A World Recession
 

I've noticed that a lot of places are closing an hour early, so I thought this would be a great topic to chat about. When I ask why early, I always get an answer "No one is buying right now". How bad is our economy? Then I look at how the United States is such a huge part of the global economy. It's like the economy has been unbalanced, because when Americans do spend, we spend more than we earn, and with the country running massive external deficits, I think our bad economy will spill over to other countries, if it hasn't already.

I think the way it will spill over to other countries is through trade.

Your thoughts.

Good topic. Glad you posted it.

I posted a similar topic last summer in another forum and it was either ignored or dismissed as "needlessly alarmist". I guess folk are paying a little more attention now.

To answer your question: How bad is our economy? Brace yourself for a second Great Depression, and that is no exaggeration. Read Warren Brussee's blog at amazon.com, which he updates around the 1st and 15th of each month tracking his predictions he wrote about in his book which has been to date for the most part rather accurate). His book is titled "The Second Great Depression."

Personally, I have suspected our economy was going to reach this point (and further), which is why I have been paying close attention to our economic downturn since early 2005.

But this economic situation have been the culmination of economic events which arguably started when President Wilson signed the Federal Reserve Act back in 1913, and the effects subsequently snowballed to this point in time now.

A good movie to watch is "American Zeitgeist", which is available via Google Video for free viewing.

But as for our economy, as Reverend Jim said on the TV show Taxi: "You ain't seen nothing yet".

I agree, but I think trade will be a major problem. Think about it, if output and demand in United States fall, something (which we have yet to define:rolleyes:) would happen in a recession. The results from this would be a decline in private consumption, capital spending by companies, and production would lead to a drop in imports of consumer goods, capital goods, commodities, and other raw materials. U.S. imports are other countries exports as well as an important part of their overall demand, which if effected, there would be a drop in their economic growth rates too.

The thing that kills me is how everyone is so afraid of China and Japan doing better than the U.S. I call bull on this. Several significant enonomies including Canada, China, Japan, Mexico, South Korea, and much of Southeast Asia are heavily dependent on exports to the United States. We are the worlds biggest consumers, so if our ecomomy is totally screwed, so is China's and Japan's.

I have been wondering about this for a while now. As our national debt increases in addition to the recent mortgage crisis and now some Federal loan programs being discontinued, I wonder if European Union or Japan will surpass the U.S.

My husband and I are in the process of looking for a new house and as everyone knows it IS a buyer's market. Not surprisingly, the majority of homes we have looked at are pre-foreclosure are already in foreclosure. We looked at a nice sized house (not even 2 years old) last weekend and the owners were so desperate to make a sell, they have it listed at a ridiculously low price (3 bdrms, 2 1/2 baths, 2-story for $112,000!!).

I am very concerned about our economy and wonder how much more we will have to pay for goods and services. It will be interesting to see how some people who have gotten used to a "comfortable" lifestyle will adjust paying more for less and unable to keep up with the Jones'.

Question, is the price really ridiculously low or has the price of homes in the area been historically artificially inflated?

Indeed it will be.

The dollar is exceedingly weak right now globally. :(

Context is important here - it's weak compared to its historical strength, but it's not like Lira in 1995 or anything.

I don't anticipate the dollar reaching that level of worthlessness, but it is certainly sliding. Things are going to get worse for us, but we have safeguards in place to avoid another severe depression. Let's hope we, as a country, wise up and learn how to sacrifice and practice self-discipline.

Now's the time to do whatever possible to get out of debt and start saving money. I recently heard that we're about to start experiencing massive auto repos (kinda like the house foreclosures). People need to open their eyes and stop lying to themselves.

I heard one of the first ways to determine a recession is to check with personal service people like manicurists and beauty shops. One of the first cut backs people will make is to stop having their nails done and getting their hair cut in longer intervals between cuts etc. I think we are headed for a recession. If people wouldn't live beyond their means, they wouldn't have all this debt. I was always told to "buy what I can afford, not what I want".

I'd say the recession is currently in progress. It's not down the road anymore.

http://www.nytimes.com/2008/03/08/bu...=1&oref=slogin

And a weak dollar will make matters worse. Already, the economic slowdown in the United States and the Fed's interest rate cuts have caused the value of the dollar to drop relative to many floating currencies such as the Euro and the Yen. The weaker dollar may stimulate U.S. export competitiveness, because those countries will be able to buy more for less. But like I was saying before, it's still bad news for other countries who rely heavily on their own exports to the United States.

China in particular is at risk, because so much of its double digit anual growth have relied on the exports to the United States, and since Americans are the worlds biggest consumers, and China one of the world's largest exporters, if Americans are reluctant to buy, where would Chinese goods go?

We're not the only country that has experienced a housing bust. There are a few countries in Europe that lag slightly behind us. At one time we were experiencing a housing boom because of easy money and low long term interest rates, which were also plentiful in other countries too. Even for the countries that are experiencing a housing boom right now, eventually higher interest rates will put an end to it, leading to a domestic economic slow down for some and a recession for others.

I agree.

...the sky is falling! Can I borrow an umbrella?

Quoting the NYTimes...are you smoking crack? Off the top of my head I can't name a bigger piece of tripe in the journalism industry.

That is a good question. There are a few houses that are worth the price, but most homes in the north and on the west coast are definitely inflated when you can get the same thing in the south for a fraction of the cost. The best place to look for this is along the coastline or near any lake/body of water.

I'm a receptionist in a salon and business is SLOW...It's frightening seeing these women fear for their success this year. One manicurist is barely getting fifteen appointments a week - you can easily do 15 manicures in a day...

Actually, this may not necessarily be true, but then again it could be, but I find it hard to believe this when millions of households are on the verge of defaulting on their mortgages. 5 bucks there's probably well over 100 subprime lenders that have gone bankrupt.

This is an avalance of major proportation.

Oil is traded in dollars and the dollar is so week, it can hardly stand up!

While it is cheaper for people outside of the US to visit, they are and are spending Billions of dollars.

So, since the dollar is in the tank, it cost more for transportation to deliver food. Food goes up in the grocers, eggs, milk, bread, meat or products similar that go to grocers or resturants, so the price goes up. To keep profits, people are laid off and have no buying power, or can spend money!

What my $20.00 bought in two big paper sacks then now get me two smaller plastic bags to bring home.:mad:

I worry where I drive and what I can do in a distance that is much shorter.

I am scared to death as I see my customer count dropping, the daily sales down and the per average costumer purchase falling. Mine is just a small business and I see feom reports that companies like Motorola, K-Mart, Old Navy and others will be closing within the next decade.:o

Crisis of confidence in U.S. financial markets? (Bear Stearns, Fed, Morgan and others)

Scary times indeed:

http://www.nytimes.com/2008/03/17/bu...17econ.html?hp

Great article. I'm not surprised. I remember in 2001 we recovered from a world recession, but I think it's different now, because back then the U.S. Federal Reserve, European Central Bank and the Bank of Japan all cut interest rates to virtually almost 0. I think it's far different now because the ability of Central Banks to use monetary tools to stimulate their economies and lessen the effect of a global slowdown is far more limited than it was in the past. It just seems like they're not a free as they once were, because now, it's like they're constrained by higher levels of inflation.

I can speak from experience as I own a small business.

I get calls daily from vendors wanting to sell me items and I hear the same thing from them. They are not selling products as no one has money as the business it down.

Ripple effect isn't it?

Houses are going into foreclosure, car dealers are closing, manufactures are laying off or closing. Oh, being bought out by foriegn countrys and production being sent there.

Am I scared, you bet I am! If I close then my employee has no paycheck and cannot pay his rent.

I could pay $20.00 for 2 paper bags for food, now I pay the same amount for two plastic sacks.

Luckily, I only drive @ 4.5 miles a day so only put $20.00 worth of gas in my paid for 4 cylender car that is paid off and 9 years old.

So, are we in trouble in this great county, You bet your butt we are.

You can get your job cut tomarrow and then what are you going to do?:confused:

lol lol lol, I wish I knew why, but my God this post is making me laugh so hard.:p

I just want to elaborate on what you said Tom, (I'm still laughing:D) but right now I think there's an oversupply of housing, automobiles, and other consumer goods, but since no one is buying these days, demand for these goods are less sensitive to changes in interest rates, because it takes years to work these kinds of things out. I just think right now that the United States is facing a financial crisis that goes far beyond what you were saying. I think the problem falls into areas of economic life that the Federal Government can't reach. It's bad now because the problems the U.S. economy faces are no longer just about having enough cash on hand, it's just that we're too ill equipped to deal with the problem.

Okay!:)

But in a nut shell, we as a country are in very dire straits.

Over building of homes caused the price of wood to go up. People want to move on up, and the home they leave may or may not sell.

Talking with the head of our water division of our Power/water company, he made an interesting statement that I argued about, he said that even though there is a building boom in our county, the number of water meters stayed within 1% from where it as five years ago. I was flabbergasted to say the least.

As for cars, the bloom has been off of the rose for a very long time. Is it because of the rise of better made and designed cars from other countrys. Yes.

American cars used to change styles usually every two years and had many brands. They then became pasturized as each looked like the same.

GM began by dropping brand names: Olds.
Chysler is going to if they have not already: Plymoth and Dodge.

Many of the plants built different name brands on the same frame with little design change.

Now, even so called foriegn cars are built in America with American people. Car makers have been mortaging sales for years with the low or no interest rate. People do not buy a new car every year.

Clothes, electronics, shoes, etc are being built outside of America and re-imported back cheaper.

Bear-Stern with a Fed bail out is sending shock waves across the financial world. Country Wide one of the biggest was bailed out before filing bankruptcy.

To me, instead of this would be to just change the ARM for houses to fixed rates. Keep the companies afloat and still get some interest rate money into them. It dang sure would help the home owners, keep the dollar up and keep them in houses they live in.

Maybe to simple to do?

If I close my little store, I do not ahve money to pay for the house loan, so, then what happens?

Let the market work it self out rather than letting the gov't extending this for months/years to come.

If you have lived above your means, well now the bill is due.

Tom, I agree with you, but it's more to it than this. This goes back to what I was saying before in an earlier post about the housing problem. I mentioned that there are millions of households that are close to defaulting on their loans, and like I said earlier, I'm sure a lot of the subprime lenders are going to go bankrupt if they haven't already. This financial housing problem probably will spread, if it hasn't already to the kinds of loans that finance excessively risky leveraged buyouts and commercial real estate too. On top of this, if the economy continues to fall even further, I'm sure corporate default rates will rise, which will lead to even greater losses. Like you said, it's a chain reaction, but I just think it's much deeper than some of the things you've mentioned. I read the The Wall Street Journal a lot, and it's so easy to see these things happening, if they haven't already.

I think at one time American cars were deemed unreliable, but now I think they're better made and certainly better looking, I just think they're too expensive. The foreign automakers can build their cars at a cheaper cost, so they're able to sell them cheaper, plus they offer much better warranties, and since women are the biggest auto consumers in the United States, we want something reliable, and inexpensive. I don't know much about cars, but to me I think they all look very generic, it's not just American cars that look the same.

Then you'll be added to the millions of other households that are on the verge of defaulting on their loans, due to a totally screwed up economy, but I'll be positive and say that won't happen to you. Right?