OT - When does a recession become a depression?
- Thread starter Genetics
- Start date
:lol:
Sinistard
New member
So if the financial markets crash, everyone is broke/jobless, and the dollar is worthless what exactly will people do with there gold? You can't take it down to the local 7/11 and buy a slushy and hot dog, its not going to put food on your table or gas in your car. Something like gold is only worth anything if there are people willing to buy it right.
I'll admit I'm not well versed in investing and economics but having gold when the economy is going to hell does not seem like it would get you by. I guess if you can hold on to it until we pull out of the crash you will be better off then the people heavily invested in the markets but during you would be in the same boat as everyone else. Like I said I have never really researched investing in precious metals well investing in general so I'm pretty uninformed about the whole thing. Maybe I'm completely off base.
I guess ill just keep investing in electric devices designed to simulate the ocean and fish/corals they will be worth it if we go into a depression right....right.... :sad2:
I'll admit I'm not well versed in investing and economics but having gold when the economy is going to hell does not seem like it would get you by. I guess if you can hold on to it until we pull out of the crash you will be better off then the people heavily invested in the markets but during you would be in the same boat as everyone else. Like I said I have never really researched investing in precious metals well investing in general so I'm pretty uninformed about the whole thing. Maybe I'm completely off base.
I guess ill just keep investing in electric devices designed to simulate the ocean and fish/corals they will be worth it if we go into a depression right....right.... :sad2:
Investments, depending on what you are trying to accomplish, differ greatly. Metals are one way to invest if you are looking to keep the value of your money in turbulent markets such as now. I've looked at buying ETFs of metals but have never actually gotten around to it.
Metal that is crafted for a purpose, such as wedding rings, don't have as much value as what is paid into it because of the cost of labor. But I would venture that the emotional cost of divorce far exceeds the investment loss. But then again CleveYank makes a good point, its depends on what the divorce settlement is.
Metal that is crafted for a purpose, such as wedding rings, don't have as much value as what is paid into it because of the cost of labor. But I would venture that the emotional cost of divorce far exceeds the investment loss. But then again CleveYank makes a good point, its depends on what the divorce settlement is.
MJAnderson
Premium Member
<a href=showthread.php?s=&postid=13392858#post13392858 target=_blank>Originally posted</a> by hollback
I'm going to disagree.
I agree and would not put everything in metals but my 401k, OPERS Stock/Bonds, don't seem to be doing any better.
Actually gold only went over 900 for a very shot period of time and was previously about $250 per oz. It then declined again and there was a reason for that.
I agree that gold does the opposite of the stock market. On the other hand history has shown that gold increases as another market increases, oil. With oil prices growing, gold should/will follow. The spike in 1978 was directly related to Iran oil.
I guess I should have clairified that I see gold as a 5-15 year investment. A graph of these time lengths has a nice increase.
My point on Palladium has more to do with it's chemical makeup and future energy sources. Palladiums unique ability to absorb 900 times it's own weight in hydrogen will be critical in Hydrogen fuel storage for Hydrogen fuel cells.
I will say that I am FAR from an expert on gold/palladium but I do know people that are and they seem to make sense.
But you're saying two things...one that your stocks and bonds aren't doing well now and another that gold is a 5-15 year investment.
Since the US went off the gold standard in 1970, the S&P 500 has outperformed gold by a factor of 2 to 1.
If you bought gold 30 years ago, S&P would have outperformed gold by 750%
20 years ago, it would be 900%
10 years ago it switches, with gold outperforming stocks by 30%
Whenever an asset class has a run-up, people come out talking about how this will be the next big thing and how fundementals of the market no longer apply. That's usually the time to dump it. Gold's value comes from the fact that it's a place to store value, not make money. It increases in value when there is uncertainty in the economy and political landscape. It should be used in your portolio much like an insurance policy --- does nothing for you except in times of crisis then it kicks in to offset losses. We are currently in crisis and it's seeming like a smart investment, but unless you feel that the world economic and political scenes have peaked and it's all downhill from here then gold shouldn't be thought of as a long term investment.
All I can say is that this bailout NEEDS to work. Without free flowing credit our economy will cease to function.
If the bailout fails, gold may be a safe alternative for the next five years that could potentially follow.
In the future, I'm going to assume the government makes sure that banks are not allowed to issue mortgages to ppl that can't afford. Which sadly, brings more market restrictions to what should be a free market economy. But greed also needs to be regulated. Just because there was a huge market for trading mortgages doesn't mean a bank should issue them to satisfy this demand.
If the bailout fails, gold may be a safe alternative for the next five years that could potentially follow.
In the future, I'm going to assume the government makes sure that banks are not allowed to issue mortgages to ppl that can't afford. Which sadly, brings more market restrictions to what should be a free market economy. But greed also needs to be regulated. Just because there was a huge market for trading mortgages doesn't mean a bank should issue them to satisfy this demand.
I think that everyone is feeling what washington is now realizing that it has to address. The middle class is shrinking with the rise of inflation and housing crisis. This Bailout if executed right should work to slow the decline of what in a short time will be a recession. But that's just when the governement admits what we already know. That this is a recession and no just a economic slow down. But there are some who have post gloom and doom and here comes another great depression. One our government put regulations in place to prevent such an economic diaster from ever happening again. We also have no clue what this bail out will actually cost us. If the plan that is laid out works how it should then it will cost the taxpayers virtually nothing. Since the bailout the federal government has a say in righting what has been screwed up and stopping risky business and getting our money back asap. But what they haven't done is address OUR struggles. Those of use who punch a clock every day. I understand that they have really no choice but to bail out these companies. But that doesn't help those of use who go to sleep everynight wondering how we will pay the bills, and if we can ever retire. Our country use to have the great promise that if you went to work 40 hours a week till you were 65 you could retire. But that's not true anymore. Is that asking too much?
I think the key with the mortgages is make sure those who underwrite loans must hold some of the risk. Thats one of the things that got us in this place. These banks were making bad loans because they were able to sell off all of the risk to investment companies. Without any risk involved why not write as many loans as possible, right? I think that will be fixed without much problem for the future, its dealing with the domino effect now. Wish I had that answer!
Yes, our government put in place checks so that people could not have margins greater than what their worth was preventing a meltdown in that regards. However, the new problem was with trading mortgage bundles that were incorrectly rated (which is a flawed system). As the mortgages in these bundles default, which is increasing quarterly to 2010, the housing prices drop. As a % of GDP this is supposedly negligible, but what they have yet to truly factor in is the inability for people to sell their houses for what they paid for them in a credit tightening market. This will invariably lead to lower housing prices than what they cost to construct, essentially destroying this market. The homeowner will have to foot the bill for the decrease in home equity, which this bailout is not offering to fix. So this bailout is just the beginning. To help individuals refinance from the mortgages the gov is buying is still going to cost us more...
MarineFishGuy
Capn Jack Sparrow
I think a lot of the issues came around with the new Mortgage vehicles in recent years.
Who ever thought an Interest Only loan was a a good idea besides the banks.
Talk about getting upside down in a hurry.
Having recently bought a house, I was amazed at how many options there were when we started looking.
By the time we went to close, the mortgage options had shrink considerably (3 months ago). The banks had stopped offering certain loan options (for good reason).
With shrinking home values, also comes lower tax revenue (assuming they actually adjust downward). Our statement said our's would not increase, but they did not lower them either.
The problem with investing in Precious Metals is Inflation.
If you buy Palladium at $200/oz in 1997.
In 2007 that $200 investment is worth $157 assuming it is still selling for $200/oz.
While it may never be worth nothing, it needs to at least beat inflation to "Hold" it's value.
Who ever thought an Interest Only loan was a a good idea besides the banks.
Talk about getting upside down in a hurry.
Having recently bought a house, I was amazed at how many options there were when we started looking.
By the time we went to close, the mortgage options had shrink considerably (3 months ago). The banks had stopped offering certain loan options (for good reason).
With shrinking home values, also comes lower tax revenue (assuming they actually adjust downward). Our statement said our's would not increase, but they did not lower them either.
The problem with investing in Precious Metals is Inflation.
If you buy Palladium at $200/oz in 1997.
In 2007 that $200 investment is worth $157 assuming it is still selling for $200/oz.
While it may never be worth nothing, it needs to at least beat inflation to "Hold" it's value.
Yeah the interest only loan ranks right up there with the "no doc" loan. I only bought my house 5 years ago but I remember bringing to closing a paystub from the Friday before to show them I was still working and what I made last week and at least 1 maybe 2 W2s. To think until recently you could just basically show up and say "Oh yeah I make $150K a year" and they'd give you a loan is crazy.
<a href=showthread.php?s=&postid=13402760#post13402760 target=_blank>Originally posted</a> by hollback
Palladium went over $1000 just 3 years later. You just gotta know when to get out! I also believe that diversification is the best form of investment. I just tend to lean on an invest I can physically hold.
I want to chime in on this. There is a difference between buying and selling and what are considered investments. I know we confuse the two but buying and selling is another way to accumulate wealth. This is what it sounds like with the metals market. So, now we can end the metal discussion.
Also, from an investment standpoint, the banks we were told were great investments 1yr ago are much less than currently. Think about how much you would sit to lose if your broker still was holding this for you.
MarineFishGuy
Capn Jack Sparrow
My point was, an Investment needs to do better than Inflation or you are losing money, or more specifically purchasing power.
The Wikipedia Definition is:
A severe or long recession is referred to as an economic depression. Although the distinction between a recession and a depression is not clearly defined, it is often said that a decline in GDP of more than 10% constitutes a depression.
This line is actually quoted from an article on economics.about.com
It goes on to say:
Considered a rare but extreme form of recession, the start of a depression is characterized by unusual increases in unemployment, restriction of credit, shrinking output and investment, price deflation or hyperinflation, numerous bankruptcies, reduced amounts of trade and commerce, as well as violent currency devaluations. There is no official definition for a depression, even though some have been proposed. Generally it is marked by a substantial and sustained shortfall of the ability to purchase goods relative to the amount that could be produced given current resources and technology (potential output). One could say that while a recession refers to the economy "falling down," a depression is a matter of "not being able to get up."
It sounds like we are on the verge of a depression, if it has not already started.
The Wikipedia Definition is:
A severe or long recession is referred to as an economic depression. Although the distinction between a recession and a depression is not clearly defined, it is often said that a decline in GDP of more than 10% constitutes a depression.
This line is actually quoted from an article on economics.about.com
It goes on to say:
Considered a rare but extreme form of recession, the start of a depression is characterized by unusual increases in unemployment, restriction of credit, shrinking output and investment, price deflation or hyperinflation, numerous bankruptcies, reduced amounts of trade and commerce, as well as violent currency devaluations. There is no official definition for a depression, even though some have been proposed. Generally it is marked by a substantial and sustained shortfall of the ability to purchase goods relative to the amount that could be produced given current resources and technology (potential output). One could say that while a recession refers to the economy "falling down," a depression is a matter of "not being able to get up."
It sounds like we are on the verge of a depression, if it has not already started.
But a recession is 2 consecutive quarters of negative GDP growth. And we haven't had that yet... So the other question is can we start a depression while not technically in a recession? The 3rd and 4th quarter would have to be negative for us to be in a recession as the 2nd quarter GDP growth was around 3%
Bill
Bill
Teddy Ballgame
New member
It's too bad Washington is two steps behind....
It's only a problem when is gets to a catastrophic level.
We need a BIPARTISAN bailout or our economy will cease to exist the way we know it. I know everything goes in cycles, but this time the greed of our banking system is finally caught up with them. I sold mortgages and let me tell you how unbelievable some of the products the banks were pushing us to sell....stated/stated, no doc, etc....what a joke! Still, in the end, it is our whole country's problem, that's why we need major help. And for that sake, parents and teachers must teach their kids about the pitfalls of credit. I can't tell you how many grown adults over-extend themselves to live the American Dream. Wake Up People!!
It's only a problem when is gets to a catastrophic level.
We need a BIPARTISAN bailout or our economy will cease to exist the way we know it. I know everything goes in cycles, but this time the greed of our banking system is finally caught up with them. I sold mortgages and let me tell you how unbelievable some of the products the banks were pushing us to sell....stated/stated, no doc, etc....what a joke! Still, in the end, it is our whole country's problem, that's why we need major help. And for that sake, parents and teachers must teach their kids about the pitfalls of credit. I can't tell you how many grown adults over-extend themselves to live the American Dream. Wake Up People!!
MarineFishGuy
Capn Jack Sparrow
Sorry for the Long Post, but I think these citations are relevant to the topic.
Don't believe everything you read, from Wikipedia again:
"Newspapers often quote the rule of thumb that a recession occurs when real gross domestic product (GDP) growth is negative for two or more consecutive quarters. This measure fails to register several official (NBER defined) US recessions.[2]"
Cited from a money.cnn.com article titled:
The risk of redefining recession
This article goes on to say:
The idea originated in a 1974 New York Times article by Julius Shiskin, who provided a laundry list of recession-spotting rules of thumb, including two down quarters of GDP.
...
Like most rules of thumb, it's far from perfect. It failed in the 2001 recession, for example. At the time and until July 2002, data showed just one down quarter of GDP, leading policy makers to claim there had been no recession. Yet, later that month, revisions showed GDP down for three straight quarters. Complicating matters further, with the benefit of time, we now know that GDP actually zigzagged between negative and positive readings, never showing two negative quarters in a row.
My comments:
Basically the overriding idea is that a Recession is not defined by any single measure, but a combination of factors, that by themselves may not lead to a recession. Washington believes there is a problem or they would not have issued the $600 refund checks. However that money has mostly been spent and the economy is not substantially stronger for it. In fact the Rebate checks may be why we do not see two consecutive down quarters of GDP.
I learned my lesson in Credit early when I ran up a credit card in college. After that I worked for a Credit Company and was able to see it from the inside as well. I am far more skeptical now which has helped me to avoid overextending as Teddy pointed out many Americans have done.
Don't believe everything you read, from Wikipedia again:
"Newspapers often quote the rule of thumb that a recession occurs when real gross domestic product (GDP) growth is negative for two or more consecutive quarters. This measure fails to register several official (NBER defined) US recessions.[2]"
Cited from a money.cnn.com article titled:
The risk of redefining recession
This article goes on to say:
The idea originated in a 1974 New York Times article by Julius Shiskin, who provided a laundry list of recession-spotting rules of thumb, including two down quarters of GDP.
...
Like most rules of thumb, it's far from perfect. It failed in the 2001 recession, for example. At the time and until July 2002, data showed just one down quarter of GDP, leading policy makers to claim there had been no recession. Yet, later that month, revisions showed GDP down for three straight quarters. Complicating matters further, with the benefit of time, we now know that GDP actually zigzagged between negative and positive readings, never showing two negative quarters in a row.
My comments:
Basically the overriding idea is that a Recession is not defined by any single measure, but a combination of factors, that by themselves may not lead to a recession. Washington believes there is a problem or they would not have issued the $600 refund checks. However that money has mostly been spent and the economy is not substantially stronger for it. In fact the Rebate checks may be why we do not see two consecutive down quarters of GDP.
I learned my lesson in Credit early when I ran up a credit card in college. After that I worked for a Credit Company and was able to see it from the inside as well. I am far more skeptical now which has helped me to avoid overextending as Teddy pointed out many Americans have done.
