On an issue related to falling MEW, securities provide a similar boost to spending to the upper end of the income curve. It's estimated that 4-5% of equity gains will end up as consumer spending over the next several months.
With the equity markets turning negative, it provide a secondary hit to consumer spending.
Is the unprecedented signaling of a recession in advance of its arrival (if not by goldman then by others) just a sign of how fast-moving information is nowadays, or something more significant? And if we have enough smarts to see recessions before striking them now, why can't they be avoided? are they just a necessary phase that contributes to a stable system? if they are signaled in advance and enough rich dodge their effects does this do damage to the economy or pile the load higher on the average joe?
Just some pondering going around and around in my head.
I just posted something on this, but here goes again. What falling MEW does for the lower end of the income curve, falling stock prices does for the upper end of the curve/
WSJ Marketbeat: Tony Crescenzi of Miller Tabak notes that in general, for every $1 drop in stock prices, consumer spending falls by about four cents over the next 12 to 18 months. With share prices down over 10% over the past three months, this not only means that consumer spending could be cut by $80 billion over the next 12-18 months, it also means that retail sales in the winter months could be quite weak, especially when the drop in share prices is combined with the many other strains consumers are facing, he writes.
I'm of the mind, that a $4T hole blown in the financial landscape is ignored here. A whole lot of that $4T is going to end up being debt instruments that never get paid, and trade at pennies. That's going to blow some big boys up. This 2 Q neg then sluggish upswing scenario is a pipe dream.
I do disagree on one point. I believe many of those without mortgages are considerably older, and I believe that the economic conditions will cause more of them to remove equity to pay for living expenses, medical expenses, and taxes. This will happen especially in the higher tax areas. Understated CPI has generally hurt SS/pension income for this bracket, and this demographic spends a much higher proportion of its income on food, fuel and medical. All of these have outstripped the CPI solidly over recent years.
But one place that MEW won't go is toward the types of consumer-bling that has previously benefited so much. New cars, boats, vacations, electronics and all that are going to be largely cut off from the MEW gravy train.
The problem, off the top of my head, with GS's analysis, is that it assumes past trends. I can't think of a time when so much of the economy depended on housing.
I mean I'll go a little deep here. Obviously you've got loss of middle class blue collar construction work, a bit higher middle class real estate, and a bit higher middle class loan brokering. Also the financial's lay offs.
Then you've got CRE problems, with those RE, Broker, Construction firms leaving their leases.
Then you have the IT guys, and B2B IT purchases of these companies going buh bye. Then you've got broadband going dark, and phone lines, etc...impacting line providers.
Think back from the retail front line all the way back up the chain of stuff used to fund this credit bubble. Then think of all the buyers that are leaving the field, and the effects on the businesses up the chain.
Two weak quarters and a sluggish uptick...maybe, but I wouldn't bet on it.
With finance, housing and related industries in a major slump, lasting at least through the end of this year and likely much longer, what industry is going to pull the US out of a recession?
Manufacturing is too small now to offset the declines in such a short period of time.
If other major economies around the globe falter, exports could actually decline in the face of a weakening dollar.
If Simmons and others are correct that global oil production has peaked, we could see further increases in energy costs that will put more stress on consumer demand and business investment. I think that we still haven't seen the energy cost increases over the last couple of years fully work their way into prices.
While I certainly see some strong industries in the US, such as energy and agriculture, I don't see how those can provide enough new jobs to offset the declines in other areas. If job losses continue along with increased tightening of credit, we certainly can't expect the consumer to pick up the slack 9 months from now.
In summary, I think that any real increase in economic output over the next year is simply a fairy tale. Then again if food and energy prices continue to rise, government spending increases, and the GDP deflater stays at ridiculously low levels, then I guess GDP growth remains a possibility.
Im still having a very difficult time modeling any kind of scenario with a recession that ends up being mild. Muddle through, maybe. Severe recession, probably, but mild recession? Uh, no. If you get that kind of downward momentum going with the kind of economic imbalances this economy has, it is very hard to write a story which doesn't include the word "unraveling."
Agree that 4Q07 is positive, but I'll take the under on the 1.5%, more like 1.0%, will also take the under on 1Q more like -0.5%, as a matter of fact subtract 0.5% throughout the forcast horizon there. We could be up a bit in 09, but it will be an anemic recovery and that presupposes the fed cuts aggressively (inflation will be significantly higher in late 08/09)
Where the rubber meets the road...
Conclusion...anyone who believes this will be a short and shallow recession has been cultivating their Kimcha in bongwater.
Last evening I posted a part time job for an extra assistant in this rural burg. So far, in 24 hours, there have been 20 applicants...for a part time job.
Laid off teacher as class size shrunk, probably due to Mexicans moving out of town and certainly due to no new influx, many who were real-sex workers in the real estate related fields, students of course, people who can't get full time work, and the normal flotsam of the mentally special.
It's time for many to take the bongwater cure and look at the craigslist stats on job offerings, as well as Monster's stats on numbers of job seekers. This doesn't go away in a day or month or quarter. The job losses are pervasive and sticky.
I agree. It seems to me the unraveling has already started.
I think if you ignore all the losses that are beginning to work their way through the system, ignore the tightening of credit, you still have a major shift of "consumer" sentiment in progress. Something we haven't seen since the 70's at least.
People's expectations are getting completely shattered. Ron Paul mentioned in his speech last night that more people are aware and concerned about our monetary system and monetary policy than any other time in the last 100 years, and I happen to agree.
I think even with mild contraction of the economy, the shift in sentiment away from consumption will be anything but mild.
if [recessions] are signaled in advance and enough rich dodge their effects does this do damage to the economy or pile the load higher on the average joe?
Good question.
Excellent question.
Chilling question.
Do you think the average wage slave at Wal-Mart has as much time as the average member of the investor class to read the financial news and prepare?
Justin - to start with your point the tools of analyzing business cycles have gotten enormously better in the last few years. It helps to know that the academics still don't have good models so it's a bit by guess and by gosh. But with the ready availabilities of dloadable data and some meme changes things are improving fast. The biggest see change is the YOY% change meme which after Ellis's book came out last year spread like wildfire.
Now I'm picking on the academics (some of my best friends...) - their analysis of the underlying structure and relationships is still the goto. Anyway that's all IMHO. But backtest it against this blog - how long has CR been publishing ? Are his tools esoteric or simple everybody-can-see ones ? Yet how prescient has he been by analyzing structures, trends and patterns that jump out from the data. If you've the domain knowledge.
Well, I think Justin makes a good point: all the financial smarties are doing their level best to dump the burden onto the average Joe. I think it's become easier for them to do that, don't you, as long as the distance between blogs like CR and the mainstream media remains large?
Um, we're going to eventually wind up with a very small amount of very "smart," very rich people versus a very large amount of very "dumb," very poor people.
There's just so long 5 smart rich people can hold off 300 million+ dumb poor people.
Does that sound good to you? Cause I dunno, it sounds kinda ripe for unrest, for me, and the sort of changes that take, say, 70 years to undo.
Now on the subject of patterns there are some very good obs here. For G-S to step up like this is startling IMHO but they aren't all that different from the Fed's forecast. Still think the mild U-dip recession (everybody concurs) is likely but vastly exposed on the downside by the weaknesses in housing and credit where the latter is ebolasized more widely than suspected. Worse the balance sheets of banks, consumers and businesses are very leveraged and fragile. So Level 1 is weakening economy, with L2 downside risks and L3 cracks in the foundation. Even if we come out the other side growth'll be 2-2.5% for years.
Now if you'd like a forward-looking indicator with pretty charts and everything try the YOY% changes in WAges + Employment.
Forecasting Consumption Demand:http://tinyurl.com/yuyune
If you buy those charts and interpretations it'll be easy to slip from L1 to L2. And then those strains cold trigger L3 crackages to keep coining words.
One of the reasons recessions are so hard to predict is because we have a fiat currency and we don't know what the Fed and government will do until they do it. They have a huge influence on the economy, which gives them the ability to postpone mild recessions.
In this case however I think it is EASY to predict that there would be a recession, all you need to know is that large expansions of credit always eventually end with a bust. We saw the mortgage credit bubble begin to burst last year, so it's pretty obvious to me that it was only a matter of time before we entered a recession. Getting the exact timing right is impossible, since there isn't even an exact definition of a recession according to those who officially declare them to have occurred.
Murphy.Cr,who i deeply respect thinks this will be a mild recession.I don't.This is an extremely complex system with a lot of feedback loops that are not readily apparent,and unlike machines,public sentiment/psychology changes can have very large effects.It is all wiggly...and getting wigglier.I do not know how to express it better than that,but I could feel the real estate market get wiggly right at the peak here in Sonoma County and the US economy has the same feel now.I got publicly abused for calling the peak in august '05,and I intend to be more circumspect now.
GaudiaRay - thanks for the report. Where is the "rural burg", if I may ask?
Dblwyo, I agree the analysis tools are better, but all analysis is only solid to the degree that the data underlying it is strong. The uncertainties in some of the data are real. NBER takes at least 18 months to even figure out when recessions started, which should sober us all up somewhat.
I think it is safer to work with relative trends (i.e. are jobs strengthening or worsening). That is really CR's approach, and it is perhaps the most robust.
When I look at trends, I agree with Tom. It's shaky, it's wiggly, there are a lot of points at which things have a high potential of breaking down.
CR: Merrill Lynch's Rosenberg is much further ahead of the curve then anyone at Goldman. By the time Goldman gets around to making a call, you've missed the boat. Obviously noone else at the top of Merrill was listening to Rosenberg, but they may be catching on. You should too.
Ya'll kill me with your elitist J6P comments. Definetly need to widen your social circle a little bit. Maybe talk to Joe a bit an be surprised.
To bad, I bet not one of you was in the military. All Joe is looking for is someone who can articulate what he already knows. You get that, times get hard, you will end wishing Joe had stayed in front of the TV.
Americans are scary people. The level of violence that vibrates just below the social surface is amazing. No, a depression is not what you want wish for. I bet 90% of the readers here have ever been seriously challenged in their life at a basic survival level. If your lucky, you never will be because some of you just won't cut it
Haloscan has been acting up fairly badly tonight. That was my reference. Reload and stuff just disapears. Then reappears on a reload.
As for seriously challenged, when the early 90's recession was really kicking ass...well let's just say, I drove around after work looking for somewhere to park for the night.
I'm with Dirk & taking the under. Too much deflation of discretionary assets & too much inflation of nondiscretionary assets against the backdrop of massive trade & budget deficits. This is no run-of-the-mill recession. Too much leverage and not enough debt being paid back means an unpredictable unwind.
Misean, I might dump Haloscan soon. It is acting up again, they load all ads into the text - and they keep the page from loading correctly some time.
I'm looking for an alternative.
MaxedOutMama, I don't disagree. The no mortgage homeowners are probably older, and might use their equity in coming years - but I don't think it will be anything like the tidal wave of equity withdrawal we've seen in recent years - and, as you note, it won't be used for big screen TVs!
Cat: "Forget red - let's go all the way up to brown alert!"
Kryten: "There's no such thing as a brown alert sir."
Cat: "You won't be saying that in a minute!"
- Cat and Kryten, Back in the Red Pt 1
If a brown alert comes I for one won't be much help. I failed shop.
Hopefully not revisiting those "challenged" days of waiting for boxes of hand me downs from the cousins so I would have a coat (maybe) for the winter, but thanks for the memory. Hamburger and rice soup was quite a treat.
Yep, I, too was "seriously challenged" (economically) in the past (e.g. as kid learned that eating dirt makes you less hungry when there is no food. My favorite food at the time: rice with sugar on it.).
You get that in a society with wide income imbalances.
10 years of mis-allocated capital suddenly solved in two quarters?
A blogger can dream.
To recover, this country has to create value for the world economy. Anybody know what that is? Do you think we can develop, produce, and market our product(s) in less than 12 months? In the 90's we brought the world the internet. Now what do we have...the IPhone, Guitar Hero?
We are starting to see some token asset purchases from SWF's but how long can that really continue?
Misean, "Do you think they'd understand it if they read it? They get their info from the boob tube."
It's quite obvious you don't bother paying attention to the workers at WalMart. Let's throw a fact into your fetid pool of assumptions to clear the water.
An extraordinarily high proportion of Wal Mart workers are retirees - or rather, who THOUGHT they were retirees - needing supplemental income. Assuming you go to WalMart at all, stop and talk to the greeter (who is almost always one of these) and ask what they used to do for employment. Even if you don't do that, stop to consider exactly how disinterested they are in the financial situation when that same situation has UN-RETIRED them.
And co-workers talk. So even those who DON'T read it - who might not understand it if they did - get to become at least somewhat knowledgeable.
Consider a last small point. They're working at WalMart, not as real estate brokers. Which of the two groups do you think really had a better grasp on the economy over the past year?
I think it's going to be deeper and longer as well. The cornerstone is what is a common (but not universal) assumption of this place: This is a housing driven recession.
As long as there is a glut, housing sales (volume and price per) will fall -- or at best, climb somewhat in line with inflation. There are two major industries that will bleed from that wound, both mentioned over and over here, but... Those are the financial industries and (local) governments. Both of those impact the 'faith' necessary for Joe Public to invest in the future - less spending like tomorrow is going to be sunny, more saving for tomorrow's rainy day. So in addition to government losing taxes from property (both due to empty housing and to the values on which the taxes are based declining) you've got reduced revenue from sales taxes. Now a lot of this was beat in the past because of intentionally beefing up in the good times to prepare for the bad. But for the past couple of decades there's been a concerted effort to deny any fat from the good - burn it now, leave no reserves or slack.
I'm not - yet - willing to go so far as to say "depression". But once the recession triggers I'm betting we don't see quarterly GDP break 0.5% till we've got a handle on the housing glut and its impact. 2 years is my guess, with some areas undeniably hitting "depression" even though the nation is "only" in a recession.
On an issue related to falling MEW, securities provide a similar boost to spending to the upper end of the income curve. It's estimated that 4-5% of equity gains will end up as consumer spending over the next several months.
With the equity markets turning negative, it provide a secondary hit to consumer spending.
Is the unprecedented signaling of a recession in advance of its arrival (if not by goldman then by others) just a sign of how fast-moving information is nowadays, or something more significant? And if we have enough smarts to see recessions before striking them now, why can't they be avoided? are they just a necessary phase that contributes to a stable system? if they are signaled in advance and enough rich dodge their effects does this do damage to the economy or pile the load higher on the average joe?
Just some pondering going around and around in my head.
I just posted something on this, but here goes again. What falling MEW does for the lower end of the income curve, falling stock prices does for the upper end of the curve/
WSJ Marketbeat:
Tony Crescenzi of Miller Tabak notes that in general, for every $1 drop in stock prices, consumer spending falls by about four cents over the next 12 to 18 months. With share prices down over 10% over the past three months, this not only means that consumer spending could be cut by $80 billion over the next 12-18 months, it also means that retail sales in the winter months could be quite weak, especially when the drop in share prices is combined with the many other strains consumers are facing, he writes.
I'm of the mind, that a $4T hole blown in the financial landscape is ignored here. A whole lot of that $4T is going to end up being debt instruments that never get paid, and trade at pennies. That's going to blow some big boys up. This 2 Q neg then sluggish upswing scenario is a pipe dream.
IMO.
Cheers,
PS First?
Very interesting post, CR.
I do disagree on one point. I believe many of those without mortgages are considerably older, and I believe that the economic conditions will cause more of them to remove equity to pay for living expenses, medical expenses, and taxes. This will happen especially in the higher tax areas. Understated CPI has generally hurt SS/pension income for this bracket, and this demographic spends a much higher proportion of its income on food, fuel and medical. All of these have outstripped the CPI solidly over recent years.
But one place that MEW won't go is toward the types of consumer-bling that has previously benefited so much. New cars, boats, vacations, electronics and all that are going to be largely cut off from the MEW gravy train.
It will be interesting.
Holoscan gone teets up?
Holoscan, come back!
The problem, off the top of my head, with GS's analysis, is that it assumes past trends. I can't think of a time when so much of the economy depended on housing.
I mean I'll go a little deep here. Obviously you've got loss of middle class blue collar construction work, a bit higher middle class real estate, and a bit higher middle class loan brokering. Also the financial's lay offs.
Then you've got CRE problems, with those RE, Broker, Construction firms leaving their leases.
Then you have the IT guys, and B2B IT purchases of these companies going buh bye. Then you've got broadband going dark, and phone lines, etc...impacting line providers.
Think back from the retail front line all the way back up the chain of stuff used to fund this credit bubble. Then think of all the buyers that are leaving the field, and the effects on the businesses up the chain.
Two weak quarters and a sluggish uptick...maybe, but I wouldn't bet on it.
Cheers,
With finance, housing and related industries in a major slump, lasting at least through the end of this year and likely much longer, what industry is going to pull the US out of a recession?
Manufacturing is too small now to offset the declines in such a short period of time.
If other major economies around the globe falter, exports could actually decline in the face of a weakening dollar.
If Simmons and others are correct that global oil production has peaked, we could see further increases in energy costs that will put more stress on consumer demand and business investment. I think that we still haven't seen the energy cost increases over the last couple of years fully work their way into prices.
While I certainly see some strong industries in the US, such as energy and agriculture, I don't see how those can provide enough new jobs to offset the declines in other areas. If job losses continue along with increased tightening of credit, we certainly can't expect the consumer to pick up the slack 9 months from now.
In summary, I think that any real increase in economic output over the next year is simply a fairy tale. Then again if food and energy prices continue to rise, government spending increases, and the GDP deflater stays at ridiculously low levels, then I guess GDP growth remains a possibility.
Im still having a very difficult time modeling any kind of scenario with a recession that ends up being mild. Muddle through, maybe. Severe recession, probably, but mild recession? Uh, no. If you get that kind of downward momentum going with the kind of economic imbalances this economy has, it is very hard to write a story which doesn't include the word "unraveling."
Agree that 4Q07 is positive, but I'll take the under on the 1.5%, more like 1.0%, will also take the under on 1Q more like -0.5%, as a matter of fact subtract 0.5% throughout the forcast horizon there. We could be up a bit in 09, but it will be an anemic recovery and that presupposes the fed cuts aggressively (inflation will be significantly higher in late 08/09)
Where the rubber meets the road...
Conclusion...anyone who believes this will be a short and shallow recession has been cultivating their Kimcha in bongwater.
Last evening I posted a part time job for an extra assistant in this rural burg. So far, in 24 hours, there have been 20 applicants...for a part time job.
Laid off teacher as class size shrunk, probably due to Mexicans moving out of town and certainly due to no new influx, many who were real-sex workers in the real estate related fields, students of course, people who can't get full time work, and the normal flotsam of the mentally special.
It's time for many to take the bongwater cure and look at the craigslist stats on job offerings, as well as Monster's stats on numbers of job seekers. This doesn't go away in a day or month or quarter. The job losses are pervasive and sticky.
Geoff-
I agree. It seems to me the unraveling has already started.
I think if you ignore all the losses that are beginning to work their way through the system, ignore the tightening of credit, you still have a major shift of "consumer" sentiment in progress. Something we haven't seen since the 70's at least.
People's expectations are getting completely shattered. Ron Paul mentioned in his speech last night that more people are aware and concerned about our monetary system and monetary policy than any other time in the last 100 years, and I happen to agree.
I think even with mild contraction of the economy, the shift in sentiment away from consumption will be anything but mild.
Justin:
if [recessions] are signaled in advance and enough rich dodge their effects does this do damage to the economy or pile the load higher on the average joe?
Good question.
Excellent question.
Chilling question.
Do you think the average wage slave at Wal-Mart has as much time as the average member of the investor class to read the financial news and prepare?
Dale,
"Do you think the average wage slave at Wal-Mart has as much time as the average member of the investor class to read the financial news and prepare?"
Do you think they'd understand it if they read it? They get their info from the boob tube.
Cheers,
Justin - to start with your point the tools of analyzing business cycles have gotten enormously better in the last few years. It helps to know that the academics still don't have good models so it's a bit by guess and by gosh. But with the ready availabilities of dloadable data and some meme changes things are improving fast. The biggest see change is the YOY% change meme which after Ellis's book came out last year spread like wildfire.
Now I'm picking on the academics (some of my best friends...) - their analysis of the underlying structure and relationships is still the goto. Anyway that's all IMHO. But backtest it against this blog - how long has CR been publishing ? Are his tools esoteric or simple everybody-can-see ones ? Yet how prescient has he been by analyzing structures, trends and patterns that jump out from the data. If you've the domain knowledge.
Well, I think Justin makes a good point: all the financial smarties are doing their level best to dump the burden onto the average Joe. I think it's become easier for them to do that, don't you, as long as the distance between blogs like CR and the mainstream media remains large?
Um, we're going to eventually wind up with a very small amount of very "smart," very rich people versus a very large amount of very "dumb," very poor people.
There's just so long 5 smart rich people can hold off 300 million+ dumb poor people.
Does that sound good to you? Cause I dunno, it sounds kinda ripe for unrest, for me, and the sort of changes that take, say, 70 years to undo.
Now on the subject of patterns there are some very good obs here. For G-S to step up like this is startling IMHO but they aren't all that different from the Fed's forecast. Still think the mild U-dip recession (everybody concurs) is likely but vastly exposed on the downside by the weaknesses in housing and credit where the latter is ebolasized more widely than suspected. Worse the balance sheets of banks, consumers and businesses are very leveraged and fragile. So Level 1 is weakening economy, with L2 downside risks and L3 cracks in the foundation. Even if we come out the other side growth'll be 2-2.5% for years.
Now if you'd like a forward-looking indicator with pretty charts and everything try the YOY% changes in WAges + Employment.
Forecasting Consumption Demand:http://tinyurl.com/yuyune
If you buy those charts and interpretations it'll be easy to slip from L1 to L2. And then those strains cold trigger L3 crackages to keep coining words.
One of the reasons recessions are so hard to predict is because we have a fiat currency and we don't know what the Fed and government will do until they do it. They have a huge influence on the economy, which gives them the ability to postpone mild recessions.
In this case however I think it is EASY to predict that there would be a recession, all you need to know is that large expansions of credit always eventually end with a bust. We saw the mortgage credit bubble begin to burst last year, so it's pretty obvious to me that it was only a matter of time before we entered a recession. Getting the exact timing right is impossible, since there isn't even an exact definition of a recession according to those who officially declare them to have occurred.
Murphy.Cr,who i deeply respect thinks this will be a mild recession.I don't.This is an extremely complex system with a lot of feedback loops that are not readily apparent,and unlike machines,public sentiment/psychology changes can have very large effects.It is all wiggly...and getting wigglier.I do not know how to express it better than that,but I could feel the real estate market get wiggly right at the peak here in Sonoma County and the US economy has the same feel now.I got publicly abused for calling the peak in august '05,and I intend to be more circumspect now.
GaudiaRay - thanks for the report. Where is the "rural burg", if I may ask?
Dblwyo, I agree the analysis tools are better, but all analysis is only solid to the degree that the data underlying it is strong. The uncertainties in some of the data are real. NBER takes at least 18 months to even figure out when recessions started, which should sober us all up somewhat.
I think it is safer to work with relative trends (i.e. are jobs strengthening or worsening). That is really CR's approach, and it is perhaps the most robust.
When I look at trends, I agree with Tom. It's shaky, it's wiggly, there are a lot of points at which things have a high potential of breaking down.
CR: Merrill Lynch's Rosenberg is much further ahead of the curve then anyone at Goldman. By the time Goldman gets around to making a call, you've missed the boat. Obviously noone else at the top of Merrill was listening to Rosenberg, but they may be catching on. You should too.
Oh man, Haloscan is becoming an acid trip.
Misean, go to bed.
Ya'll kill me with your elitist J6P comments. Definetly need to widen your social circle a little bit. Maybe talk to Joe a bit an be surprised.
To bad, I bet not one of you was in the military. All Joe is looking for is someone who can articulate what he already knows. You get that, times get hard, you will end wishing Joe had stayed in front of the TV.
Americans are scary people. The level of violence that vibrates just below the social surface is amazing. No, a depression is not what you want wish for. I bet 90% of the readers here have ever been seriously challenged in their life at a basic survival level. If your lucky, you never will be because some of you just won't cut it
Nova,
Haloscan has been acting up fairly badly tonight. That was my reference. Reload and stuff just disapears. Then reappears on a reload.
As for seriously challenged, when the early 90's recession was really kicking ass...well let's just say, I drove around after work looking for somewhere to park for the night.
Quite the preachy little post man.
Cheers,
I'm with Dirk & taking the under. Too much deflation of discretionary assets & too much inflation of nondiscretionary assets against the backdrop of massive trade & budget deficits. This is no run-of-the-mill recession. Too much leverage and not enough debt being paid back means an unpredictable unwind.
It is at least as hard to predict the end of a recession as the beginning.
Misean, I might dump Haloscan soon. It is acting up again, they load all ads into the text - and they keep the page from loading correctly some time.
I'm looking for an alternative.
MaxedOutMama, I don't disagree. The no mortgage homeowners are probably older, and might use their equity in coming years - but I don't think it will be anything like the tidal wave of equity withdrawal we've seen in recent years - and, as you note, it won't be used for big screen TVs!
Best to all.
Holoscan, come back!
Misean | 01.09.08 - 8:06 pm | #
Holoscan? Is that something like a Hologram?
dryfly,
All I have for that one is
Cheers,
Cat: "Forget red - let's go all the way up to brown alert!"
Kryten: "There's no such thing as a brown alert sir."
Cat: "You won't be saying that in a minute!"
- Cat and Kryten, Back in the Red Pt 1
If a brown alert comes I for one won't be much help. I failed shop.
dryfly,
Oh bloody hell , the link didn't show up.
Ah! Red Dwarf....thanks man
Cheers,
Nova I bet 90% of the readers here have ever been seriously challenged in their life at a basic survival level.
Let's take a poll. I have, in more than one way. "Seriously challenged" doesn't even begin to describe it.
Anyone else? I doubt it's just me and Misean.
"seriously challenged" aka, broke?
Sure.
"seriously challenged" aka, poor?
Thankfully not in this life.
Big difference and has nothing to do with money.
Hopefully not revisiting those "challenged" days of waiting for boxes of hand me downs from the cousins so I would have a coat (maybe) for the winter, but thanks for the memory. Hamburger and rice soup was quite a treat.
Yep, I, too was "seriously challenged" (economically) in the past (e.g. as kid learned that eating dirt makes you less hungry when there is no food. My favorite food at the time: rice with sugar on it.).
You get that in a society with wide income imbalances.
10 years of mis-allocated capital suddenly solved in two quarters?
A blogger can dream.
To recover, this country has to create value for the world economy. Anybody know what that is? Do you think we can develop, produce, and market our product(s) in less than 12 months? In the 90's we brought the world the internet. Now what do we have...the IPhone, Guitar Hero?
We are starting to see some token asset purchases from SWF's but how long can that really continue?
Misean, "Do you think they'd understand it if they read it? They get their info from the boob tube."
It's quite obvious you don't bother paying attention to the workers at WalMart. Let's throw a fact into your fetid pool of assumptions to clear the water.
An extraordinarily high proportion of Wal Mart workers are retirees - or rather, who THOUGHT they were retirees - needing supplemental income. Assuming you go to WalMart at all, stop and talk to the greeter (who is almost always one of these) and ask what they used to do for employment. Even if you don't do that, stop to consider exactly how disinterested they are in the financial situation when that same situation has UN-RETIRED them.
And co-workers talk. So even those who DON'T read it - who might not understand it if they did - get to become at least somewhat knowledgeable.
Consider a last small point. They're working at WalMart, not as real estate brokers. Which of the two groups do you think really had a better grasp on the economy over the past year?
CR, haloscan is fine for Mish's blog. It just seems to affect CR.
Is inflation now at 0% ?
If it isn't 1% Q42008 is still negative growth. How can anyone not see that?
I think it's going to be deeper and longer as well. The cornerstone is what is a common (but not universal) assumption of this place: This is a housing driven recession.
As long as there is a glut, housing sales (volume and price per) will fall -- or at best, climb somewhat in line with inflation. There are two major industries that will bleed from that wound, both mentioned over and over here, but... Those are the financial industries and (local) governments. Both of those impact the 'faith' necessary for Joe Public to invest in the future - less spending like tomorrow is going to be sunny, more saving for tomorrow's rainy day. So in addition to government losing taxes from property (both due to empty housing and to the values on which the taxes are based declining) you've got reduced revenue from sales taxes. Now a lot of this was beat in the past because of intentionally beefing up in the good times to prepare for the bad. But for the past couple of decades there's been a concerted effort to deny any fat from the good - burn it now, leave no reserves or slack.
I'm not - yet - willing to go so far as to say "depression". But once the recession triggers I'm betting we don't see quarterly GDP break 0.5% till we've got a handle on the housing glut and its impact. 2 years is my guess, with some areas undeniably hitting "depression" even though the nation is "only" in a recession.