Great News! We are NOT in a recession!

Parent Cafe
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<p>“I did not say we have a recession but all the signs are pointing toward one.”</p>

<p>OK; let’s assume we are. So what? What’s the problem. It is part of economic balance. If all you have is growth, then you have inflation. With the inflation, everything inflates. Price of goods go up, wages go up, demand exceeds supply, house prices go up, interest rates go up, etc… You wind up spending pretty much the same percentage of your income on the same items you bought before. The people who get screwed during inflation are the very poor. Their meager paycheck (low tech employment), government assistance checks, etc… don’t stretch as far.</p>

<p>However, after such growth comes a slow down. Sometimes a recession. So what? Price of goods and services are reduced. interest rates come down, home prices come down, (Most real estate is long term, so those who bought when it was higher aren’t hurt. Unless they are investors trying to sell), yes, unemployment goes up but it’s cyclical. There are many workers who routinely get laid off a couple of times a year. Sometimes because of seasonal work; e.g construction workers. Either way, the cost of doing business and living drops. People then start to spend money again; supply goes up because of demand. Employment picks back up. etc… This is part of the economic cycle. And with economies being more global, there are many influences now compared to 20-30 years ago.</p>

<p>When we allow our inflation to grow to high (Even though you think that means more money for you, which it doesn’t); then the cost of doing business overseas becomes cheaper. It’s cheaper to buy and produce goods overseas. Especially if those countries are in a recession or much lower standard of living. The best example would be talking about “Mutual Funds”. If you keep a mutual fund for at least 7 years; and look long term; it is almost impossible to lose money it it. There will be ups and downs, but if you buy continuously, then you buy more when it’s low and less when it’s high. If I didn’t know about economics and investing, I would WANT the economy to be in the toilet for the next 10-20 years. I could buy more and more shares in mutual funds and stocks. Then when the economy came back towards inflation, I would make a lot of money. Of course as soon as I cashed it in, it would have an immediate affect on the market. Same as the millions of others who buy low and sell high. There’s even a lot of measures in place because of day trading and such. Luckily I know a little more about the market and economy than that.</p>

<p>Basically; I am asking so what if we are heading towards a recession? Or, even if we are in one now? What is the harm. For everything that you can come up with that is a so called negative, I can list the positive reciprocal. That is how it works. Has since the beginning of time. There are those affected negatively, but others who are affected positively. The same happens no matter what the economy does. Of course, if you look at it solely from a personal perspective; i.e. I this, my relative that; then yes it’s more difficult to accept. But that too is part of economics.</p>

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<p>On another note, I don’t understand this business of people getting scared cause their house is worth less than their mtge and they either sell at a loss (to get away from the mtge) or walk away from the mtge (!) even tho they have not lost their job, just cause they’re scared. </p>

<p>We bought our house just before the 80’s oil bust and poof, overnight it was worth less than the mtge, and only 1 yr old to boot. Took 10 years to come back, but it did, and then it went up in value. Why don’t these people just live in their house, which I assume is what they bought it for, and wait for the mrkt to come back. All this panicky irrational behavior is just making things worse, imho.</p>

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<p>[Economics</a> Blog : Merrill Lynch: Recession to Be Worst Since 1970s](<a href=“http://blogs.wsj.com/economics/2008/03/11/merrill-lynch-recession-to-be-worst-since-1970s/?mod=economy_real_time_blogs]Economics”>http://blogs.wsj.com/economics/2008/03/11/merrill-lynch-recession-to-be-worst-since-1970s/?mod=economy_real_time_blogs)</p>

<p>March 11, 2008, 3:59 pm
Merrill Lynch: Recession to Be Worst Since 1970s</p>

<p>“Merrill Lynch economist David Rosenberg, one of the most bearish Wall Street economists, says to look past the 1990-91 recession as a guide to the current downturn. The key difference: the depth of home-price declines.”</p>

<p>Banks are in trouble. AAA bonds will be downgraded. My husband is in the securities business and has never seen anything like this for 20 years.
I really hope we can minimize this, but I don’t see any reason for optimism.</p>

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<p>This is a problem, I don’t see price of goods and services reduced. I might see a reduction in house prices but in relative terms to income house prices are still high. I have received notice that our school district is going through a rough time, possible layoffs. I don’t recall that was what happened last time in 2001 recession. By the time we can actuall measure we had a recession, the recession is usually over because they are laggard indicators.</p>

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<p>Regarding mutual fund. The Dow Jones is basically the same in the last seven years, plus and minus a few points.</p>

<p>[Dow</a> Jones Indexes](<a href=“http://www.djindexes.com/mdsidx/index.cfm?event=showavgDecades&decade=2000]Dow”>http://www.djindexes.com/mdsidx/index.cfm?event=showavgDecades&decade=2000)</p>

<p>Overtly negative? The Fed would not inject $200 billion worth of credit if it does not think it needs to. It won’t come out and admit anything because the FED wants people to spend money to stimulate the economy.</p>

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<p>ASAP, I have access to similar info. The situation is way scarier than the average person has any clue.</p>

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<p>My husband would agree, mercymom. It doesn’t look good. </p>

<p>The fed has been dropping the interest rate again and again, and it works for a short time, but then stops. The mortgage problem is not over, by any means.</p>

<p>We haven’t seen a real depression in our lifetime. And I really hope we can keep it that way.</p>

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<p>whether we are in recession or not doesnt matter. all that matters is how consumers are feeling about the economy. and b/c consumers FEEL we’re in a recession means they will spend like its a recession, further hurting the economy.</p>

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<p>That may be true in normal recession circumstances, but this time around is different. If people are losing their homes, and their jobs, they have real problems.</p>

<p>Investment also suffers when the reasonably well off lose in the market, as well, which is happening right now.</p>

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<p>Christcorp: “recession” and “inflation” are not reciprocal concepts. “Inflation” is basically devaluation of financial assets relative to tangible assets. Recession is medium-term cessation of economic growth. If people (and capital) are employed productively, economic growth happens. When economic growth stops, that’s never a good thing. When it stops for longer than a few quarters, that’s the Great Depression.</p>

<p>While there can be a relationship between fast growth and inflation, that’s not always the case (see the “stagflation” of the mid-70s), and we have enjoyed good growth with historically low inflation for the past 17 years or so.</p>

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<p>mercymom–it’s nice if you can stay in your house for 10 years until the price rises again. Suppose your company transfers you or you lose your job and need to relocate? You can’t sell, so you own two houses, or rent while the other one is vacant.</p>

<p>Suppose you lose your job and can’t pay the mortgage? And now the house is worth less than you owe the bank?</p>

<p>And as far as inflation “only” being in energy and food, so what’s the big deal…I’ll tell you what the big deal is. Energy prices eventually affect EVERYTHING. I heard a gov’t official in a radio interview say “as long as the current inflation is limited to energy and food, we’ll be ok.” For low-income people, energy and food are a huge proportion of their expenses. Not to mention things like the rising cost of corn (due to ethanol demand) pushing up the cost of beef and milk. The rising cost of fuel and fertilizer pushing up the cost of raising food and transporting it, and the cost of making everything else that we make from petroleum (and transporting it.)</p>

<p>Consumers can’t spend us out of this recession b/c they are already maxed out. (Well, we’re not, b/c we pay off our cards every month.) But a lot of people have been spending beyond their means (as encouraged by the government,) or because they are at the end of their resources.</p>

<p>And finally to cristcorp:

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<p>With so many skilled jobs going overseas, what we have an abundance of in this country are fast-food, retail sales (think Walmart,) and hotel maid jobs. What are these a stepping stone to? Sounds like a pyramid scheme to me…only a lucky few will make it to managerial positions. And there aren’t enough teenagers in the country to fill all these minimum wage jobs so why are we surprised when they are the permanent dumping ground of able-bodied adults?</p>

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<p>They even remove the second level managerial positions. My organization just did.</p>

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<p>Economics is cyclical. It would be great if we remained constant forever but it just doesn’t work that way. We will rebound. I suggest the Fed concentrate on pumping up the dollar. This would be a great first step in the right direction.</p>

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<p>Pumping up the $ will hurt exports which will hurt employment. BMW is getting ready to build a huge new plant in SC because it’s cheaper here to build BMWs. High oil is good for us in the long run. Less traffic and more transit. Less waste.</p>

<p>[BMW</a> spending $750M to expand US plant; 500 new jobs created - APF - GainesvilleSun.com](<a href=“http://www.gainesvillesun.com/article/20080310/APF/803100697]BMW”>http://www.gainesvillesun.com/article/20080310/APF/803100697)</p>

<p>[Manitowoc</a> Model 21000 makes heaviest lift on reconstruction project at Chinese oil complex](<a href=“Manitowoc Company | Crane Manufacturer | Equipment”>Manitowoc Company | Crane Manufacturer | Equipment)</p>

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<p>It seems to me that our economy is changing, and we are going to go through a period of adjustment. In my area, the decent paying jobs are going by the wayside. Manufacturing jobs have been sent overseas or to Mexico. Those that remain are being “bought out,” and the workers are being replaced with new workers who make 1/2 what the previous worker made in the same job. White collar workers are eliminated & those who remain are doing their own jobs & the jobs of those who left. Upper management doesn’t seem to be cut … but that’s another story. The many jobs posted on our state jobs bank pay $7-9 per hour. Grads are leaving in droves. Foreclosures are rampant. Construction is at a standstill. Communities have a lower tax base as a result of the economy & services have been cut. Roads are in disrepair. School funding has been cut. Gas was $3.15/gal this morning & $3.35 this afternoon (really!); it was $2.97 last week. </p>

<p>If it’s not a recession, it is something else that is very real & very scary.</p>

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<p>Close relative a commercial builder in Manhattan, </p>

<p>He says it is BAD. When business do not reinvest in renovations, relocating office space, Bank renovations>Huge effect and it always seems to start at that level, he said he saw the slow down start last summer, no contracts coming in or slowed to a trickle He has lived thru 3 such events, he says this one is reeking of a bad one. The early 90’s were nothing compared to this.</p>

<p>September 2007 the Euro was 1.40</p>

<p>Currency Converter Results
Monday, March 10, 2008 </p>

<p>100 Euro(s) = 153.539 US Dollar(s)
1 USD = 0.6513 EUR
1 EUR = 1.53539 USD</p>

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<p>"mercymom–it’s nice if you can stay in your house for 10 years until the price rises again. Suppose your company transfers you or you lose your job and need to relocate? You can’t sell, so you own two houses, or rent while the other one is vacant.</p>

<p>Suppose you lose your job and can’t pay the mortgage? And now the house is worth less than you owe the bank?"</p>

<p>I wasn’t talking about those situations. I specfically was addressing where people who have NOT lost their job, who have NOT been transferred, who have NO reason to sell their house are panicking because of negative equity and selling at a loss or walking away from the mtge for NO reason other than being scared. I have now read more than one article about this. It was quoted above my comment, hence my comment.</p>

<p>Obviously if you lose your job or get transferred it’s a different situation. That’s exactly what we lived through in the 80’s oil crash when every engineer in town was getting laid off and/or transferred. That’s what caused our house to plummet even tho’ we were one of the only people on the block not working for an oil company. It was like living thru the depression.</p>

<p>But selling for no reason just cause you’re scared is stupid and having lots of people do it just exacerbates the problem.</p>

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<p>Actually the article with the panic selling isn’t quoted on this thread, but the concept is highly related to the problem we’re talking about. Look, my relative is about to lose everything; I am certainly sympathetic to that situation. otoh, there are people WITH JOBS who are scared by their negative equity and they’re making bad irrational decisions, which is just making the entire situation worse. It’s like we’ve got a whole pile of people who think real estate always goes up and never goes down, or maybe they viewed their house as a bank account rather than just the house they live in. It’s that thinking I don’t understand.</p>

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<p>And more trees in my neighborhood, too! Wishful thinking…</p>

<p>Oiis used for more than just fueling cars and jets. Plastics, composites, even pharmaceuticals all start as oil. Was it Mendeleev (the chemist who came up with the Periodic Table) who said that burning oil was equivalent to burning cash? May be we will stop burning this precious resource?</p>

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<p>We had to do this during the 1990-91 recession. We were able to afford our mortgage, so we just stuck it out. The problem I see now is that with so much property bought with ARMs, people are finding that they can no longer afford their mortgage payments when their loans rates re-adjust. In the days of escalating housing prices, you could always sell your house and even walk away with $$$. No longer…</p>

<p>One problem is that even if you can stick it out in your house, if many of your neighbors leave, it really wrecks havoc on a neighborhood. Even the Humane Societies feel the effects.</p>