[ARCHIVED THREAD] - The Next Depression (Page 1 of 3)
Posted: 5/21/2007 5:10:59 AM EDT
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I have talked with a few people who deal with large amount of money lately. They all seem to think that the voo-doo that is keeping the economy going is about to run out. None of them are sure of a time line or anything but it they are sure that if there were some external catalyst that it would send us into a death spiral, like if gas went to $4-$5 per gallon. Anyone else getting bad vibes from those that may know more? What are some of your worst case scenarios for the economy. I would bet that if the economy took a dump, there would be a massive reverse immigration out of here. |
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I don't think we'll see a depression like the Great Depression of the 30s anytime soon (my guess is not in our lifetimes) - unless it's caused by something external like a nuclear attack that destroys infrastructure/communications, etc, or a complete refusal of anyone on the planet to sell us raw materials, etc. I don't think it will happen due to stcok speculation (and inflation) or lack of consumer confidence. Because of the very proactive (and sophisticated) invovlement of the Fed these days, because of the FDIC insurance protecting peoples' deposits in banks, and because of the much larger number of small investors in the stock market (who are always looking for "deals" and jump back into the market during any drop, I basically think the economy is far more resistant to the kind of factors that were involved in the Great Depression. I'm NOT saying we won't have recessions - of course we will - but I think the factors mentioned above will prevent a drop from developing into a full-blown "depression" (Just my layperson's opinion, nothing more) |
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I know that the market has the ability to stop trading if things start to fall apart. The thing is that these guys seem to think that it won't start on Wall Street. They seem to think that fuel and food are going to be the biggest issues and since those are no longer part of the inflation calculations  it will be sort of a back door thing. Lots of baby boomers are starting to retire now and they will be pulling money out of the market soon too.I don't know much at all about it but it though. |
| The equivalent of a nuclear attack will occur after the Olympics finish in China. At that point the Chinese will step on the economic break and the 11% growth (last quarter) will come to a screeching halt. Cut the Chinese growth in half and we have a recession that could very well move into a depression. |
Gas here is $3.09 up .30 in 2 weeks. We won't have another depression, but we will have a deep recession. The housing market is going down the shitter right now. The economy is propped up so to speak. |
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I don't see any major upsets unless gas goes well over $5 a gallon. People will gripe & complain, and maybe vacation closer to home, and shipping charges will be adjusted commensurate with fuel increases, but I don't see much else happening. Now if gas went to $6-7 a gallon, then you would start to see some serious relocation (folks moving closer to work). That could do some weird things with the RE market. I think the control over the market & economy is 95% perception. As long as people believe the .gov can cover their assets, then all is hunky dory... but if someone spooks the herd, goodnight. I would direct all my efforts over the next year toward eliminating debt. The 2008 elections could unnerve the masses. |
Since when are food and fuel no longer part of inflation calculations?  www.bls.gov/cpi - both food and transportation (including fuel costs) are part of the official CPI calculation. What your friends are talking about is CORE INFLATION, which is the official measure of inflation, the CPI, with the "Special Indexes" of Food and Energy taken out. When people work with these numbers, the often use (or report) on segments of consumers, or on particular rates (and fuel is excluded for some reporting/calculations because of the volatility of it from quarter to quarter, which is not really related to long-term inflation over time). But nobody has "changed" the reporting of inflation - the official CPI is still calculated with food and fuel included - it's just that (for a variety of reasons), some analyses are better and more reliable if the "Core" rate is used, because it reflects the actual T-bill inflation rate better. |
You are right, I should not have said no longer included. What I meant was the the Core Inflation is being used to tell everyone that everything is OK and it does not include fuel and food. As best I can tell, it is a lagging indicator though. As fuel goes up everything else will surely follow. |
Even Wal-Mart has expressed concerns about the price of gas having an impact on slowing their sales growth. If things get stupid(er) in the Middle East or if we have hurricanes in the gulf in the next 3-4 months, I think the resulting gas prices could make things interesting for our economy. 
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Small point of contention.... Baby boomers pulling $$ out of the mkt isn't a bad thing. Combined with the dying off of the Great Depression/WWII generation, that will release significant amounts of money that has been invested/saved for decades. Baby boomers are going on a spending spree the likes of which has never been seen in this country. I cite the recent real estate boom in Florida as an example. Many were northeasters with two lifetimes of money to spend. Property went sky high & those buying did not care what it cost. Enormous amounts of money are going to be spent on leisure, recreation, travel, gambling & just plain fun stuff. Two things will kill our current economy, increased taxes & increased numbers of nonproductive people sucking money from the fewer & fewer tax payers. That includes social security/medicare receipiants. |
If people are spending money on stuff that has no value or depreciating value the next generation will be the ones to pay for it in more ways than can be understood at this time. We will be in the worst possible situation when there are more leaches than producers. The leaches will be able to out vote the producers, driving us further into the abyss. |
| CPI also isn't being calculated the way it used to be (like in the 1970s, when the CPI was 15%). Stated CPI is around 2.75%. Using 1970's formula, it's 10.5%. A lot of people don't have confidence in the economy because the government is playing games with the numbers. |
FDIC cannot cover even a small percentage of deposits. If you are lucky, they'll mail you a check in 4 to 6 weeks AFTER you make a request from the result of a banking collapse. While not legally covered by the FDIC, the Savings & Loan scandal during Bush 41's term proved that the FDIC was a stop-gap measure, at best. The cascade effect of the 1997 Asian stock market crash is the most recent and probably the most realistic model of what could cause our economy to nose-dive. The common misconception is that a major economic failure has to start here. Due to the dramatic increase in the globalization of banks, this is no longer true. A natural or man made catastrophe in China or Japan would be an immediate trigger to market failure in the US. Our stock market may be less speculative than in the 1920's, but that is no guarantee that other world markets aren't. http://www.pbs.org/wgbh/pages/frontline/shows/crash/etc/cron.html Debt reduction/elimination should be the focus of every American family. I wonder how many had this same uneasy feeling during the market boom of the 1920's? |
Not only that, it just isn't the stock market today. The derivative markets is probably will things will all unravel. |
i would like to add something, i work as a service technition at a ford dealership in forsyth,ga. when gas price go up our work comes to a halt, the last 3 weeks have been the worst i've ever seen in going on 18 years with ford. we get paid buy the job, no vehicles, no pay period. my family was looking to buy a home but now can't afford it, i bring my lunch now, and we have had to cancell family night on friday evening, we use to drive to a pizza joint in north macon for the kids and do something family oirented. we have had to adjust. when i stop going out and spending money then other people feel it and have to adjust also. it's not just here, it's all over in the auto industry. i'm off by more than 20k from last year and it has been in decline since 9/11. i posted in the Georgia forum on advice and offering to do side work for anyone interested, i'll be selling my firearms collection bit by bit soon to pay bills
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I agree that derivatives are an unholy arcane art. When my finance professor colleague (the hot lesbian one  ) tries to explain it to me, I am conviced that if I recorded her voice and played it backwards, I'd hear Satan speaking.
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I for one don't put a lot of stock in gov. numbers concerning inflation. much like the repeated "this is not an act of terrorism, nothing to see here, move along" responses when muslims commit jihadic type acts. The gov. wants nothing more than to calm the sheeple... |
Maybe you should take off one of your wooden shoes and whack that bimbo upside the head. Ponzi smoke & mirrors shell game, that's what it is. Three card monty with pasties and it gets people all googly and common sense goes out the window. Whooosh. |
Do you mean derivatives or lesbianism? ETA: She's actually EXTREMELY intelligent, and understands this stuff very well - but we do disagree on some fundamental assumptions. |
BOTH! Lookit, because we are dumb we think that all women deep down are hot lesbos and also that WE TOO can MAKE MILLIONS in the BULL MARKET if only we BUY THIS INFORMATION PACKED PROGRAM for only 3 EASY PAYMENTS of $79.99 when the reality is that we are average pudgies that might get Madge or Gladys from the beaty salon to give us a handjob of regret if we plied them with enough Riunite (on ice!) and that any money spent on the market would be better off compressed into a dense wad and hurled into an incinerator. Not that I am cynical... |
I talked with a guy this weekend who just got back from Europe, drove 2k miles in a Peugeot. Gas averaged the equiv. of 7 bucks. they have not collapsed. Of course, they can fall back on their mass transit system to an extent. At 3-3.50 we have not, as a whole, changed our driving habits. If it gets to 5 maybe we will. There's a lot of slack in many of our budgets/lifestyles short of a "collapse." |
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Sadly, Americans generally* don't realize just how much oil our economy uses. The greatest lesson we Americans seem to have forgotten from the Great Depression and WW2 was that self suffiency at both the national and individual level is the best insurance in troubled times. While isolationalism is no longer practical for our nation, individual economic responsibility is the key to American stability. Again, generally*, we are debt ridden and real-equity poor at the individual/family level. Not the best buffer for our national economy to use as a fall-back position in case of trouble. * Referring to the sheeple part of the population, who never consider this at all, and couldn't care less or understand the concepts, for that matter. |
OMG!  That is the funniest thing I've read on here this year! 
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I totally disagree. The US is not Europe. We drive trucks that get 12 MPG and we like them. The US is far more spread out than Europe and in this country the middle class and the poor are much less likely to drive a fuel efficient car. This means that MC/Poor people are much more likely to feel the price difference. People are taking a pay cut when everything but wages goes up. Honestly I don't care about the price of gas, I can't walk or take a bus so I have to pay it. I am starting to change my habits but I unlike most understand that I can not conserve enough to show any sort of savings. I will believe that demand is driving our problems when I start to see gas stations that have no fuel, because that is when supply and demand is really working. |
If gas is $6 or $7 dollars a gallon you won't have to worry about moving closer to work because there won't be much jobs left outside the Gov & Military..
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What are derivatives? Is it the same thing as deviancy?  96Ag |
Old saying, but still very true.
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Yea I've got some slack in my budget but I've been counting on that slack to help bring down debt. I'll tell you one thing. Cleaning house and playing video games in no way makes up for missed trips to the range. |
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I went to Ocean City, MD last week for the big annual car show / cruise. I have no doubt the economy had an impact on the event. There was a substantial decrease in the number of cars and cruisers all week. Everyone we talked to noticed the same thing... "It seems like alot less cars this year than years before". I know it's affecting our household... I don't drive our Suburban to work much anymore...(I drive the Toyota) I pack my lunch every day now instead of eating fast food... I don't knock-off work as much, as I cannot afford a single day off anymore. We don't go out as a family much anymore, due to the tight budget... I haven't been buying car parts or guns at all.... for probably almost a year now. The "play-money / disposable cash" just isn't there anymore. Going week to week and paycheck to paycheck is a really uncomfortable way to live. 
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Well said, I see the same thing every day. Someone is blowing sunshine up our ass that is for sure. The upper, middle and lower middle class will be the folks hurt real bad when this whole deal goes sour. Not a damn thing will happen to the elite rich folks running things just like back in 1929. Almost every person I know has cut back on spending and it is getting worse each month as their funny money budget all but dries up with these gas prices and inflation of almost everything we buy now. I don't drive anymore now then I use to 3 years ago and most people I know also drive less. I think the problem with US gas consumption is the increase of about 3 to 5 million extra cars being driven everyday by 20+ million illegal aliens most were not here before 2000. Illegal aliens drive cars everyday that would have been long since scrapped or used very little by legal Americans as a 2nd or 3rd car. I don't understand why more people have not caught on that part of this supply issue is being caused by illegal aliens. When I moved here to North Alabama over 6 years ago is was very uncommon to see an illegal alien driving, maybe once or twice a week. Now about half the cars I see everyday during my commute are filled with illegals. I know of dozens of people that have been hit by them and almost everyone knows somebody that has a freind or relitive that has been killed or injured by one of these fools. My local Wal-Mart and nearest small town that use to be nice and clean now looks like a third world country, this has happened in less then 4 years. |
Sadly, it's how most Americans live. That's the underlying problem, IMO. |
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I honestly thought it would have fallen by now. My fear is that too many compromises have been made to keep the economy shored up. The real estate market is due for a correction sometime soon, and has been for a while. Low interest rates prompted people to BUY BUY BUY, and no surprise here, the prices went up due to demand. When people can't make payments and the house goes into foreclosure, and enough of that happens, it will send the market into a regression that might lead to a major adjustment in prices. The BEST thing a person could have during the next recession or depression is a combination of cash money, tangible goods, and some kind of back-up supply of food, water, electricity. I think the back-up supply of consumables is actually important these days, as even in my agrarian area there is almost no food grown locally. Cash money is a good thing to have, but if major depression hit money might not have value, tangible goods are always a nice thing to have for bartering. You guys that bought 50 shotguns and thousands of shotgun shells to put back might have something as good as gold if something major went down. Bartering IS the basis for the money system to begin with. As to the price of gas, Americans seem to be absorbing it the same way they absorbed housing prices escalating 15% per year when the interest rates were low. When it gets too high, then people will make serious decisions about driving 12mpg vehicles, driving 50 miles one way to a job, everybody in a family having a vehicle, carpooling, public transportation, etc. If Americans would buckle down and get smart, at least 30% of the demand for both gas and diesel could be eliminated. |
We never use to live like this... It's just been going downhill the last few years. I just can't seem to make enough money fast enough to keep up with the rising cost of living. My utilities are insane anymore. EVERYTHING has gone up. Natural gas, electric, water, sewer, cable, phone, food costs, school taxes, property taxes, gas to get to work, etc... I don't know how much longer we can stay afloat... I already work 60hrs/6 days a week. I don't have much time leftover for a part-time job on top of it. My wife stays home with the kids, as daycare would cost more than my wife is capable of earning... So we are stuck with what I make... and getting more frustrated every time a new bill shows up in the mailbox. |
I can't agree more with you . My Parents still live up in MD and they got a notice that their elec bill will go up aprox 80% with in the next year. That is just insane. What is happening is the eliminatiion of the middle class plain and simple. We will be a nation of 3 types of people in the near future (5 to 10 years). Elite Rich, Working Poor and 70 million+ illegal immigrant working slaves.
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This is what I am talking about. A back door depression. I am running really thin and not saving any money (except for my 15% allocation to my 401K) to pay down my debt. By the first of June, I will have paid my $5000 balance on my CC off in 2 months and I hope to continue that schedule to pay my truck off by the end of summer, a year early. As things get more expensive, the extra money starts to disappear and then as it gets tougher to make ends meet, people turn to credit or dip into their savings. If it goes long enough like this things will get extremely bad. |
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Man is full of pride and trusts in his arm of flesh... Generally..The Coming Generational Storm. www.amazon.com/Coming-Generational-Storm-Americas-Economic/dp/0262612089/ref=pd_bbs_sr_1/102-6589668-6140168?ie=UTF8&s=books&qid=1179771987&sr=8-1 |
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Harry S. Dent thinks the same thing. Because of baby boomer demographics we're going to have a huge boom. Then that'll be followed by a huge bust. He thinks the same thing that happened in Japan will happen here. Japan's baby boom happened earlier than US's. They had their huge stock market and real estate boom, then a long drawn out bust and are now only beginning to emerge from it. [tinfoil on]Maybe the secret society elites who run the US and Europe realize this and that's the reason why so much immigration has been allowed.[/tinfoil off] |
Don't forget the printing press (or for DK_Prof, monetization of debt).
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