The Coming Recession

[Maddog 521]

Debt free and loving the last 3 years. I just took my annual disbursement and my bottom line was bigger than last years after I took that one. I'm hoping for at least another 5 years of this.

 

[Farmer17]

Many were saying the economy was going to turn down sharply six months after our current president took office. I think they were just hoping the economy would fail because they want their candidate elected next time.

 

[Jessie]

People have to talk about SOMETHING.
Me? I quit listening to the talking heads a while ago.

 

[ladder13]

Diversification

 

[BigBoy99]

The word "recession" is creeping into the medias vocabulary lately. Doesn't this happen just about the time elections are coming? The liberal media starts talking about the upcoming recession, trying to plant in the minds of voters the doom and gloom which will happen if the politics continue is the same vein.

 

[glenwolde]

The business cycle is more or less a law of nature.

If you study history, there were boom and bust during the 19th and early 20th century when the early capitalist economy was pretty much unregulated, proving the free-market fanatics wrong who claim all will be fine if you just leave the economy alone.

Then there were boom and bust throughout the 20th century, proving the Keynesians wrong who thought all would be fine if the government steered the economy.

Both schools of thought are, somewhat simplistically put, a bunch of hooey. It doesn't matter who is president, even though we have a tendency (understandable, but irrational) to vote for people depending on how the economy is doing (which is about as political as I'm going to get). The economy just does its thing, largely based on factors we can't control. No president saved the economy, no president deserves credit for any boom or bust, although Herbert Hoover likely didn't help.

All you can do is save up during the boom to be ready to problem-solve during the down-turn.

I don't think the "free market fanatics" ever claimed they would eliminate booms and busts. They are sort of a necessary part of the plan. But I'd agree that totally unregulated free markets don't work. You at least need the anti-trust regulations to prevent manipulation by the larger players.

The problem with Keynesians is they only read half the book. They got the part about downturns but failed to apply the theory to the upturns. Which leads us to our current predicament...a level of debt that can not, and will not, ever be paid.

But this is the fault of the Politicians.

 

[Geronimo Jim]

Doesn't anyone remember or know that the bad recession of 2008/2009 was caused by the bust in the housing market? That was caused by the Federal Government forcing lenders to make loans that anyone and everyone?

 

[sheepdawg]

Is that the day before you retire?

No I've already retired but if bad things happen the day before I might have to go back to work. I wouldn't qualify for any of the free stuff promised.

 

[Rule3]

But what does "Greta" predict??

 

[pharmer]

Meh, no big deal. I've been through all of them since the '60's. Nothing will match 1974. 25% unemployment; the lines at the Passaic UI office were a mile long. Burn barrels every 100 yds and you better get there 7 in the morning if you wanted your check before closing at 5 pm. The Carter years slowed the recovery. 1987 the stock market crashed and took a shortwhile to come back. The . com bust at the end of the last century. 2008, easy money. Around here folks were "buying" new houses without jobs and no down payments. During that crash I bought this house for half the original price and now it's worth the original price. Point is, quit worrying; "boom and bust" is necessary for capitalism to function. One more bust is all in a life's course. Joe

 

[Univibe]

The Fed will keep the economy pumped up until Democrats get in; then they'll raise rates and pull the plug on the economy.

 

[Ziggy2525]

Seems like the race will be how long the Fed can manipulate the economy before the debt problem overwhelms their efforts.

 

[Farmer17]

During the great depression of 1929 the stock market crashed and people were afraid to spend or invest money so there was little money flowing in American causing things to get worse and businesses laid off employees, factories closed, banks failed, and many companies filed bankruptcy. The Keynesian theory of economics states that when an economy slows down the Federal Government will then borrow and spend money to create jobs and get the economy going again. Once the economy is doing better the Government then starts paying back the borrowed money. Its a genius concept that works quite well, but there's only one little tiny problem. THE GOVERNMENT NEVER PAYS BACK THE FREAKING MONEY THEY BORROWED AND THE DEBT TURNS INTO A MONSTER! Some of the top financial people on Wall Street discussed the $22 trillion national debt recently and they all agreed that America would definitely default on the loans some day. The biggest question of all time is "how bad will that be"? It might be a simple restructuring of loans and payment plans or it might be a recession that makes 1929 look like a trip to Disney Land.

 

[old bear]

Gentlemen/ladies, please keep up the great thoughts. I'm learning a lot here!!

 

[biku324]

People have to talk about SOMETHING.
Me? I quit listening to the talking heads a while ago.

Exactly right. The nonsense factor has the meter pegged hourly.

 

[Absalom]

I don't think the "free market fanatics" ever claimed they would eliminate booms and busts. They are sort of a necessary part of the plan. But I'd agree that totally unregulated free markets don't work. You at least need the anti-trust regulations to prevent manipulation by the larger players.

The problem with Keynesians is they only read half the book. They got the part about downturns but failed to apply the theory to the upturns. Which leads us to our current predicament...a level of debt that can not, and will not, ever be paid.

But this is the fault of the Politicians.

I oversimplified grossly, as I indicated. But economic behavior is indeed cyclic, and tied to human psychology in such a way that no ideological recipe can offer a "solution". Tinkering and problem-solving is all that can be done, and being prepared. And I don't mean for the fictional doomsdays hawked by gold bugs on late night TV, but the next inevitable downturn.

Keynes died too early. The post-war Keynesians did indeed take what he developed largely as a crisis response and thought they could actually control the economy all the time. I'm not sure it's so much the politicians as the voters who won't LET the politicians do the necessary things in the boom.

[ame]https://m.youtube.com/watch?v=d0nERTFo-Sk&t=339s[/ame]

 

[vt_shooter]

I get a kick out of the financial talking heads on TV - they all sound like geniuses after something happens, but none of them can tell us when the next significant event will happen.

 

[vytoland]

People have to talk about SOMETHING.
Me? I quit listening to the talking heads a while ago.

MY SENTIMENTS EXACTLY.....

 

[glenwolde]

I doubt we'll default on our debt. No need too. Just print money to pay it....they call it "monetizing the debt"....you just inflate it away.

There's no good way out. You can monetize it, or pay it, or default. Paying it would require the Mother of All Austerities for a very long time. More politically palatable to monetize it. Default would cause a severe contraction but it'd be over sooner than any other sceanrio. But that would make the Great Depression look like good times. I think a lot of people would starve.

Just compare it to your household budget. If you spend more than you make you have to borrow the shortfall, and eventually the payment on the debt will consume all your income. Of course if you can go down into the basement and print all the money you need...no problem. But you can't. Only the Government can do that.

In that scenario cash would lose its value rapidly. Keeping cash right now isn't too painful, but it still has a negative real return. What pitiful return you get is still more than eaten up by taxes and inflation.

There is no risk-free investment. Not even cash, which is actually a guaranteed loser. Granted at the moment it is a small loss but anybody who remembers the inflation of the 70's knows what I'm talking about. Inflation was in the middle teens, maybe more, and Government Bonds paying 10% were called "Certificates of Confiscation". Of course that was the bottom and the perfect time to buy.

Where do you think we are now? In spite of stimulus that dwarfs anything in economic history we have paltry economic growth given that we've thrown everything we've got at it. The dollar of growth we get per dollar of stimulus has been falling ever since they started stimulus decades ago. What happens if stimulus fails to generate any growth? Game over.

Of course the $64,000 question is what do you do about it on a personal level.

 

[bagga]

Having done collection work and foreclosures on my final job, I absolutely agree with everyone who has said to reduce your debt load. If your economic situation is good, use it as an opportunity to pay off debt.

Dave Ramsey had a great line to show how it makes sense to pay off a home mortgage. He said, "Why do you want to pay the bank $1 in interest to save $.28 in income tax?"

this is exactly what I would tell the guys I worked with. they believed the BS about keeping debt and get the tax deduction. my masters degree supervisor was the biggest proponent of this very idea. I would tell him he was wrong. He couldn't bring himself to believe a underling.