for me” (DAVID BOWIE)…
Strap in! (It might not end up being so bad if your name is Wanger and can “indovinate” reversals to within fractions of decimals)…
September 9th, 2009 at 11:20 pm
…….and call 50+% rallies well AFTER the fact.
September 9th, 2009 at 11:24 pm
Good Post BARRY,
You & I don’t always agree…and I think you’re too upbeat, but…you’re right, FDR built a house of steel re-enforced concrete that neither yesterdays nazi or todays nihilist can burn or bomb.
It’s good when a dude with a rep can face reality bare fisted. Bring up the issue and knock it down, what we lack is good leadership, that is why we fear. With good leadership we have nothing to fear.
Good on you!
& God Bless FDR
September 9th, 2009 at 11:25 pm
BTW
Between the time that BR initiated this LOVELY thread (8:15 time stamp), and now…
9/09/09 9PM 9 minutes 9 seconds (not military time) has come and gone (on the EAST COAST)… For the 2nd time this century… Time comes and goes quickly doesn’t it?… BE PREPARED THUS…
So Thor & I-Man, karen and all the rest of you have less than an hour to contemplate my homily on that notion…
September 9th, 2009 at 11:27 pm
What an amazing thread! Barry posts another awesome, rational position. Which has a very good chance of being right. But just look at all the blow back from the uncomfortable bears. This is just the type of thing they don’t want to consider. They have too much invested in the worse case scenario.
At this point, I am seeing it is as controversial as the old canard of a red herring about Community Reinvestment Act causing the crisis. Interesting.
The time for anticipating the crisis, and leveraging that knowledge for gain is probably over. Seems like some people just can’t let it go. Just because we are probably in a secular bear market, doesn’t mean we are in a second great depression.
The government (and other governments around the world) have shown that deficits don’t matter (until they do – which can be decades down the road). There is a good understanding of debasing currency to manage debt. There is now also a track record of massive government intervention in a financial crisis. Next time, they will actually do it better with the benefit of this experience. Look at how many consecutive bubbles we blew through before the crisis hit. Now we are actually on a path where we will look back some day (worst case scenario here) and say, “look how many financial crises we blew through with bailouts and massive government backstopping before the ‘you know what’ really hit the fan.”
Even in the great depression, the rich (some) did fine. Everything didn’t end. Barry is a guy with intellect, energy, drive, and vision. CV, BR has nothing to worry about.
Sour grapes for all who are missing this bull market. So sorry for you.
Finally the crisis came, and you all were right (once), why can’t you let it go? Get back to the real world, this is not the end of the world. It’s not a depression. This “just you wait and see” stuff is, well, I’ll take the other side of all that action.
September 9th, 2009 at 11:31 pm
Barry, could you please have this dialogue with the following clowns: Peter Schiff, Nuriel Roubini, Doug Kass and Bill Bonner. Ok, and throw Bill Fleckenstein in the mix too. While you are still too conservative on your assessment of the current economy, at least you understand the worst was exaggerated and at a minimum, stabilization began in the spring. I’ve had enough of the above mentioned folks, so please, even with your conservative view where we are, give them a reality speech. Please.
September 9th, 2009 at 11:34 pm
Nice comparison between the current whatever-it-is and the Great Depression. Now let’s see that same sort of comparison between the current ONGOING whatever-it-is and any severe recession you care to name. [BR: Its far worse]
And bear in mind that we are more or less forced to use the Great Depression as our only prototype for the “depression” concept, as the 19th century (and earlier) financial panics were in such a different economic and national backdrop as to render them useless for comparison purposes.
I suspect that you will find that the current (ongoing) whatever-it-is falls in between the two archetypes, and more or less forces one to come up with some sort of definition as to what constitutes a generic “depression”.
If we are to use the Great Depression as our marker, with nothing being considered to be a depression unless it definitively exceeds the Great Depression in most ways, I think that is a bit disingenuous and leads one nowhere.
I also think that if we find ourselves with unemployment in excess of 8.5% (to arbitrarily pick a number) for 4-5 years (also to arbitrarily pick a number), with capacity utilization below 75% for that period, then you are going to look pretty silly if you want to call THAT a “recession” and state that it ended when the stock market bottomed in March of 2009. Depressions and recessions are economic things having a wide breadth and depth, while the stock market is a comparatively narrow thing by comparison.
We will see what develops. As divided as people are over this “how many angels can dance on the head of a pin” debate, someone is going to wind up with egg on their face.
September 9th, 2009 at 11:34 pm
@laughing….perfectly stated! “Finally the crisis came, and you all were right (once), why can’t you let it go? Get back to the real world, this is not the end of the world. It’s not a depression. This “just you wait and see” stuff is, well, I’ll take the other side of all that action.”
Yes, the crisis of a lifetime came their way yet they still want more. Foolish, naive and, sadly, not making any money in the easiest market of my lifetime. Cheers!
September 9th, 2009 at 11:36 pm
@laughing: “Missing the rally” couldn’t be further from my concerns at this point. I have plenty of long exposure in my retirement accounts that have done well during this recent run. Did you stop to possibly think that many of us are actually concerned with the direction of the country (and generations beyond mine?) and not just concerned with gathering mere crumbs for our greedy selves? I know, what a quaint thought, isn’t it? To me, your “get-what-you-can-while-you-can-any-way-you-can” mindset speaks to the cultural rot in this country that is slowly bankrupting us ethically, morally, and financially. Enjoy your paper gains while the country burns. How patriotic.
September 9th, 2009 at 11:36 pm
The Great CNBC Sucks is the 877th person to agree with Jeff’s original comment. This is like the first thread I have seen in a long time where just about the entire gang — including Mark E. Hoffer even, but no karen, sadly – posted. Heck, most of the Ritholtz fantasy football league is here – cvienne and CFA are the prohibitive favorites, by the way – so I figured I would resurface for the reunion. It’s like February 2009 again, if only for one night.
The economic abyss is ahead, not behind…but these days, I just like talking about how cvienne and CFA are the prohibitive favorites in the Ritholtz fantasy football league.
September 9th, 2009 at 11:38 pm
@Wanger: I’d give you and others far more credit for your so-called “predictions” if you had actually made them here at TBP. Where were you? After all, you said you’ve been a regular here for a long time. Why so quiet then? Please explain.
September 9th, 2009 at 11:39 pm
ahab- yes, i understand the dustbowl was irrelevant to the real estate collapse and debt collapse that began the GD, but the severe drought and land mismanagement of the midwest states sort of exacerbated an already tough scene….sort like “anything that can go wrong will go wrong…” perfect storm stuff….
September 9th, 2009 at 11:40 pm
I say “toe-may-toe”. To me, this is a depression. But, that doesn’t mean you can’t make money going long/a-long for the ride up in nominal dollars.
September 9th, 2009 at 11:40 pm
Mannwich: Melodramatic much? laughing, others and myself, aren’t “gathering mere crumbs for our greedy selves”, we’re making money to pass along for generations. The country is fine, the best in the world. We’re all patriotic and, myself, very optimistic. That’s why the pessimism of people like yourself baffle me. It’s as if you don’t want the country to succeed. That’s the problem I have with the doomers in general – pessimism. Plain and simple.
September 9th, 2009 at 11:40 pm
@CNBC: Since cvienne is the “Tiny Tim” (commish) of our league, I plan to have him merely change the rules midstream to help my team (The Lispy Lloyd “Blankfiends”) win it all, and then I’ll split the (fake paper) proceeds with him. After all, who cares how one “makes money”, right? Just gotta get on the train while you can. USA! USA USA! Definitely something to be proud of.
September 9th, 2009 at 11:41 pm
Yeah, Andy. Imagine if Katrina happened *after* the financial crisis instead of before. Severe flooding and land/water mismanagement sort of exacerbated an already-tough scene.
September 9th, 2009 at 11:41 pm
FDR built a house of steel re-enforced concrete that neither yesterdays nazi or todays nihilist can burn or bomb
What FDR “built” was a series of safety nets rated for 40 pounds, which we’re all desperately hoping will somehow hold, so that we are not forced to choose between landing on the “sovereign default” or the “currency hyperinflation” spike.
September 9th, 2009 at 11:42 pm
@Wanger: Laugh all you want big guy. There’s a difference between being realistic about the macro picture and being optimistic about one’s own prospects. My own personal situation is more than fine but it’s not just about me. Go ahead and laugh. It’s a sign that a top is nearly upon us…….and of course, by then, as all trolls do, you’ll disappear from TBP and reappear under another handle AFTER the next bubble-induced rally to proclaim victory.
September 9th, 2009 at 11:44 pm
1. laughingAllTheWay Says:
2. HarryWanger Says:
——–
We’re at 2. Has anyone kept track of how may are needed for the market to roll over?
September 9th, 2009 at 11:44 pm
Sorry to join this party late. Plus, drank some port earlier. So…”nytol”
September 9th, 2009 at 11:46 pm
Again, it’s quite easy to come on here after the fact and pound your chest. I reserve my respect for those who make their calls BEFORE it happens and faces the music either way. Wanker is not one of those posters here at TBP.
September 9th, 2009 at 11:46 pm
I find it interesting that those who consider it a fait accompli that it is a “recession” do so because the stock market has bottomed and has has had a roaring rally — in effect seeing the “economy” through a stock-market lens — while those who see it as closer to a “depression” are seeing the “economy” through a much broader range of indicators, of which the stock market is only a single indicator that is only loosely connected to the economy.
Allow me to remind y’all — THE STOCK MARKET IS NOT THE ECONOMY.
What will the recession-is-over crowd do if the NBER does not find grounds to declare that the recession is over this quarter, or the next, or if it has not been decreed “over” by the standards body in charge of such things a year from now?
September 9th, 2009 at 11:47 pm
LOL: I can’t believe how many times I’ve heard this exact statement from ill informed bears during the past several months “My own personal situation is more than fine but it’s not just about me. Go ahead and laugh. It’s a sign that a top is nearly upon us…….”
-Their personal situation is always fine. It’s not about them, it’s about everyone else. Very magnanimous.
-It’s always a sign that the top is almost here when realists post economic truth regarding growth.
Over, and over, and over again. Bear after bear after bear. I admire their consistency – it’s almost as if the same person writes the same nonsense on every blog on the net.
September 9th, 2009 at 11:47 pm
@ the reformed broker – a little lesson for you – the earth is not round unless “we” say it is round. Scientific beliefs, eh? Too many technical, scientific, accountant types looks for the reason, the logic, the rational, the bullet proof ’cause and effect.’ This is just a trap.
Society and its constructs (economies, bureaucracies, banks, governments, corporations, etc) are not engineering marvels which follow “laws.” They are living beasts which are only understood through the eyes of the open minded who are willing to sit with uncertainty.
Barry has done an amazing job of seeing the crisis coming, but not getting stuck focusing on the same story as so many who saw it coming have. I’m very impressed with his ability to reason through the uncertainties, and not cling to one opinion. Look at all the bears who are stuck being bearish. Yes they were right once, but they have been wrong before, and now they are wrong again.
And another thing. I’m sick of hearing people who make market calls say “I’m always early.” Well, if you are always early, then you are always wrong. Can’t you adjust once you know you are always early?
September 9th, 2009 at 11:50 pm
laughting…perfectly stated: “Barry has done an amazing job of seeing the crisis coming, but not getting stuck focusing on the same story as so many who saw it coming have. I’m very impressed with his ability to reason through the uncertainties, and not cling to one opinion. Look at all the bears who are stuck being bearish. Yes they were right once, but they have been wrong before, and now they are wrong again.”
My exact sentiments.
September 9th, 2009 at 11:50 pm
@Wanger: I’m NOT a trader. Just an average person and concerned citizen trying to protect mine and my wife’s financial interests. I don’t DAY TRADE the market. If you were a regular here, you’d know that. And go fuck yourself for questioning my integrity and honesty.
September 9th, 2009 at 11:50 pm
@CNBC…you’re going OT there….BR might go off the reservation….CFA will be a tough match for me this weekend, but if I take him out, it should be agreed that my side is the favored for the season….
Back OT: Wunsacon…I’m not sure if we’ve had a eco-disaster similar to the Dust Bowl…hurricanes are sort of one-off deals that affect smaller areas….that who Dust Bowl deal affected a huge area over several years…I”m sure someone will be able to come up with some great examples to counter that….but I can’t think of any late at night now…
September 9th, 2009 at 11:51 pm
It would be difficult to believe that somebody with a book on the NY Times best seller list would perceive that we are in a depression. There is no question Barry, YOU are not in a depression.
Please remember that the majority of Americans have been getting trashed over the past four decades. It matters not what you call it. Intellectualize, rationalize, hypothesize, define it any way you wish, but there are millions of families in this country seriously suffering, who do not spend time chatting with strangers over whose Ferrari is whose.
Barry, sometimes you seem really out of touch with the average person.
September 9th, 2009 at 11:51 pm
Mannwich: you forgot to mention that you’re obviously a classy guy. LOL!
September 9th, 2009 at 11:52 pm
Cvienne, don’t torture me with esoterics. (i can make up words, right.) personally, i would like to be wrong about my current negative outlook; but I think jobs are all important and I just don’t see exciting growth in that area.. negative growth, actually..
September 9th, 2009 at 11:52 pm
Barry has done an amazing job of seeing the crisis coming, but not getting stuck focusing on the same story as so many who saw it coming have
———-
Sorry. He still thinks the economy is crap. Only he understands there’s a difference between the economy and the markets.
September 9th, 2009 at 11:52 pm
Jeff, good job working the FF angle in without going OT. That’s the way you can sneak a side discussion in without making Mount Ritholtz blow up.
Ritholtz – Hi there. I have been calling you “Mr. Big Head” on your namesake fantasy football league, because SOMETIMES it appears fame has gotten to your head. It’s not a criticism; far be it for me to criticize a fellow megalomaniac. You don’t mind, do you?
September 9th, 2009 at 11:53 pm
In the long run I would prefer to have BR in my corner over Mish. What Mish is proscribing is a doomsday scenario, and he hates governments doing anything to support our economy. His view is a do nothing view, and I prefer a do something view, even if it might not be perfect. I think that the masses will agree with me over Mish. This might create increadable uncertainty for time to come, and that might mean the price of gold and other paranoid commodities will rise. But my view of markets is that a stallion can be a wonderful horse to follow, and stare at, but at some point that stallion needs to be broken. That is our markets, and we need to understand that at some point the stallion can’t be let to run amok, and needs to be broken. Bring out the whip and the lash. Tame that horse and ride it.
September 9th, 2009 at 11:53 pm
@The Great CNBC Sucks
Glad to make your acquaintance AGAIN… on this thread…
Anyway… BR… It’s a GREAT Thread… Probably the best one I remember being part of since I fell upon this site in March or April of this year…
For ALL OF YOU… Good luck… Excellent comments, insights, & opinions…
For all of you in TBP Fantasy Football (especially – The Great CNBC Sucks – who I play in Week 1 and has a monster team & has prepared himself in a MONSTER way for success in Week 1)… Good Luck as well…
September 9th, 2009 at 11:55 pm
“..Society and its constructs (economies, bureaucracies, banks, governments, corporations, etc) are not engineering marvels which follow “laws.” They are living beasts which are only understood through the eyes of the open minded who are willing to sit with uncertainty..”
–laughingAllTheWay
Nice Point~
“Barry has done an amazing job of seeing the crisis coming, but not getting stuck focusing on the same story as so many who saw it coming have.”
x2
BR is a quality Thinker, and an excellent Trader. Broad-mindedness and varied interests are key Staples.
September 9th, 2009 at 11:58 pm
@Andy T
Anecdotally – China is experiencing the same “land mismanagement” DUSTBOWL issues that the US faced in the depression era…
…an eerie co-incidence!
It came down to the failure of maintaining the fertile topsoil level (an issue that I’m keenly aware of on my farm)… It affects weather patterns… It’s happening in China as we speak…
September 10th, 2009 at 12:01 am
@HarryWanger
A pessimist is simply a well informed optimist
September 10th, 2009 at 12:03 am
@Andy T
…for example,
The “pollution” that many were describing at the Beijing Olympics last year wasn’t pollution at all…
It was DUST… (from the encroachment of bastardized farmland)
Much like the Oklahoma dust reached Washington DC in the 1930’s…
again… an eerie coincidence (economically speaking)
September 10th, 2009 at 12:03 am
I believe we are in a far worse situation now and it will more slowly play out. The banks are technically insolvent and are legally allowed to have 0% reserves. So contrary to popular belief, your account says ZZZ but the banks don’t really have it. The FDIC is broke, where is this extra FDIC insurance money coming from? We are creating a debt burden which cannot be paid back. It’s irreversible. Steve Keen’s debt watch is a good source for understand what neoclassical economists don’t. What about the level III toxic credit and interest rate derivatives? Do these not matter or at the end of the day is someone going to collect? If someone wants to collect, there’s gonna be a lot of paper being printed much a kin to Zimbabwe (well not exactly). I think BP is on the take now.
September 10th, 2009 at 12:05 am
@Karen – 11:52 says “i would like to be wrong about my current negative outlook”
I hope I’m wrong too.
Looks like it will be a long multi-generational slide to a lower standard of living for us. It won’t be so bad really. We already have a great standard of living, and we are getting free healthcare soon. Losing it little by little to a sustainable level will be fine.
September 10th, 2009 at 12:05 am
Well maybe sideways is due to my Fantasy draft going on tonight. I can float a little hope, or maybe channel a little Franklin. His unbound optimism only translates to sideways for me. For me the summer is over, the workload is completed so that I can focus on the Macro.
I won’t deny if the current Fed actions do not prevent the total washout that could happen we could end up with something worse than the GD. Then on the other hand I read something about panics and it’s the ones in charge that do the panicking. Why because they have the most to lose. Joe six pack really doesn’t care, he doesn’t have as much to lose. The joe six packs I know, have still not been really troubled so far. They don’t need to replace their 50″ big screens that they bought on credit. Nobody is going to repo, it’s not worth the effort.
For info tech, I’m referring with what can be done with the information, not the news brought to you by the telegraph. The telegraph of yesteryear is like twitter today. All headlines no substance. You could make a split second decision to make a buck, but long term it translated to Nada. The tools to consolidate the information and take action were primitive.. It took time to do that, during that time lapse decisions were made, actions taken. Usually in the wrong direction.
The point I was trying to make is that we have the tools to shorten the timeline. Do we have the political will to shorten it. CA will tell the tale. In the past CA was the bell weather of trends, I think is still holds true today.
September 10th, 2009 at 12:06 am
cv. As you can probably guess….I don’t believe in coincidences….or accidents….
As Master Oogway, from Kung Fu Panda, brilliantly explained: “There are no accidents.”
[You'd have to have seen the movie to understand the humor there. It was a friggin' great 'kids' flick BTW]
September 10th, 2009 at 12:09 am
HarryWanger
A pessimist is simply a well informed optimist
———–
If I were older, I’d be an optimist. But I know the hard times will come in MY lifetime. For example, la Caisse de Dépôt du Québec (manages SS equivalent for Quebeckers) just announced that they would not have enough money for today’s 40 and under unless some changes are made. These involve either increasing premiums, cutting benefits or delaying retirement. Guess which option will be chosen? Since the deciders are 50+… increasing premiums I’m sure!
Just a year ago , they were bragging and or reassuring us that our public pensions were very well funded. LOL.
September 10th, 2009 at 12:14 am
Awesome thread tonight.
Lots of great comments.
September 10th, 2009 at 12:16 am
Well tomorrow we see more economic numbers and, likely, more improvement. Futures are already anticipating a big move tomorrow. We’ve consolidated and the spring is coiled. And the beauty of it is, if you missed the rally to this point, you still have 20% more gains through the end of this year – it’s not too late. Until then, smiling while sleeping.
September 10th, 2009 at 12:19 am
@Todd
Much appreciated your POV (from my perspective), this evening…
You’ve threaded a fine needle…
And I hope your DRAFT went well… (I say that as an AFFICIANADO)… Are you ready for some football?
September 10th, 2009 at 12:22 am
@karen
Was I torturing you on something my dear? If so… Pray tell what?
As I reflected… our individual viewpoints were weavingly symbiotic…
September 10th, 2009 at 12:26 am
@BR
Lastly… Hell, this might not EVEN be lastly because I’m still STOKED here on the east coast…
Between this thread, and my ROCKBAND2 BEATLES version…cvienne is rocking on in to the night… (mostly basslines so far, but I’ve done some Ringo Starr drums as well)…
But BR… THIS, IMO, HAS BEEN THE BEST THREAD EVER! Thanks bro!
September 10th, 2009 at 12:27 am
“Futures are already anticipating a big move tomorrow.”
Harry, with that sort of statement, you’ve told me everything I need to know about you….funny stuff that.
Good night all.
September 10th, 2009 at 12:30 am
My thoughts exactly, AT. I did a double-take on the futures. Up barely a percent of a percent and they are “anticipating a big move tomorrow”. No more feeding the trolls. Bye bye Wanker.
September 10th, 2009 at 12:37 am
Ritholtz, you don’t mind if I let my fantasy football peeps do my economic debating for me, do you? I realized pretty much everybody I respected here was on the same page macroeconomically on the 315th time I commented on your blog.
The Great CNBC Sucks has decided not to worry anymore about your “big picture” things. I have decided to live, to go beyond depression or recession. Heck, I have gone beyond emo or indie. I have become…FASHION-FORWARD.
September 10th, 2009 at 12:37 am
Mann. Well there’s that and the fact that the “futures” don’t “anticipate” anything. People who are new to markets are under that impression they do because of the namesake….but afterhours like this..the “futures” ARE the market as it’s just a derivative instrument….so….yeah…the market is up a smidge after hours….need to get to bed.
New folks trolling around on the TBP as the market churns higher….that’s interesting in itself.
September 10th, 2009 at 12:40 am
@AT: Agreed all around. Remember, you don’t believe in “coincidences”. Getting tired. Hitting the hay myself.
September 10th, 2009 at 12:40 am
haven’t read all the comments but one thing is clear, we have no economy without the gov’t right now. housing and autos have gov’t aid, cash for clunker yada yada yada. and there is no private mortgage investor, it’s all government. so how do we know the worse is over when the gov’t is backstopping everything?
September 10th, 2009 at 12:45 am
Todd,
to be clear, w/this: “For info tech, I’m referring with what can be done with the information..”
remember that those Men, without Polarized lenses, were, still, able to See. And, without Pentiums, were, still, able to Calculate.
sometimes I think we, too readily, forget that a Healthy Man, given a Cane, will begin to go Lame.
past that, I hear your point, growth of InfoTech has deepened the pool of potential knowledge, though the Telegraph, by ‘73, certainly, was more akin to AIM (;
http://www.telegraph-history.org/transcontinental-telegraph/index.html
http://mysite.du.edu/~jcalvert/tel/morse/morse.htm
September 10th, 2009 at 12:47 am
While I can’t speak authoritatively about how severe real estate declined during the Great Depression, I can speak from family history about one area of the country back then.
Compared to most of the country, and in strong contrast to the rest of Los Angeles, Hollywood was a prosperous community during the 1930’s. The great film studios were almost all based there, and movie going steadily climbed throughout the 30’s. With vertical integration – the studios controlled everything from their contract-locked stars to the chain of theaters – they brought in, for the times, an incredible cash flow.
Hollywood was more than just the studios. Large numbers of retail shops lined the major streets, selling everything from hats to hamburgers. There were substantial office buildings. Movie theaters of course, grand palaces like Grauman’s, and small neighborhood ones. Live theater as well, that ran the gamut from Shakespeare to vaudeville.
There was a wide economic range of residences, all within a fairly compact area. Mansions in the hills and in some enclaves here and there, single middle-class homes, upscale apartment buildings, garden apartments, and places that were just above being flophouses.
You would think, with a thriving local industry, much lower than national average unemployment, fairly decent wages, that the real estate market would have been okay, if not terrific.
Not so.
The Hollywood real estate market, during the 1920’s, had undergone the kind of boon period similar to what we experienced this decade. Prime property in Hollywood had increased in price almost 10 fold from 1919 to 1928, the peak year. (Interestingly, more than a year before the start of the Great Depression.) Other property and residences hadn’t increased quite as much, but single family homes generally had tripled or more in value.
Prices were generally flat during 1929-1930, but then they began to steadily collapse. At the nadir, you could buy commercial real estate at 40 cents, or so, on the dollar of replacement cost, homes at a 20-40% discount to the replacement. In effect, land was valued at zero.
Well, you might say, there was a bubble… True, but there also was that healthy economy, the collapse of real estate didn’t significantly impact the area’s income. You would expect prices to drop a lot, but not that extremely; and, from what I’ve read and heard, declines of that magnitude occurred in most of the major cities during the 1930’s.
[Fortunes were made in a few years, literally, in New York, by people who bought office buildings and apartments in Manhattan in the 30's - and saw the values sky rocket during the 2nd World War as demand far outstripped supply]
So, what happened that caused prices to fall to incredibly low levels – far lower than anything we’ve seen now. Perhaps a version of Keynes famous observation (not original to him, but he made it popular), the “Paradox of Thrift.”
People who had the money to buy, chose to save instead, which stifled demand and drove down prices. Declining prices created a deflationary attitude – why buy now when it will be cheaper later – which further added pressure on pricing. Not to mention putting economic pressure on those who needed to sell. A downward cycle that can last until attitudes change; a change that is psychological as much as monetary.
Sort of a segue: Sir John Templeton was quoted a few years ago as saying he wouldn’t buy real estate until he could get it at 40 cents on the dollar. (This was before the current decline). He grew up during the 30’s. I think he recalled it very well, how bad real estate can really get.
I rather doubt that prices will fall to those levels, expect in a few cases, but it is illustrative of the difference of the eras
In real life terms, the economic similarities between then and now, are very narrow.
Be thankful.
September 10th, 2009 at 12:49 am
@cvienne
When I was younger it was Friday, Saturday, Sunday, Monday for football. High school, College, Pro. Now not so much, waiting for the kids to get to an age to start it all back up again. My fantasy league, with my luck half of them will get injured this weekend.
With everything else, if companies are unwilling to change their ways until nearly death, or large losses place them on the verge. I hold little hope for the political will to pull through unless forced. All we can do now is thread the needle.
September 10th, 2009 at 12:52 am
surprised to see mish say there’s no NEBR definition of recession. makes me think he IS a kook.
on the other hand…some of your points are kind of weak. especially if you’re like me and think that we’re really in the first stage of this collapse. a lot of the things you mentioned as strong points in the economy could be caused by the structure raised around the system, instead of real fundamental economic strength.
~~~
BR: Ahhh, thats a very different debate — THIS MIGHT BECOME A DEPRESSION — is a very different argument than IT IS A DEPRESSION.
I allow the possibility that this could morph into something much worse. When that happens, we can discuss it. Otherwise, its hard to see the current run of minus 6% GDP equaling what a real depression looks like.
Maybe we should forget the 1930s (Mish’s comparo) and look at the 1907, 1890s, etc.,
September 10th, 2009 at 1:02 am
I agree with Manny that it is too early to call it. Still no later than the 5th inning probably earlier. But qualitatively, a recession is an inventory correction, as soon as excess production is removed, growth resumes. A depression is a debt/credit contraction. Until the excessive, unproductive debt is eliminated or reduced, sustainable growth will not occur. If we have bottomed out here already, it is a recession. If we “double dip”, which is likely because it seems that it is only government spending which is keeping us afloat, then we will be calling it a depression. Question: Was Japan’s experience in the last 19 years a recession, depression or something else?
September 10th, 2009 at 1:08 am
Ok I’m going to offer the cvienne ALL-STARS moment for this thread tonight… (Simply because I’m still awake and playing ROCKBAND 2 Beatles bass rifts)… Which qualifies me as less than zero (on some scales)…
1. Top prize goes to BR – The ULTIMATE Thread…EVER…Thanks!
2. Silver Medal goes to MEH… Way to stay focused, my wordsmith… U never cease to amaze…
3. Bronze goes to laughingAllTheWay/Harry Wanger… I ADMIRE your individual verve and steadfast natures (amidst the full bloom of presently outrageous fortune)… Congratulations! May the force be with you… & especially, HW, sage that you are… Dude, will you please shower us with RINGING THE BELL at the eventual top (assuming there ever is one)?…
HONORABLE MENTION
hue: Thanks, simple, clear, well said
Todd: I’ve already expressed my compliments
impermanence: Courageous comment… applauded
TheReformedBroker: Thumbs up
cn: as always, check plus plus
Manny, ahab, ben22, TheGreatCNBCSucks, Andy T: Well you know I love you guys, but tonight being the ‘eve’ of the 2009 NFL season, it’s every man 4 himself…
ARE YOU READY FOR SOME FOOTBALL?!
September 10th, 2009 at 1:12 am
cvienne, go to sleep. You have to get up early to grow your pot and strip mine the West Virginia landscape in the morning.
The Great (and Fashion-Forward) CNBC Sucks
PS: Back to retirement for me. Transor-Z, stop counting.
September 10th, 2009 at 1:14 am
Interestnig use of the paste tense BR (“was” a severe downturn). I doubt if Mish is using it.
The Fed can spit shine the figures all they want. The edge of the woods is a loong way off yet. My read of things says we’re in for a very bumpy ride – all across the globe.
September 10th, 2009 at 1:22 am
Jesus Christ (not to be offensive to anyone)…
But while I was making my 1:08 post, Second Look just slipped in and took the SILVER MEDAL…
Sorry MEH…
& BTW, 2nd Look… I appreciate your lack of punctuation and spelling errors (although I need to double check)…
Wanger? laughingAllThe Way? Alas, no medals to put in your respective display cases… Tough & confusing, this life, isn’t it? Full of last minute surprises…
September 10th, 2009 at 2:21 am
@HarryWanger,
my 40 trillion dollar question for you is, can these two things occur at the same time:
1. a self-sustainable economic expansion
2. a significant deflation of a mountain of private debt
?
rc
September 10th, 2009 at 2:27 am
DAMN you people.
I turn my back for just a few hours and you post all this stuff.
Seriously BR thank you for this website, but a much BIGGER thank you to all of you for your input.
At work I sneak on line press ctrl+A, then ctrl+C, then open word, then ctrl+V . And I spend more time reading you……..F’rs then doing actual work. WOW after seeing this post I now know what I will be doing at work in the morning.
I have learned a lot over the last few months and hope to learn even more.
Never mind my little bro fanky411 or my uncle Harry they do not always come around very quickly
September 10th, 2009 at 2:47 am
@HarryWanger:
“Well tomorrow we see more economic numbers and, likely, more improvement. Futures are already anticipating a big move tomorrow.”
Quite possible, at least regarding international trade. Trillions of dollar stimulus spending by governments all over the world have to show up somewhere. It’s not so difficult to calculate how much the GDP is increased by debt expansion. This will probably be interpreted as a good reason for the stock markets to rally.
As for jobless claims. These will show with high probability that the US economy lost more hundreds of thousands jobs. This will probably be interpreted as a good reason for the stock markets to rally.
“We’ve consolidated and the spring is coiled. And the beauty of it is, if you missed the rally to this point, you still have 20% more gains through the end of this year…”
Also possible. The markets are a bad indicator of economic reality, anyway. Expectations of investors can stay detached from reality for a very long time.
rc
September 10th, 2009 at 2:57 am
@Harry Wanger:
“-It’s always a sign that the top is almost here when realists post economic truth regarding growth.”
Since you perceive yourself as the one who posts the “economic truth regarding growth”. I am always interested how people like you have achieved such a state of great knowledge, and I am very eager to learn from them. Therefore, I would like to ask you how you have established what the economic truth regarding growth is. On what is your superior insight founded?
Thanks much in advance.
rc
September 10th, 2009 at 3:16 am
Dividends, Earnings, and Stock Price Trends have Tracked the Great Depression
http://www.thoughtofferings.com/2009/09/dividends-earnings-and-stock-price.html
September 10th, 2009 at 3:19 am
laughingAllTheWay,
obviously you have become much more optimistic, since the time when you agreed[3][4] with my comments[1][2] on June 11. Apparently, now you have developed a strong opinion where it will go from here. You are calling this a bull market and pity others who aren’t.
[1] http://www.ritholtz.com/blog/2009/06/nasty-fed-emails/#comment-181993
[2] http://www.ritholtz.com/blog/2009/06/nasty-fed-emails/#comment-182034
[3] http://www.ritholtz.com/blog/2009/06/nasty-fed-emails/#comment-182005
[4] http://www.ritholtz.com/blog/2009/06/nasty-fed-emails/#comment-182041
I’ll stick with my comments back then until further notice.
rc
September 10th, 2009 at 3:52 am
Good thread.
My 2 Indian rupees.
In India, what I see is banks have again started lending, yes, to Real Estate also. Media is abuzz with Indian growth story, a few IPOs have also tapped the market and the autumn of 2008 is now only a story to be told. The mood has swung from fear to “the worst is over”. But as we all know, the mood swings too often.
How can the worst be over if indebtedness of US continues to rise while consumer deleverages. There is just way too much uncertainty as to how this is going to get sorted out. Point is it is not sorted out yet.
BR may be proven right ultimately, but I think not. It may/may not be a depression but looks like it is going get much worse before it gets any better. And the best part is, as always, no lessons have been learnt and the problem continues.
Disclosure:
In cash. Would continue in cash.
No house ownership.
Itching to short, but not short yet.
September 10th, 2009 at 4:42 am
@cvienne
> We’re milliseconds away from losing what we rely on as ENTERTAINMENT to keep the Romans happy with their bread and circuses…
I expect to be watching you host ‘Flip My GARDEN’ on HGTV in 10 years. That, plus playing Beatles Rockband should get the nation through to better times… if there is such a thing.
I’m enamored of the crowd that thinks 2009 looks like 1930 and that it’s too early to tell where we go from here, but it doesn’t look pretty.
I’m bummed I didn’t get in to the TBP football league but I did find a runner up league at work. I AM READY FOR SOME FOOTBALL! I hope y’all enjoy the season.
September 10th, 2009 at 5:32 am
Biggest difference between 1929 and today?
In 1929, America had little debt. Today, America’s $10 trillion debt gives us little wiggle room and puts us at a severe disadvantage to our competiters.
That’s a huge difference!
September 10th, 2009 at 6:38 am
Wait, it’s all over!? Sweet! So this FIRE economy stuff works! I guess I should toss out my Engineering degree and go back to school to get an MBA, maybe an RE license too.
September 10th, 2009 at 6:52 am
I’m starting to believe the older I get the less I know, kind of a benjamin button phenomena. Kind of in Todd’s camp……..understand AllTheWay, and he may be correct………………very hard though not too think of every american as and individual AIG, we have approx 200k in govt debt, average income 50k, if you donate 10k in taxes, the numbers are just as horrible when you consider present costs and what is left of the 10k to go towards the 200k…………..so that’s my personal prisoners dilema, if money is all a fantasy I should be fine, if it’s not, uh-oh………..if you had too call it now it’s definitely a severe recession……what does the future hold…………….has japan been in a 20 year depression, or reccession, there market is off 75%…………………..one thing is sure though, as long as credit flows the band plays on……
September 10th, 2009 at 7:18 am
Very useful.
This again goes to show how deeply mired the US economy is.
If I look across the atlantic, it seems to be returning to stabilisation. Europe stabilizing and emerging stronger
Does anyone has a view on this?
September 10th, 2009 at 7:45 am
In 1929, America had little debt. Today, America’s $10 trillion debt gives us little wiggle room and puts us at a severe disadvantage to our competiters.
That’s a huge difference
—————
Well, our leaders are all set on not repeating the errors of the GD. That’s one reason for the difference up to now. Something tells me that no matter what they do, the dust will settle anyway… just later.
We’re about to find out.
September 10th, 2009 at 8:00 am
I’m starting to believe the older I get the less I know, kind of a benjamin button phenomena. Kind of in Todd’s camp……..understand AllTheWay, and he may be correct………………very hard though not too think of every american as and individual AIG, we have approx 200k in govt debt, average income 50k, if you donate 10k in taxes, the numbers are just
———-
If you are in your 60s+, things will probably be all right, especially if they manage to push off the whole thing for a decade. If you are between 40 and 60, things won’t be pretty for most. Not enough savings and huge debt with an empty SS fund. If you are under 40, you probably have a lot of time to prepare and adapt.
For me, it is obvious that a real shock will appear within the next 20 years for sure. So I don’t care if the economy picks up a bit next week or in 6 months. I care about the entire 20 year stretch. And this stretch will depend on what is happening now. If the shock and the clean up happens now, I’m happy. If it happens in 10 years, not so good. In 20 years, worst case scenario.
I’d love to see the population pyramid for BR’s readership. Because one thing I’ve noticed in my entourage is that the older boomers are quite an optimistic bunch. The 35-45 are way more negative. We know that we’ll be the sacrificed generation. The younger ones have been brought up to believe everybody will be their servants, plus they have time on their side.
September 10th, 2009 at 8:07 am
It’s way too early to make the comparison, it’s 1930 now not 1932. The US & Fed (re)actions are consistent with a depression not a recession.
The country is very different structurally than it was in 1930, services vs manufacturing and I think that will mitigate some of the job losses and dramatic declines in stuff like steel production in 1930.
I think all these furloughs by states and private employers mask the severity of job losses, de facto job sharing – which is way better than absolute job losses but certainly shows up in consumer spending.
September 10th, 2009 at 8:09 am
Barry,
Your analysis of the comparison of economic factors is fundamentally flawed simply because the fiscal response in the 1930’s was a drop in the bucket compared to the trillions of taxpayers dollars the Federal Government has spent to stop the economic decline. Yes things have stopped declining excessively presently but what’s going to happen when the Government back-stops are removed? Where is the economy going to get any real growth going forward? The presumption of the green-shoots crowd is we rise from the bottom. A more likely situation is we fall from the current plateau to a new and true bottom once investors realize the government can’t “grow the economy” and the only miracle cure for debt destruction is time.
September 10th, 2009 at 8:24 am
damn, I’m 51, it’s a trust thing. You generally belive the folks at the top are better, and trustworthy, and since about 35 i’ve come to the conclusion most people at the top look out for no. 1 all the time for the most part, sans outliers like buffet and gates. I also can’t understand, even though I know how it works, lol, how folks at the top let stuff get to certain crossroads, and example……..”Healthcare Is A Right”…..that seems to be a policy most want to adopt, I say, shouldn’t FoodCare be first…………
September 10th, 2009 at 8:28 am
These are some great charts, informative how much reported earnings and operating earning have diverged since accounting standards were loosened. Which will drive dividend changes going forward? Companies will be cutting dividends just as surely as they have been cutting employees, emplyee benefits etc. It’s 1930 not 1932 way too early so determine recession or depression.
http://www.thoughtofferings.com/2009/09/dividends-earnings-and-stock-price.html
September 10th, 2009 at 8:29 am
danm Says:
“I’d love to see the population pyramid for BR’s readership. Because one thing I’ve noticed in my entourage is that the older boomers are quite an optimistic bunch. The 35-45 are way more negative. We know that we’ll be the sacrificed generation. The younger ones have been brought up to believe everybody will be their servants, plus they have time on their side.”
I totally agree with you on this. I’ve noticed my friends in their early 40’s are starting to do the math and realize they probably won’t be able to retire, let alone retire early like they had hoped. They just accepted the whole 401k thing and figured it would work out but now they realize it’s not so certain.
September 10th, 2009 at 8:32 am
Interesting comment that homes were financed with 5 year loans in the 20/30s which had to be refinanced or foreclosure. We returned to that with the exotic financing driven RE bubble in the past decade, still waves or refis coming in the next few years and banks are already sitting on lots of shadow inventory. That will be the focus of the next outrageous round of bankster bailouts US purchases of bank owned properties at “fair ” prices
September 10th, 2009 at 8:36 am
This Depression business is so Thirties..you touched on it with the C-word in your statement “…
Let’s look beyond that. While we can find some obvious parallels between the Great Depression and the Great Recession, there are also some enormous differences. Looking at the current contraction versus the 1930s,…”
What we have here is the Great Contraction. Depression is engendered by the absence of imagination. De-leveraging must proceed and depression is for people who want someone else to make money for them.
If you don’t like the news, go out and make some of your own.
As a society we have taken up the crack pipe of credit because the FED lack of vision that real domestic cash-flow and incomes must be aligned and asset bubbles are wildfires not windfalls. For this the toxic waste must be puked up and our Japan-style face saving for banks must be accelerated. Free the FDIC and let’s get back to business.
September 10th, 2009 at 8:39 am
Harry Wanker must be your buddy Dennis Kneale
September 10th, 2009 at 8:42 am
El Guapo,
I agree too. 401Ks were supposed to complement traditional pensions but employers dropped or reduced their pensions and now many have eliminated their 401K matches. In normal times home ownership is enforced savings but now thats going backwards too. SS will be tapped out before the younger people will benefit too.
We need hyperinflation to create illusory asset appreciationin stocks & RE (and de facto devaluation of US debt) to paper over these structural problems. The US can cap SS COLA to shift some of the pain from the youngsters to the oldsters.
BB is riding the tiger and needs hyperinflation to make everyone a winner again. He’s already pumping the stock market, now they just need a US program that buys foreclosures at “fair” prices from the banks to stop the distress sales from pulling down RE prices. After hyperiflation starts driving RE prices back up again the US can sell their holdings at a profit just like their AIG and CITI holdings. They just need asset hyperinflation to create the paper profits.
September 10th, 2009 at 8:44 am
rootless – Great memory. I really haven’t changed so much as the posts might indicate. Trying to give a little balance.
September 10th, 2009 at 9:04 am
The Great Depression 2.0 is just starting.
We’re in 1930 on your graph, at U6 ~15%.
A couple more years of decline at the same rate and the “recessionistas” will sing a different tune.
DJIA 3600, the sooner the better.
September 10th, 2009 at 9:04 am
let’ s say you’re 40 that means you missed the 90’s boom for capital appreciation, and you’ve been around for two major economic messes in the 2000’s, statistically you are also reaching maximum output of money for your kids high school and college with probably a negative bias for future capital appreciation, all fairly realistic views based on your experience…………..if you’re above 47 or so you should still have some positive game if u didn’t go nuts, some home equity some 401k and your SS should be oaky
September 10th, 2009 at 9:12 am
CV – I protest the silver metal shenanigans. I demand a drug test. Someone ranked above me is on roids (or meth)! Not fair.
September 10th, 2009 at 9:22 am
USA Populations:
307,409,345 in 2009
122,093,455 in 1930
from the thread start:
“Any measure of (current) unemployment U3 at ~10% or U6 ~17%
During the Great Depression, the Unemployment rates ran over 25 percent”
I didn’t see any relation to the number of human souls this % means. Maybe the % should be related on a curve?
2009:
10% = 30.7 Million
17% = 52.3 Million souls
1930:
25% = 30.5 Million souls
Now before I post this .. times are different .. back then the nuclear family was probably 4 to 8 children with a mom and dad in a home .. nowdays …
http://en.wikipedia.org/wiki/Nuclear_family
September 10th, 2009 at 9:47 am
the 401k thing. last year during the market crash i heard on CNN that the median amount in the us is $14k, and i’ve read somewhere this year it’s $26k. let’s say that the markets are back to all time highs, and everyone’s 401k is loaded in equities and the median is doubled. that is still either $28k or $52k. how long will that last in retirement? a few months?
that is why we’re loaded up in debt and partying in our McMansions like 1999. we’re afraid to do the math or even think about the math, and living for today cause there is no tomorrow, no retirement for us 40 somethings, like danm says.
the irony is that those in the middle class who are being convinced against universal health care will prolly need it to most. the American dream of being rich someday, which is really impossible for the most since there isn’t enough wealth to share, is really hard to let go of. poor smucks voting like they will be rich someday.
September 10th, 2009 at 9:58 am
let’ s say you’re 40 that means you missed the 90’s boom for capital appreciation, and you’ve been around for two major economic messes in the 2000’s, statistically you are also reaching maximum output of money for your kids high school and college with probably a negative bias for future capital appreciation, all fairly realistic views based on your experience
———
Bingo!
I’m one of the few who got some equity because I bought my house early… I put minimum down in mid 90s. I became a portfolio manager and got to participate in EVERY single bubble since the beginning of the 90s. Built up a good nest egg but not as much as those 5 years older than me. Built up cynism too.
1. Oil and Gas analyst at beginning of 90s. That burst.
2. Gold analyst 91-96. That burst.
3. Tech analyst in late 90s. We know how that went.
4. Portfolio manager for financial services fund 2001 to 2005. Amen.
But I am convinced the chances are high that my savings will be taken away from me one way or another unless I reinvest in some business where I roll up my sleeves. If I am in the market, it will tank when the boomers start taking out more than they put in (in a few years). If I am out, chances of huge inflation.
I find there are a lot of traders on this site. I don’t know what their story is but I just can’t get into trading mode. Why? Although I believe we’re in a trader’s market, I also believe the risk reward premium is not there in my case. In a trading mode, you have to be on top. I think it is more important to invest my resources somewhere else right now. Most investors are looking for 8% annually, that’s 80K on a million dollar portfolio. You already need that for retirement so you need another 10-40K to add to your fund, plus your living expenses which are high when you have two kids.
And the smaller your portfolio, the less sense the trading equation makes if you are around 40. It is much easier still to go out and make that amount than to sit at a Bloomberg and try to get that extra 4% outperformance. Even the pros have a hard time beating the market… 4% is asking for the moon. Statisitics clearly show that most traders don’t do well over the long term. Maybe I would not be most traders but I don’t have the inclination. Why would I want to invest my time, resources and energy in trying to beat the house? It’s all speculation today. There will always be addicts who gamble their savings, I am not one to do this.
Even finding a business to create is hard. I think there is currently oversupply in nearly every segment. A large amount of boomers will be looking to sell their companies over the next few years. Maybe that will consolidate the market and fix the overcapacity issue.
But I also think our whoe economy will be going through an overhaul. For example the big box services companies. Many boomers will be looking to generate extra income (5K, 10K, 15K…) and will not be looking at their incoem in a ROI fashion. This will affect the big boxes which are probably still fixated on their 15% ROI. This will also impact all the little businesses. The boomers needed 100K+ and created the big box economy.
Now the boomers will be satying in the work force needing extra income (5K, 10K, 15K…) which could lower household incomes. This woud be hardest on Gen-X.
September 10th, 2009 at 10:02 am
globaleyes Says: @ September 10th, 2009 at 5:32 am
In 1929, America had little debt. Today, America’s $10 trillion debt gives us little wiggle room and puts us at a severe disadvantage to our competitors.That’s a huge difference!
*******************
You have the best 1 sentence summary
And the best website to put America’s severe disadvantage into perspective is http://www.usdebtclock.org/
September 10th, 2009 at 10:02 am
I have been crunching some numbers, and aside from the financial shananigans, one of the root causes of our financial problems is that the population is increasing and jobs aren’t. WE’VE GOT TO CREATE 5 TO 10 MILLION JOBS. How do we do it???
Here are some highlights of my data posted here
http://spreadsheets.google.com/ccc?key=0AvRFR4rZB3dudFpRSEJwX3pKYkl5aUN3dVcyRFdPS3c&hl=en
Since 2000 the population of males over 16 has increased by 13 million.
Since 2000 the number of employed males over 16 has DECREASES 100000.
From 2000 to 2007 the number of housing units increased 12 million.
The number of owner occupied housing units increased 5 million. (w/o an increase in jobs, how can people pay for them?)
Increase in average home price (Case Shiller) Jan 2000 to Jan 2007: 179%
And on income growth…
Since 2000 the lower quartile annualized weekly salary increased $3700 (28%) to $18.2k.
The top decile increased $25k (39%) to $95k.
Draw your own conclusions on that one.
This past year the median salary for those still working increase about 2% compared to an average 3% in the past decade. (Comment: Those still employed are holding their own.)
Finally on labor force participation:
In 1948 (earliest year I found data for) 86% of males over 16 were employed. By 2007 it was down to 70%. And now it is 65%!!!
September 10th, 2009 at 10:10 am
@Greg0658
Would also need to know how many people are now collecting SS benefits.
I believe many elderly and young people (younger than current official working age) were classified as unemployed in the 30’s.
September 10th, 2009 at 10:11 am
Correction on above post:
From Jan 2000 to Jan 2007 average home price increased 102% (not 179%). And now it is 42% higher than Jan 2000. Sorry.
September 10th, 2009 at 10:11 am
“Maybe that will consolidate the market and fix the overcapacity issue”
less folks working to buy stuff .. what a system .. I guess (maybe) there is an equilibrium .. maybe a civil war would help it become
“Keynes famous observation (not original to him, but he made it popular), the “Paradox of Thrift.”
September 10th, 2009 at 10:12 am
what bugs me the most is the people saying how you missed the 50% rally this year. as if people got out of the market last September and jumped back in in March. it’s likely that you rode the market down from s&p 1550. got really scared and sold at 700. jumped back in when it got up to 950 this summer, make a little on this ride and about to get smacked again.
September 10th, 2009 at 10:29 am
I guess it is very easy to call it a (little) depression if everybody is free to make his own definition of the word
Maybe it’s more productive to just forget the words and just compare the downturn of today with the downturn of 1930’ies as well as the worst ressesion we have had (is that early 80’ies?).
September 10th, 2009 at 10:42 am
Historical references, as the one forming the framework of the debate above only make sense as long as the subject matter is more of less the same. Whereas the US economy was a kinda closed economy for depression experience, as well as almost all the recession periods. This was probably not true any more even before the credit crunch (in the sense of dynamics, but also in simple openness statistics). However, early data re where the global momentum came from Q2-Q3 this year suggests that the subject matter has definitely shifted from the national-economy level to the global one.
The upshot is that there is not much point to make the comparison to the previous crisis at all, unless, of course you compare the current global recession (and almost – or would be global depression) to previous national level ones. In that case, the US history will provide only a small fraction of the possible examples…
September 10th, 2009 at 10:50 am
what bugs me the most is #s in accounts = notion of profits .. NOT .. herd out and see the profit
do I wish to send out pessimism vibes .. Nope .. but pyramids need a base
September 10th, 2009 at 10:53 am
A depression is when world economic growth no longer returns to trend over a period of years. Many people called the 1970s a depression while we were actually in the soup. Although the mainstream would totally discount that characterization. Mostly because the mainstream is controlled by the politicization of economics. Ain’t no politician ever going to belly up to calling his or her time in office one of depression. Which is the main reason the 1970s was not called anything. It was a time when we shifted in and out of growth quite often. The global economy is NOT going to return to trend. Period. This is a global depression.
September 10th, 2009 at 11:21 am
The difference of opinion is largely a difference between two words: A and THE.
Barry seems to be of the opinion this is not a depression unless we match or nearly match the conditions of “The Great Depression” while I think we can have “A” depression without matching those conditions.
As I noted, prior to the Great Depression, the word depression applied to all economic downturns. Someone coined the word recession later. Because of various social safety nets, some things are unlikely to happen again. Does that mean we can’t have a depression?
Yesterday consumer spending came in. Add another data point.
From Rosenberg …
“NEITHER A LENDER NOR A BORROWER BE
Consumer credit now down $109.5bln from the peak, which was set this time last year
U.S. consumer credit was released yesterday and WOW, it fell a record $21.6bln in July on top of the revised -$15.5bln reading in June (was -$10.3bln) — consensus was expecting a decline of -$3.6bln. Consumer credit is now down six months in a row for a total $92.3bln in credit being paid off. On an annual rate, consumer credit is falling 10.4% in July, which is the fastest pace of consumer deleveraging since June 1975. The year-on-year trend is now at -4.24% (or -$109.5bln), which is the fastest pace of decline in consumer credit since June 1944.
As for the breakdown, revolving credit fell $6.1bln in July and is now down 10 months in a row totaling to a record -$69.6 decline in revolving credit. Non-revolving credit is down $15.4bln in July on top of the $10.7bln reduction in June.”
Quite literally nearly everything about this “Deression” or whatever some want to call it is as bad or worse than the great depression. And I doubt it is over. Nonetheless, the NBER will proclaim an end but what happens on the next dip? Roubini started calling this a “stagdeflation” or something like that. Do we need still more terms?
I think recession and depression are reasonably good words even if there are no precise definitions. If one wants to use what is happening now as a guideline, perhaps even something a little less severe, that would make sense to me. By including a look at treasury yields, consumer spending, bank failures, housing etc, and especially the Fed’s unprecedented response, the word “recession” or even “severe recession” just does not seem to do justice to what is happening.
Mish
September 10th, 2009 at 11:52 am
Mish,
I suppose it will be a depression when (and if) it is generally perceived as such a one, especially since there isn’t any precise definition for it.
rc
September 10th, 2009 at 11:55 am
I redub thee, “The Great Restructuring”. How about that one?
September 10th, 2009 at 11:58 am
What about, “The Great Inverse Recovery”?
rc
September 10th, 2009 at 12:00 pm
I think a lot of people are making the wrong analogies when they look back to the 30s for guidance. The consensus seems to be that this is like 1930 after the 29 crash, but for me that just doesn’t work. It seems to me that the 90s and the 20s were similar periods in that there was rising productivity (from positive technological changes) and essentially deflation as a result. (Commodity prices fell in the 90s just as they did in the roaring 20s.) Both periods featured loose monetary policy that was intended to prevent a larger deflation. We got stock market bubbles in both cases. The difference was the response to the two crashes. Bernanke, being the depression scholar, convinced Greenspan that they needed to pull out all the stops after the tech bubble crash to prevent deflation. In other words, he thought 2001 could become 1930 if the Fed didn’t act. So what we are facing now is what would have happened had Milton Friedman run the Fed in the 30s. The point is that this is uncharted territory. I have no idea how all this will turn out and neither does anyone else, but I feel confident in saying that it won’t be like the 30s.
September 10th, 2009 at 12:09 pm
BR: That’s half the argument — the other half is, “What makes this a depression?”
No one seems to be able to answer that . . .
_______________________________________
The old saw….
If some of your neighbors lose their jobs, its a Recession
If you lose yours its a Depression
If you lose your house too, its a Great Depression.
September 10th, 2009 at 12:17 pm
Exactly Mish. I agree. And I think the most important thing in this discussion is to recognize (and have our leadership recognize) that this is much different than that garden variety inventory cycle, Fed interest raising induced, recession. It’s the debt that weighs us down and we have to deal with that reality or it will only get worse. We can’t outrun it. It will catch us. Unless you believe there’s some very big productivity miracle in our near future.
September 10th, 2009 at 12:20 pm
Manny
The problem with that (as you well know) is that we haven’t restructured a thing yet! Other than some household balance sheet improvement, offset, of course, by the increased public debt.
Eventually, no doubt. But not yet.
September 10th, 2009 at 12:25 pm
I saw “Debate with Mish” and just immediately thought what a waste of time that would be…
September 10th, 2009 at 12:26 pm
JusTryinTaMakeIt Says:
Finally on labor force participation:
In 1948 (earliest year I found data for) 86% of males over 16 were employed. By 2007 it was down to 70%. And now it is 65%!!!
Herein lies the root problem.
It won’t go away.
It doesn’t care what you call it.
September 10th, 2009 at 12:38 pm
Mish-
good post
jyc3 Says:
“Bernanke, being the depression scholar, convinced Greenspan that they needed to pull out all the stops after the tech bubble crash to prevent deflation. In other words, he thought 2001 could become 1930 if the Fed didn’t act.”
and thst bought us how much time? 6 years or so- so maybe the thing to take away from this- is that- because the same mechanisms are used to contain depressionary forces-
maybe each time these tactics are used delays but magnifies the problem- so we get greater economic destruction in shorter periods of time-
soon- there will be no time between bubble episodes and the depression will be all powerful
September 10th, 2009 at 1:40 pm
An apple
1)Grows on a tree
2)Is a fruit
3)Has seeds
4)Comes in various shapes and sizes
A recession:
1) A significant decline in economic activities
2) Is spread across the economy
3) Last more then a few months
4) Normally visible in production, employment and income i.e. Comes in various shapes and sizes.
A grapple:
1) Is a fruit you get from combining a grape and an apple
2) May be better for you then a regular apple
3) Has many of the characteristics of an apple
4) In NOT an apple – therefore can not be defined as such – But WHAT is it?
A depression
1) Is a significant decline in economic activities
2) May be worse then a regular recession
3) Has many of the characteristics of a recession
4) Is NOT a recession –Therefore can not be defined as such – But WHAT is it?
What I have read is Mr. Ritholtz asking what is the difference between a recession and a depression? We have all seen and eaten an apple, just as we have all been threw and experienced a recession. Both of those are well defined, but what is a grapple? How many have seen one let alone eaten one? What is a depression? How many of us have seen one let alone lived threw one?
If I am reading Mr. Ritholtz correctly he is NOT saying this could NOT be a depression or become one, it just sounds he is being agnostic and will believe it when he sees it.
It is NOT my intent to answer for anybody, I just read things different then most and although this has been a very interesting a well debated thread, it seems the base question still goes unanswered.
Anyway just my thoughts, I am going to go pour myself a glass of grapple juice, anyone care to join me?
September 10th, 2009 at 1:41 pm
@Onlooker: Give it time. It’s coming. Beware The Mother of all Laws of Unintended Consequences.
September 10th, 2009 at 2:13 pm
ahab
“maybe each time these tactics are used delays but magnifies the problem- so we get greater economic destruction in shorter periods of time-”
Exactly. That’s all that’s happening. And that’s what folks are celebrating. Hurray! The party rolls on; for a shorter period. Get it while you can.
September 10th, 2009 at 2:34 pm
Another good article by Dr. Housing Bubble re: the GD
The Gospel of Economic Prosperity: Lessons from the Great Depression Part XVIII. Pretend and Spend and Success will Come.
September 10th, 2009 at 2:40 pm
Recession: An economic contraction described as a “depression” prior to the Great Depression of the 1930’s. The severe social, political and trauma that resulted from the Great Depression made the term “depression” unspeakable and dangerous thereafter, in that the very spectre of “depression” could induce behaviors that might lead to a fear induced economic contraction such as one yells fire in a crowded theater. The result of this psychotic social semantic shift is that all mentions of depression are automatically linked to the Great Depression. A similar social semantic shift was apparent in the re-naming of the US “War Dept” to “Dept of Defense” after the trauma of two world wars and an emerging cold war.
Empirical definition of Depression: A socio-economic event that results from the combination of:
long term accretion of debts well beyond incomes such that aggregate and organic incomes can no longer service the debt resulting in massive cascading defaults, resulting in debt and capital destruction primarily in real estate.
Erosion and loss of social capital such as trust, fidelity, thrift, good will, adherence to law via the appearance of apparently free money through credit, shadow banking, serial hyperinflation of assets (aka bubbles). The lack of recognition of the value of social capital has exactly the same effect as not recognizing the outcome from polluting one’s land with poisoning heavy metals. They both reach a tipping point beyond which the substrate can no longer support the activity.
unfortunate alignments of Multiple technology based disjunctions resulting in near simultaneous deaths of industries via chronic hyperinvestment (P/E expansion) in new technology where in combination with debt supersaturation and loss of social capital whole industries become unviable or cease to exist in a catastrophic cascade collapse. For example Moore’s Law and Metcalf’s law behave as a virtual black hole for costs and performance such that cost avoidance leads to pricing and business model destruction in all things that are information based holdovers from the previous paradigm…Post office, music, movies, newspapers, long distance telephony, real estate brokerage, Travel agents, checkout clerks etc. A trivial example from an earlier era is the death of the Pony Express due to telegraphy – along with the arrival of automobiles and airplanes, the 5,000 year paradigm of the horse ended.
September 10th, 2009 at 3:00 pm
all we can do is look back at the past to try to figure out the future. for now, 1930 will do.
that said, one major thing that is different now is life expectancy. i think this is also left out of the health care debate too. when SS was created, it was only suppose to help you a few years. it’s not design to sustain you to your 90s. so now, we are all healthier and living longer, but the wealth and economy are lagging to support our longer lives.
i’m still amazed that people think it’s over. look at any instrument after a bubble, tulips, rail roads etc. it may pop back for a short time like the market is doing now, but the direction is down for a long, long time.
it’s like people expect Cisco to roar back to the 70 level in 2002. tech is a market leader now nearly a decade later and the wintel complex is just trading in the low 20s. doesn’t the nasdaq have to go back to 5000 first because housing will recover to 2006 levels? the same with oil, no matter what the fundies are. i’m sticking to my bearish view no matter what
September 10th, 2009 at 3:06 pm
Onlooker, very much agree with you and ahab about the longer this is drawn out the worst the concequences will be.
I kind of liken it to children that reach the age of seperating from their parents. Some parents don’t want it to happen nor do some children don’t, but it is a necissary evil.
As long as the (Adult) child stays under the parents roff the more difficult it will be for the children to grow into the adults they need to be and the parents can not reach the level of comfort they should have.
But here we have uncle stupid supporting A LOT of children who just refuse to grow up, but the older they get the harder it will be when the parents are finally put into a nursing home or die.
September 10th, 2009 at 4:22 pm
How about the “little great depression” or “the great little depression” or “the little depression that couldn’t” or “the great depression that wouldn’t or “the optimistic great depression” or “the pessimistic great ressesion”…….
September 10th, 2009 at 5:26 pm
“Most investors are looking for 8% annually, that’s 80K on a million dollar portfolio. You already need that for retirement so you need another 10-40K to add to your fund, plus your living expenses which are high when you have two kids…”
danm,
you should understand covered-call writing..
see: http://finance.yahoo.com/q?s=MO as one, potential, vehicle
and: http://finance.yahoo.com/q/op?s=MO for the chain (note: this is Not fortuitous timing, for this ex.)
LSS: double-digit returns w/ Covered-Call Writing are Not OOQ..
ht tp://finance.yahoo.com/q/op?s=DRYS
one with, somewhat, better current attributes..
September 10th, 2009 at 6:15 pm
The Great Depression started in the summer of 1929. It took a few months for the stock market to throw in the towel. This depression started two years ago in August of 2007. At the end of 1930 U.S. unemployment reached a high of 8.7%. It crossed 10% in the early spring of 1931, which was a little less than 2 years in. While our unemployment rate is officially 9.7%, the labor department has lowered the number of participants in the workforce by 2 million people. If they had kept the number of people in the workforce constant the unemployment rate would be 11%.
The CPI is officially down 2.1% over the last 12 months. However, in January of 1983 home prices were replaced by owners equivalent rent to approximate the cost of acquiring and maintaining a home in the CPI. If we were calculating inflation/deflation in the same way as they did in the 1930’s our deflation rate over the last 12 months would be 6%. In fact, owner equivalent rent rose 1.9% in the last 12 months while home prices fell at least 15%. This error prone calculation also understated inflation earlier in this decade and caused the Fed to miss the true inflation rate caused by the housing bubble.
Finally, the economic improvement reported in GDP in Germany, France, Japan, and the U.S. (only down 1%) was mainly due to net exports (the trade gap). Since the imports in these countries dropped more than the exports the gap added to GDP. In the U.S. net exports made a positive 1.38% overall contribution to GDP despite actual exports falling 5%. The formulas measuring unemployment, GDP, and the CPI need to be adjusted to more accurately reflect the real trends in the underlying economy.
But our calculations are not nearly as far off as China’s. In China electricity consumption is down and imports have dropped a whopping 15% from a year ago. Yet China says its GDP is growing at 7.9%.
The point of all of this is we are definitely in a global depression. By my calculation we have at least two more years to go before the economy hits bottom. Where will auto sales and home sales be in the fourth quarter without cash for clunkers or the first time home buyers tax credit? The Treasury and the Fed have opted for Zombie banks rather than painful reform such as a true “bad abnk” to absorb the assets. The problems have been swept under the rug and not dealt with in a meaningful way. Until real actions are taken by Washinton the dwonturn in the economy will continue. There is simply too much debt and not enough real assets or income to support the debts. Many businesses and consumers that are current on their loans right now ar doing it by draining ever dwindling savings accounts.
http://www.escapethenewgreatdepression.com
September 10th, 2009 at 6:34 pm
Mish “especially the Fed’s unprecedented response”
Thats what convinces me this is a depression – although it will take time like wine & cheese
September 10th, 2009 at 10:08 pm
escape-
GREAT POST- quote-
“Many businesses and consumers that are current on their loans right now ar doing it by draining ever dwindling savings accounts.”
true- i know folks who are draining their 401k’s- for the last 18 months or so- it’s called-
survival
September 13th, 2009 at 6:56 am
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check them out at their blog if your’e interested:
http://dubairecession.blogspot.com/
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Cheers.
Survivor!!
September 17th, 2009 at 8:36 pm
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