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Recession? U ain’t seen nothun’ yet

Recs

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April 22, 2009 – Comments (6)

OK, something here is wrong. I know: 8% unemployment, people having trouble making mortgage payments, demand is up and donations are down at charities, restaurants cutting back hours and offering lower prices, downturn in corporate earnings and dividends, states and cities having trouble balancing bloated spending, car dealers closing, etc. Y’know, it sure seems like an ordinary recession, like the many we have had once or twice per decade recently. Is this right?

Credit markets are still mostly frozen, and credit is the life blood of business and economic activity. Based on what most business and economic writers are expounding, I am expecting a deep, painful, depression with major economic dislocations. I am just not seeing it; you know: entire towns being abandoned, whole industries and retail segments evaporating into thin air, whole categories of financial institutions disappearing (think S&L crisis from a couple of decades ago), massive (e.g. millions) numbers of homeless, etc.

Either the US has dodged the bullet (fat chance, but my portfolio sure hopes so), or business, banks, and consumers are just running on fumes, and still due for a super-hard landing very soon.

 

6 Comments – Post Your Own

#1) On April 22, 2009 at 8:25 PM, wax (96.76) wrote:

jerry;

I think the economy is in for a very hard landing as you describe, just not any time soon. There is still much to unravel with the financial markets, with home foreclosures still rising, credit card defaults rising, and the commercial real estate market close to imploding, we still have a long way to go.

Assuming we get through all of that, few people are talking about inflation, or more importantly hyper inflation, caused by too many dollars chasing far too few goods.

My point is, if you think the end of the downturn in the economy is at hand...come back in mid to late 2012.

Wax

 

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#2) On April 22, 2009 at 9:55 PM, MikeMark (29.47) wrote:

Well said Wax.

One thing about many good businesses.  Good business people generally have a savings pad instead of an operating credit need. When those begin to implode, then there will be real trouble. I see signs of really good businesses just giving up an closing shop in order to protect the savings of the operator. That's another sign of long term trouble.

When I see new business beginnings in main street, then my attitude will change. Unfortunately, the government and the Fed are doing everthing in their power to destroy savings. These policies will come to no good.

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#3) On April 22, 2009 at 10:21 PM, JonBarleycorn (72.10) wrote:

Please, a little perspective: 1929 Wall St. Lays an Egg. Fast forward 5 years to Dustbowl Oklahoma. Now you’ve got your “… deep, painful, depression with major economic dislocations.”

But wait, … fast forward again 6 more years to 1940. The US is still mired in the economic mud. Along the way we’ve had 25% unemployment.

Never mind the happy horseshiite, the Happy Days That Were Here Again (1932) but weren’t.

The Great Depression lasted over 10 years. Ten grinding, gut wrenching years of educations, careers & kids put on hold. But wait, … the folks that had educations, careers & kids to put on hold were not the ones that starred in the Grapes of Wrath. Those folks really had it rough.

It took WWII to get our economy back on track. You remember WWII? It was in all the papers.

Sorry, I didn’t mean to come down on you so hard. But, a little perspective, please.

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#4) On April 22, 2009 at 10:51 PM, russiangambit (29.30) wrote:

It is ridiculous, of course, that people expect recovery so soon after we fell off the cliff. Things like this take 2-3 years to work out, in the best case scenario. So far we are still in denial stage. Wait another 6 months when unemployement benefits start to run out and there are no new jobs in sight.

We only really fell off the cliff last September, until then it was kind of an orderly decline. So, it has been only about 10 months since we glimpsed the extend of the problem and layoffs started for real.

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#5) On April 23, 2009 at 6:02 AM, DaretothREdux (41.21) wrote:

JonBarleycorn,

WRONG. WWII did NOT get our economy back on track! In fact we did not recover until the war ended (every other country was in sambles) and businesses were once again allowed to return to making what they chose to make.

Stop perpetuating the false idea that war is ever good for economic growth. War is only good for inflation, property destruction, loss of life, loss of liberty....

War is only good for expanding government power.

Other than that little (dangerous) mistake you have your history pretty accurately paralleled to what is going on today.

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#6) On April 23, 2009 at 10:48 PM, JonBarleycorn (72.10) wrote:

Dare

Wikipedia describes The Great Depression as “A major economic collapse that lasted from 1929 to 1940 in the US …”

WWII is generally given credit for increasing aggregate demand and thus fueling the economic recovery that took place in the US after 1940. (See, for example, http://www.theaustralian.news.com.au/business/story/0,28124,25334814-5018019,00.html).

My point was that the Depression lasted over 10 years and that a longer term view is necessary. I take your point that wars are bad and in no way did I mean to imply that wars are good for the economy, or, for anything else.

JB

.

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