Why there won't be a recession

First off, a recession is having two straight quarters of reduced Gross Domestic Product or Real Income Growth. While I think the 1st Q of 2008 may be slower than Q4 2007, I think the economy will recover and show growth by Q2 of 2008 thus keeping us out of a recession by definition.

Among the reasons:

1. Stimulus package. Much of the $150 billion or so they will be handing out will get spent almost immediately. Even if it is used to pay off debt, it will circulate through the economy and ultimately cause much more then $150 billion in spending. The tax cut portion will also allow small biz to keep more money. This money will either be spent or invested in new employees, etc, once again causing a greater increase in GDP than the amount invested in the stimulus. This is trickle down at its finest.
2. Housing. I think we have about reached bottom on the housing crash. Fed is expected to lower rates again this coming week. This is going to make 15 & 30 year fixed payments quite attractive versus renting. People who were sitting on the sidelines will start jumping in. People who were going to have to sell may be able to hang on. People who couldn't have qualified to refinance at higher rates now may be able to. Overall, it will cause a very quick firming of the housing market.

3. Dollar strengthening. Despite all the gloom and doom, I believe the dollar will begin to strengthen. Much more money, investment and available credit has been wiped out of our economy than the Fed has put back into it. Thus, if they actually still measured the money supply we would find that it has actually dropped. As foreigners realize this, American assets will start to climb in value. They will be buying our stocks, our real estate and anything dollar denominated to save them from their own plummeting currencies, thus driving up the prices of American assets, which in turn will spur more American Spending.

4. Wages and Inflation - for those with no real estate exposure we will only see increased spending. Wages are rising, albeit quite slowly. Prices are also rising for most of the goods a lower income household buys. Since generally they already spend everything they make, they will continue to spend everything they make plus any raises they get. And yes most employees still do get raises.

5. Presidential election - Presidential elections either bring the prospects of little change for those doing well or much change for those yearning to better. This will lead to great optimism for all as the year unfolds. Optimism and hope brings productivity. People will figure a way to make things better for themselves and the economy will benefit.

6. Everyone thinks things will get worse. When consensus is this strong in one direction things usually happen in the other direction. 2 years ago, everyone was saying that you could never lose money in real estate. I wanted to sell my home, but wife wouldn't let me because you have to live somewhere. But the point being, when everyone thinks sell, you need to buy. When everyone says buy, you need to sell.

These bubbles and subsequent crashes of various sorts happen about 20 times in the average person's lifetime. People don't understand that it is just a natural cycle and thus they make decisions that may haunt them for the rest of their lives. The world is not ending, the economy is far from dead, the dollar is not going to be worthless, so please make sure you think very hard and look at all the evidence before making a decision that will affect you for the rest of your lives. 30-40 years from now people will be talking about how they wished they would have stayed in stocks, they will still be waiting to get even on gold, they will be wallpapering their bathrooms with Euros, they will be ruing over the house they let go because they were upside down, and is now worth 10 times what they had owed on it.

Disgustedbyhumanity – did you study economy or you write from your head (common sense)? I think you didn’t.

Originally posted by disgustedbyhumanity
1. Stimulus package. Much of the $150 billion or so they will be handing out will get spent almost immediately. Even if it is used to pay off debt, it will circulate through the economy and ultimately cause much more then $150 billion in spending. The tax cut portion will also allow small biz to keep more money. This money will either be spent or invested in new employees, etc, once again causing a greater increase in GDP than the amount invested in the stimulus. This is trickle down at its finest.

$150 billion is nothing. It will just increase budget deficit and inflation.

Originally posted by disgustedbyhumanity
2. Housing. I think we have about reached bottom on the housing crash. Fed is expected to lower rates again this coming week. This is going to make 15 & 30 year fixed payments quite attractive versus renting. People who were sitting on the sidelines will start jumping in. People who were going to have to sell may be able to hang on. People who couldn't have qualified to refinance at higher rates now may be able to. Overall, it will cause a very quick firming of the housing market.

Bottom – not yet. Lower interest rates will just fuel inflation and your real wage will be lower.

Originally posted by disgustedbyhumanity
3. Dollar strengthening. Despite all the gloom and doom, I believe the dollar will begin to strengthen. Much more money, investment and available credit has been wiped out of our economy than the Fed has put back into it. Thus, if they actually still measured the money supply we would find that it has actually dropped. As foreigners realize this, American assets will start to climb in value. They will be buying our stocks, our real estate and anything dollar denominated to save them from their own plummeting currencies, thus driving up the prices of American assets, which in turn will spur more American Spending.

Yea right. Lowering interest rates will further weaken $. And that’s the only way as another is full market crash and depression. FED decided to go into inflation.

Originally posted by disgustedbyhumanity
4. Wages and Inflation - for those with no real estate exposure we will only see increased spending. Wages are rising, albeit quite slowly. Prices are also rising for most of the goods a lower income household buys. Since generally they already spend everything they make, they will continue to spend everything they make plus any raises they get. And yes most employees still do get raises.

When increase of prices is faster than wages, you are in inflation. Because of it, you only spend money on goods which you really need. And because of it, many sectors will suffer from lower sales like for example happened 2007 in USA with auto and housing sectors. Did you ask yourself why GM, Ford and Chrysler suffered so much 2007 and had record loses?
U.S. auto sales seen down in December, outlook weak

Originally posted by disgustedbyhumanity
5. Presidential election - Presidential elections either bring the prospects of little change for those doing well or much change for those yearning to better. This will lead to great optimism for all as the year unfolds. Optimism and hope brings productivity. People will figure a way to make things better for themselves and the economy will benefit.

The later problem starts solving; problems will be much worse.

Originally posted by disgustedbyhumanity
6. Everyone thinks things will get worse. When consensus is this strong in one direction things usually happen in the other direction. 2 years ago, everyone was saying that you could never lose money in real estate. I wanted to sell my home, but wife wouldn't let me because you have to live somewhere. But the point being, when everyone thinks sell, you need to buy. When everyone says buy, you need to sell.

It will be worse. This time there is no way US economy will survive without major earthquakes.

Originally posted by disgustedbyhumanity
These bubbles and subsequent crashes of various sorts happen about 20 times in the average person's lifetime. People don't understand that it is just a natural cycle and thus they make decisions that may haunt them for the rest of their lives. The world is not ending, the economy is far from dead, the dollar is not going to be worthless, so please make sure you think very hard and look at all the evidence before making a decision that will affect you for the rest of your lives. 30-40 years from now people will be talking about how they wished they would have stayed in stocks, they will still be waiting to get even on gold, they will be wallpapering their bathrooms with Euros, they will be ruing over the house they let go because they were upside down, and is now worth 10 times what they had owed on it.

This time is fundamentally different:
The Collapsing American Dollar

Originally posted by disgustedbyhumanity
1. Stimulus package. Much of the $150 billion or so they will be handing out will get spent almost immediately.

The current debt (not credit) crisis is much worse than that, $150 billion won't put a dent in it.

Originally posted by disgustedbyhumanity
2. Housing. I think we have about reached bottom on the housing crash.

Morgan Stanley just said they expect a nationwide drop in housing prices of 25-30%...not a typo. I agree with them.

Originally posted by disgustedbyhumanity
6. Everyone thinks things will get worse. When consensus is this strong in one direction things usually happen in the other direction.

Have to agree with you there...

Originally posted by disgustedbyhumanity
These bubbles and subsequent crashes of various sorts happen about 20 times in the average person's lifetime. People don't understand that it is just a natural cycle and thus they make decisions that may haunt them for the rest of their lives.

Agreed however the current crisis is not run-of-the-mill by any means...this is going to be either a very bad recession or a depression. I'm leaning towards bad recession due to some creative .gov financing which may or may not resolve the banking crisis permanently.

We've been in a recession for a while now. Anyone who believes otherwise is blind or ignorant or both.

By definition

"In macroeconomics, a recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year."
I dont follow finances that close, when did we have our 1st two qtrs of declining GDP? How long have we been in it.

Originally posted by mindping
I dont follow finances that close, when did we have our 1st two qtrs of declining GDP? How long have we been in it.

My best friend has been a broker for a major firm for 22 years. She has an MS in finance from a major league university. I'm pretty sure she knows what she's talking about.

reply to post by disgustedbyhumanity


High interest rates = inflation

Low interest rates = price stability

The record shows this is true, despite what all the "experts" say over and over again. Intrest is a big factor in peoples cost of living. When interest rates are low, people pay less interest and thus inflation stays low.

There is no indication that the economy slowed in the 4th quarter. Americans may have bought less, but american companies sold more goods overall. I would not assume that just because someone has 20 years experience that they know what they are doing.

Housing has already fallen the 25-30% that Morgan Stanley predicted.

reply to post by disgustedbyhumanity


You are right, Is not going to be a recession because America, our inheritance our sovereignty has begun to sell herself to the world thanks to the greed of corporate elite.

They rather sell our nation to communist and terrorist sponsored states than lose what they already had rob from us the hard working American people.

reply to post by disgustedbyhumanity

You must be blind. Take a look at what is going on in the world. We're in trouble.

We may be at the bottom of the housing market crash but what happens to all those people that lost their houses?

+ The influx in illegal immigration
+ The increase in gas prices
+ The soon to come increased unemployment

Edit add:

The interest rate was cut by the federal reserve.
That interest rate is what THE US GOV OWES THE FEDERAL RESERVE IN INTEREST FOR BORROWING MONEY!!!!

OH they cut that by 3/4 a %!!! *SNIP*!!!

THE US GOV STILL OWES THE FEDERAL RESERVE what...

30% interest on they money they loan us out of the kindness of their great heart?? GIVE ME A BREAK! You took economics? Well wake the fuk up and realize that nothing is FEDERAL about the federal reserve!

[edit on 28-1-2008 by Techsnow]

*Moderator Note - Profanity edit -
1b.) Profanity: You will not use profanity in our forums, and will neither post with language or content that is obscene, sexually oriented, or sexually suggestive nor link to sites that contain such content.


[edit on 29-1-2008 by dbates]

Originally posted by disgustedbyhumanity
High interest rates = inflation

Low interest rates = price stability

Sorry, but I can't stop:

Originally posted by disgustedbyhumanity
The record shows this is true, despite what all the "experts" say over and over again. Intrest is a big factor in peoples cost of living. When interest rates are low, people pay less interest and thus inflation stays low.

Because money is cheaper people more borrow and fuel inflation.

I already showed you what happened with auto sector in USA, but you just ignore facts.

Originally posted by Vojvoda
you just ignore facts.

Thank you. I feel like I've been beating my head against a brick wall.

Originally posted by Anatomic Bomb
Thank you. I feel like I've been beating my head against a brick wall.

Well, disgustedbyhumanity just doesn't understand how monetary policy is working. When economy faces inflation higher than normal, central bank raises interest rates to slow down credit expansion which would just fuel inflation. That's because real interest rate would stay lower [nominal is the same], people would borrow more money and spend, and that just fuel inflation.
Main problem of US economy is that if FED raises interest rates US economy would crash and went into depression. FED decided to weaken dollar, lower interest rates and fuel inflation to stop crash scenario. The problem is that Ben Bernanke believes that 'infinite' liquidity can prolong recession forever.
And our fellow disgustedbyhumanity just thinks as Helicopter Ben.

www.poorandstupid.com...

[edit on 29-1-2008 by Vojvoda]

Originally posted by disgustedbyhumanity
1. Stimulus package. Much of the $150 billion or so they will be handing out will get spent almost immediately. Even if it is used to pay off debt, it will circulate through the economy and ultimately cause much more then $150 billion in spending. The tax cut portion will also allow small biz to keep more money. This money will either be spent or invested in new employees, etc, once again causing a greater increase in GDP than the amount invested in the stimulus. This is trickle down at its finest.

How can you be sure that it will be spent on new employees?

2. Housing. I think we have about reached bottom on the housing crash. Fed is expected to lower rates again this coming week. This is going to make 15 & 30 year fixed payments quite attractive versus renting. People who were sitting on the sidelines will start jumping in. People who were going to have to sell may be able to hang on. People who couldn't have qualified to refinance at higher rates now may be able to. Overall, it will cause a very quick firming of the housing market.

Why do you think we've hit bottom on the housing crash? Please
explain.


3. Dollar strengthening. Despite all the gloom and doom, I believe the dollar will begin to strengthen. Much more money, investment and available credit has been wiped out of our economy than the Fed has put back into it. Thus, if they actually still measured the money supply we would find that it has actually dropped. As foreigners realize this, American assets will start to climb in value. They will be buying our stocks, our real estate and anything dollar denominated to save them from their own plummeting currencies, thus driving up the prices of American assets, which in turn will spur more American Spending.

I don't understand your reasoning here; why would this lower our money supply? Also, the govt has been furiously printing up more money in the last few years. We have no idea how much money is in circulation, because the M3 is no longer published.

4. Wages and Inflation - for those with no real estate exposure we will only see increased spending. Wages are rising, albeit quite slowly. Prices are also rising for most of the goods a lower income household buys. Since generally they already spend everything they make, they will continue to spend everything they make plus any raises they get. And yes most employees still do get raises.

Wages are rising?? Could you please tell me what your sources of
information are? Last time I checked, alot of people get about
2.5% COLA increase - which is below the cost of living increase.

5. Presidential election - Presidential elections either bring the prospects of little change for those doing well or much change for those yearning to better. This will lead to great optimism for all as the year unfolds. Optimism and hope brings productivity. People will figure a way to make things better for themselves and the economy will benefit.

We're living in a country where less than half the people vote. What leads you to think people will be optimistic? Most people I know are concerned about the direction our govt is taking and thinking that a new prez will just bring the same old, same old. I don't see anyone being optimistic, I think many, if not most, have lost faith in the system.

6. Everyone thinks things will get worse. When consensus is this strong in one direction things usually happen in the other direction. 2 years ago, everyone was saying that you could never lose money in real estate. I wanted to sell my home, but wife wouldn't let me because you have to live somewhere. But the point being, when everyone thinks sell, you need to buy. When everyone says buy, you need to sell.

Except that when you have no money and a very low income, you can't buy a house, or much of anything for that matter.

These bubbles and subsequent crashes of various sorts happen about 20 times in the average person's lifetime. People don't understand that it is just a natural cycle and thus they make decisions that may haunt them for the rest of their lives. The world is not ending, the economy is far from dead, the dollar is not going to be worthless, so please make sure you think very hard and look at all the evidence before making a decision that will affect you for the rest of your lives. 30-40 years from now people will be talking about how they wished they would have stayed in stocks, they will still be waiting to get even on gold, they will be wallpapering their bathrooms with Euros, they will be ruing over the house they let go because they were upside down, and is now worth 10 times what they had owed on it.

This happens 20 times in a person's lifetime? Maybe if they expected to live 300 years or so. I'm 53, have worked for 40 years and have not been through 20 recessions/crashes/whatever. This is about my third one, IIRC.
The rest of the world has lost faith in the dollar. We have nothing to backit up with except our reputation - which is in shreds. Alot of other countries have been dropping the dollar as reserve currency and are using their own country's money or the euro.
I don't believe there are any "natural" cycles in our economic system. The Federal Reserve (a privately held corp) controls everything. They WANT you to think these things are natural, but they aren't. Subprime mortgages, inflation and the erosion of trust around the planet towards the U.S. - all of these things and more, are causing a perfect storm in the financial world.
When Bank of America loses 95% of their profit over one year, I'd say that's pretty serious. When was the last time you saw this many tent cities in suburbs? Greed has taken over America and the rest of the world doesn't trust us because of that (and alot more reasons).

Originally posted by Vojvoda

Originally posted by Anatomic Bomb
Thank you. I feel like I've been beating my head against a brick wall.

. The problem is that Ben Bernanke believes that 'infinite' liquidity can prolong recession forever.

[edit on 29-1-2008 by Vojvoda]

Do you honestly think that Ben thinks that? I just have a hard time believing that the people who are making these seemingly idiotic moves are really as dumb and blind as they appear to be. I think they are hiding something and know full well what they are doing. I don't think that Ben thinks for a second that lower rates are going to save the economy. I think that one problem is that our poor leaders refuse to be honest with the American people. It is a system based on lies and it appears to be coming to its end.

Kudos, Karl. As usual, you speak the absolute truth and I agree with you 100%.

It just shows how unstable and fragile our "civilization" really is.

Much the same way that a spoilt child reacts to having a toy taken away from it, the general (better off) population cry over not having enough, while the underclasses do what they have always done, and survive on what they have got.

Is it any wonder that we fear control from one world governments, much the same way as we once feared control from our parents and teachers.

Is it any surprise that governments treat us like misbehaving children, give us new toys and distractions to keep us busy and stop us complaining?

It amuses me how we can harp on about how advanced, cultured and intelligent we are when all we do is what we choose, without a real thought for the impacts.

Recession, is just that. A word. Yet another clever form of control to guide the mis-guided blinkered populous.

Now play nice everyone or the Recession-man or the terror-man will get you!

I think douglas adams put it best. Ill try my best to remember the quote.

"Earth is an utterly insignificant little blue-green planet far out in the uncharted backwaters of the unfashionable end of the western spiral arm of the galaxy. The sapient life forms on Earth are, in descending order of intelligence, mice, dolphins and human beings, the lattermost of whom may or may not be descended from a race of Golgafrinchan telephone sanitisers, hairdressers, management consultants, and documentary film producers"

Most of the population are depressed about the movement of small, green pieces of paper, which is odd as the green pieces of paper themselves are happy.

Originally posted by Anatomic Bomb

Originally posted by mindping
I dont follow finances that close, when did we have our 1st two qtrs of declining GDP? How long have we been in it.

My best friend has been a broker for a major firm for 22 years. She has an MS in finance from a major league university. I'm pretty sure she knows what she's talking about.

By _definition_ we are NOT in a recession yet...even though it's obviously on our doorstep.

Originally posted by Karlhungis
Do you honestly think that Ben thinks that? I just have a hard time believing that the people who are making these seemingly idiotic moves are really as dumb and blind as they appear to be.

Hi.
I read his opinion about Great Depression and I really think he is an idiot who don't understand how Great Depression happened and now is in position to prove his theory.

Originally posted by Karlhungis
I think they are hiding something and know full well what they are doing. I don't think that Ben thinks for a second that lower rates are going to save the economy. I think that one problem is that our poor leaders refuse to be honest with the American people. It is a system based on lies and it appears to be coming to its end.

I agree about it, but I think Ben is put in position because he's idiot. Sometimes is better to put an idiot in position of power because when he create mess it is easier to blame him. And he creates mess without any intention which is better for ‘conspirators’.

reply to post by disgustedbyhumanity


you make very convincing arguements...i for one do not see this happening...why?... been around for too long....there is a slow degregation
of the money paid out in wages and benefits to workers. how do i know this...just look at the CBO numbers for employment over the last 20 years.yes, they can be researched online