It's an Economic Reset, Not a Recession 23 comments
an article to
-
Font Size:
-
Print
- TweetThis
Over the past 50 years, the U.S. and the rest of the developing world lived to excess aided by the widespread availability of credit. The pace accelerated in the past 10 years with looser credit standards on everything from houses and commercial real estate, to credit cards and automobile loans. That excess should never have occurred and will not recur.
Hence, what we are presently going through is what I term an “Economic Reset” and not a recession. The lifestyle and economic prosperity that we all enjoyed over the past half a century peaked with the collapse of Bear Stearns in March 2008. We are currently going through a reset, which history will show, hastened with the Bankruptcy of Lehman Brothers.
When the reset has run its course (Bernanke implied the end of 2009 but I think end of 2010), the economic growth trajectory moves to the right but on a much less steep slope, as illustrated in the graph below:
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Joseph L. Sha...
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
Stick with your gut - it may be incorrect from time to time, but you can trust your own instinct on balance more than someone else's.
"You've heard of mental depression; this is a mental recession," he said, noting that growth has held up at about 1 percent despite all the publicity over losing jobs to India, China, illegal immigration, housing and credit problems and record oil prices. "We may have a recession; we haven't had one yet."
"We have sort of become a nation of whiners," he said. "You just hear this constant whining, complaining about a loss of competitiveness, America in decline" despite a major export boom that is the primary reason that growth continues in the economy, he said.
"We've never been more dominant; we've never had more natural advantages than we have today," he said. "We have benefited greatly" from the globalization of the economy in the last 30 years.
"Misery sells newspapers," Mr. Gramm said. "Thank God the economy is not as bad as you read in the newspaper every day."
<<<<<&l...
Thank God this idiot is no longer in our government with his "insights".
The only way to avoid this is to have some competitive advantage, such as innovation or a specialization not shared by the rest of the world.
We won't prosper as a country by doing things the same old way, but there is no reason we cannot adapt to the new reality and make a better life for ourselves and our future generations.
The problem's complexity arises because we as a nation need to deleverage. Our debt on the consumer, corporation, and national level is maxed out. In a best case scenario we would have deleveraged in a methodical fashion, however; pandemonium struck.
Now, with lending decreasing and spending dropping, America's 80% service based economy is unwinding at an accelerating rate (i.e. see job losses). The problem is the more jobs that are lost, the less services' are needed and the cycle continues leading to more and more job losses. In addition, lenders will continue to tighten up even more, with this activity you can begin to see how GDP could drop more than 8% next year.
To avoid systemic risk Barack Obama was forced to sign a stimulus bill to help avoid massive unemployment and economic deterioration. One might notice how counterintuitive it might be to borrow more money, to get out of a problem that was caused by borrowing too much money. However, to help avoid collapse Obama's hand was forced. The hope is that we figure something out before the stimulus runs out. Anyone got a stop watch?
In the next couple of years America will need to figure out a new paradigm for financial markets. The next one will not be the orgy of money the last one was.
The world is changing and we are on the brink. The sooner we as a nation understand the problem we are confronted with the stronger we will turn the corner. However, if we continue on the path of excessive spending and lending we will risk devastation.
Spot on, Joe. Unfortunately we've spent our past fifteen years of innovation on whiz-bang financial "instruments". We've got some catching up on renewables and especially on transportation technologies.
On Feb 26 06:01 PM Joe from Dallas wrote:
> I agree here, however on the other side lies a whole new world. There
> might be slow growth here, but greater growth overseas. The only
> way to ensure American prosperity now is to sell the rest of the
> world our innovation and new technologies to build a more efficient
> world instead of selling them jet planes and missiles and various
> war machines.
D E P R E S S I O N
George Orwell.....where are you now when we really need you.
The Chinese leaders told investors and homeowners to stop buying houses when things looked bad.
It seems that if we needed a reset someone could have given the market a holiday while the house was cleaned.
The Obama solution (Bush too) is to mortgage the future of the future tax payers and tax those who are actually productive now. When I talk of tax payer I mean those who pay federal income tax. That group is who will have to pay back all the debt. Where will these people come from. Pretty soon 50% of the people won't even pay into the federal system. Most only pay a little of those who do. It seems to me that when the time comes to actualy pay of these debts there won't be anyone around will to do so. Hyperinflation here we come.
I'd also just like to say how amazing it is that even college educated people are amazingly stupid with their money. It just goes to show you how poorly educated we really are. Socialism in this country is breeding immorality, ignorance, and more socialism.
I am not implying that we are not in an economic downturn or using another word to placate it. I am in fact implying the far opposite and that we are in the worse downturn that some of us (depending on age) have ever experienced. Call it a Depression if you want and I won't argue with you, but point is, we will never get back to the lifestyle that we have known. It all changes from here on forward.
Some of my professor friends are getting a kick out of the graph and one has asked for permission to show it to his students.
So what should we call a system crash? An unplanned maintenance opportunity? I don't mean to be a jerk, but to take an economic term and apply a system metaphor....that doesn't map...... is the problem.
I agree generally about oversupply, overconsumption and globalization. To imply however, that we are resetting implies a return. From Bank of America to General Motors, they will not be back in the way they used to work. We are in a brand new age. There is no way back.
On Feb 27 11:00 AM Change is only constant wrote:
> Tomato, tomato....potato, potato, let's call the whole thing.......reset.
>
>
> So what should we call a system crash? An unplanned maintenance
> opportunity? I don't mean to be a jerk, but to take an economic
> term and apply a system metaphor....that doesn't map...... is the
> problem.
>
> I agree generally about oversupply, overconsumption and globalization.
> To imply however, that we are resetting implies a return. From Bank
> of America to General Motors, they will not be back in the way they
> used to work. We are in a brand new age. There is no way back.
>
>
As for passing the graph to professors, I'm not personally enthused very much by the notion that another generation of students is being misled into thinking that life is lived in straight lines.