So what about his analysis?

[Pale Blue Dot]

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=2753737&mesg_id=2753737

He makes some interesting points. Is he right?

[Fresh_Start]

1. I don't find his analysis compelling

there is no easy bailout for the housing problem
housing appreciation has fueling consumer spending for better than a decade
the problems of housing will continue for at least one year (if we are very lucky)
and will most likely continue for several years
housing prices will continue to deflate due to the pending and upcoming foreclosures
there is a huge glut of houses for sale
much of the sales in the last 5-7 years have been investors (second home purchases)
and with the realization that real estate investment is risky, many will not return for a long period of time
state and local governments are already have huge budget gaps, these will increase possibly putting further
downward pressure on housing prices
we should expect to see job losses continuing for some time
inflation is not going down any time soon
job creation is not ramping up any time soon
we have lost the confidence of the world financial markets in our ability to manage our economy
credit markets are tight and banks must tighten lending criteria in order to shore up their ratios
relaxing the fed rate might have helped but it doesn't help much since a substantial problem is in the quality of their assets

[Pale Blue Dot]

3. I agree with all of what you said.

Why does it seem like people are so reluctant to see it?

[Fresh_Start]

4. damned if I know

I should have mentioned
substantial increase in long term unemployment for professionals as another factor that disturbs me greatly

my husband and I are fortunate, we are both 6 figure earners
but its been a long time since either of us felt 'income secure'
and there is nothing on the horizon to solve the 'I don't know if I'll have a job next year feeling'

because we are prudent, income security stops much of our discretionary spending

[Zynx]

11. Because this isn't a recipe for Depression.

A bad recession, very possibly. However, my point is this is hardly something we haven't seen before. Those elements that are new are rapidly being assessed. Inflation is not out of control nor will it be any time soon. It was much worse in the 1970s. The government deficits are not out of historical precedent as a percent of GDP, they were much larger in the 1980s. Policy tools are still available to us if total calamity does strike. I can go on and on.

[Warpy]

21. People are reluctant to think their comfortable world is about

to change and that they are likely to be sorely inconvenienced by that change. They call us "doom and gloomers" and are nowhere to be found when we'd love to be able to tell them we told them so.

The truth is that no economy that has concentrated wealth at the top and debt at the bottom can sustain itself for long.

[flashl]

2. U.S. has multiple economies. Michigan is now called Michi-gone

[BeatleBoot]

5. Michigan truly is in a huge mess right now

If you're lucky to be working, you're scared shitless of losing your job.

And if you lost your job and found a new one, its for a lot less money.

I took the hit last year. Wife hasn't had any meaningful employment in over 2 years now. Both college educated professionals.

Most taxable incomes are on the decline here which really messes with your Social Security calculation, by the way.

Talking with a guy at work today and he had planned to re-finance his home and wrap his home equity loan into it.

Now he's afraid to let the bank appraise his house for fear they'll discover he's "upside down" on his note due to depreciating values.

I have never seen it like this.

[flashl]

18. And, the economic prophets want you to not believe your lying eyes

and 'trust' the gospel of their ever changing Orwellian theories. Sound theories for the economic health of a society work universally not only in bubbles or pockets of the economy.

[SlowDownFast]

6. I told the OP that Citi's a real good deal right now and he better hurry on it

before it REALLY takes off.

:rofl:

:hide:

[Zynx]

10. I will buy a small position in Citi soon.

I have started accumulating selective bank shares. That's my decision. If you wish to laugh about it go ahead, but no major bank will fail.

[SlowDownFast]

26. Suit yourself. n/t

[sendero]

7. I answered...

.. in the thread.

No one knows how bad it's going to be, but it is NOT going to go away in a couple months. That you can take to the bank.

The situation we're in now is virtually unprecedented. When was the last time you heard of a bank or investment banker taking a TEN BILLION DOLLAR WRITEOFF?

There have been several and it's not over yet.

The fact is, when I hear our illustrious president saying "the fundamentals are sound", it sound like every thing else he says, it is a blatant lie.

There is nothing particularly sound about our economy. We are borrowing money from the Asians and European at a breakneck pace. The dollar is swooning, and the actions of the Fed to continue to pump money into the economy isn't going to help. New industries and their attendant jobs are no where on the horizon. The housing debacle has at LEAST a year to go, probably longer.

Are we going to have a full scale depression? Probably not, but it is absolutely NOT an impossibility IMHO.

[Zynx]

12. When I say the fundamentals are sound I mean an entirely different thing than Bush.

Economics is not a black and white profession. There is nuance. As for the write-offs, these are large. No question about it. However, companies like Merrill Lynch have probably taken the brunt of it already. Those securities can only be written down to 0 once. What's more is that these firms are still solvent. We had a tremendous banking crisis in the late 1980s and early 1990s and the government stepped in with a huge bailout, much bigger than the cummulative write offs so far. It was certainly bigger as a percent of their capital bases than now. We can do it again if need be.

[sendero]

19. I still disagree..

... with you vehemently.

The current housing/credit crunch makes the 80's debacle look like kids play.

There were some foreclosed properties, but there was NOT a massive foisting off of bad debt as good.

You act as though the writeoffs taken to date are the end of it. Au contraire, they are just the start, you wait and see. It's not just about the number, it's about who and how. The credit markets will never be the same because trust has been breached. In the S&L crisis, it was individual firms becoming insolvent, not firms cheating each other.

The printing of money the Fed will have to do and has already started doing will hurt the dollar even more. This isn't conjecture, damn near every reputable economist agrees.

Our dependence on foreign oil and goods is going to hurt a lot when the dollar keeps dropping.

Our employment situation has been deteriorating for years, masked by the phony numbers coming out of Washington. Even if you believe the raw numbers, believe this, in their world a $6 an hour mcJob is the same as a $25 manufacturing job. But that isn't really the case at all.

Go ahead and throw your cash in the stock market if you like, I think we have a long way to go and I don't have any confidence in the idiots in Washington, who've created this mess to begin with, being able to fix it.

It will fix itself, painfully, but that will take some real time.

[RUMMYisFROSTED]

8. #131 has a point.

[gravity]

9. He is correct

The chances of the US entering a depression are nil. We have learned from our past mistakes and have proper regulations to prevent things from going to far astray. In the past 25 years, the Fed has managed to keep inflation below 5% the whole time which is pretty damn good. Unemployment is still very low based on historic levels, even if you factor in different means of calculating the data.

There are lots of problems in our economy right now which are worrisome, but it doesn't mean that you need to start hoarding gold. The markets and economy is correcting from the recent excesses, which will be painful, but then things will get back to normal. America has the most resiliant economy in the world and has gotten back from worst before.

[Zynx]

13. Thank you. The voice of reason, not hysterics.

[A HERETIC I AM]

14. Seconded. Zynx is spot-on. n/t

[nightrider767]

23. Inflation rate!?!

What index are you using? The real inflation rate or the fake one foisted on us by the government?

Sounds like Bernanke,,,,, as long as you buy Chinese goods, you should be ok.

Thanks Bernanke, sell me some Chinese milk.

[CGowen]

27. I think even the official one was over 6% in 1990

http://inflationdata.com/inflation/Inflation_Rate/HistoricalInflation.aspx?dsInflation_currentPage=1

[rustydad]

28. Fairy Land

Do you have any idea of how inflation is controlled? It is controlled by destroying the unions and getting most households to work double time (husbands and wives), by getting people to go deeper and deeper into debt, by getting the rest of the world to loan us their savings. God some of us are sooooo stupid about economics. We are just screwed and the happy days are gone forever. Bob

[abelenkpe]

15. I doubt it.

Historically crisis of one kind or another tend to come every 60-80 years. But we'll have a better understanding of things in time. No point in worrying about who is right or wrong about predictions of the future.

In the meantime, lets all go spend our free government money! :beer:

[leftofthedial]

16. someone will always tweak numbers one way or another

But people are hurting. LOTS of people are hurting. MORE people will be hurting this time next week and next month and in the coming years. The "stimulus package" is a PR campaign, nothing more.

If you define the "economy" as a set of government statistics or as the relative financial health of an elite few families, it will always be "fine." If you define it in terms that are relevant to the suffering of workers and the poor, not so much.

[flashl]

17. Exactly. Whose economy?

[fasttense]

20. I did a quick survey of ten people I know

picked at random.

Of the 10, four have full time good paying jobs; 3 have no jobs but are looking; 3 have McJobs, cleaning houses, waitressing until a descent job comes along.

To me that tells me if you are lucky you can be in that 40% with a good job. But in reality you are likely to either be underemployed or unemployed because you can't find that good paying job.

A good economy can not survive with only 40% of the people having decent jobs. There will be major recession and depression unless we get decent jobs in the US. House cleaning and waitress jobs are not going to pull us out of this slump.

We could survive and avoid a serious recession or depression if jobs are created in the US. If they are not, things will only get worse and worse.

[leftofthedial]

22. 40% today

but that percentage is going down daily

[nightrider767]

24. Once people stop spending on credit....

this house of cards will fall.

Damn the assholes to hell who don't consider the fundamental problems with this economy.

We don't produce anything, we are a consumer society.

Even as "colonials" we recognized that as a one way road to no where.

[BeatleBoot]

25. I saw a political cartoon recently...

It had 3 frames.

The first frame was captioned, "The China Economy" and it had a drawing of Chinese folks working in a manufacturing environment.

The second frame was captioned, "The European Economy" and it had a drawing of Europeans building automobiles.

The third frame was captioned, "The U.S. Economy" and it had a picture of a guy at the banker's desk re-mortgaging his home.


I that that was spot on.