OT - When does a recession become a depression?
- Thread starter Genetics
- Start date
I'm afraid the "bailouts" could make things even worse!
I'm afraid the "bailouts" could make things even worse!
From my limited observation of bailouts, they seem to have the opposite effect on business competitiveness. Sunday's Times had an interesting article on the 79' Chrysler bailout and how it may have inadvertently been a significant contributing factor to the downfall of U.S. automakers and their competitiveness.
An additional issue has to do with the bailout's impact on our relationship with our global trading partners. That impact has been immediate and will continue to erode confidence in our financial system. The impacts on our global competitiveness and our political effectiveness could be disastrous
I'm afraid the "bailouts" could make things even worse!
From my limited observation of bailouts, they seem to have the opposite effect on business competitiveness. Sunday's Times had an interesting article on the 79' Chrysler bailout and how it may have inadvertently been a significant contributing factor to the downfall of U.S. automakers and their competitiveness.
An additional issue has to do with the bailout's impact on our relationship with our global trading partners. That impact has been immediate and will continue to erode confidence in our financial system. The impacts on our global competitiveness and our political effectiveness could be disastrous
serpentman
part time superhero
Yes. In simplified terms the fundamental difference between a depression and a recession is duration and impact. A generic definition of depression is a reduction of GDP by 10% or more. Therefore, a depression is in other words a severe recession. Historically, if you look at the Great Depression of the 30's, it was actually a series of multiple depressions with intermittent periods of small growth. However, when you consider the where things began and where they ended, the period of 1929-39 was lumped as one singular event.
Not being an economist myself, I believe it would take a series of cataclysmic events to bring a reduction of GDP to that extent. With that being said, we are already seeing some very scary events of monumental proportion in a small amount of time. Yesterday crude jumped $25 in 1 hr. Although it has retracted, it has never moved like that in over 100 yrs. If this bailout package goes through, we will likely see significant devaluation of an already weak dollar which could push commodities to unprecedented levels. Not to say they shouldn't do this package, its just that there will be consequences either way.
IMO, the country as well as the world is teetering on the brink. Either way, I find it difficult to believe we aren't at least heading into a recession.
Teddy Ballgame
New member
So Sad.....ironic how financial stress leads to not being able to teach about financial stress.....
serpentman
part time superhero
Yeah, the proposed bailout terrifies me, especially if given with no oversight.
What scares me more is what they know and most likely aren't telling us. Without that little tidbit, its hard to be for or against it. And finally what scares me most is what will happen if it doesn't work.
What scares me more is what they know and most likely aren't telling us. Without that little tidbit, its hard to be for or against it. And finally what scares me most is what will happen if it doesn't work.
MJAnderson
Premium Member
Just a comment on the oil price jump. That day just happened to be the last day that traders had to cover contracts for October delivery. So everyone who had been sitting on those waiting for the price to fall more were forced to buy on that day, causing the price to skyrocket and costing them a ton of money. The Novemeber contract was only up $5. It was more of a timing thing than a real event.
serpentman
part time superhero
Agreed, it was a perfect storm of events. However, even over the past three years of increasingly volatile crude markets, it was unprecedented by a long shot. Although Monday had little to do with exchange rate, its a bit unnerving to think what a continually weaking dollar would do.
Many people laughed (myself included) when Goldmann Sachs predicted $200 crude by 12/31/08.
Many people laughed (myself included) when Goldmann Sachs predicted $200 crude by 12/31/08.
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MarineFishGuy
Capn Jack Sparrow
I watched an hour of Cspan2 coverage with Paulson and Bernake answering questions from congress.
Their responses were awful, incoherent at times, and lacking information related to the questions asked.
Congress does not seem to have any intention of granting this package as written by the White House (thank goodness).
I am glad many of the rank and file Republicans have not supported the White House on this issue. Although I have seen reference to not supporting it to win political favor, I want to believe the majority actually think it needs oversight and improvement.
I would like to see congress delay the package until January so the next administration can have a say in how this get's handled. however the current administration is painting Doom and Gloom if this is not "Fast Tracked", sound like Iraq to anyone else?
Scary Stuff, just in time for Halloween
Their responses were awful, incoherent at times, and lacking information related to the questions asked.
Congress does not seem to have any intention of granting this package as written by the White House (thank goodness).
I am glad many of the rank and file Republicans have not supported the White House on this issue. Although I have seen reference to not supporting it to win political favor, I want to believe the majority actually think it needs oversight and improvement.
I would like to see congress delay the package until January so the next administration can have a say in how this get's handled. however the current administration is painting Doom and Gloom if this is not "Fast Tracked", sound like Iraq to anyone else?
Scary Stuff, just in time for Halloween
I know this may seem slightly socialist... but what if these failing banks were to sell themselves or the mortgage part to the government? Could that be seen as an alternative to doling out massive amounts of unregulated money. Then when the markets stabilize they could sell the mortgages back to the companies. I know this would probably have issues but I think the government would step in and reissue loans at a lower percent keeping families with houses.
serpentman
part time superhero
I think that actually is one of the counter proposals on the table. In exchange for the bailout, the US govt would take equity shares in the recipients that it could later sell at break even or profit economics to help offset the cost of the bailout.
Either way this plays out, I think the days of unregulated loans of these types will come to a halt.
Either way this plays out, I think the days of unregulated loans of these types will come to a halt.
Yes it scares the crap out of me for my previous mentioned reasons... that and you know it will balloon to over a trillion if they are admitting to $700B now.
IMO, the markets would have recovered just fine, yes there would have been a shake up and some folks would end up losing their homes but that should have been allowed to happen. In a capitalist society you're gonna have some business fail, some people that singed mortgages they should not have may be priced out, that's just part of the way it works. But the government should not be deciding which business fail and which ones do not.
Slightly? the government shouldn't be in the mortgage business. Period.
We're not even talking about the people losing their houses. This will still happen! This bailout is to keep the collapse of the financial investment firms that have defined wall street for the past 20 years with history going back a century. To let these fail would inevitably lead to complete collapse of the credit market. It's sad to think that 700B may rescue the credit market but it still leaves trillions that could potential be in defaulting loans. Not to mention the housing bubble bursting resulting in houses that are cheaper than what they cost to build.
Also, if the gov assumed the mortgages they could reissue all loans with a lower fixed rate and help some of the struggling home owners retain their property. The tax payer would assume the bill of course but once the defaults are sorted from the good these could be packaged again and sold back to investment firms... for a potential profit.
Aqua Keepers
New member
I don't wanna pretend like I understand all this stuff, but the above statement scares me. Would this not create a vicious circle and hurt the average Joe?
serpentman
part time superhero
That's my impression.
Maybe. If you use your house as your main investment, it already has. The price of housing will continue to drop for at least 2yrs (except in certain markets). By the credit market coming to a halt, that would essential effect everyone. At first people going to school or people needing to finance a car, businesses will not be able to get credit they need, it will cause the inability (as MarineFishGuy pointed out) to get the economy up. The president just made a speech tonight, that I believe was one of his better. It sounds like they're going to use the 700B to buy these securities and hold them until the market stabilizes. Yes, the tax payer has the potential to foot up to 700B dollars but if they bail out the credit market and then help the individuals who over extended their credit then there is the chance the government will get all 700B back.
I think Genetics is right. The government could make money on this deal.... could. Would I hold my breath on that? Probably not.
I think the largest problem with just letting this whole thing happen on its own is the global interaction. Don't get me wrong I'm not too concerned about China or even Europes economy, I'm a "lets look out for number 1 (America) right now" kind of guy. But a major difference between now and the Drepression Era which took an economic spur from a world war to get us out of, is we are no longer a self reliant country. The self reliance can be debated of whose fault that is and if it is a bad thing but the fact of the matter is it is true, we live in a global economy. If our financial markets collapse the dollar will be worthless internationally. I believe that's why we are sending money abroad; not to bail out foriegn banks but to add liquidy to an already hurting dollar. Everything is such a domino effect anymore it is hard for me to get my head around the whole thing. I do not like government regulation for sure, but if they can TEMPORARILY take out one of the dominos in the string I think it is our best bet.
Bill
I think the largest problem with just letting this whole thing happen on its own is the global interaction. Don't get me wrong I'm not too concerned about China or even Europes economy, I'm a "lets look out for number 1 (America) right now" kind of guy. But a major difference between now and the Drepression Era which took an economic spur from a world war to get us out of, is we are no longer a self reliant country. The self reliance can be debated of whose fault that is and if it is a bad thing but the fact of the matter is it is true, we live in a global economy. If our financial markets collapse the dollar will be worthless internationally. I believe that's why we are sending money abroad; not to bail out foriegn banks but to add liquidy to an already hurting dollar. Everything is such a domino effect anymore it is hard for me to get my head around the whole thing. I do not like government regulation for sure, but if they can TEMPORARILY take out one of the dominos in the string I think it is our best bet.
Bill
