United States Heading towards a Depression?

Good post. 100% agree that many Americans seem perfectly content on being dependent instead of being INDEPENDENT. That's what caused the problem, and that's what's going to keep us from improving the country. Earning things I want is so much sweeter than being handed things I want. This country needs a swift kick in the ass! Do parents not teach their children any self respect anymore?

 

What parents?

 

You've completely missed the point, yet re-enforced it at the same time.
Go figure

I think I've said all along that we should not be taking money from one group and giving it to another. That does not create wealth.

Let small businesses keep more of what they make, we'll take care of the rest. Thank you very much.

 

This thread is really interesting - It was started on Dec 28th 2007, !

If you take some time to read through it you can see how the opinions have changed over the last 2 years.

If you wrote in this thread way back in the beginning, where you on track ?

 

Ahh... we had better not continue this conversation publicly. Writing posts in French is a bannable offense on DP. (No joke!)

 

Karl Denninger has a terrifyingly insightful post on the current and future depression at How Long Before You Wake Up, Politicos?

 

You have to be deaf ,dumb and blind not to know that our debt of 12 Trilllions is going to destroy this country.

China holds a large block of our debt and keep telling the USA stop spending beyond your means to pay.

The dollar is on the edge of failure people wake up !!!!!!!!!!!!!!

I trillion is equal to: if we had to wait a 1 trillion seconds :
One trillion seconds of ordinary clock time =

( 1012 sec)/( 3.16 x 107 sec/yr) = 31,546 years!


Watch the USA Debt Clock in real time http://www.usdebtclock.org/

 

When the Chinese finally adjust the Yuan, or let it float, Americans won't be able to afford to buy.

In a way, it could be the best thing to happen to the United States -- enforced austerity.

 

From everything that I have seen we are headed towards hyperinflation. The same mistakes that or government is making has happened in the past. I searched hyperinflation last week and the info that I read is very scary. I worry for my kids financial future. I have been buying silver since I was a kid and now I have children in college. If hyperinflation hits we as Americans will be in trouble. How many of American's have the ability to provide for them selves. I love this country but we have been spoiled with a very easy life. All we can do is plan for the worst and hope for the best.

 

Just what do you people think happened over the past two years??? As in crisis management, Depression averted - mission accomplished. At least being aware inflation and other ills lie ahead and having the time for their aversion as well was the result of the prior election than had the Republicans won another 4 years to spin their self-delusional reactionary rhetoric this nation would indeed be over the cliff with no time left but for submission to total chaos.

 

With home values already down sharply and headed still further downward, unemployment already around 10% and reasonably expected to head much higher, and taxes already out-of-control and expected to veer sharply higher, the only thing most Americans can do is learn to live on a lot less money.

The only thing keeping hyperinflation in check right now is the government paying the banks not to lend. Historically, the government has paid the banks nothing for temporarily parking their cash with the federal reserve. Now, the banks are paid interest to do this. That's a major reason why the banks aren't lending. Why should they take risks and lend to real people when they can lend to the government with (effectively) no risk?

This keeps money out of the economy. The money exists, but it doesn't cause inflation because it's not in use in the real economy. If this money ever escapes into the wild, we're headed for hyperinflation the likes of which we haven't seen since we elected that mad peanut farmer in the 70's.

The downside to this strategy to prevent hyperinflation is the limited liquidity it causes in the private sector. But hey, the government is what's really important in a socialist society, right? Capitalism is passe'. Business is so not cool anymore. Only Chebama is cool now.

 

Who are you, and what have you done with Will!

 

I have done very bad things to him and I have plans to do even more bad things to him.

Sleep deprivation isn't torture, it's a way of life.

 

Oh, how I remember the days when people in this thread blamed poor people and minorities for the economy.

Such ignorance must have been bliss.

 

is that showing signs of a recovery since the focus of the depression is changing?

 

I've worked to stay out of these economic discussions because A) I'm very busy & I often try and throw in real facts not political BS and B) because they often include statements that reflect pure political bias and ZERO descriptions of economic reality. The above quote is a prime example wherein political BS is being spread that has little reflection on reality.

Take the above statements bit by bit. All opinion with a heavy political slant and no facts.

Home Values Home values have taken an enormous hit. There is ZERO hard evidence where they are going overall. ZERO. Here is some interesting data and hard facts though that may suggest a change.

Take a look at census data on housing starts and data from the National Home Builders Association. See the volume of housing starts (the NAHB data goes back to 1978). Per data Warren Buffett cited (and he has investments in these sectors and does hard research (unlike the political big mouths here)--stabilized new home demand is about 1.2 million/year in the US. Take a look at housing starts during the 1990's and first part of this decade through 2007. The numbers regularly exceeded this demand amount. Supply just overwhelmed demand. Yet strangely prices went up.

That phenomena is the exact opposite of the very basics of market economics. With higher supply prices should have fallen. How did prices go up? Pure speculation. Overwhelming volumes of speculation. The result? The largest recession since the great depression of the 1930's. A recession that essentially wiped out about 20-30% of all American wealth in both real estate and the stock market bottoming out in spring 2009.

In the last 2 years and currently housing starts are dramatically lower. Its bottomed to the lowest levels in several decades. It is way below the volume of new housing demand from new families. Buffett suggested it might reach equilibrium in 2011.

Currently the regions and submarkets that tanked first (parts of California, Florida, Las Vegas, Arizona etc.) have bottomed on prices and are rebounding. Other submarkets are far more in flux.

Real estate is always a function of demand and supply. Except....and there is a big except....there have been two overwhelming examples that caused recessions...showing that the combinations of real estate, real estate financially oriented firms, and overall finance simply don't respond quickly to clear examples where demand and supply curves don't respond the way they should. This recession is one example and the period of the late 1980's and early 1990's shown with this link: http://www.fairfaxcountyeda.org/sites/default/files/publications/ye08rer.pdf Are prime examples.

Money for housing recently and money for commercial properties in the past should have dried far more quickly as demand and supply went out of whack. The fact that they didn't is an inditement against the financial industry.

But to get back to the demand and supply issue: If supply dries up....prices will rebound. That is the simple and hard truth behind market economics.

Now there are other factors at work. Housing is still shaky. There are still severe problems. Many existing mortgages remain under water. Many homeowners are out of work and unnable to support existing mortgages. There are lots of unknowns. OTOH if supply increases at way below the increase in demand though, excess inventory of vacant houses will be lifted off the market and pricing will rebound.

Those are the most basic rules of a market economy. If you don't believe that then you don't believe in free markets.

Unemployment Unemployment has been steady at about 10% for about 6 months. The rapid increase in unemployment from 5% to 10% over the course of a year has ended for the time being. There are various signs of hiring.

Will, where are the hard signs that unemployment is "reasonably expected to head much higher" (in your own words) when it has seemed to hit a 6 month stabilization period? Who is being "reasonable"? A political polemicist without any hard facts? That is just Bull Sh!t politics without any hard facts.

Look at housing and unemployment. According to the New Housing start data we are producing between 1.5 to 1 million less housing units/year than at the peak. Whoa. One million or more less housing units. We are at a 20-30 year low for new housing units.

CRAP...of course unemployment is high at that level. It can't go signficantly lower since we have so bottomed out at the new construction level. It simply doesn't have that much lower to go. Look at another huge employer of people: new auto sales. Before the recession New vehicle sales were about 16 million/year. We've been running at about 10 million new vehicle sales/year for a couple of years. Again supply is below a stabilized buying rate. New vehicle sales seem to be inching upward. If that occurs there will be hiring.

BTW: Those two industries are amongst the two largest private industries and employers' of people in the nation.

Taxes Taxes are EXACTLY where they have been during the entire past decade. Exactly the same. No difference. That means they aren't out of control...except to a political Bull Sh!tter without hard facts.

Can they change? Yep. Politics will see about that. Obama wants to return basic individual tax rates to what they were before Bush's tax cuts. Those are not "expected to veer sharply higher" except in the eyes of a political bull sh!tter. They hit the wealthy harder than anyone else by an extraordinary level. 95% of people don't get a hit. 95%

I faced roughly 50% marginal tax rates through the 90's. (39.6% fed plus about 10% state). I did fine. In the last decade I faced about 45%....(35% fed and the same in state). The change doesn't kill you when you are making that much. If it does...you are spending too much money on speculative and bull sh!t crap. If you aren't you live like a prince.

During the 2008 Presidential primaries Fred Thompson was asked a question about taxes and he responded that he wished he had as much money as Mitt Romney and then said...(paraphrase) "then you don't have to worry about taxes.". When you are that wealthy...that is correct. (I'm nowhere's close to that)

American's can learn to live on a lot less money Yup. That is what the unemployed are doing right now because of the speculative fueled recession that wasn't controlled.

BTW: If you want to get a feel for how long a deep financially created recession can impact an industry again take a look at the information presented in this link: http://www.fairfaxcountyeda.org/sites/default/files/publications/ye08rer.pdf and see how long it took for significant amounts of new commercial real estate to be built again. It took years. Again its a factor of real market economics wherein demand and supply have to reach equilibrium.

Hyperinflation Will: Don't loosely throw terms around. I was working in the early 1980's. American inflation hit terrible highs. It was miserable. It sucked if you bought a house and when you kept seeing prices go up at rediculous rates.

That was not hyperinflation. Hyperinflation hit Germany after WW I. Around 1922 prices doubled every 2 days That is hyperinflation. We had High Inflationduring the late 1970's into the early 1980's. Just to be factual...high inflation started during the Nixon years, continued during the Ford years, peaked during the Carter years into the early Reagan years and then dipped. It started way before Jimmy Carter. (Again--politically motivated Bull Sh!t without facts)

Now I'm a capitalist. I own (in partnership) businesses and I own investment real estate. I worked exclusively in the commercial real estate markets. I worked through one recession (late 1980's-early 1990's) (which was a depression in the commercial real estate industry) and I've seen this latest financial/real estate caused recession in this past decade.

Experience suggests the impact of this recession will take years to overcome. I expect demand/supply curves will work things out in time.

Of course if one wants to run away from the US to Singapore and make all kinds of exaggerated comments totally unsupported by facts that is your prerogative. Personnally I'd rather work through the problems. In fact that is what the founding father patriots did. They stayed and worked. That is how a great nation was created

 

I've already come to the conclusion that too many accept facts ONLY if it fits their political hatred, biases, and prejudices.

This course of price instability, high unemployment, and high inflation began with Richard Nixon. Going off the gold standard, the oil embargos, the big jumps in oil prices began in the early 1970s.

If you didn't live through it, I guess you can't fit the history to whatever agenda you want, to blame whoever you don't like that day.

 

Good point. Alternatively, the causes could have been the double impact of guns and butter, with the US spending considerably more and creating govt. debt as a result of the Vietnam war. If that is the case then the root causes could have occurred pre Nixon, possibly during the Johnson years...although the inflation impact and price increases didn't start hitting until Nixon became President.

IMO, based on experience from the 1980's leading into the 90's and the past decade it appears that normal expected results from demand/supply don't take effect or work when it involves massive amts of real estate and finance. In both examples there were severe examples of overbuilding, severe examples of huge unimpeded volumes of investment going into real estate and the construction side; clear examples of huge flows of speculative money going into real estate.....and the results were bubbles and busts(recessions) that have horrendous results.

On the macro level I'd seriously change this cycle to prevent it from reoccurring.

 

The smartest thing would be to cut the debt. Living within your means is ok. Spend what you make ... fine. but from what I see its the debt trap which continues to work against people. It gives control to the banks and is getting now to a point where the people with a more frugal and economical mindset appear to be more stable. Part of why asian countries do well now, their lifestyle is less based on the line of credit available and more on what the people actually have in their bank accounts.

 

This is so true and it is true for people and governments. Unfortunately, that's not what we have been doing. The government has been using artificially low interest rates in a misguided attempt to stimulate the economy and people have responded naturally by borrowing like crazy. Our savings level has gone negative and our personal debt levels have spiraled out of control. Our government has lost all sense of financial responsibility. When we should be reducing spending and cutting costs, we blew a trillion dollars on pork barrel projects and protecting government jobs.

Frankly, I don't think that the nation has what it takes to enforce the required fiscal discipline. It's going to take some significant pain to accomplish that sort of mental change -- the kind of pain we simply have not experienced since the Roosevelt administration.

Of course, saving "money" is very dangerous right now, because of the bank reserves I mentioned previously. But, there are a lot of ways other than "money" to store wealth.