The "D" word.

[Paul Bruening]

Well, they're finally using the bad word, "depression." I guess we wait to see if cash holds up. I remember as a kid seeing a script (small hand written contract, not screenplay) from the depression (1930's). Local folks had to write promissory notes to each other because currency had fallen apart. They would actually take each other's promissories as if they were currency. A note might float around town with more and more endorsements on the back.

[Saul Rodgar]

Well, they're finally using the bad word, "depression." I guess we wait to see if cash holds up. I remember as a kid seeing a script from the depression (1930's). Local folks had to write promissory notes to each other because currency had fallen apart. They would actually take each other's promissories as if they were currency. A note might float around town with more and more endorsements on the back.

 

Actually, and if I understand you correctly, one could argue that during economically depressed times, people often turn to entertainment (i.e. movies) equally or more so than during economic booms. The cash is going to go to proven hit makers and comedy and all that stuff, but there are plenty of movies being made right now. I was just called by two shows, a medium budget Jackie Chan martial arts comedy and a 70 million Denzel Washington post apocalyptic drama . . . I am seriously debating getting on one, just to be safe. The economy could tank BIG TIME and not having a big paying job would suck . . . But I hate the long haul slog.

Edited September 16, 2008 by Saul Rodgar

[Paul Bruening]

I had spent much of my life assuming that people depended more on frivolous and low cost entertainments to help them forget their financial woes. A few years ago I was doing an art history class paper on Busby Berkley musicals. While doing research I found out that 1/3 of the previous-to-depression theaters closed during the depression. About 1/3 barely scratched by, some by consolidating their orders under distribution coops. I was quite surprised to find that both studios and theaters actually shrank.

 

Probably not the kind of news anyone wants to hear. I would think that television would expand in a time like we're facing. Low-cost reality TV might find an even greater investment. Who knows the future?

[Brian Drysdale]

Probably not the kind of news anyone wants to hear. I would think that television would expand in a time like we're facing. Low-cost reality TV might find an even greater investment. Who knows the future?

 

Could be a reality TV version of the "They Shoot Horses Don't They?" style dance marathon.

[Ira Ratner]

"The economy is fundamentally strong."

 

Wait--I just crapped myself from laughing.

[Nate Downes]

Just remember folks, former Senator Grahm claimed that this is all a "mental recession" and is all in our minds....

[Walter Graff]

Don't worry, it will not be as bad as 1929. Consumer spending is down slightly (the biggest indicator of the economy). This shake out of the financial sector is long overdue. It started with Clinton who made it easy for institutions to loan money. That created greed. Consumers saw that they could get loans even though they had not collateral so the greed grew. Eventually someone said "Show me the money" and it wasn't there. But as you can see the government is letting this thing pan out over time. Had Bear Sterns, Lehman, etc all been allowed to show the truth at once we would have had 1929, but they made it so each financial institutions collapse occurred separate and over time. Now this week well have AIG's fall, saved by the government giving it the 75 billion it needs to stay afloat via more loans from two of hte more solvent banks. It's everyone's fault from the banks to the consumers who knew they couldn't afford the loans they were taking. Give it a year and we'll settle back into more stability. Don't count on any real improvement (positive for more than three quarters) for at least two years. Then of course whoever is president will try to take credit for it. Of course the president has little to do directly with the economy, but politics writes that a different way. The saying goes we blame the sitting president for the economy and presidents calmly say they made the economy good if they are lucky enough to be in office during a good time.

[Serge Teulon]

....... Then of course whoever is president will try to take credit for it. Of course the president has little to do directly with the economy, but politics writes that a different way. The saying goes we blame the sitting president for the economy and presidents calmly say they made the economy good if they are lucky enough to be in office during a good time.

 

 

Does that mean that Bush has nothing to do with the recession?

[David Rakoczy]

Does that mean that Bush has nothing to do with the recession?

 

Yes it does...

 

This is not a Democrat or Republican thing.. this is a Capitalist thing.

 

Walter, I always enjoy reading your logical, reality based economic posts after reading all the emotional, 'dramatic', completely biased posts... thanks for taking the time even though most won't listen or can't understand because of their Partisan blindness.

 

Have a great day Walter.

[Guest]

"The economy is fundamentally strong."

 

Wait--I just crapped myself from laughing.

 

For once in his time as president Bush is right. Unemployment is 6.1% in the USA, interest rates are low, the commuter routes are still packed with drivers every day.

 

The collapse of this bank or financial institution or what ever it was will be forgotten in a week or less, just like the last one has already been erased from memory.

 

The media act irresponsibly in this situation as they always do, they LOVE to scare the crap out of people. Nothing sells papers or drives ratings better than fear, and the media hand out as much fear each day as they possibly can. Fear is their product, and they have cornered the market on it.

 

 

R,

[Adrian Sierkowski]

To piggie back on the notion of fear, wired.com ran an article, yesterday on how terror fear could create psychosomatic episodes (http://blog.wired.com/27bstroke6/2008/09/terrorism-fear.html)

 

As for the economy, I would argue Walter and David are correct. In a capitalistic economy there has to be a "righting," scenario when the good times are balanced out by the bad times. And, while the collapse of banks and whole problem with home foreclosures is a terrible and immediate thing which in some way effects every American, and even goes worldwide in today's economy, we will come through it all and continues to live. When the riots and looting start happening I'll start to worry. Until then, it's just time for all of us to act more financially responsible; and while that may include forgoing the luxuries we have in past been used to, it doesn't quite mean that we should stockpile canned-goods and wait for the soup kitchens to open. But, I will say, I don't think I'll be taking any ski trips anytime soon (not that I could afford those in the best of times!)

[Serge Teulon]

Yes it does...

 

This is not a Democrat or Republican thing.. this is a Capitalist thing.

 

Walter, I always enjoy reading your logical, reality based economic posts after reading all the emotional, 'dramatic', completely biased posts... thanks for taking the time even though most won't listen or can't understand because of their Partisan blindness.

 

Have a great day Walter.

 

 

David,

 

You are wrong in your assumption.

If my question touched a raw nerve, even though you obviously don't know where I'm coming from, then I'm sorry but that is your problem.

In future if you feel like making antagonising comments just send yourself an email.

[Paul Bruening]

To piggie back on the notion of fear, wired.com ran an article, yesterday on how terror fear could create psychosomatic episodes (http://blog.wired.com/27bstroke6/2008/09/terrorism-fear.html)

 

I'm episodically crazy anyway. Does that mean that these will be good times for me?

[Guest]

I don't think I'll be taking any ski trips anytime soon (not that I could afford those in the best of times!)

 

Ah Ha, you see you are giving into the fear ;) You should take a ski trip and help stimulate the economy, if every one ignored the media twits and started spending a little extra cash they can afford the economy would go back into more positive territory.

 

One other note....I love the graphics the news media comes up with over the shoulder of the anchor. They must have teams of people standing around pondering how best to scare the crap out of the viewer on sight.

 

They should just show a highly graphic image of a middle class person having their head cut off by a guillotine every time they talk about the economy. The more blood and gore the better, from the media's perspective. I'm amazed how the media still consider themselves to be in an honourable profession.

 

John Stewart does a good job every night of pointing how the media has just become a silly group of people by cutting all of their commentary on the same subject back to back.

 

R,

[Adrian Sierkowski]

Paul; It may help the crazies (myself included) fit in a bit better. :lol:

 

 

Also one thing; I do think it Can be a Democrat/Republican thing but only insomuch as it effects consumer psychology. I mean, in the end, it seems to me that the American economy is driven to a high degree by consumer's spending... So ye,s I can see the election of x or y party effecting the economy directly in terms of consumer psychology, indirectly in terms of legislation, and abstractly in terms of foreign policy. Of course; I personally think all politicians are a bit crooked, no matter how good they look, so I remain cynical on who will do a better or worse job.

[Keith Mottram]

For once in his time as president Bush is right. Unemployment is 6.1% in the USA, interest rates are low, the commuter routes are still packed with drivers every day.

 

The collapse of this bank or financial institution or what ever it was will be forgotten in a week or less, just like the last one has already been erased from memory.

 

The media act irresponsibly in this situation as they always do, they LOVE to scare the crap out of people. Nothing sells papers or drives ratings better than fear, and the media hand out as much fear each day as they possibly can. Fear is their product, and they have cornered the market on it.

 

 

R,

 

your being sarcastic right?

[Chad Stockfleth]

My city got hit by hurricane leftovers this weekend and 90% of us are without power.

 

This has led to huge lines at any gas station, grocery store or restaurant that has power. It feels like "The Depression".

 

At the same time, it has brought the best out of a lot of people. Everyone is out on the street, talking, riding bikes, throwing football. Many are getting together for "empty the fridge" potluck.

 

It harkens back to simpler times which is actually quite nice.

 

Perhaps if there is a "real" depression it could spur us towards more community oriented living.

 

Of course there will also be death and financial ruin.....

:blink:

[David Rakoczy]

David,

 

You are wrong in your assumption.

If my question touched a raw nerve, even though you obviously don't know where I'm coming from, then I'm sorry but that is your problem.

In future if you feel like making antagonising comments just send yourself an email.

 

 

Serge, the only thing in there that was meant for you was the "Yes it does"... the rest was regarding 'other' posts... hence the sentence breaks,

 

Ahhh, the joys of posting :rolleyes:

 

Have a great day Serge!

[Bob Hayes]

I really feel that we are suffering the consequences of deregulation of the financial markets. I believe Capitalism is a great system but it needs supervision and oversight. The idea that these huge complex systems can regulate them selves is such a failed belief and the American people suffer every time.

 

Walter you obviously have a terrific grasp of economics and it is well stated. I feel it is also well seasoned with typical Republican philosophy.

 

?It started with Clinton who made it easy for institutions to loan money.?

It?s Clinton?s Fault. Even though there was a huge push for deregulation by the Republicans and Phil Gram blame Clinton.

 

?It's everyone's fault from the banks to the consumers who knew they couldn't afford the loans they were taking.?

It?s everyone?s fault. Even though these huge financial institutions gamed the system, lobbied heavily for deregulation, and were profiting from this mismanagement.

 

?The saying goes we blame the sitting president for the economy and presidents calmly say they made the economy good if they are lucky enough to be in office during a good time.?

Clinton took credit for a great economy created by REAGAN (followed by heavenly fanfare) and now Bush is a victim of this horrible economy created by Clinton.

 

This banking collapse is another of many examples like 9/11 and Katrina where they Bush administration just didn?t see it coming.

 

In 2004 Chris Swecker, the FBI official in charge of criminal investigations said of fraud in the mortgage business "It has the potential to be an epidemic". Do you think the White House was informed? In the 90?s there were 1000 FBI agents assigned to Banking Fraud. In 2007 that number had been reduced to 100.

 

And as for you Richard

?The media act irresponsibly in this situation as they always do?

There is a huge push by the right to attack the media. You can?t trust the liberal media etc. Wake up. The press is one of the few institutions that level the playing field between the powerful corporations and the average citizen. The Founding Fathers felt it was so important they put freedom of the press in the first amendment. Is the media flawed? Sure. But without the media our information is spoon fed to us by the people of wealth and power.

[Saul Rodgar]

I really feel that we are suffering the consequences of deregulation of the financial markets. I believe Capitalism is a great system but it needs supervision and oversight. The idea that these huge complex systems can regulate them selves is such a failed belief and the American people suffer every time.

 

Thanks Bob, I was just going to write this very same thing, but couldn't have said it more succinctly.

 

While I am guilty of being pretty partisan, there is no denying that Bush has moved to deregulate the financial sector at a greater speed and degree than any of his predecessors, to put it midly. I am sorry, boys, but facts are facts. This one from the Wall Street Journal, not any "liberal" news outlet:

 

http://online.wsj.com/article/SB1216412960...tml?mod=djemITP

[Walter Graff]

Does that mean that Bush has nothing to do with the recession?

 

 

Yes it does. Most Americans can not shake the media created notion, perpetuated even further by whatever party is not in office, that the president steers the economy. He has little to do directly with the economy. One look at history shows that not a single president directly effected the economy during his time. Some tried to steer the economy. FDR for instance tried to create jobs in the depression with his initiative to increase government and stimulate jobs, but it didn't turn our economy that was in it for deeper reasons. It was WWII that got the economy out of it's slump. It was his policies enacted after he left office that affected the economy directly. Just as any sitting presidents policies towards the economy don't generally take effect till after he leaves office. Even Bush who tried to create tax cuts to stimulate the economy saw no effect now but that effect (higher interest rates and debt) will effect presidents after him. You can blame where we are going as far back as the Carter Administration and moving forward to Reagan, Bush 1, and namely Clinton who introduced NAFTA, allowed creating loopholes for corporate taxes, who single-handedly allowed the liberalization of financial markets.

 

We like to blame Bush for gas prices, housing bubble, financial institution collapse, less jobs, less tax revenue, but anyone that took a single course in economics would see that far more factors than the sitting president have to do with the economy. Bush may not be such a great president, but he also got in office just as the proverbial SH%T hit the fan in terms of what was brewing since the early nineties. Of course it is easier to blame him when he sits there and keeps saying nothing is wrong. That isn't a great way to answer the question when everyone sees that there is something wrong, but frankly what he could do now or four years ago wouldn't really affect us until after he left office. He already tried and got both parties to sign off on it and it didn't work. I mention both parties because I am showing that it was not political in nature, just another failing attempt by a president to stimulate the economy backed by the house and senate.

 

Actually if you look at the current situations in our economy you can see absolute parallels to any number of countries that have faced similar situations. Two economists did a very good study of the comparison of economic downturns that show the real reasons behind these scenarios and how little the people in charge at the time of the problem had to do with it. In all eighteen historical scenarios they looked at, it was always liberalization of financial markets that caused the problems (as it has for use now in the US), the same problems we have today. Look at what presidents created policy that created the liberalization of financial markets and you will find the presidents who are actually a bigger blame for where we are than the one sitting in office. You can read their study here:

 

http://www.bluesky-web.com/US_Subprime_Cri...o_Different.pdf

 

It's very easy to look at one portion of the government and blame it because it is represented by a single man. But in fact you have to look at 2/3rds of it (to include congress and the Senate) to see the reality of why our economy is where it is.

 

Every American should be forced to study political science, economics, and politics so that the myths that prevail in the eyes of the American public can be stamped out.

 

Personally I find it funny how many responses to things economic and political have their origins in what people hear in the media with no first hand knowledge of the subject and yet are spoken as if in first person, just as camera manufactures have people spewing off marketing crap like it's accurate. It answers the question of why we live in a Republic in the US and not a Democracy. Of course many will now have to look up what a republic is (thank God for the web and the pledge of allegiance) because when asked the question, Americans get the answer wrong 99% of the time. But everyone is a couch economist and seems to know a lot about how the economy works cause they heard a politician 'tell you' :)

[Guest]

"There is a huge push by the right to attack the media. You can’t trust the liberal media etc. Wake up. The press is one of the few institutions that level the playing field between the powerful corporations and the average citizen. The Founding Fathers felt it was so important they put freedom of the press in the first amendment. Is the media flawed? Sure. But without the media our information is spoon fed to us by the people of wealth and power."

 

Well if you read my post carefully you would see that I was not attacking the media in the sense that they are not needed or don't provide a valuable service to democracy. When they function properly, they do this quite well.

 

These days though the media is very much a money driven business, more circulation and viewers means higher ad revenue. And all I am saying is that media use "fear" as a big tool to achieve this.

 

I used to work in newsrooms, I know what they do. Even scarier I have sat in on long meetings with the "news doctors". These are highly paid consultants that help the news media improve their ratings.

 

During one presentation on creating an effective topical news promo the consultant pointed out that nothing drives viewers to a news cast like "a child in jeopardy." He said when ever you can run a promo about a child in jeopardy do it, even if it's not the lead story.

 

This is the type "fear" based news media BS I am talking about.

 

R,

[Walter Graff]

Walter you obviously have a terrific grasp of economics and it is well stated. I feel it is also well seasoned with typical Republican philosophy.

 

"It started with Clinton who made it easy for institutions to loan money."

It's Clinton's Fault. Even though there was a huge push for deregulation by the Republicans and Phil Gram blame Clinton.

 

"It's everyone's fault from the banks to the consumers who knew they couldn't afford the loans they were taking."

It's everyone's fault. Even though these huge financial institutions gamed the system, lobbied heavily for deregulation, and were profiting from this mismanagement.

 

Thanks for your thoughts Bob. I should state that I have absolutely no political affiliation. I do have a minor in economics and political science. It is tough to mention a president and then to find fault because right away an association is made between his party and him and one might think that the speaker must fall on the side of one of two paths. I do not. I blame many presidents form Regan, to Bush1, to Clinton for our problem. But I do give Clinton a special nod for the banking crisis as he did more than most recently to help banks give money to anyone that wanted it.

 

As for blame, you can see by my posts that it is everyone from predatory lenders to the American public who said, I only make 60k but will take a loan for 180k. It's everyone's fault and to try to sum it up here would be difficult. Since the topic was presidents, I am using names to answer questions but it is important to understand that I don to care about either political party in the US. I try to speak from a place that no politician is, an unbiased place.

[Serge Teulon]

Serge, the only thing in there that was meant for you was the "Yes it does"... the rest was regarding 'other' posts... hence the sentence breaks,

 

Ahhh, the joys of posting :rolleyes:

 

Have a great day Serge!

 

 

What you said following to "Yes it does" seem to be connected indirectly.

 

I'll take your word for it and offer you my sincere apologies for my mistake.

 

Cheers

[Michael Lehnert]

I cannot believe this has entered our venerable place here, too. Please, everyone relax a bit.

 

Having been away from this forum for considerable time exactly because I currently work on a project about the global financial system, I find the media reporting increasingly irresponsible and sensationalist.

 

The idea that a 1930s depression is imminent is exaggerated. Similarly, the idea of yesterday's "stock exchange meltdown" is groteque, and calling it a "Black Monday" really reduces the historic importance and impact of days like the 28 October 1929 or 19 October 1987. How any journalist can look into their cheap videocam lenses and say that a 5% drop in shares is "a catastrophy not seen since the Great Depression" is bewildering. I mean, Apple lost more in a day because people thought the new iPod colours were lame. I would fire these journos. In crash times, shares fell totally unexpected by 17% to 30%+ within minutes and continued to do so for days. In context, yesterdays trading was not even a market correction. Even if AIG in the US and HBOS in the UK go bust (which is plausible), the impact on society will not be on the same scale as in 1930.

Barclays UK purchase of Lehmans US today that was anticipated (why buy a whole classic car wreck on Sunday if you know you that on Tuesday, you can just buy the leather seats and the aircon compressor that you actually need for pimping your own vehicle for much less) shows how valuable these companies still are after write-offs that in essence takes the heat out of some private households that can no longer repay their morgages (after all, to really simplify things alot, a bankrupt business does no longer collect debt, too).

 

1929 as well as 1907 (and lesser so: 1987) had a lot of private investment go bust, and targeted the commercial banking sector. Today, the crisis is essentially sandboxed to the investment sector. Even with AIG or HBOS going bust, the impact on the commercial and private household market will be stark, but limited.

Also, Wall Street was the only globally relevant trading place for the financial market then, and communication flows were measured in hours, not seconds as now. So bargaining was totally different. I am sure you would make different purchases today would you not be able to doublecheck on the web how mach Target or Amazon or eBay would charge you for that Criterion Luxury DVD set.

Today, a much wider and diverse spread in money and 8 main trading places around the globe allows a better security against this happening again (yes, actually more people have money today than earlier in history, so the so-called "increasing rich-poor gap" isn't actually true on a global scale at all, but hey, it's always easier to point out how poor "we" are and how much better "those rich bastard others" are.) One should remember: Lehman could have been saved if they hadn't been such arrogant fools to walk away from Korea's offer to buy them for $26 per share (which was more than 3 times what they are actually traded on the market). So yesterday would not have happened at all if some self-absorbed NY managers had not thought that they could play hardball with those "Asian foreigners" who "don't know anything about Wall Street anyway, as they come off their rice fields".

 

I would look exactly at the original formulations used by governments, central banks and companies. They actually don't lie as many conspiracy theorists would make you believe. You just have to read the formulation and think a bit critically to disect them. Which anyone in a Democracy should be able to, anyway. Otherwise, we are really doomed, but in a very different way. Above all, always question what journalists tell you (except George Stephanopolous, of course - he is waaayyy tooo good looking to lie, said a gay friend of mine recently... :rolleyes: )

It's no secret that the run on Northern Rock here in the UK was actually caused (unintentionally) by Robert Peston from the BBC who saw the chance to make a name for himself by getting the opening slot on the news, being new to his position as Business Editor and a rather self-absorbed chap in the first place. His reporting was false or misleading at worst, speculative at best, and caused the retail customer panic that then lead corporate investors to end weeks-long negotiations with Northern Rock about a capital injection that they needed to cover only short-term lack of solvency. Had these negotiations not been taken over by psychological fear and stopped, Northern Rock would have got the credit line and sort themselves out.

 

Markets are indeed mostly about psychology. Because that determines how people read the numbers and how they take actions. So this talking about depression matters alot as even people who should and indeed know better get either worried and sceptical and cautious, or have to engage in debates on that level, taking energy out of other practical talks that matter more at this point of time. Unfortunately, humans are emotional creatures and can sometimes get carried away too easily. Let's call it a depression when we are all lined up in front of David Mullen's house and he serves us food with an Arrimag used as a serving spoon, and we eat out of old Vision3 film cans as bowls.

 

At least the bankers learned one thing. Current Skyscraper windows can't be openend anymore, so noone can jump out now.

 

After me recent insightful time spend in LA, well, would I still be there right now, I would go skiing right now, or pay my $7 full-day parking and lie on Santa Monica beach in an attempt to get as tanned as Cary Grant.

 

 

-Michael