# Are we at the beginning of a 2008-like stock market crash? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [February 13, 2016, 12:04pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014 "2016-02-13T12:04:11Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Deeg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/deeg/32/2955_2.png) [@Deeg](https://boards.straightdope.com/u/Deeg)\ **Post date:** [February 16, 2016, 7:12am UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/21 "2016-02-16T07:12:00Z")
> [@truthSeeker2](#): > > It used to be backed by gold 40 years back which was removed, so the FED could print potentially infinite amounts. Will the currency have to again be backed by gold anytime soon if the possibility of repeated QEs coupled with negligible economic recovery and stock market bubbles becomes a reality? No economist thinks that the gold standard is good and it would likely be a disaster. The fact that we’re off the gold standard makes it easier for the Fed (and the economy) to react to market fluctuations. ---
**Author:** ![dalej42](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@dalej42](https://boards.straightdope.com/u/dalej42)\ **Post date:** [February 16, 2016, 2:46pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/22 "2016-02-16T14:46:52Z")
> [@truthSeeker2](#): > > Thanks everyone for valuable contributions. Pls keep sharing your views. > > Anyone here been listening to Mike Malloney or Peter Schiff about how historically, the currency works, changes every 30-40 years? > > It used to be backed by gold 40 years back which was removed, so the FED could print potentially infinite amounts. Will the currency have to again be backed by gold anytime soon if the possibility of repeated QEs coupled with negligible economic recovery and stock market bubbles becomes a reality? Absolutely not. Schiff is a loony permabear with ties to Ron Paul. Wasn’t familiar with Maloney but a quick Google shows he’s a nutty goldbug. This guy are as far out there as Alex Jones. ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [February 16, 2016, 5:10pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/23 "2016-02-16T17:10:09Z")
The decline in the stock market between 2007 and 2009 was (by the S&P500) 53%. Currently, since the last peak, the S&P500 is down about 11.5%. Every major crash looks like a smaller one at the start. But plenty of small declines don’t turn into major crashes. No one knows, but the odds are against it. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [February 16, 2016, 6:31pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/24 "2016-02-16T18:31:44Z")
> [@truthSeeker2](#): > > QEs have largely resulted in increasing the public (Govt.) Debt in USA. I believe this is _ **incorrect** _. Government debt is created when Federal spending exceeds revenue. The central bank operates independent of the Federal government; QE simply means the FRB is exchanging newly created money for other assets (mainly U.S. Treasury bonds), but that “new money” is not scored as government debt. There may be a case for thinking QE to be inflationary (though inflation might be a _good_ thing now), but it doesn’t increase the debt. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [February 16, 2016, 7:57pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/25 "2016-02-16T19:57:53Z")
No. We’re probably at the beginning of a recession, but there’s no reason to expect a crash. > [@davida03801](#): > > Yes, the signs been there awhile now. About 30 years, really. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [February 16, 2016, 8:59pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/26 "2016-02-16T20:59:22Z")
> [@Really\_Not\_All\_That\_Bright](#): > > No. We’re probably at the beginning of a recession, but there’s no reason to expect a crash. The U.S. stock market is already down over 10% from its 2015 highs. Expect it to fall further if (as expected?) we do indeed enter a recession. I’m not sure how “crash” is defined, but many stocks will fare poorly unless the recession is short-lived. ---
**Author:** ![dalej42](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@dalej42](https://boards.straightdope.com/u/dalej42)\ **Post date:** [February 16, 2016, 10:08pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/27 "2016-02-16T22:08:30Z")
Falling unemployment is not an indication of recession. Doom and Gloom newsletter writers and tv pundits like to engage in scare mongering. ---
**Author:** ![truthSeeker2](https://avatars.discourse-cdn.com/v4/letter/t/7cd45c/32.png) [@truthSeeker2](https://boards.straightdope.com/u/truthSeeker2)\ **Post date:** [February 16, 2016, 10:12pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/28 "2016-02-16T22:12:46Z")
> [@septimus](#): > > I believe this is _ **incorrect** _. Government debt is created when Federal spending exceeds revenue. The central bank operates independent of the Federal government; QE simply means the FRB is exchanging newly created money for other assets (mainly U.S. Treasury bonds), but that “new money” is not scored as government debt. > > There may be a case for thinking QE to be inflationary (though inflation might be a _good_ thing now), but it doesn’t increase the debt. check the public debt to GDP ratio from 2008 to now. What I am saying is that Govt. is creating enormous debt and FED is buying it in form of bonds. Your government’s debt now is probably over 19trillion. Government’s income and expenditure is 3.x trillion iirc . If they keep on increasing debt, it shows that either they don’t ever wish to repay it (I expected this to be the case) or they will have to increase taxes or reduce expenditure(like health care, defense or salaries). Like mentioned earlier, QEs created massive inflation and currency instability in many countries. QEs brought in dollars into these countries and now, they can’t handle the outflow. Oil Price also follows the supply of money. Increasing since 2008, decreasing in last 1.5 yrs since there’s been talk of tapering and stopping QE. ---
**Author:** ![truthSeeker2](https://avatars.discourse-cdn.com/v4/letter/t/7cd45c/32.png) [@truthSeeker2](https://boards.straightdope.com/u/truthSeeker2)\ **Post date:** [February 16, 2016, 10:43pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/29 "2016-02-16T22:43:17Z")
But, QEs has been good for artificially preventing a recession till now, creating wealth effect, saving jobs and there have been some cool innovations (cheap Android phones, cheap Internet, shale oil etc). It remains to be seen how much more debt they want to create that they won’t ever repay. ---
**Author:** ![truthSeeker2](https://avatars.discourse-cdn.com/v4/letter/t/7cd45c/32.png) [@truthSeeker2](https://boards.straightdope.com/u/truthSeeker2)\ **Post date:** [February 18, 2016, 10:33pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/30 "2016-02-18T22:33:39Z")
Market cap to GDP ratio - [![](http://4.bp.blogspot.com/-MrwVlfH08gk/Va65dqzOgtI/AAAAAAAAIt0/aB4lGi5dJ40/s1600/fig1.gif) ](http://4.bp.blogspot.com/-MrwVlfH08gk/Va65dqzOgtI/AAAAAAAAIt0/aB4lGi5dJ40/s1600/fig1.gif) ---
**Author:** ![JustinC](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/justinc/32/8083_2.png) [@JustinC](https://boards.straightdope.com/u/JustinC)\ **Post date:** [February 19, 2016, 2:19pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/31 "2016-02-19T14:19:29Z")
[Here](http://seekingalpha.com/article/3905506-bear-market-yet-bezeks-daily-briefing?v=1455809443&commenter=1) and [here](http://www.businessinsider.com/feds-mester-us-economy-will-regain-its-footing-2016-2) are pertinent articles and no, we are not at the beginning of a 2008-like stock market crash. No where near, in fact. An article I read yesterday said if all oil loans failed the banks could use one quarter (three months) of profits to settle them all. ---
**Author:** ![Diceman](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Diceman](https://boards.straightdope.com/u/Diceman)\ **Post date:** [February 19, 2016, 5:46pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/32 "2016-02-19T17:46:00Z")
I was wondering about those negative interest rates Japan is using. Doesn’t that mean charging people to save money? Would that even be legal in the United States? I’m thinking if the Fed tried it, they’d face a raft of class-action lawsuits claiming siezure without due process. ---
**Author:** ![Finagle](https://avatars.discourse-cdn.com/v4/letter/f/b19c9b/32.png) [@Finagle](https://boards.straightdope.com/u/Finagle)\ **Post date:** [February 19, 2016, 6:05pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/33 "2016-02-19T18:05:27Z")
> [@Diceman](#): > > I was wondering about those negative interest rates Japan is using. Doesn’t that mean charging people to save money? Would that even be legal in the United States? I’m thinking if the Fed tried it, they’d face a raft of class-action lawsuits claiming siezure without due process. I guess it’s happened, [at least in the secondary markets.](http://www.wsj.com/articles/u-s-treasury-bonds-pull-back-1444052528) > [@](#): > > In the secondary market, some bills have been yielding slightly below zero or around zero for weeks. On Monday, the yield on the one-month bill traded at negative-0.02% and the three-month yield was zero. An investor who holds the one-month bill through maturity will log a moderate capital loss, but that is the price the buyer has been willing to pay to obtain the bills. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [February 19, 2016, 8:09pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/34 "2016-02-19T20:09:12Z")
> [@JustinC](#): > > [Here](http://seekingalpha.com/article/3905506-bear-market-yet-bezeks-daily-briefing?v=1455809443&commenter=1) and [here](http://www.businessinsider.com/feds-mester-us-economy-will-regain-its-footing-2016-2) are pertinent articles and no, we are not at the beginning of a 2008-like stock market crash. No where near, in fact. An article I read yesterday said if all oil loans failed the banks could use one quarter (three months) of profits to settle them all. How can you be so certain? The first link isn’t to any long-term analysis; it’s just speculation on price changes over the past week. :smack: The second article is an optimistic government guess – _optimism is part of their job_. In fact, the FRB is afraid that the rcent tiny interest rate hike was over-optimistic. Junk bond yields are soaring. The U.S. economy has been growing less than 2.5% annually in recent years, much less than the 3 to 4% typical during good times; _the annual growth rate in the most recent quarter was less than 1%._ The strong dollar adversely affects many big U.S. companies. U.S. stocks are doing well in part because of high profit-to-sales ratios as workers are squoze, but an assumption of _continued high profits is factored into present stock prices_. European stocks are down 20% over the last 12 months; political problems loom; France has been in and out of recession. Many analysts believe we’re already entering a serious bear market. I don’t know one or the other. But dismissing the possibility seems way too optimistic. ---
**Author:** ![Deeg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/deeg/32/2955_2.png) [@Deeg](https://boards.straightdope.com/u/Deeg)\ **Post date:** [February 19, 2016, 8:39pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/35 "2016-02-19T20:39:14Z")
> [@septimus](#): > > Many analysts believe we’re already entering a serious bear market. This is probably always true. It’s probably always true that some analysts think we’re about to hit a bull market. Multiple studies have shown that almost nobody can consistently beat the market long-term. That means that almost nobody knows anything more than anybody else. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [February 19, 2016, 9:59pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/36 "2016-02-19T21:59:32Z")
> [@truthSeeker2](#): > > check the public debt to GDP ratio from 2008 to now. What I am saying is that Govt. is creating enormous debt and FED is buying it in form of bonds. > > Your government’s debt now is probably over 19trillion. Government’s income and expenditure is 3.x trillion iirc . If they keep on increasing debt, it shows that either they don’t ever wish to repay it (I expected this to be the case) or they will have to increase taxes or reduce expenditure(like health care, defense or salaries). While debt keeps growing, the deficit has been significantly cut. Maybe cut too much. I’m not sure what you mean by the government not repaying debt. Surely not a particular bond - that always gets repaid. Please provide evidence that paying all debt is a good thing. That would mean that we would take money from the public at large and funnel it into bondholders to be repaid early. The public at large could probably spend it more wisely, ditto the government. > [@](#): > > Like mentioned earlier, QEs created massive inflation and currency instability in many countries. QEs brought in dollars into these countries and now, they can’t handle the outflow. Oil Price also follows the supply of money. Increasing since 2008, decreasing in last 1.5 yrs since there’s been talk of tapering and stopping QE. I think someone has already explained QE to you. If oil prices follow the money supply, how come they have collapse when the money supply is getting bigger? If money supply caused inflation then perhaps oil prices would increase, but that is not happening here. Are you one of the people who have been expecting runaway inflation due to the deficit over the past 7 years? Why do you think inflation has been below the target? ---
**Author:** ![truthSeeker2](https://avatars.discourse-cdn.com/v4/letter/t/7cd45c/32.png) [@truthSeeker2](https://boards.straightdope.com/u/truthSeeker2)\ **Post date:** [February 20, 2016, 1:21am UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/37 "2016-02-20T01:21:14Z")
@voyager 1. oil prices did stay between $110-120 for 5 yrs after dropping to $35 in 2009. This was only due to money supply(QEs). FED posturing of stopping QE and doing rate hike brought it down. 2. Less fiscal deficit(2.1% iirc) is a good decision, but ultimately that will good also be a slight drag on corporate earnings. 3. Dollar went up because people thought it had a value. People will realise USA’s trade deficit is MASSIVE and they just keep printing money and people will dump the dollar. Like China, Russia are doing 4. The above coupled with Russia, China Iran Syria alliance could mean the end of petrodollar. Trump’s( i dont dislike him) Muslim comments could alienate Saudis too if he becomes President. 5. The above coupled with the fact that US stock valuations are quite rich gives a feeling there’s going to be amassive crash. Technical structure is looking tht way as well. I wish well for everyone which is why I will urge everyone to take out their money. ---
**Author:** ![samclem](https://avatars.discourse-cdn.com/v4/letter/s/a9a28c/32.png) [@samclem](https://boards.straightdope.com/u/samclem)\ **Post date:** [February 20, 2016, 1:55am UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/38 "2016-02-20T01:55:39Z")
> [@truthSeeker2](#): > > 1. oil prices did stay between $110-120 for 5 yrs after dropping to $35 in 2009. This was only due to money supply(QEs). FED posturing of stopping QE and doing rate hike brought it down. Provide a cite that oil prices only stayed high because of QE. I don’t think that was a major factor. > [@truthSeeker2](#): > > 1. Dollar went up because people thought it had a value. People will realise USA’s trade deficit is MASSIVE and they just keep printing money and people will dump the dollar. Like China, Russia are doing Show me a cite that China and Russia are dumping U.S. Dollars. If they are, it’s not because they fear a collapse of the dollar(which isn’t collapsing BTW). ---
**Author:** ![truthSeeker2](https://avatars.discourse-cdn.com/v4/letter/t/7cd45c/32.png) [@truthSeeker2](https://boards.straightdope.com/u/truthSeeker2)\ **Post date:** [February 20, 2016, 2:11am UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/39 "2016-02-20T02:11:50Z")
^google ‘China selling treasuries’. I read somewhere that an unaccounted for entity called ‘exchange stabilisation fund’ is buying. > **[China FX reserve sell-off to soon move beyond U.S. Treasuries: BAML](https://www.reuters.com/article/idUSKCN0UP1VI20160111)** > > The unwinding of China's foreign exchange reserves could soon extend beyond U.S. Treasuries, with U.S. corporate and euro zone sovereign bonds among the assets most vulnerable to selling from Beijing, Bank of America Merrill Lynch said on Monday. ---
**Author:** ![samclem](https://avatars.discourse-cdn.com/v4/letter/s/a9a28c/32.png) [@samclem](https://boards.straightdope.com/u/samclem)\ **Post date:** [February 20, 2016, 12:36pm UTC](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014/40 "2016-02-20T12:36:00Z")
> [@truthSeeker2](#): > > ^google ‘China selling treasuries’. I read somewhere that an unaccounted for entity called ‘exchange stabilisation fund’ is buying. > > [http://mobile.reuters.com/article/idUSKCN0UP1VI20160111](http://mobile.reuters.com/article/idUSKCN0UP1VI20160111) Thanks. Your cite proves my point. China is selling foreign currencies and bonds to prop up their slowing economy. It has NOTHING to do with flight from the US dollar. [Previous page](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014.md?page=1) [Next page](https://boards.straightdope.com/t/are-we-at-the-beginning-of-a-2008-like-stock-market-crash/746014.md?page=3)