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Personal impact of recession/depression in layman terms?
Old 12-03-2007, 01:30 PM   #1
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Personal impact of recession/depression in layman terms?

Reading about the housing market, the probability of a recession, the potential of a depression...I get the big $$$/government perspective...but I really do not understand the personal impact on ME. (my apologies for my blatant ignorance) If we are still employed, not changing residences, what will be the crunch felt by an individual? Apparently, I was sleeping through the "recession" of 2000/01. (silly me, I was thinking that my investment $$ will purchase a larger quantity of stocks at lower rate, which should move upwards in years to come...or that housing prices will contine to drop, and maybe I can afford something interesting)

So, I am hoping for layman answers. Thank you.
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Old 12-03-2007, 01:38 PM   #2
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Hi Fireup -

Well, my portfolio is down this month...

Granted, I also see it as a buying opportunity, but for people already retired or very close to it...mentally, it is the impact of a paper loss to my portfolio, but I don't plan to sell anything, so it will stay on paper.

I, too, am not going to lose my job (fed gov't), and am not planning to sell my house, and I have about 14 years until I plan to retire, so I don't feel too much of an impact. either.
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Old 12-03-2007, 01:42 PM   #3
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a recession is when your friend/neighbor loses their job
a depression is when you lose your job
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Old 12-03-2007, 02:59 PM   #4
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Originally Posted by Fireup2025 View Post
Apparently, I was sleeping through the "recession" of 2000/01. (silly me, I was thinking that my investment $$ will purchase a larger quantity of stocks at lower rate, which should move upwards in years to come...or that housing prices will contine to drop, and maybe I can afford something interesting)
So, I am hoping for layman answers. Thank you.
I see opportunities everywhere.

Yep, you're supposed to pray that the stock market sucks until just before you FIRE. Take a look at financial stocks or ETFs like regional-bank index KRE. I might hesitate to get grabby now, but I'm always early to the party.

Spouse and I are spending a lot of time at realtor's open houses. (We don't intend to buy, but it's kind of like recreational sex-- we don't plan to have more children but we enjoy the process.) If you do that every weekend (I'm talking about the open houses) then you'll know what areas you want to live in and what's available in order to be ready to make a quick decision before an opportunity smacks you in the face. But especially even in your state you might have another year or two of open-house practice ahead of you before prices stop dropping.

Mortgages may be more difficult to come by, but a 20% down payment and a squeaky-clean credit score might actually get you some breaks from NFCU or PenFed.

If oil breaks $100/barrel then gas-guzzling vehicles might be selling way below market. Of course you'd have to balance that against insurance & fuel costs, but on your roads a big honkin' gross-tonnage SUV might be a better deal than medical insurance.

And finally, if the economy gets really crappy then airlines & Hawaii hotels will be offering significant discounts...
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Old 12-03-2007, 04:04 PM   #5
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I've never experienced a depression (and hope I never do), but the unemployment rate hit 25%, and over 8000 banks failed. In retrospect, we say "holy cow, stocks got cheap!" But my understanding is that things got so bad there was talk of having public companies become state-run enterprises.

You think talks of "bailouts" are bad now. But would you want to invest in the stock market if you thought the company you owned was going to become a state-run enterprise?
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Old 12-03-2007, 05:39 PM   #6
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I've never experienced a depression (and hope I never do), but the unemployment rate hit 25%, and over 8000 banks failed.
It's hard to realize the enormous impact resulting from 25% unemployment. I remember my mother's stories about that. Often employers would not hire married women at all, because their husbands would (theoretically) have an income and someone else would need the job more. Also, many people who found themselves unemployed and in the soup lines committed suicide.

I don't think this could happen today. If it did (given the changes in our society since the 1930's), I think crime would rise enormously and many areas would become non-liveable.

Due to so many banks failing, people who kept their money literally under their mattresses did better than most. Cash is King even in the present, relatively good times. Imagine what cash could do for you when nobody has any.

Musing about the Great Depression is, well, depressing! I am pretty ignorant of economics, but I understand that it can't happen again for some reason, I think due to regulation of investing.
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Old 12-03-2007, 06:01 PM   #7
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Depends alot on the security of your job, or whether you have FIREd or not. If you FIREd in before a bust, and didn't have your stocks in good dividend payers plus a couple year's worth of cash in CDs, then you might feel some pain (selling stocks when they are down significantly just to put food on the table is not fun). But, eventually the markets will recover, and if you are into good dividend payers and the recession is not too protracted, then you should be OK.

Actually I was thinking that early last week was a buying opportunity, and I had some spare cash sitting around waiting to be invested, but didn't have the time to the buy orders in. Oh well, other opportunities will come...

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Old 12-03-2007, 06:14 PM   #8
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If it did (given the changes in our society since the 1930's), I think crime would rise enormously and many areas would become non-liveable.
I sure agree with this. Even a long and deep recession as in the 70s might severly stress our social fabric, such as it is. Look what happened in the aftermath of Katrina. We could even see political change- and I don't mean Dems instead of Repubs.

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Old 12-03-2007, 06:28 PM   #9
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It's probably always a good time to look at how your current allocation can withstand (1) a deflationary depression as in the early 1930's, and (2) an inflationary recession as in the early 1970's. That got me to the AA I have now. Firecalc is a nice tool for this.
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Old 12-03-2007, 09:06 PM   #10
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I remember my mother's stories about that. Often employers would not hire married women at all, because their husbands would (theoretically) have an income and someone else would need the job more.
If I remember correctly, employers in general would not hire a married woman if a man also applied for the same job - for the same reason.

WWII changed that. Anyone remember 'Rosie the Riveter'?
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Old 12-03-2007, 09:11 PM   #11
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Your hometown might start looking like Cleveland:

Foreclosure impact: Next stop, tax drop - Nov. 29, 2007

High crime rate, deteriorating neighborhoods, cuts in public services... That's in addition to bank failures, rapidly declining retirement portfolios, depressed real estate values... Sure if you manage to keep your job through all this, you won't be starving, but your life will be impacted one way or another... You may also have to financially help relatives or friends who fall on hard times, and that might lower your savings rate. Sure, eventually stock prices will recover. But it took stocks about 25 years to recover from the great depression. So that could completely ruin your early retirement plans especially if you are getting close to pulling the plug. But in a depression, not everyone suffers. Whenever there is a crisis, there are people who will find ways to make a buck at other people's expenses. So will you be the one doing the eating, or the one being eaten?
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Old 12-03-2007, 09:17 PM   #12
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If I remember correctly, employers in general would not hire a married woman if a man also applied for the same job - for the same reason.
Even in the mid 1960's I remember my employer hiring a typist at a higher salary than me to help me with my duties. He couldn't type at all and had no experience.

I asked about the pay difference and was told that he was a man so he probably had a family to support. (He didn't - - was just as single as me). Thank goodness, times have changed.
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Old 12-03-2007, 09:53 PM   #13
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Yep. Equal pay for equal work seems - well - equitable to me.
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Old 12-04-2007, 09:41 AM   #14
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Even in the mid 1960's I remember my employer hiring a typist at a higher salary than me to help me with my duties. He couldn't type at all and had no experience.

I asked about the pay difference and was told that he was a man so he probably had a family to support. (He didn't - - was just as single as me). Thank goodness, times have changed.
When I was a kid my mom supported the family as a school teacher, while my dad was in a tuberculosis sanitarium. She earned less than the male teachers, 'cause they needed the money. Boy, I miss the good old days..........not.
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Old 12-04-2007, 09:48 AM   #15
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i always wondered how bad it really was and the effect of 25% unemployment

the unemployment rate has steadily fallen for decades and we keep lowering the full employment percentage. the great depression was also at a time when agriculture was a much higher percentage of the economy. does anyone know the unemplyment numbers in the 1920's?
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Old 12-04-2007, 10:00 AM   #16
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The Great Depression
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