Well we have been a recession for over a year and it might lead to a depression.  How do you compare this economic crisis with the ones in the early 80s,early 90s and early 00s?

I say this recession could be far worse than previous ones, because it is affecting all sectors of economy and it's global.

I lived through the last couple, and this one is much, much, worse.

I agree this one is worse... at first I thought it might be worse because this is the first one where I am on my own...no parental assistance like in the 80s when I was still living at home.... but now I know its worse just because it is...

This might be the worst since the Great Depression, but the 70's recession was also pretty bad.

So what really caused this recession?  Is it because people bought houses they can't afford, Bush's ridiculous finanical decisions, both or neither?

I think it was a combination of the ARM's and credit card companies giving them out too freely.  When people stopped paying because they couldn't afford them, the companies stopped giving credit for cars, homes, etc.

So what really caused this recession?  Is it because people bought houses they can't afford, Bush's ridiculous finanical decisions, both or neither?


More than that.  Allowing Wall Street to police itself is the biggest.  Unfettered access to credit.  The credit companies, including banks and card companies, offering slight of hand loans and mortgages whose rates went from decent to usury in a matter of months.  People being allowed to borrow what they could never afford to repay. It is just one big mess.

More than that.  Allowing Wall Street to police itself is the biggest.  Unfettered access to credit.  The credit companies, including banks and card companies, offering slight of hand loans and mortgages whose rates went from decent to usury in a matter of months.  People being allowed to borrow what they could never afford to repay. It is just one big mess.


I agree.  What's more, it's the end result of following Reaganomics (a demonstrable failure from the start) to the nth degree.  It's like having somebody steal your future and blow it on a pyramid scheme. 
>:(

BTW, this thread belongs on the politics board.

I think it was a combination of the ARM's and credit card companies giving them out too freely.   When people stopped paying because they couldn't afford them, the companies stopped giving credit for cars, homes, etc.


Yeah it is a combination of many factors. The reason why people couldn't afford the adjusted mortgages was because the interest rates started creeping up, along with the inflation rate with other costs, like gas and groceries, and the wages/salaries couldn't keep up with the inflation. The inflation was caused by the weakening dollar rate because of being in the worst deficit in history, due to mismanagement by the administration by giving tax breaks to the extreme upper class. So it wasn't the housing slump that originally caused the weakening economy, the weakening economy came first, which caused foreclosures due to the once optimistic investors hoping to flip and make a profit unable to sell, since there were less optimistic buyers due to the economy and rising prices, and that in turn caused the housing prices to drop, which in turn caused the economy to fall harder.

Yeah it is a combination of many factors. The reason why people couldn't afford the adjusted mortgages was because the interest rates started creeping up, along with the inflation rate with other costs, like gas and groceries, and the wages/salaries couldn't keep up with the inflation. The inflation was caused by the weakening dollar rate because of being in the worst deficit in history, due to mismanagement by the administration by giving tax breaks to the extreme upper class. So it wasn't the housing slump that originally caused the weakening economy, the weakening economy came first, which caused foreclosures due to the once optimistic investors hoping to flip and make a profit unable to sell, since there were less optimistic buyers due to the economy and rising prices, and that in turn caused the housing prices to drop, which in turn caused the economy to fall harder.


Gotta call issue with you on this.  You've got the basic sequence of events correct, but you've got the root and proximate causes all mixed up.  I used to think like you did -- that it was really just a housing problem, and that it wasn't going to destroy the rest of the economy with it, and burned my retirement to ash in the process.  Sucks to be me, back to work on Monday.

With the benefit of 20/20 hindsight (read: "I started to understand things at the same time most people in the business did, namely a month too late to make any money off each stage in the decline"), it was more like this:

The root cause is a series of perverse incentives that started in the mortgage lending and securitization industries.

Joe Sixpack didn't care as long as he could "buy" a $600K house on a $30K income.  Hey, it was still cheaper than rent.  NINJA loans - "No Income, No Job / Assets" - were the flavor of the day.  Just pencil in a "1" before that "30K", and Joe Sixpack is making $130K/year as far as the bank's concerned.  Who cares, as long as Joe gets his house, the REALTOR(tm) and the mortgage originator get their commissions?  Everyone gets what they want, and the risk is transferred up the chain.

Banks didn't care about mortgagors being able to pay back the mortgages they'd bought, so long as they were able to underwrite enough mortgages to sell off tranches of the debt (via packaging them up and selling the packages in the CDO - collateralized debt obligation - markets) to pension funds and other banks.

Those funds and banks didn't care about whether or not the debts would ever be paid, so long as they thought they could hedge their risks by buying CDS's - credit default swaps.  (And on the other side of the trade, the banks didn't care, so long as the money from writing credit default swaps kept coming in.)

Those ARMs weren't affordable because they were being issued to people who had no business buying those homes in the first place.

But they led to a lot of people buying houses they couldn't afford - at ever-increasing prices.  These borrowers then took out HELOCs - home equity lines of credit - and borrowed against the value of their overinflated homes; yet another effective increase in the money supply.  They then spent that newly-printed money on everything from flat-screen TVs to giant SUVs.

Inflation in housing led to inflation in everything, including the basic commodities with which houses were built, the gasoline used to power the SUVs, and the products of the farmers who had to fuel their tractors with the same scarce fuel.

(( This is where I screwed up.  I figured there'd be demand for gasoline, food, and other "necessities" even if the housing market collapsed.  The government, in my estimation, would print piles of money and ignite an inflationary phase here, destroying paper money in favor of hard assets, and I'd make a boatload by piggybacking on it while the rest of the homeowners stayed essentially flat, because their banks owned 90% of their homes. The rest of the economy would continue relatively unhindered.  I grossly underestimated how much consumption had been financed by people using their homes as piggy banks, and failed to recognize that once nobody could withdraw money against their home's equity, everything's earnings would implode. ))

You got the government spending part right -- abysmally-profligate fiscal policy led to a de facto devalution of the US Dollar.  Because most of the commodities we're talking about are traded in US Dollars, that compounded the problem of rising prices.  (In this case, it's not inflationary in the economic sense -- it's just that the value of a US Dollar was going down relative to the value of a barrel of oil.  It was hard to separate the monetarily-driven inflation effects from the currency trade effects, because they were working in the same direction.) 

Interest rates don't "creep up", they are moved up as a result of deliberate decisions by the Federal Reserve.  In this case, the Fed raised rates in order to deal with an incipient inflationary spiral. 

When that happened, at about the same time as the first wave of subprime ARM resets hit (hey, the Alt-A wave hits next year, and will be at least as big!), a lot of people couldn't make their payments, and handed over the keys to foreclosure.  The models that predicted the values for CDOs failed, because the data on which those models were built was garbage.  There were so many levels of securitization between Joe Sixpack and the buyer of the CDO that everyone at the top of the pyramid was pricing those things as if Joe Sixpack really was making $130K/year instead of the $30K/year he was really making. 

Garbage in, Garbage out.  So the CDO market seizes up.  Banks whose assets are backed up by these CDOs are insolvent.  They either get new capital or shut their doors the next days.  When they default, everyone tries to cash in their CDSes, and the entire system implodes. 

Money (in the form of credit) is destroyed faster than even the Fed and the Treasury can create it.  We enter a debt-deflation cycle similar to that of the 1930s.

(( imagine a little arrow labeled "You Are Here", pointing to this line. ))

Whether we continue to implode (deflation), flatten out (a "lost decade" like that of Japan from the 1990s to the present day), or reflate (Zimbabwe-style wheelbarrows of money to buy your grocery) as the Fed attempts to monetize the massive amount of garbage it's taken onto its balance sheet remains to be seen.  I don't even think the Fed has a clue how this plays out, so your guess is as good as mine and as good as theirs.  Ya plays your money and ya takes your chances.

Back to the original topic.  Worse than the Carter Malaise Era of the 70s, worse than the high interest rates in the early 80s by far, and the recession in the early '90s barely counted as a recession by comparison.  This one really is comparable to the one in the 1930s.  We've survived the Crash of 1929 and are at about 1930.  The bottom didn't actually come until another 70% drop over the next 3 years. 

History's dirty little secret is that we only got out of the Great Depression by being geographically isolated from WW2, a conflict in which both sides managed to jointly reduce the rest of the planet's industrial capacity to smoking rubble.  As the last man standing, we had first-mover advantage during the rebuilding of the world.  In an ironic twist, the technology we developed during WW2 makes a repeat of this strategy a non-starter.  As Einstein said, "I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones."

This one really is comparable to the one in the 1930s.  We've survived the Crash of 1929 and are at about 1930.  The bottom didn't actually come until another 70% drop over the next 3 years. 



Wait, so you are saying we are in a depression now?

This one really is comparable to the one in the 1930s.  We've survived the Crash of 1929 and are at about 1930.  The bottom didn't actually come until another 70% drop over the next 3 years. 



Wait, so you are saying we are in a depression now?


Maybe, though some say the depression might start in 2009.

Maybe, though some say the depression might start in 2009.


From my viewpoint (I work for a company that manages shipments for large industrial firms) that is certainly a possibility.  Maybe as high as a 50-60% possibility.

In any event if we do get into a Depression II, let's make this the BEST DEPRESSION EVER!!!!!  ;D

I can't say that i can compare this to any previous recessions/depressions. I havent been alive long enough to have anything to compare it to I don't think. I can say this.

At the end of the great depression we were thrown into a historical battle known as World War II.
At the end of the great depression we (The U.S. Anyway) were promised that we would never be put into such a similar situation again.

The promis has obviously be broken due to some unfortunate decisions made by the higher ups. so who is to say that this depression will not worsen. Could we be on the brink of a Third World War????

I can't say that i can compare this to any previous recessions/depressions. I havent been alive long enough to have anything to compare it to I don't think. I can say this.

At the end of the great depression we were thrown into a historical battle known as World War II.
At the end of the great depression we (The U.S. Anyway) were promised that we would never be put into such a similar situation again.

The promis has obviously be broken due to some unfortunate decisions made by the higher ups. so who is to say that this depression will not worsen. Could we be on the brink of a Third World War????


Well it doesn't look like it will happen soon.  America did get out of the last depression due to the aftermath of the war, seeing as it was the one country that benefited from rebuilding other nations. 

I'll try to be optimistic(even if irrational) and say the economy will fix itself, hopefully...

Well it doesn't look like it will happen soon.  America did get out of the last depression due to the aftermath of the war, seeing as it was the one country that benefited from rebuilding other nations. 

I'll try to be optimistic(even if irrational) and say the economy will fix itself, hopefully...


I hope it will work itself out too. Hopefully we haven't banged it up too bad. ;)

From my viewpoint (I work for a company that manages shipments for large industrial firms) that is certainly a possibility.  Maybe as high as a 50-60% possibility.

In any event if we do get into a Depression II, let's make this the BEST DEPRESSION EVER!!!!!   ;D


Ha ha ha ha ha haaaaaaaaaaaaaaaaahhhhhhhhhhaaaaaaaaaaaaaaaaaaaaaaaaaa ha ha ha ha ha hhhhhhhhhhaaaaaaaaaaaaaaaaa!!!!! Lol!  ;D ;D

Gotta call issue with you on this.  You've got the basic sequence of events correct, but you've got the root and proximate causes all mixed up.  I used to think like you did -- that it was really just a housing problem, and that it wasn't going to destroy the rest of the economy with it, and burned my retirement to ash in the process.  Sucks to be me, back to work on Monday.

With the benefit of 20/20 hindsight (read: "I started to understand things at the same time most people in the business did, namely a month too late to make any money off each stage in the decline"), it was more like this:

The root cause is a series of perverse incentives that started in the mortgage lending and securitization industries.

Joe Sixpack didn't care as long as he could "buy" a $600K house on a $30K income.  Hey, it was still cheaper than rent.  NINJA loans - "No Income, No Job / Assets" - were the flavor of the day.  Just pencil in a "1" before that "30K", and Joe Sixpack is making $130K/year as far as the bank's concerned.  Who cares, as long as Joe gets his house, the REALTOR(tm) and the mortgage originator get their commissions?  Everyone gets what they want, and the risk is transferred up the chain.

Banks didn't care about mortgagors being able to pay back the mortgages they'd bought, so long as they were able to underwrite enough mortgages to sell off tranches of the debt (via packaging them up and selling the packages in the CDO - collateralized debt obligation - markets) to pension funds and other banks.

Those funds and banks didn't care about whether or not the debts would ever be paid, so long as they thought they could hedge their risks by buying CDS's - credit default swaps.  (And on the other side of the trade, the banks didn't care, so long as the money from writing credit default swaps kept coming in.)

Those ARMs weren't affordable because they were being issued to people who had no business buying those homes in the first place.

But they led to a lot of people buying houses they couldn't afford - at ever-increasing prices.  These borrowers then took out HELOCs - home equity lines of credit - and borrowed against the value of their overinflated homes; yet another effective increase in the money supply.  They then spent that newly-printed money on everything from flat-screen TVs to giant SUVs.

Inflation in housing led to inflation in everything, including the basic commodities with which houses were built, the gasoline used to power the SUVs, and the products of the farmers who had to fuel their tractors with the same scarce fuel.

(( This is where I screwed up.  I figured there'd be demand for gasoline, food, and other "necessities" even if the housing market collapsed.  The government, in my estimation, would print piles of money and ignite an inflationary phase here, destroying paper money in favor of hard assets, and I'd make a boatload by piggybacking on it while the rest of the homeowners stayed essentially flat, because their banks owned 90% of their homes. The rest of the economy would continue relatively unhindered.  I grossly underestimated how much consumption had been financed by people using their homes as piggy banks, and failed to recognize that once nobody could withdraw money against their home's equity, everything's earnings would implode. ))

You got the government spending part right -- abysmally-profligate fiscal policy led to a de facto devalution of the US Dollar.  Because most of the commodities we're talking about are traded in US Dollars, that compounded the problem of rising prices.  (In this case, it's not inflationary in the economic sense -- it's just that the value of a US Dollar was going down relative to the value of a barrel of oil.  It was hard to separate the monetarily-driven inflation effects from the currency trade effects, because they were working in the same direction.) 

Interest rates don't "creep up", they are moved up as a result of deliberate decisions by the Federal Reserve.  In this case, the Fed raised rates in order to deal with an incipient inflationary spiral. 

When that happened, at about the same time as the first wave of subprime ARM resets hit (hey, the Alt-A wave hits next year, and will be at least as big!), a lot of people couldn't make their payments, and handed over the keys to foreclosure.  The models that predicted the values for CDOs failed, because the data on which those models were built was garbage.  There were so many levels of securitization between Joe Sixpack and the buyer of the CDO that everyone at the top of the pyramid was pricing those things as if Joe Sixpack really was making $130K/year instead of the $30K/year he was really making. 

Garbage in, Garbage out.  So the CDO market seizes up.  Banks whose assets are backed up by these CDOs are insolvent.  They either get new capital or shut their doors the next days.  When they default, everyone tries to cash in their CDSes, and the entire system implodes. 

Money (in the form of credit) is destroyed faster than even the Fed and the Treasury can create it.  We enter a debt-deflation cycle similar to that of the 1930s.

(( imagine a little arrow labeled "You Are Here", pointing to this line. ))

Whether we continue to implode (deflation), flatten out (a "lost decade" like that of Japan from the 1990s to the present day), or reflate (Zimbabwe-style wheelbarrows of money to buy your grocery) as the Fed attempts to monetize the massive amount of garbage it's taken onto its balance sheet remains to be seen.  I don't even think the Fed has a clue how this plays out, so your guess is as good as mine and as good as theirs.  Ya plays your money and ya takes your chances.

Back to the original topic.  Worse than the Carter Malaise Era of the 70s, worse than the high interest rates in the early 80s by far, and the recession in the early '90s barely counted as a recession by comparison.  This one really is comparable to the one in the 1930s.  We've survived the Crash of 1929 and are at about 1930.  The bottom didn't actually come until another 70% drop over the next 3 years. 

History's dirty little secret is that we only got out of the Great Depression by being geographically isolated from WW2, a conflict in which both sides managed to jointly reduce the rest of the planet's industrial capacity to smoking rubble.  As the last man standing, we had first-mover advantage during the rebuilding of the world.  In an ironic twist, the technology we developed during WW2 makes a repeat of this strategy a non-starter.  As Einstein said, "I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones."


Do you think the effects of NAFTA is effecting this company?  I mean most of the companies now are in India.

Well we have been a recession for over a year and it might lead to a depression.  How do you compare this economic crisis with the ones in the early 80s,early 90s and early 00s?

I say this recession could be far worse than previous ones, because it is affecting all sectors of economy and it's global.


Not as bad as you think.

We need a Recession once in awhile, Let me tell you about it in the Religious/Politics section because some of it involves Hoover, Carter, and Bush II.

Its probably more like the early 80's recession economically which was worse than the early 90's recession obviously.

I hope there is no depression but there is 30% chance there will be one in my opinion looking at it now.

You know this thing(this current recession)started with the high gas prices in June or July than the whole Lehman Brothers thing and the AIG bailout. The whole Benard Madeoff thing does no favors either.

The economy I predict won't recover till 2013 and probably bottom out in 2012.

Its probably more like the early 80's recession economically which was worse than the early 90's recession obviously.

I hope there is no depression but there is 30% chance there will be one in my opinion looking at it now.

You know this thing(this current recession)started with the high gas prices in June or July than the whole Lehman Brothers thing and the AIG bailout. The whole Benard Madeoff thing does no favors either.

The economy I predict won't recover till 2013 and probably bottom out in 2012.


Yeah, things didn't really help that much with the whole free $600 checks the government gave up during June/July also since most, like me, probably used that money to pay the bills rather than buying cool stuff like a tv(no pun intended lol).

Do you think the effects of NAFTA is effecting this company?  I mean most of the companies now are in India.


ABSOLUTELY!

Look it up on the internet and you'll find a lot of NAFTA-hating sheesh.

Also, many unions are taking things for granted. We should do what the Japanese do.

I asked my father today how bad is this recession because he has lived through a few recessions. He said it is bad as the late 70's/early 80's recession which was a pretty bad recession. I expected him to say the economy currently is as bad as the tail end of the that late 70's/early 80's recession(1981-1982) but to say the economy as is bad as the start of that recession(late 70's/early 80's) is a bad thing. My dad is usually an optimistic person too.

My dads uncle who is in his early 90's(age wise) told my Dad today he expected this current recession to happen because everybody was buying things like mad or something to that affect my dad's uncle said.

We've been in a recession for like 5 and a half months I mean this could be the worst recession since World War II I heard.

I'm scared of stagflation. We should also be scared of rapid inflation as well on prices of goods if Obama's Stimulus bill doesn't work in the long run.

Look it up on the internet and you'll find a lot of NAFTA-hating sheesh.



  Come over to my house and you'll find alot of NAFTA hating sheesh...



Also, many unions are taking things for granted. We should do what the Japanese do.



  What DO the Japanese do?  I hope it's good...

  Labor unions represent the interests of the workers.  The interests of the workers mainly involve not being exploited...

I remember in the '90s when the whole Workfare, Welfare-to-Work, End of Welfare-as-we-know-it Republicrat B.S. was the political talk of the day, the Massachusetts Department of Transitional Assistance needed a new call center.  Where did they set it up?  India of course!
::)

That's what happens when you farm everything out to private contractors.  The fact that a $10 an hour call center job might be a good stepping stone for a Workfare client means nothing.  It's all about making profit for shareholders.  

Sometime the working classes have got to start asking themselves, why are we begging corporate-government complex for "jobs"?

ABSOLUTELY!

Look it up on the internet and you'll find a lot of NAFTA-hating sheesh.

Also, many unions are taking things for granted. We should do what the Japanese do.


Prespammersite.  The unions represent under 10% of the private sector workforce and they are under attack every day from fascists.  They're taking nothing for granted.

I agree on your third statement.  The Japanese put a premium on company-worker loyalty and provide health insurance for all their citizens.

Prespammersite.  The unions represent under 10% of the private sector workforce and they are under attack every day from fascists.  They're taking nothing for granted.

I agree on your third statement.  The Japanese put a premium on company-worker loyalty and provide health insurance for all their citizens.


Max,

Those are my opinions. Feel free to disagree.

Also, I have someone in my church who's Pro-Union and buys American no matter what.

Max,

Those are my opinions. Feel free to disagree.



And so I did.