The First Step is Acknowledging the Problem

"Worst since the end of World War II" (4.00 / 1)

That's what Alan Greenspan predicts. But Greenspan's record in economics is pretty lousy. His prediction underlines that.

Here is a list of historical US recessions. We were in one when WWII ended; the war ended in September, the recession in October.

Since then we have had ten recessions:

1. 11 months (Truman)
2. 10 (Eisenhower)
3. 08 (Eisenhower)
4. 10 (Eisenhower)
5. 11 (Nixon)
6. 16 (Nixon)/Ford)
7. 06 (Carter)
8. 16 (Reagan)
9. 08 (GHW Bush)
10. 08 (GW Bush)

Of these, the Nixon/Ford and Reagan recessions were longest and, I believe, most severe. So saying that we now face "the worst since WW II" is meaningless puffery: "the worst since 1973" means the same thing.

(Yes, that's 104 months in recession since 1946 - 17 under Democrats, 87 under Republicans.)

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by: elwood @ Sat Mar 22, 2008 at 08:18:51 AM CDT

Reagan Recession was worst since Great Depression (4.00 / 1)

Regardding the chances we are in a protracted recession now
Nouriel Roubini http://en.wikipedia.org/wiki/N... has outlined a harsh 12-step scenario.[32]

  1. U.S. home prices will fall between 20% and 30% from their peak. NYTimes chart
  2. Losses to the financial system from the subprime disaster, as high as $300 billion, are now spreading to near-prime and prime mortgages.
  3. The recession will lead to a sharp increase in defaults on other forms of unsecured consumer debt.
  4. Monoline insurance companies will take losses on their insurance of residential mortgage-backed securities, collateralized debt obligations and other asset-backed securities products, which are much higher than the $10 billion-to-$15 billion rescue package that regulators are trying to arrange.
  5. The commercial real estate loan market will soon enter into a meltdown similar to the subprime one.
  6. Some large regional or even national banks that are very exposed to mortgages, residential and commercial, may go bankrupt. Bear Stearns Companies, Inc. collapsed on March 16, 2008, and was bought out by JP Morgan Chase.
  7. Banks' losses will grow as a result of hundreds of billions of dollars of leveraged loans on their balance sheets at values well below par, currently about 90 cents on the dollar.
  8. Once a severe recession starts, a massive wave of corporate defaults will take place. Typically U.S. corporate default rates are about 3.8% (1971-2007); in 2006 and 2007 this figure was a rather low 0.6%. And in a typical U.S. recession such default rates surge above 10%.
  9. The "shadow banking system" (as defined by Pimco, it is composed by non-bank financial institutions that borrow short and in liquid forms and lend or invest long in more illiquid assets), will soon get into serious trouble.
 10. Stock markets in the U.S. and overseas will start pricing in a severe U.S. recession and a sharp global economic slowdown.
 11. The credit crunch that is affecting most credit markets and credit derivative markets will lead to a drying up of liquidity in several financial markets, including otherwise very liquid derivatives markets.
 12. A vicious cycle of losses, capital reduction, credit contraction, forced liquidation of assets at below fundamental prices will ensue, leading to further credit contraction.

The EEAG Report on the European Economy 2008 states:[33]

   The 2008 performance of the U.S. economy is difficult to predict due to the declining house prices and the subprime crisis, the full impact of which is still unclear. ..., it is not in our view very likely that the U.S. economy will fall into recession. Recessionary tendencies will be counteracted by both low interest rates and a substantial fiscal stimulus programme. Our forecast is that U.S. GDP will grow by 1.7 percent in 2008.

U.S. employers shed 63,000 jobs in February 2008, the most in five years, supporting the view that the U.S. is falling into a recession. [34]. NBER's president, Harvard University economist Martin Feldstein, recently said on March 14, 2008 we are in a recession, though it was not an official NBER declaration[35]. He said the nation has entered a recession that could be the worst since World War II. The economists surveyed by Bloomberg News this month predicted the GDP growth will slow to 0.1 percent in January to March.

Glenn Maguire, Chief Economist at Societe Generale, thinks that US recession is likely to continue until mid 2009 and that Fed fund rates would be seen at 1% by middle of 2008[36].

Annie 2012!

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by: JonnyBBad @ Sat Mar 22, 2008 at 09:49:12 AM CDT

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Gas/Real Estate (0.00 / 0)

Biggest effects on me will be gas prices and the slow Real Estate market.

I drive ~130 miles/day to MA for work. I am able to split the load most weeks with another fellow that works down there, so that helps take the sting off, but it still feels strange to put $45 worth of gas into a VW Jetta.

We are going to but our house on the market this spring... I suspect it could take 18-24 months to sell.

Hope > Fear




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by: Mike Hoefer @ Sat Mar 22, 2008 at 09:47:47 AM CDT

Reich (0.00 / 0)

Has had some good stuff regarding the economy  http://robertreich.blogspot.com/

American consumers are coming to the end of their ropes and don't have the buying power they need to absorb the goods and services the U.S. economy is capable of producing. This is likely to mean fewer jobs, which will force Americans to pull in their belts even tighter, leading to still fewer jobs - the classic recipe for recession. That recession may turn into a full-fledged Depression if fiscal and monetary policies can't make up for consumers' lack of buying power. And there's reason to worry they cannot because consumers are in a permanent bind. They're deep in debt, their homes are losing value, and their paychecks are shrinking.

Hope > Fear




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by: Mike Hoefer @ Sat Mar 22, 2008 at 10:24:05 AM CDT

Bromide : Do People Vote Their Pocketbooks ? (0.00 / 0)

Reading Election Tea Leaves
Monday, Aug. 06, 1984
Time Magazine
By CHARLES P. ALEXANDER

Economists have found some evidence for the politicians' bromide that people vote their pocketbooks. In one study, Robert Wescott and Miriam Goldberg of the Wharton Econometrics consulting firm in Philadelphia compared the outcomes of presidential elections from 1948 to 1980 with what was happening to real disposable income, which is the amount of money people have after taxes, adjusted for inflation. Over those years, the average annual rise in real disposable income was 3.8%. Wescott and Goldberg discovered that, coincidence or not, whenever the growth in income topped 3.8% for the twelve months before the voting, the party in power invariably kept its lease on the White House. But whenever the rise in income was only 3.8% or less, the voters sent the incumbent party packing.

In 1980, for example, income increased a meager .5%, and Reagan swept

With Reich forecasting the Real Possibility of a Depression, will our political landscape change even more than it did in 2006 ? That would truly be historic...if the U.S. House and Senate were both Democratic in Majority Status, and Obama is in the White House. An historic passing perhaps of the politics of division and scorched earth for a while...while we heal.

Annie 2012!

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by: JonnyBBad @ Sat Mar 22, 2008 at 11:40:37 AM CDT

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