Inspired by a statement I saw made on another message board:
This astounded me, though I suppose it shouldn’t have. It also put into mind the idea of economic panic. Many conservative bloggers I’ve read have argued, “You know, things aren’t that bad. The media and government are hyping this out of proportion for their own ends. If everyone would calm down and just wait things out, let the banks fail, and suck it up, we’d get out of this so-called crisis a lot sooner.” Even if you disagree with this, many economists of all stripes have said that panic DOES make things worse.
So how much panic is there out there, really? And since fear in SOME amount and context definitely has a use and a place, how much SHOULD there be?
Obama has been trying to tell the people that things are very scary. He can not just tell everybody the system is screwed, even if he believes it is. Some repubs are asking him to say only uplifting things to keep from panicking the citizens. I think we are in a lot of trouble. The mortgage foreclosures are continuing and will just take the banks down over and over. They have to be stopped. But some are saying it might let someone who does not deserve help get it. That would be worse than letting the whole economy collapse I guess.
You should read more conservative blogs then, because the media is always hyping things out of proportion. The media hyped the boom, now they are hyping the bust. People want to see blood on the floor.
Houses in the USA are still way overvalued – need to come down another 30%-40%:
meaning that there are still a lot out there which have made a killing on the real estate market without lifting a finger.
so what if it tanks another 50%? Bad for pension funds for sure. And Russian/Norwegian oil funds. But otherwise. I have my doubts that regular working people without any special knowledge in stocks should be speculating on the stock market. And certainly only for money they can afford to lose.
The USA is still the richest country in the world. Unemployment is still lower than most nations in Europe. 90% are still working. It is rather foolish to accept Euros but not US dollars, when you can take the dollars to any bank and have it converted to Euros.
What is the worst - realistic - case scenario? Economic goes in serious negative for 10% in 2009 & 2010? That would be like setting the economy back two-three-four years. Were times so bad in 2005? Even if the economic should shrink by 50% - that would be like going back to 1987 or thereabouts. I remember 1987. We had old shitty cars, we didn’t eat strawberries in the winter flown in from Egypt or go on vacation to Spain and Greece three times a year – and the music was lousy. But we didn’t starve or anything.
I also dimly remember that back then people actually expected to work for their money. Rather than during the last years of the economic boom times, when everybody would gamble for quick profit on the stock market or speculate in real estate. So back to reasonable expectations. I’m almost looking forward to it. But you really are fucking your children over with all these massive “stimulus” packages for borrowed money.
Besides you have just decided to send 900 million us dollars to Gaza. I think any country which feels is can afford to send that kind of money to a foreign country of questionable loyalty is probably not as fucked as all that.
You’re tying the skill of politicians spending money to economic reality?
The main problem (in the US) is bank liquidity. Currently the Federal Government has had to take financial responsibility for Fanny Mae/Freddie Mac to the tune of 4 trillion dollars. This doesn’t address the losses that are still on the books for the bank affected by the housing bust. The money poured into those banks to shore them up is not liquid. There is still a shortage of money to be lent out. THAT’S the problem today. GM and Chrysler do not have the liquid assets to function and cannot borrow additional money.
The banking situation also applies to private borrowing. One of the recent whistle-stops the President made was at Elkhart In. The primary industry there is RV’s and the buyers for these vehicles are having problems getting loans. It doesn’t matter how many nickels Uncle Sam throws our way as individuals, it won’t affect consumer purchase power without bank liquidity.
Short answer, money infused to the consumer as cash or tax rebates will have an upward leveraging affect but a lack of banking liquidity will leverage businesses down at a greater rate as a result of an already burdened economy.
Living in California, I have not heard or seen anything of a sort. Roadside vendors that sell produce have been around for quite a while, but they take US currency, and I have not seen any food stores boarded up. Longs and Mervyn’s have closed down though, but not because they ran out of food…they over-expanded.
Saw lots of food to buy last night at a Super Target…enough to feed our Town for weeks and weeks.
Until they’re not hyping things enough, like the fact that Obama’s a foreign-born Muslim, the impending Amero deal, or the massive voter fraud committed by ACORN.
Agreed that houses are still overvalued. But what do current asset prices have to do with who made money in the boom? That’s how bubbles work. People get in early and saddle the saps with the losses. There’s nothing we can do to punish the undeserving without dragging everyone else down with them.
Did you even look at the graph? We’re currently worse than everything but the crash of '29-32, and we’re only 16 months in. There are no signs of this slowing down any time soon. GDP dropped 6.2% this quarter.
Except the companies that are traded on the stock market employ people in the United States. They’re going bankrupt and firing people, leading to dropping confidence and spending, leading to more bankruptcies. It’s a negative feedback loop. Exporters and oil men are in worse shape, but we’re not rosy.
That’s misleading and you know it. 10% unemployment doesn’t equal 90% employment. We also don’t have the safety net that Europe has, or the low birthrates and low immigration. We need lower unemployment.
Agreed. Europe is worse off than the U.S. in the next year.
The stock hit level it hasn’t seen since 1997 this week. It would take an act of God to put us back at 2005 levels in the near term.
I’ve got to run, but the rest of your post is similarly ill-informed.
I don’t think you have that many first time real estate buyers. Currently real estate prices are back to 2005 levels or thereabouts. A large majority of people who own property today also owned property in 2005. They followed the market up, now they follow it down. For those people only phantom money is being lost. Personally I think lower housing prices is good. Easier for young first time buyers to afford enter the market and less speculation.
Btw. here is a thread I started in autumn 2006: What’s driving the rising property prices?
The low points of the two other modern major bear markets were 48.2% and 49.1% off top and the current market is 53.0% off –4%-5% more. No I don’t find that especially worse. But as I wrote, it might be so in the future. Who knows. The 1929 crash bottomed out at -89.2%. There are still some ways to go.
That was not what I commented on. The price of stocks are not one-to-one a reflection of how much wealth is generated in an economy. If the stock market tanks 50%, it doesn’t mean that average Americans become 50% poorer.
Some parts of Europe. Other parts may do better.
Maybe stocks – like real estate - were overvalued and shouldn’t come back up. But stock prices don’t concern me so much. Rule number one has always been not to invest money you can’t afford to lose. I was talking GNP. The people as a whole are going to become poorer if the nation is in a recession. The question is how much poorer. Back to 2000 levels or further back to 1988. Or what.