dex
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Oct 28, 2003
- Messages
- 5,105
I was thinking about this recently - that there has not been a substancial recession in the USA for quite some time - I'm talking at the level that occurred in the 1970s and early 1980s.
This might sound hartless to some people but it is not intended to be hartless - just an objective (as far as is possible) view.
Recessions shake out the execeses in the economy just as nature hates excess so does economics. Where have been the excesses - mostly in:
Money growth
Government spending
Lending
General Publics expectations for the economic future - personal and the economy's in general.
There is a theory that depressions happen approximately every 60 years due to the generational affect
1st generation grows up poor and saves money - this becomes the cheap seed money for the general economy's growth
2nd generation builds upon the 1st because of what was taught to them by the 1st BUT they are more liberal in spending with their children
3rd generation does not know about the bad time - spends and goes into debt
The Chinese have a saying it takes three generations to loose a fortune - similar to the above.
So on the negative side - if there is a recession there will be a lot of pain for people who are in debt and those who loose their jobs. One of the greatest pains will be what we here in the media and politicians when the unemployment rate increases from 4.5% to ? No one will say that the past few years were uncommonly low rates for unemployment because 4.5% is the what the new standard will be.
Depending upon how deep the recession is will determine how radical the proposals will be.
Small - similar to the one from Bush 1 to Clinton - no actions
Mild - focus on illegal immigrants and expelling them
Harsh - focus on all the work exported to China and India
Extream - protectionism
The benefits:
For the general economy - shake out of excess
For those RE & have cash:
Opportunity to buy investments at a discount
Opportunity to buy many hard assets at a discount - real estate; stocks etc.
I guess I am posting this for the younger members on the board who have not experienced a recession and if you think about it unless you were born in 1960s and remember the recessions of the 1970s and early 1980s many do not really know what they are.
If a recession dose hit then all the advise about not having debt and having a rainy day fund begins to mean something.
I hope other knowlegeable posters contribute in a similar vain because the next few days due to the concerns about the stock market and sub prime loans the media will be talking doom and gloom.
I just bought a house in a new subdivision with land still to be build upon. The builder could build and sell homes for less than I paid so I do have some risk in real estate and other investments.
The greatest fear I have is that there is another terrorist attack in the USA. The reason is my rule of 3. In most things in life you can screw up one or two things and it will not get you fired or kill you. It is usually the third thing that gets you.
--------------------------------------------------------
I should have added some facts to this topic:
http://en.wikipedia.org/wiki/1970s
"The 1970s was perhaps the worst decade of Western and American economic performance since the Great Depression. Although there was no severe economic depression as witnessed in the 1930s, economic growth rates were considerably lower than previous decades. As a result, the 1970s adversely distinguished itself from the prosperous postwar period between 1945 and 1968. Then, the world economy was buoyed by the Marshall Plan and the robust American economy. However, the high standing enjoyed by the American economy gradually became discomposed by years of loose domestic spending (particularly the Great Society campaign) and funding for the Vietnam war. The oil shocks of 1973 and 1979 added to the existing ailments and conjured high inflation throughout much of the world for the rest of the decade. Soaring oil prices compelled most American businesses to raise their prices as well, with inflationary results. The average annual inflation rate from 1900 to 1970 was approximately 2.5 percent. From 1970, however, the average rate hit about 6 percent, topping out at 13.3 percent by 1979. This period is also known for "stagflation", a phenomenon in which inflation and unemployment steadily increased, therefore leading to double-digit interest rates that rose to unprecedented levels (above 12% per year). The prime rate hit 21.5 in December 1980, the highest in history. By the time of 1980, when President Jimmy Carter was running for re-election against Ronald Reagan, the misery index (the sum of the unemployment rate and the inflation rate) had reached an all-time high of 21.98 percent.
----------------------
Unemployment rate see the included chart for the 70s and 80s
http://en.wikipedia.org/wiki/Unemployment_rate
This might sound hartless to some people but it is not intended to be hartless - just an objective (as far as is possible) view.
Recessions shake out the execeses in the economy just as nature hates excess so does economics. Where have been the excesses - mostly in:
Money growth
Government spending
Lending
General Publics expectations for the economic future - personal and the economy's in general.
There is a theory that depressions happen approximately every 60 years due to the generational affect
1st generation grows up poor and saves money - this becomes the cheap seed money for the general economy's growth
2nd generation builds upon the 1st because of what was taught to them by the 1st BUT they are more liberal in spending with their children
3rd generation does not know about the bad time - spends and goes into debt
The Chinese have a saying it takes three generations to loose a fortune - similar to the above.
So on the negative side - if there is a recession there will be a lot of pain for people who are in debt and those who loose their jobs. One of the greatest pains will be what we here in the media and politicians when the unemployment rate increases from 4.5% to ? No one will say that the past few years were uncommonly low rates for unemployment because 4.5% is the what the new standard will be.
Depending upon how deep the recession is will determine how radical the proposals will be.
Small - similar to the one from Bush 1 to Clinton - no actions
Mild - focus on illegal immigrants and expelling them
Harsh - focus on all the work exported to China and India
Extream - protectionism
The benefits:
For the general economy - shake out of excess
For those RE & have cash:
Opportunity to buy investments at a discount
Opportunity to buy many hard assets at a discount - real estate; stocks etc.
I guess I am posting this for the younger members on the board who have not experienced a recession and if you think about it unless you were born in 1960s and remember the recessions of the 1970s and early 1980s many do not really know what they are.
If a recession dose hit then all the advise about not having debt and having a rainy day fund begins to mean something.
I hope other knowlegeable posters contribute in a similar vain because the next few days due to the concerns about the stock market and sub prime loans the media will be talking doom and gloom.
I just bought a house in a new subdivision with land still to be build upon. The builder could build and sell homes for less than I paid so I do have some risk in real estate and other investments.
The greatest fear I have is that there is another terrorist attack in the USA. The reason is my rule of 3. In most things in life you can screw up one or two things and it will not get you fired or kill you. It is usually the third thing that gets you.
--------------------------------------------------------
I should have added some facts to this topic:
http://en.wikipedia.org/wiki/1970s
"The 1970s was perhaps the worst decade of Western and American economic performance since the Great Depression. Although there was no severe economic depression as witnessed in the 1930s, economic growth rates were considerably lower than previous decades. As a result, the 1970s adversely distinguished itself from the prosperous postwar period between 1945 and 1968. Then, the world economy was buoyed by the Marshall Plan and the robust American economy. However, the high standing enjoyed by the American economy gradually became discomposed by years of loose domestic spending (particularly the Great Society campaign) and funding for the Vietnam war. The oil shocks of 1973 and 1979 added to the existing ailments and conjured high inflation throughout much of the world for the rest of the decade. Soaring oil prices compelled most American businesses to raise their prices as well, with inflationary results. The average annual inflation rate from 1900 to 1970 was approximately 2.5 percent. From 1970, however, the average rate hit about 6 percent, topping out at 13.3 percent by 1979. This period is also known for "stagflation", a phenomenon in which inflation and unemployment steadily increased, therefore leading to double-digit interest rates that rose to unprecedented levels (above 12% per year). The prime rate hit 21.5 in December 1980, the highest in history. By the time of 1980, when President Jimmy Carter was running for re-election against Ronald Reagan, the misery index (the sum of the unemployment rate and the inflation rate) had reached an all-time high of 21.98 percent.
----------------------
Unemployment rate see the included chart for the 70s and 80s
http://en.wikipedia.org/wiki/Unemployment_rate