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Re: Are we headed for a recession?
Posted: January 23 08, 7:14 pm
by planet planet
Wow, that was a depressing read, gashouse. Although it confirms my suspicions and paints a very bleak future.
Re: Are we headed for a recession?
Posted: January 23 08, 7:27 pm
by Gashouse
planet pujolsian wrote:Wow, that was a depressing read, gashouse. Although it confirms my suspicions and paints a very bleak future.
Of course, I have no idea who that person was - just another poster on another board. I think it's a little too pessimistic, but I think it points in the right general direction in that I don't think the stock market is going to maintain the historical 10% average annual return.
Re: Are we headed for a recession?
Posted: January 23 08, 7:34 pm
by greenback44
But who's going to finance the additional debt? Take a look at the recent Major Foreign Holders data from the Treasury and you'll see that most countries are decreasing their treasury holdings. Banks are selling off treasuries too. Hedge funds have loaded up via the carry trade, but they are reaching their own credit limits. Is anyone left out there who's willing to buy another $140 billion in US government debt?
Somebody's buying Treasuries because the yields on these things are wonderfully low right now.
In the long term all this stuff is pretty much irrelevant, one way or the other. The economy ultimately is driven by productivity gains, not how some politician or the Fed or another bogeyman manipulates numbers.
Re: Are we headed for a recession?
Posted: January 23 08, 8:09 pm
by Hungary Jack
Gashouse wrote:http://boards.fool.com/Message.asp?mid=26297513
The main reason we're in this problem now is because the policy for the past 25 years has been to overstimulate the economy at any sign of slowness. We've had deficit spending, low interest rates and especially easy credit pretty much unabated. Now the bankers who made stupid loans are getting burned, the consumers who bought more than they could afford are getting squeezed, and the government has a debt burden it will never be able to pay off.
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Meanwhile, rapid money supply growth (the inflationary, unsustainable key to our growing economy over the past 2 and a half decades) is hitting a wall. With consumer, homeowner and corporate debt expansion hitting a wall for reasons of insolvency who else can borrow the country to prosperity besides the US government? And that may be the real reason this plan enjoys the support of the Fed and Wall Street. If the Government borrows another quick $140 billion, then that'll will help pick up where the private sector has begun to collapse.
But who's going to finance the additional debt? Take a look at the recent Major Foreign Holders data from the Treasury and you'll see that most countries are decreasing their treasury holdings. Banks are selling off treasuries too. Hedge funds have loaded up via the carry trade, but they are reaching their own credit limits. Is anyone left out there who's willing to buy another $140 billion in US government debt? The Fed is the money creator and lender of last resort and they've been very creative in inventing new ways to inject money into the financial system lately. Perhaps they'll just inject new money into the treasury if nobody else shows up at the weekly auctions.
If worse comes to worse, the Fed can always default on its $6-7 trillion worth of debt...
Re: Are we headed for a recession?
Posted: January 23 08, 8:16 pm
by Arthur Dent
I wouldn't put too much stock in that commentary. Worst crisis since the end of the gold standard? Really? Economic growth for the past 25 years is only the result of growth in the money supply? What about the huge increase in productivity? Maybe he doesn't believe in that since the numbers the BLS produces are "imaginary". I'm not incredibly optimistic, but I think this is more likely to be a "normal crisis" than a system threatening catastrophe.
Re: Are we headed for a recession?
Posted: January 23 08, 9:08 pm
by sighyoung
Arthur Dent wrote:I wouldn't put too much stock in that commentary. Worst crisis since the end of the gold standard? Really? Economic growth for the past 25 years is only the result of growth in the money supply? What about the huge increase in productivity? Maybe he doesn't believe in that since the numbers the BLS produces are "imaginary". I'm not incredibly optimistic, but I think this is more likely to be a "normal crisis" than a system threatening catastrophe.
I agree. The poster seems to want to go back to the gold standard, and is implying that anything else (read: any central banking policy) is a reckless monetary policy.
Past 25 years of overstimulating the economy? Wouldn't that take us back to the Reagan recession, when Paul Volcker jacked up interest rates to cool down an inflationary economy? Was Volcker applying a vibrator to the economy's naughty bits?
Interest rates remained low in the ensuing years partly because inflation (and inflationary pressures) remained so low.
This notion that the economy has been "juiced" for 25 years is bunk. It's one thing to talk about excessively high debt loads, overly optimistic ideas about future income, and the financial instability that follows a big shock to the economy. But If what the poster is writing had been true, we'd be living with hyperinflation right now.
Re: Are we headed for a recession?
Posted: January 23 08, 10:14 pm
by planet planet
I didn't necessarily put a lot of stock into the 25 yr. theory, but I do think we're in for a rude awakening. I also am something of a paranoid when it comes to money matters. When I read Money magazine and they profile couple who are 26 and 27 years old with 150k in savings/investments, I feel woefully inadequate.
Re: Are we headed for a recession?
Posted: January 23 08, 10:16 pm
by Leroy
planet pujolsian wrote:I didn't necessarily put a lot of stock into the 25 yr. theory, but I do think we're in for a rude awakening. I also am something of a paranoid when it comes to money matters. When I read Money magazine and they profile couple who are 26 and 27 years old with 150k in savings/investments, I feel woefully inadequate.
Screw them. Live your life. Spend your money.
This couple probably stayed after school because they wanted to.
Re: Are we headed for a recession?
Posted: January 23 08, 10:21 pm
by sighyoung
Leroy wrote:planet pujolsian wrote:I didn't necessarily put a lot of stock into the 25 yr. theory, but I do think we're in for a rude awakening. I also am something of a paranoid when it comes to money matters. When I read Money magazine and they profile couple who are 26 and 27 years old with 150k in savings/investments, I feel woefully inadequate.
Screw them. Live your life. Spend your money.
This couple probably stayed after school because they wanted to.
I wasn't even finished with grad school when I was 27. I wouldn't sweat it.
Re: Are we headed for a recession?
Posted: January 23 08, 10:22 pm
by planet planet
Leroy wrote:planet pujolsian wrote:I didn't necessarily put a lot of stock into the 25 yr. theory, but I do think we're in for a rude awakening. I also am something of a paranoid when it comes to money matters. When I read Money magazine and they profile couple who are 26 and 27 years old with 150k in savings/investments, I feel woefully inadequate.
Screw them. Live your life. Spend your money.
This couple probably stayed after school because they wanted to.
This brings me to question how long we'll all be hanging around this message board supporting each other through our trials and tribulations. I'm wondering if you'll still be around in 20 yrs. or so to make up for any shortcomings if I throw all caution to the wind. I'm going to be here, Leroy, are you?