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How long before we hear the "D" word
Old 01-17-2008, 01:27 PM   #1
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How long before we hear the "D" word

I'll be it starts to get bandied around in the next few weeks. I'm not sure if there is a technical definition of that like their is the "R: word.
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Old 01-17-2008, 01:29 PM   #2
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Careful, your tinfoil helmet is on a little too tight.
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Old 01-17-2008, 01:30 PM   #3
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Are we talking about Democrats and Republicans? Eww, please stop.
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Old 01-17-2008, 01:38 PM   #4
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The PC version is that:
  • there will BE no D,
  • there was only ONE D, and that was the Great D,
  • you young whippersnappers ought to KNOW better than to call this a D, and
  • that is all there is to it!!!
They're probably right, but I think it's almost like the word was banned. I'm no economist, but I think what we have threatening us is more like stagflation. If it was a D, prices would be falling instead of rising. (Right, guys?)
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Old 01-17-2008, 01:42 PM   #5
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"D" just means a long severe "R."

For some reason, the word was never used to describe Japan's condition. And, if you ask the Japanese, things aren't so bad. They just spend less and work longer.

For us, the big hit was in the unemployment rate. Since we don't have a paternalistic view of employment like the Japanese do, and we don't have a strong export economy like the Japanese do, a severe recession would be different here....
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Old 01-17-2008, 02:45 PM   #6
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If it takes deflation to get a depression, I don't think we will get one in the US with our modern financial institutions and current political attitudes.

We'll just get another bubble, after a short scare.

Ha
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Old 01-17-2008, 03:20 PM   #7
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If it takes deflation to get a depression, I don't think we will get one in the US with our modern financial institutions and current political attitudes.

We'll just get another bubble, after a short scare.

Ha
Ding, ding, ding, we have a winnah!!! Give that man a seegar! Now for the bonus round: where will the next bubble be? Commodities, anyone? MAybe Brazilian equities?

Now I am off to look at 80+ page earnings press releases...
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Old 01-17-2008, 03:27 PM   #8
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Brazillian equities have been on fire since 2003. Up about 1400%. Even hotter than China.

Good article on Bernanke here:

http://www.nytimes.com/2008/01/20/ma...anke-t.html?hp

I don't think he's going to be a Greenspan-style serial bubble blower.
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Old 01-17-2008, 03:58 PM   #9
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I always like the Ronald Reagan line (probably not his originally, but who cares)

A recession is when your neighbor loses his job
A depression is when you lose your job and
A recovery is when Jimmy Carter loses his job.
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Old 01-17-2008, 04:34 PM   #10
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congress essentially outlawed future depressions with passage of the "Employment Act of 1946" (most interestingly making the president responsible for that achievement!) the original bill, the “Full Employment Act of 1945” required the federal government to “provide such volume of Federal investment and expenditure as may be needed ... to assure continuing full employment.” the bill was rather emasculated before passage (similarly, a like-minded “Full employment and Balanced Growth Act of 1976,” the now regularly referenced “Humphrey/Hawkins Bill of 1976”); note that the “Full” had been dropped from the title -- so while recessions can still happen, it seems (depending on who’s interpreting the law i suppose) that depressions have been forbidden by law. we should be very grateful that neither of the original bills passed with their initial provisions.
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Old 01-17-2008, 05:18 PM   #11
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The next bubble will be salaries.

Employers are going to triple wages in '08 and require no additional increase in productivity to boot.

This will allow the employed to continue to continue to buy inflated goods such as houses, which have themselves tripled in price in recent years.

Problem solved. Now I'm off to something challenging.
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Old 01-17-2008, 06:27 PM   #12
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recession is when your neighbors are out of work ,,,,,,a depression is when your out of work
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Old 01-17-2008, 07:51 PM   #13
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'D' = dead
'R' = rally

DR = dead rally.
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Old 01-18-2008, 05:52 AM   #14
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How long before we hear the "D" word...
Less than a day, heard it this morning on BBC from some econ professor, then BBC reported FTSE was up about 1/2 %.
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Old 01-18-2008, 07:10 AM   #15
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Ding, ding, ding, we have a winnah!!! Give that man a seegar! Now for the bonus round: where will the next bubble be? Commodities, anyone? MAybe Brazilian equities?

Now I am off to look at 80+ page earnings press releases...
Commodities. Since the politicians are in charge, Pork Bellies might be the most appropriate.
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Old 01-18-2008, 12:22 PM   #16
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And just where is this depression coming from? The 1930’s had high real interest rates due to deflation, with securities being re-priced on that basis. Nothing magic about it.

Today we have 4.5% 30 year Treasury bonds, 5.5 % 30year mortgages, stock earnings yield about 6%, core inflation around 3%. Certainly not high in real terms.

Unemployment is up to 5%, which used to be considered the minimum that it could be.
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Old 01-18-2008, 12:36 PM   #17
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I'll be it starts to get bandied around in the next few weeks. I'm not sure if there is a technical definition of that like their is the "R: word.
Are we even in a recession yet? Well I guess if CNBC can't scare anyone with the "R" word they have to go to the "D" word to maintain ratings .
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Old 01-18-2008, 12:48 PM   #18
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People mix up depression and deflation (I'm not saying you are however). Deflation of 1-2%/yr caused real rates to be up around 5%, with nominal at say 3%.

We're in a deflationary environment presently, Rosenberg at Merrill is talking about it among others. Certainly housing is in a huge deflationary bust, at least into the few trillions, and all those financial writedowns account for a (so far) large credit deflation. Additionally money growth has been slowing the past year by several measures, along with money velocity. So we're experiencing credit and monetary deflation, not generalized deflation.

If consumers continue to pull back in spending then we'll see generalized price deflation, probably in a few years. In such an event the long bond would probably settle to around 3%, with mild deflation of 1-2%, giving you a nice 5% real return or so. This was a common occurrence before the 20th century before we went to a more or less permanent state of war.

Depression or recession are harder to define, the quip about 'if I lose my job' is probably pretty close.

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And just where is this depression coming from? The 1930’s had high real interest rates due to deflation, with securities being re-priced on that basis. Nothing magic about it.

Today we have 4.5% 30 year Treasury bonds, 5.5 % 30year mortgages, stock earnings yield about 6%, core inflation around 3%. Certainly not high in real terms.

Unemployment is up to 5%, which used to be considered the minimum that it could be.
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Old 01-18-2008, 12:55 PM   #19
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I don't know of a definition for depression, at least not the economic kind.

I thought a recession was defined as two consecutive quarters of negative real GDP, which we haven't had yet. Nearly everyone fears one but very few are actually predicting one.

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Old 01-18-2008, 01:17 PM   #20
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My understanding of depression is a drop in real GNP of 10 percent or more and a recession is any two quarters or more of negative real GNP. About .com has the version I have come to understand as a defintion of a depression versus a recession. We are obviously nowhere near a depression at the present time.


Recession? Depression? What's the difference?
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