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View Full Version : Does the US economy need a Recession?


richw76
01-23-2008, 09:24 AM
Any economics types around. Obviously the US economy is causing ripples around the world. The fed, republicans, and democrats all seem invested in trying to slow down this possible recession or at least easing the pain.

Is this a good idea? Would the economy as a whole be better off if everything tanked in the next 18 months, and had a chance to grow again?

Obviously it's bad for individuals. If you get layed off etc. it can be like an atomic bomb to your family. But from a Macro perspective is everyone doing the wrong thing trying to stop this possible recession?

Supernatural_Serve
01-23-2008, 09:41 AM
Is this a good idea?who knows. Sometimes the medicine is worse than the illness. But how can a government (incompetent or not) resist doing "something."

There are chronic underlying root causes in this very ill society that nobody has the political will to take on.

richw76
01-23-2008, 09:49 AM
who knows. Sometimes the medicine is worse than the illness. But how can a government (incompetent or not) resist doing "something."

There are chronic underlying root causes in this very ill society that nobody has the political will to take on.

Most of the economist in articles I've been reading say that cash rebates to consumers... er I mean citizens, or even the interest rate changes will take 12-24 months to be realized in the economy.

If I understand the data correctly by the time anything takes effect the "recession" will be over anyway.

katastrof
01-23-2008, 10:04 AM
Any economics types around. Obviously the US economy is causing ripples around the world. The fed, republicans, and democrats all seem invested in trying to slow down this possible recession or at least easing the pain.

Is this a good idea? Would the economy as a whole be better off if everything tanked in the next 18 months, and had a chance to grow again?

Obviously it's bad for individuals. If you get layed off etc. it can be like an atomic bomb to your family. But from a Macro perspective is everyone doing the wrong thing trying to stop this possible recession?

FED Economists have been giving a 50-50 chance for an upcoming recession. I wouldn't agree with surrendering to it & that's for the sake of the labor market, but I am not an expert on business cycles.

I would ask & read experts instead of asking this to people on a tennis forum. If you just want to discuss it, find an economics forum.

Serve em Up
01-23-2008, 10:29 AM
Things need some time to reach equilibrium. The more severe the downturn the faster we can get on to moving forward again.

A more severe recession would correct the following imbalances.:

1. Reduce cost of oil by curbing consumption. Rising oil prices has been a major contributor to inflation and americans reduced spending power.

2. Reduce prices of homes by forcing people to sell rather than hold onto homes at prices that were artificially inflated by speculative buyers and unqualified purchasers who were given loans by an over aggressive lending industry.

3.Scare more americans into saving and pay down debt rather than buy more cheap stuff. Consumer debt is at an all time high and is unsustainable in the long term. Too much spending at a time when there's downward pressure on net worth due to falling home equities. People withdrew too much home equity for vacations, and cheap stuff. Now there's no personal wealth left. Needs to be built back up.



The more quickly these events take place the sooner we can go back to work and grow the economy.

BreakPoint
01-23-2008, 12:17 PM
I think the Fed should stop trying to prevent the housing bubble from continuing to crash and just allow it to keep crashing. They are trying to intervene with market forces which is always a no-no. It was this intervention that created the housing bubble in the first place in the aftermath of the dot-com bubble.

The Fed keeps talking about wanting to keep housing prices from dropping further. Why? The prices aren't even supposed to be where they are now due to all the ridiculous appreciation over the past 10 years so they are still mostly way overvalued, especially in CA. Why are they only interested in helping homeowners remain rich and maintain their net worth? How about all of the renters that have been waiting for housing prices to drop by at least 50% so that they can actually buy one? How about helping them? Aren't they also tax paying citizens?

Why is the Fed trying to help people that went way over their own heads and bought a house that they couldn't afford in the first place? Now they want to use my tax dollars to allow these imprudent people to keep their overpriced houses? How unfair is that? They're penalizing all the prudent people that didn't spend way above their means. I mean if I bought a Mercedes that I couldn't afford, would the govenment step in and help me to lower my payments so that I can keep it from being repossessed? Heck no! But what's the difference? Also, if I bought stocks or bonds or any other investment that dropped in value, would the government step in and help me? I think not. So why are they doing it with houses?

What I want is for mortgage rates to go to like 100%, this will cause the value of houses (especially in way overpriced areas like CA) to drop by like 60-70% or more. This way people can just stroll in and buy one with cash without needing that ridiculous mortgage. :) LOL

richw76
01-23-2008, 12:21 PM
FED Economists have been giving a 50-50 chance for an upcoming recession. I wouldn't agree with surrendering to it & that's for the sake of the labor market, but I am not an expert on business cycles.

I would ask & read experts instead of asking this to people on a tennis forum. If you just want to discuss it, find an economics forum.

Hey katastrof. We, meaning 98% of the people on this board are completely unqualified to answer 99.99999% of the questions posed in the Rants, Odds&Ends, or health and fitness sections. See most religion/political/health/moral/current events threads.... etc for numerous examples.

So why draw a line at economics?

richw76
01-23-2008, 02:06 PM
I think the Fed should stop trying to prevent the housing bubble from continuing to crash and just allow it to keep crashing. They are trying to intervene with market forces which is always a no-no. It was this intervention that created the housing bubble in the first place in the aftermath of the dot-com bubble.

The Fed keeps talking about wanting to keep housing prices from dropping further. Why? The prices aren't even supposed to be where they are now due to all the ridiculous appreciation over the past 10 years so they are still mostly way overvalued, especially in CA. Why are they only interested in helping homeowners remain rich and maintain their net worth? How about all of the renters that have been waiting for housing prices to drop by at least 50% so that they can actually buy one? How about helping them? Aren't they also tax paying citizens?

Why is the Fed trying to help people that went way over their own heads and bought a house that they couldn't afford in the first place? Now they want to use my tax dollars to allow these imprudent people to keep their overpriced houses? How unfair is that? They're penalizing all the prudent people that didn't spend way above their means. I mean if I bought a Mercedes that I couldn't afford, would the govenment step in and help me to lower my payments so that I can keep it from being repossessed? Heck no! But what's the difference? Also, if I bought stocks or bonds or any other investment that dropped in value, would the government step in and help me? I think not. So why are they doing it with houses?

What I want is for mortgage rates to go to like 100%, this will cause the value of houses (especially in way overpriced areas like CA) to drop by like 60-70% or more. This way people can just stroll in and buy one with cash without needing that ridiculous mortgage. :) LOL

I agree in principal. To everything. From what I learned in my few semesters of macro/micro etc. Nothing they do at this point will matter and their just wasting money. If there's no recession no harm no foul. If there is it's like pouring a glass of water on a forest fire.

As for the Housing situation I do think that CA, and to a smaller part FL are actually exception to your idea. Because although there were some speculators driving up prices, they are the exception. Most home buyers are the same as always/everywhere. Families trying to build something and have a little more room. In CA for $500k families weren't getting McMansion's, like here in GA. They were buying 1500-2000 sq ft 3/2's that were 20+ years old.

Also there is some precedence in the bailout to save the economy. Hedge Funds is a perfect example, in the last 10 years the US has paid 10's of Billions to save those guys. I can't remember the name but they were a hedge fund based in Greenwich, CT that caused the asian markets to crash.

katastrof
01-23-2008, 06:33 PM
Hey katastrof. We, meaning 98% of the people on this board are completely unqualified to answer 99.99999% of the questions posed in the Rants, Odds&Ends, or health and fitness sections. See most religion/political/health/moral/current events threads.... etc for numerous examples.

So why draw a line at economics?

Write on, then brother :) I am about to get my PhD in Economics & I won't touch this issue, but hey, why should that stop you, right :)

Fuzzy10sBalls
01-23-2008, 06:47 PM
Any economics types around. Obviously the US economy is causing ripples around the world. The fed, republicans, and democrats all seem invested in trying to slow down this possible recession or at least easing the pain.

Is this a good idea? Would the economy as a whole be better off if everything tanked in the next 18 months, and had a chance to grow again?

Obviously it's bad for individuals. If you get layed off etc. it can be like an atomic bomb to your family. But from a Macro perspective is everyone doing the wrong thing trying to stop this possible recession?

Currently the usa is 100% in a recession, but thats much different then a depression. A recession is basically when we have 2 quarters in a row of slowed growth. A recession happens every few years.

soyizgood
01-23-2008, 07:36 PM
Big business needs a damn good beatdown from the Feds. In pursuit of more money, they have outsourced, merged, weakened regulations, and come up with creative, speculative products that pass the blame and risk on to someone else just like a pyramid scheme. Corruption, conflict of interests, creative accounting, etc. big business did to themselves. Now they are looking for the Feds to give them money so they can keep doing the same stuff, while doing nothing in return for getting the funds.

Considering small and medium sized businesses create 2/3 of the new jobs, why bend over backwards for greedy corporations that continue to employ people outside our country than inside? It's bad enough they have lobbyists, PACS, special interests groups running the show and still messing stuff up. If they could give our freedom to China for $1, they'd do it in a heartbeat and rename us the People's Republic of America for good measure.

We need to go back to a gold or silver standard, ditch the Federal Reserve, let this business cycle play its course, and come up with long-term solutions to Social Security, Medicare, the national debt, energy, healthcare, and selling out to potential enemies among other issues.

ugotnext
01-23-2008, 08:08 PM
@richw76 long term capital mgmt (greenwich,ct)

lude popper
01-23-2008, 08:56 PM
we are sitting on a house of cards. We have been floating on one fake-stimulus after another. In order to keep the economy going, we jump from one bubble to another -- from tech to housing. Every time we get close to a recession, the fed helps Americans borrow money they cannot repay in order to buy products they don't need. Reaganism writ large: we have become a nation of deficit spenders and we are about to pay the price. For over ten years, we have been keeping the economy alive on crack cocaine, i.e., quick fixes which only serve to make the eventual landing harder. The money we've been spending isn't there, and it hasn't been there for a long time. China owns us and people are hanging on to their middle class status not because of good jobs, but because of credit. The fundamentals stink and we have been delaying a recession for too long. Our dependance on cheap imported crude will lead to inflation like you've never seen. It's already started. Easy credit, debt, and rate manipulation have destroyed the dollar. Point is: America has a hard landing in front of her.

I recommend more tax cuts for the wealthy and more deregulation for business. Reaganism is clearly working. Corporations have seen their greatest profits ever, the wealthiest 1% are living better than the robber barons, defense spending is bigger than ever, and America is sliding off a cliff. If you ever wanted to test the viability of aggressive tax cuts and trickle down economics, now is the time, i.e., when it comes to giving to the wealthy and helping corporations, Bush is Reagan on steroids.

Suckers.

Fuzzy10sBalls
01-23-2008, 11:45 PM
we are sitting on a house of cards. We have been floating on one fake-stimulus after another. In order to keep the economy going, we jump from one bubble to another -- from tech to housing. Every time we get close to a recession, the fed helps Americans borrow money they cannot repay in order to buy products they don't need. Reaganism writ large: we have become a nation of deficit spenders and we are about to pay the price. For over ten years, we have been keeping the economy alive on crack cocaine, i.e., quick fixes which only serve to make the eventual landing harder. The money we've been spending isn't there, and it hasn't been there for a long time. China owns us and people are hanging on to their middle class status not because of good jobs, but because of credit. The fundamentals stink and we have been delaying a recession for too long. Our dependance on cheap imported crude will lead to inflation like you've never seen. It's already started. Easy credit, debt, and rate manipulation have destroyed the dollar. Point is: America has a hard landing in front of her.

I recommend more tax cuts for the wealthy and more deregulation for business. Reaganism is clearly working. Corporations have seen their greatest profits ever, the wealthiest 1% are living better than the robber barons, defense spending is bigger than ever, and America is sliding off a cliff. If you ever wanted to test the viability of aggressive tax cuts and trickle down economics, now is the time, i.e., when it comes to giving to the wealthy and helping corporations, Bush is Reagan on steroids.

Suckers.

I could not have said it any better

richw76
01-24-2008, 10:12 AM
@richw76 long term capital mgmt (greenwich,ct)

Thanks I couldn't remember the name. They based the whole business on some funky mathematical model/formula if I remember right.

But yeah if they can give a couple billion to billionaire A-Hats why not, working people trying to save their houses :-)

Truth is ideally I believe small government works better. I want them to enforce law, so there are consequences if someone robs me. And keep things stable by not allowing outsiders to invade and conquer. Maybe build some roads, and thats it.

Private sector can do everything else, better, with more efficiency and cheaper.......

Unless I get laid off then I love big government. :-)

richw76
01-24-2008, 10:23 AM
we are sitting on a house of cards. We have been floating on one fake-stimulus after another. In order to keep the economy going, we jump from one bubble to another -- from tech to housing. Every time we get close to a recession, the fed helps Americans borrow money they cannot repay in order to buy products they don't need. Reaganism writ large: we have become a nation of deficit spenders and we are about to pay the price. For over ten years, we have been keeping the economy alive on crack cocaine, i.e., quick fixes which only serve to make the eventual landing harder. The money we've been spending isn't there, and it hasn't been there for a long time. China owns us and people are hanging on to their middle class status not because of good jobs, but because of credit. The fundamentals stink and we have been delaying a recession for too long. Our dependance on cheap imported crude will lead to inflation like you've never seen. It's already started. Easy credit, debt, and rate manipulation have destroyed the dollar. Point is: America has a hard landing in front of her.

I recommend more tax cuts for the wealthy and more deregulation for business. Reaganism is clearly working. Corporations have seen their greatest profits ever, the wealthiest 1% are living better than the robber barons, defense spending is bigger than ever, and America is sliding off a cliff. If you ever wanted to test the viability of aggressive tax cuts and trickle down economics, now is the time, i.e., when it comes to giving to the wealthy and helping corporations, Bush is Reagan on steroids.

Suckers.

Soo luckily Gulliani won't get in. That dude is trying to take a weed eater to tax liability.

And I agree. I try to use credit as a tool, but its' easy to fall into the traps. I remember when my dad used to tell me if you can't pay off a car in 4 years you can't afford it. Now its' common to see 6 year financing on cars. And last statistic I saw said average american had $10k of unsecured debt. Meaning many have twice that in secured debt. Meaning when the bottom does fall out its' gonna be ugly.

However, as a hypothetical I think the Gov shouldn't bail people out. Same to the Corporate welfare policies in the US it just encourages bad behavior.

Again see energy and hedge funds.

Serve em Up
01-24-2008, 10:44 AM
The banks greediness have a lot to do with the current mess.

Twenty years ago you HAD to have 15% money down to buy a house. Now they have No Verification loans for houses. The banks deserve to take it in the shorts.

Twenty years ago the only credit card I could get was a Sears charge card because Visa and mastercard said I had no credit history.

Now anyone can get credit and get overextended.

We are addicted to cheap stuff, TV's, Computers, designer labels, DVD's, and 80% of the money we pay for that cheap stuff goes to China.

Heck, even people considered poor in America have lots of Cheap Stuff. We're overspent. We took out all of our home equity to buy video games. Now have no wealth and people think we should get bailed out.

I don't think so.

We need to take on some pain, save money, get our finances in order personally and governmentally. Boy Scout missions on borrowed money needs to stop, we can't afford it.

stormholloway
01-24-2008, 11:07 AM
This is going to end badly for the American people. Think 1929 all over again.