Are we really close to a recession?

[LiveStrongSkins]

Overheard some guys talking in class today about how they are certain there will be a recession. I dont know enough about the economy to say one way or the other. I know what I need to know but not nearly enough to keep up with this type of thing. To tell you the truth, I've been too busy with clinicals and exams to even care...:laugh:(j/k) I imagine there alot of people who know the economy on here.... what do you guys think?

[SkinsHokieFan]

Nope, the economy is growing fine and people are hiring

The stock market took a bit of a tumble

Growth may slow down and not be as robust as its been since mid 2003, but the economy will keep growing for the forseeable future

[Prosperity]

no recession unless there is a new war

[PokerPacker]

Overheard some guys talking in class today about how they are certain there will be a recession. I dont know enough about the economy to say one way or the other. I know what I need to know but not nearly enough to keep up with this type of thing. To tell you the truth, I've been too busy with clinicals and exams to even care...:laugh:(j/k) I imagine there alot of people who know the economy on here.... what do you guys think?

i thought we were just in one.

[SkinsHokieFan]

i thought we were just in one.

Tecnically we have not been in a recession since Q3 1990 until Q1 1991 (had 3 straight quarters of the economy contracting)

We had a negative growth quarter in Q1 of 2001. Thats been the only blemish since 1991

The problem is, you feel lots of effects for a little while after a negative growth quarter

What people fail to realize is that economies when generally left on their own are bound to grow, and continue to grow.

[Larry]

Note 1: I'm not an economist. Not an expert. Probably even below-average on the "expert-ness" scale.

Yeah, there are some aspects of our economy that bother me.

I see a lot of folks are of the perception (it's debatable whether it's true, but the perception is there) that they're being left behind by the economy. That can lead to resentment, anger, and could eventually reach a flash point of violence. (Don't necessarily see anything good that can be done about it, though.)

I think our government has been borrowing money WAY to heavily. If you will, I think "Reagan's legacy" was "If you raise taxes by 2% the voters will kick you out. If you cut spending by 2% the voters will kick you out. But if you increase the deficit by 400%, the voters will name their children after you."

I think our economy, right now, is more addicted to cheap credit than it is to imported oil. We're borrowing a lot of money, and we're running a huge trade deficit. We're not being punished for this, economically, because foreign capital is sheltering us from the consequences of our actions.

To me, one of the drawbacks is that we've given other countries the ability to cause a recession in the US, and likely worldwide, any time they feel like it.

Now, folks will say "they'll never do that" because a recession wouldn't help those other countries, either. But I'm not really down with just assuming that China would never want to cripple the US economy for a few years.

So, to me, I'd say that a recession is at least possible. Likely is something that I'm really unqualified to guess about.

[Yomar The Nifty]

Anyone who says they are certain of the future, especially on a subject as vague and expansive as the economy, should be regarded with a high degree of scepticism. It is hard to see things clearly when you are living through them, and when you are talking about something like the economy, there is never any official end from which you can stand and definitively explain what happened.

I believe that the big problem facing this economy is debt. Debt means leverage, and when times are good, leverage is great. But the same is true on the downside, and we have had an extended run of cheap debt financing. The subprime situation is just beginning. Subprime mortgage loans equal about 12% of the total mortgage market. How bad have the lending practices been? Well, it used to be that when immigrants came to the United States they were poor and had very little. The same is true today, except for the last 4+ years the housing market has received a boost from more immigrants purchasing homes. This leverage in the home market has provided a huge boost to home prices. These inflated prices were then used to add on more leverage as millions refinanced taking advantage of their good fortune and increased wealth, and went out and bought all kinds of good things. Everyone was making money and everyone was happy. I have no idea when or how this situation will play out, but there are real problems out there. The national savings rate has been steadily making all time lows for years, everyone is leveraged to their eyeballs, including the government. The dollar is weak and looking weaker. But all of these things have been going on for years, none of it is new and so they become increasingly easy to dismiss.

[jbooma]

If you live in Michigan then yes, due to the closing and laying off of many automobile workers. You can also though blame the unions for that, and of course many refuse to do that.

The rest of the country is doing well regarding the economy but that can change because of the war and the possibility of inflation.

[PleaseBlitz]

Here is what I am seeing:

The economy right now is moving along nicely but with some underlying problems that may or may not have a dramatic impact down the road.

#1, as mentioned, is that Americans hold too much debt and not enough savings. Simply put, having money saved is better than owing. However, keep in mind that the borrowed money was likely put BACK into the economy, which is a good thing. Bad things are happening in the real estate market right now with too many foreclosures. An entire sector of the lending industry, the "subprime" lenders, pretty much stopped existing last month.

#2, The US has the enormous trade deficit, which means a lot of our money is leaving the country to fuel someone ELSE's economy. But since we cant pay our workers in rice like China can, we cant do much. We need to reduce our consumption of foreign oil because the price of oil is just going to go up and up and up as developing countries like China need more and more of it.

#3, Soon, there are going to be too many retired people recieving benefits from the government and not enough people paying into the system. Its a big debauchle that no one has a good solution to. Its going to need fixing eventually.

This is all stuff that may be a problem way down the road, but as far as a recession happening soon, I dont see any indication of that, and i spend a LOT of my time watching these things.

[Blighty Skins]

A recession is a state of mind...so don't talk yourselves into a recession. It's a bit like your willy, it's only small if you convince yourself it is (and women laugh at it when they see it)...yeah.

[Bounce]

If someone could explain exactly what's going on with the dollar and what it all means, that'd be super.

[Blighty Skins]

If someone could explain exactly what's going on with the dollar and what it all means, that'd be super.

The dollar is fine and says hello...tell yourself that. If you think the dollar is doing badly, it will.

[Larry]

The dollar is fine and says hello...tell yourself that. If you think the dollar is doing badly, it will.

And perhaps more importantly, if foreign investors think the dollar is doing badly, then we (and the rest of the world) might be close to a recession.

[portisizzle]

If someone could explain exactly what's going on with the dollar and what it all means, that'd be super.

Invest some time in this website.

http://www.optimist123.com/optimist/

[Larry]

Invest some time in this website.

http://www.optimist123.com/optimist/

I'll certainly agree that the site you linked to is aptly titled.

The guy appears to be "debunking" a newspaper article that says that if current trends continue, the entire federal budget in 2045 will be insufficient to cover the interest on the national debt.

He disproves it by pointing out that it's possible that things will be better in the future.

He's correct, but do you really want to base your financial planning by saying "yeah, the last 30 years have seen the biggest economic growth ever recorded, but if I assume that the next 30 will be even better . . . "?

Remember the "temporary" Bush tax cuts? Remember the excuse that was used to justify them? Congress did a study. The study looked at the growth of the economy over the previous decade (the biggest-growing decade in out nation's history), and used that growth as the baseline for their future predictions. That reasoning caused them to predict that, 10 years in the future, the government would be running a surplus of somewhere between X and Y trillion dollars. They then pretended that X didn't exist, and claimed that since the economy was going to grow by y trillion dollars in 10 years, we could cut taxes right now and we'd eventually get the money back. In fact, it would be criminal to take this money from the taxpayer right now, when we've got this forecast, and if we take the most optimistic number from a forecast that started by predicting the biggest growth in history.

The claim was that we could "afford" the tax cuts, because even with the cuts, we'd be running such big surpluses right now that we wouldn't know what to do with the extra money.

(And no, I'm not saying "the Bush tax cuts caused the deficit". I'm saying "the tax cuts were justified by intentionally making rosy predictions". By "cherry picking the intel", if you will.)

[portisizzle]

Larry, all I am asking is you, or anyone interested in our monetary system and our economy, to spend some time reading what the man has to say.

I am not saying buy everything he says, although much of what he says is based upon dry fact.

But at the very minimum his site will provide you some alternate discussion points that most people are not exposed as a rule. If you dig into this site a bit you find from a political point of view that he critical of both the Republicans and the Democrats. So his views do not cut down political line. They really cut down the most important line. Giving people information without the spin.....

http://www.optimist123.com/optimist/2005/10/why_debt_doomsd.html

[jbooma]

(And no, I'm not saying "the Bush tax cuts caused the deficit". I'm saying "the tax cuts were justified by intentionally making rosy predictions". By "cherry picking the intel", if you will.)

Dam Larry that is pretty slick there to compare the tax cuts to the war :doh:

We needed the tax cuts, and honestly it would be a shame if the dems take them away (which they will). I don't think you need to worry about the dollar cash is still king and will always be.

[Blighty Skins]

Have you Americans ever thought of changing over to the Euro? Seriously though, a few years ago, when the Euro was still on shaky legs and in a bit of trouble, I was hoping it would collapse and thus mark the end of the EU (I hate the EU just as much as the UN...both very evil institutions, in my opinion). But unfortunately the Euro has become really strong and the dollar is not. How can we rectify this and make the Euro collapse? There must be a way...

[shagman]

This is all stuff that may be a problem way down the road, but as far as a recession happening soon, I dont see any indication of that, and i spend a LOT of my time watching these things.

You make some strong points PB!! One of the points you made talked about the people of our country being in debt. Do you think this is going to cause a shrinking of the middle class in coming years?

I imagine that the only reason those two individuals in your class were talking about a recession was because of the stock market following the China selloff two or three weeks ago. The market has tried to recover, but people have to remember that the stock market is it is a living entity. Its made of up of the human mind, fears included.

I think that what you will see in the coming months is that a leveling of the market to fair prices(which most are high now even still). Fall of 2006 was HUGE!! and stocks skyrocketed in the worst part of the year normally. I think that what will happen is the value investors will start buying in May and the market will recover by June. The housing market on the other hand is beyond me, I have no clue what will happen there. thats my :2cents:

[Fergasun]

The housing market is a disaster... and the question of recession lies greatly if a housing deflation will spill over.

I'm not sure how it is in other parts of the country (probably true in large metropolitan areas), but everyone has been able to buy and sell homes based on the premise that within 3-5 years when the interest rates go up, they can re-finanace based on the equity of that home.

Mr. first time buyer pays inflated money to someone who uses that inflated money to buy another inflated house, whose owner buys another inflated house. Since houses have been increasing in value at a crazy rate, not a problem.

But as people will tell you, "everything is cyclic". The market has now changed. One of the reasons is the collapse of subprime lenders, which allowed more first-time home-buyers to afford their over-inflated houses. Since there are no more first-time buyers, and no more sub-prime market... people will have to now put 10% down. This should tighten things up a little bit, but as less people are able to sell their house at a higher price, even if home-values stagnate it's bad... as everyone basically has assumed the value will keep increasing at 5-20% a year.

Value is all relative... but I think that is the idea of what could happen in housing. Today I read a blurb in USA today about how some Senators were trying to keep things afloat, but I think the lack of real assets, savings, and $$$ may bring the whole thing crumbling down.

Of course this has been predicted for the past couple of years or so, but it just seems like the tightening of subprime might lead to some more tipping points... decrease in retail spending... since more money is in houses.

I'm sure some lender will come in here and tell me I don't know ****e, so I should've disclaimed that I'm not an expert, but I did stay next to a Holiday Inn Express last night...

[33]

Bump 1 year later

[jbooma]

Bump 1 year later

We have probably been in a recession since the beginning of the fall. You never know till later

[SkinsHokieFan]

How quickly things change. I didn't expect the financial markets to start to rip through the entire overall economy the way it has started too

I simply expect housing prices to "cool"

Oops

[Larry]

I don't have a problem with what I said back then.

Note 1: I'm not an economist. Not an expert. Probably even below-average on the "expert-ness" scale.

Yeah, there are some aspects of our economy that bother me.

I see a lot of folks are of the perception (it's debatable whether it's true, but the perception is there) that they're being left behind by the economy. That can lead to resentment, anger, and could eventually reach a flash point of violence. (Don't necessarily see anything good that can be done about it, though.)

I think our government has been borrowing money WAY to heavily. If you will, I think "Reagan's legacy" was "If you raise taxes by 2% the voters will kick you out. If you cut spending by 2% the voters will kick you out. But if you increase the deficit by 400%, the voters will name their children after you."

I think our economy, right now, is more addicted to cheap credit than it is to imported oil. We're borrowing a lot of money, and we're running a huge trade deficit. We're not being punished for this, economically, because foreign capital is sheltering us from the consequences of our actions.

To me, one of the drawbacks is that we've given other countries the ability to cause a recession in the US, and likely worldwide, any time they feel like it.

Now, folks will say "they'll never do that" because a recession wouldn't help those other countries, either. But I'm not really down with just assuming that China would never want to cripple the US economy for a few years.

So, to me, I'd say that a recession is at least possible. Likely is something that I'm really unqualified to guess about.

[Drop]

we are in a recession as we speak