This Recession's Not That Bad - And We're More Than Halfway Through 20 comments
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Many are calling this the worst recession since the Great Depression. Or, most succinctly, the Great Depression 2. No doubt the news is bad and all the major economic indicators signal that growth is slowing at a quickening pace. But the question on most people's minds is how long will this recession continue.
It is getting stale to read about all the bad news making headlines everyday and it would be nice to read a positive headline like, "US economy adds 100,000 jobs". Unlikely in the near term, but there may be some light at the end of tunnel as we enter 2009 under a new political administration.
Depending on your perspective, things could get better soon or we may not have even reached the half way point of the current downturn. As the graphic from the WSJ and NBER shows, past recessions have generally lasted anywhere from 6 months to 16 months, with the Great Depression the biggest outlier at 43 months.
The current recession, which officially started in December 2007, has now run for 12 months. With few signs of improvement in the near term, it will probably go down as one of the longer recessions in recent times, but I don't think it will be as bad as some people are predicting. Furthermore, the recovery will be even more stunning and swift than the downturn.
My view on the current recession is that it will not be as bad as the Great Depression and that we are more than half way through it. Just a few months ago people were talking about high oil prices, inflation and over valued stock markets. Suddenly, relatively speaking, all these issues have been turned on their head with oil prices crashing, deflation rather than inflation a concern now and stock markets that have fallen off a cliff. The interconnectedness of the global economy magnified the severity and speed of the economic downturn, but the same forces will also work in reverse to bring back economic growth just as fast.
The keys are confidence and time for markets and people to absorb the changes being put in place by governments all over the world. Once business and consumers are confident that things are getting better (or less worse), then they will start lending, borrowing and spending more freely again which will stimulate the local and global economies of the world.
Past recessions and recoveries were mainly dependent on American consumption patterns, because of the sheer wealth of the country. Its 300 million or so citizens decided the economic fate of the world thanks to relatively large disposable incomes.
However, with the emergence of BRIC (Brazil, Russia, India and China) countries and the EU things have changed and rather than 300 million people, 3 billion people now have an influence on consumption of goods and services. That is why the effects of the current recession are also heightened, but will also be the catalyst of a much faster recovery than past history suggests. With the amount of government intervention and support, it is only a matter of time before confidence in the markets returns. Once the US recovers, the world will follow and so will 3 billion consumers.
How long do you think the recession will last? Have your say on the poll and see what others think. Based on which group you talk to, there are many definitions of what is technically a recession. For purposes of this poll let's assume that the recession will be over after we have had 2 consecutive quarters of positive economic (GDP) growth. Click here to access the poll.
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This article has 20 comments:
Do you even follow the credit market?
Check out this feature on wsj online.
Heard on the Street: Car Bailout Messing Up the Markets 12/15/2008
WSJ's David Reilly explains to Simon Constable the nasty unintended consequence of the government's plan to prop up the Detroit Three, plus how things might be done better going forward. (Dec. 15)
online.wsj.com/video/h...
Do you even follow the credit market?
Check out this feature on wsj online.
Heard on the Street: Car Bailout Messing Up the Markets 12/15/2008
WSJ's David Reilly explains to Simon Constable the nasty unintended consequence of the government's plan to prop up the Detroit Three, plus how things might be done better going forward. (Dec. 15)
online.wsj.com/video/h...
I trade daily and try not to look forward more than a week @ most and agree with most of the other replies that there is much more downside going forward.
This article certainly does make me chuckle. A very poor article indeed. We've been in this recession a year already, and it isn't improving. On what facts are the author's "optimistc assumptions" or guesses based ? Where are his convincing reasons ?
This is what's coming:
1. Peak oil is very, very close. What will this do to oil and the dollar ?
2. Paulson and Bernanke's Bailout isn't working is it ?
3. The US Fiscal Debt....What an unfixable, bloody joke.
4. Read the latest National Intelligence Council's report: Global Trends 2025 - A Transformed World. This report effectively greatly downgrades America's geopolitical influence by 2025. And the dollar will no longer be Almighty.
5. Wealth will shift from West to East.
I guess the author was instructed to write "something positive" to help fix the current and fractured "market confidence".
Dream on....
Yea, this thing is far from over.
I also tend to be on the side of the collapse theory.
BUT: It has always shown that in time of stress people are able to achive great things. For one thing I hope that the greed and the constant pushing of the large corporations will soften a little.
I do hope that this theory will help the system to create a more gentle curve downwards, and lead us to a more simple live, rather than a crash.
I often spoke with my grandmother - she lived in WWI, great depression and WWII, and it is astonishing on how she always talked about optimism.
Maybe you are just too spoiled to consider that you might just take public transport, or not eat at Mac that often, or buy all the rubbish you have.
If we take it like that, maybe we might be on the right track, and for this reason I hope that the current situation will last for some time. I was really fed up working with US corporations and dealing with their constant greed, pushing things to a limit that was bejond any sense, so that US citizens could grow even fatter.
greeting from Europe.
2) "...but there may be some light at the end of tunnel as we enter 2009 under a new political administration." Sorry, but socialist economics are not "light at the end of the tunnel"...they are what GOT us here, ala subprime lending for the socialist "Community Reinvestment Act". And we're now seeing that the mortgage renegotiations are not working -- close to half of those have redefaulted!! Clear proof that this is lending that simply SHOULD NOT HAVE BEEN DONE. Yet Baraq Obama just the other day, when announcing more cabinet appointments, talked about his appointments in the housing & urban affairs, talked up the push for "affordable housing" yet again!! The man DOES NOT GET IT. Nor do you, apparently. Socialism doesn't work -- someone has to PAY for things. And half the population simply can't afford to pay for the other half...the only workable system is capitalism, where personal responsibility rules, and its up to each individual to work for and pay for what he needs or wants. That is the only system, by strange coincidence, that respects our personal property rights -- to KEEP what we have EARNED!!
3) A HUGE root cause of this economic mess has still not been addressed: our current tax code. I should say codes, plural. We have so many types and levels of taxation. We are overtaxed...double, and triple-taxed on the same flow of money oftentimes!
a. The current income tax is philosophically flawed, in that it gives the government preemptive rights on the earners' money. That is problematic as far as personal property rights, but also in regards to efficiency -- the earner knows much better what the money is most needed for.
b. Control of the purse-strings, once given up, is hard, if not impossible, to regain. Jefferson and Madison warned against this. The result is that government spending is seemingly in an ever-increasing upward spiral!!
c. Property taxes -- our Founders would roll in the grave to think that a property once paid for...is not ever done being paid for!! Property taxes now average about 20% of mortgage payments! Is it any wonder the average family struggles to afford a home?? Or that the retired can barely afford to stay in theirs?
d. The ONE thing that the Feds have NOT yet tried in their efforts to shore up and stimulate the economy...is tax cuts!! Why not? Because letting the people keep their own money equals a loss of power by the government!! They are hanging onto that with all they have left!! What they are forgetting is that it is OUR money, and that it is government BY the people!! What is actually needed to restore economic growth IS LARGE TAX CUTS for both businesses and individuals. Businesses will be able to afford keeping more employees, helping save jobs...and individuals will have more money to pay mortgages and pay down other debt...and maybe even do some - gasp - discretionary spending!!
It's up to US to do something about this FARCE of a Ponzi Government!! Call and write your reps and Senators -- demand immediate and permanent tax cuts...and TAX OVERHAUL.
fairtax.org
The economy is getting worse, and market is not reacting, so we must be doing well.....
OK, How about this?
I am getting kicked on my head repeatedly, and I initially scream in agony, and as the kicks are repeated, I scream less and less......
I must be doing better.
Or I am dying.
You decide, Moron, and good luck when the earnings come out next year.
-the mere implication that this recession is anything less than severe albeit not a Great Depression I would admit shows how "out of Touch" you really appear to be!
I for one retired at 55, placed all my 401-K money into CASH last November 2007 when my beautiful home in M.C., Maryland sat on the market for 7 months w/o a looksy! I knew at that time we were in serious trouble in this country and went to a very strong CASH position while all the pundits said stay invested and ride this market up! LOL!
As a business major from University of Maryland 1974 I have seen and studied these RECESSIONS before.In fact when I came out of college in 1974 jobs were hard to get! We were in a bad recessionary period than and I would actually call this recession as quite similiar! The BIG difference being we were in a high interest rate environ than.I remember buying my first home 1976 and paying about 10% on that mortgage. During the next 4 years rates went up! I remember having cash saved/banked and earning a rate of about 15% at it's peak. In fact, the 1976-1980 period was pretty bad as inflation goes! That is what I foresee for us next! Look there is no way the FED can print money...flood the banking system w/ pretend dollars and the fallout being anything less than FUTURE INFLATION! Get ready for maybe a Market Rally on Obama's win into the new year but I would be out by March 2009 at the lastest.
I strictly trade stocks in this market mostly Biotech/Pharma (my career and what I know best) and keep most money in laddered CD's and Treasuries! Also NO ONE manages my assets for me a la that THIEFF, Madoff and you should be extolling the benefits of people doing the same!
I would tell the American people the truth.This economy is in serious trouble.We have had unprecedented BANKING failures and prop-ups! We have a collapsing Housing/Auto market! We have a major corpoarte restructuring taking place and JOB LOSS will be high! I see at least 7% next year Unemployment.With that brings more foreclosure! Also we have major CC debt in this country. The only silver lining I see now is fuel prices are temporarilly down but for how long?
It's time to REIN in debt and hunker down! Save what you can,pay off all expensive debt and try to stay gainfully employed.Buy nothing on credit other than essentials! That is what you should be telling the American people along w/ EDUCATE yourself on "investments/banking" now so that you can prepare now for the next Bull Market which I see way off in time!
And never give up control of your money to anyone!
Whaaat???? The key is SOLVENCY! Why do people think that a positive emotional attitude can erase debt and increase employment? The only kind of scheme where better confidence makes a material difference in the outcome is a confidence game aka con game, grift, scam, Ponzi scheme, pyramid scheme, etc. in the real world it takes more than confidence.