The Next Depression ?

[renferme]

Obviously I hope I'm wrong, but is America headed for another depression ?
.
1. Steel industry gone,
2. We don't make anything anymore; mostly imported into the USA
3. America's auto industry in dire straits
4. Very soon there will be no more defined pension plans in America,
5. Followed soon by no more retiree medical plans,
6. America's medical, hospital, etc. costs skyrocketing and no one seems to know what to do about it - Congress doesn't give a hoot, and neither does the President.
7. Our personal savings rate is very low; very few (except those on this board) will be able to retire before, say, about age 70.
8. Where are the jobs? Aside from the Medical field, where are the jobs?
9. The expected boom in IT jobs has not materialized, and coming from that field, I could never recommend it to young people.
10. Jobs continue to go overseas - many of them IT jobs.
11. Company executives are taking care of themselves, and to hell with the employees.
12. Corruption in corporations and government is rampant.
13. The country's moral values at an all-time low.
14. It's a "world economy" and does that mean the rest of the world has to catch up to our living standard, or we drop down to theirs, before the jobs come back to America ?
15. The President seems to have abandoned the principles of the GOP; he's alienated himself from most Americans...
16. Very likely the next President will be a left wing liberal and will we be moving towards socialism: higher taxes, lower standard of living.

 

[Cool Dood]

I know smokin' that stuff is fun, but man, it sure messes with your brain

 

[REWahoo]

Obviously I hope I'm wrong, but is America headed for another depression ?

No one else knows about America. But it's a safe bet you are...

Lighten up, man.

 

[cute fuzzy bunny]

Gee I hope we're headed for a depression so all the bears will shut the heck up... :

 

[frayne]

Lets not be eating the ends of our shotguns just yet. :

 

[HFWR]

I posted somewhere? a list of similar things from back in the 70s; doesn't necessarily look worse, so I think I'll light up and... what were we talking about again?

 

[brewer12345]

Can I have a hit, too?

Seriously, all we are likely to see is a recession at worst. US recessions may feel painful but they are nothing compared to the stuff that happens in Brazil, Argentina, Thailand, etc. in hard times.

 

[modhatter]

I have always been accused of being "overly optomistic" in my nature.  However, I think many of the posters points above are valid.  I am very concerned that this country that I love so much, as I know you all do, is not headed in the right direction.

The amount of debt on both the governmental and private sector is down right staggering.  I don't see any real efforts in any direction, to correcting the situation.  But when it does come, you can bet it is going to hurt your pocketbook.

True, over the last twenty years the stock market sored, with cheap money, and the Buy-BUY-Buy mentality of the average consumer (on credit)

But always, there comes a time when you have to "Pay the Piper", and that phase is around the corner somewhere.  We as a nation now are consumed in debt, on both fronts (government and private sector)

Don't you think that this situation is going to be reflected in the stock market?  How long and how high does the debt have to go, before we see the effects of overspending (and lack of savings)?

Also, on another note.  I have had a business for over 25 years, and can tell you that the quality of help and work ethic of yourng employees entering the job market has drastically changed in those 25 years.

Way too many are lazy, unreliable, uncaring.  Of course, there are always exceptions.  I am not implying all young people are this way.  But I do see enough to tell you they effect business in a negative way.  Tell me if you havn't noticed the number of "mistakes" made in the companies you and I deal with on a daily bases.  (the phone companies, the satalite TV companies, your charge card companies." ) The quality of service isn't there anymore (It's in India).  For goodness sakes, you can't even get to talk to a "real" person anymore without taking a day off from work to get through.  (a bit exagerated), but you get my point.

Believe me, I do not want to feel this way, but I am also a realist, and don't believe in putting my head in the sand and hoping it will all go away.  Well, hopefully, this post will stir up some interesting conversation.

 

[wabmester]

Obviously I hope I'm wrong, but is America headed for another depression ?

I don't think anybody can predict.   And as you can see from the responses here, few people include that possibility in their planning.

If you look at our Great Depression and Japan's 15-year long recession (which nobody calls a depression for some reason), the things to watch for are:

1) The collapse of a large asset bubble.

2) Bad monetary and fiscal policy.

3) Huge disparity between rich and poor.

We definitely have (3), we might have (2), and depending on how real estate unwinds, we at least have the possibility of (1).

So, basically you're looking at a low-probability catastrophic event.    How do you plan for low-probability catastrophic events?   Insurance and a diversified portfolio.

 

[haha]

Also, on another note.  I have had a business for over 25 years, and can tell you that the quality of help and work ethic of yourng employees entering the job market has drastically changed in those 25 years.

Way too many are lazy, unreliable, uncaring.  Of course, there are always exceptions.  I am not implying all young people are this way.  

My impression of the quality of young workers is that they are better than those of any previous American gneration. They are the first to have to compete with the entire world for professional jobs. My two sons in their 20s work way harder than I ever did. And they seem to be more squared away too.

And regarding all the bitching about service- try a Starbucks. For $1.80 an old coot like me can have a nice conversation with a cute friendly young woman. Hey, I can always throw away the coffee.

Ha

 

[laurence]

And there is this:

http://www.msnbc.msn.com/id/11742274/

Record deficit, were headed towards a trillion dollars a year at this rate, and unemployment rolls are starting to head up.  I don't see a depression, but I definitely see a recession, real soon.  Less than 12 months.  

....but pay no attention to me, I've been slightly less optimistic than usual these past couple of weeks (baby daughter decided sleeping through the night wasn't her thing anymore).

 

[unclemick]

Don't forget De Gaul and the Norwegian widow.

A good supply of dryer sheets wouldn't hurt either.

heh heh heh heh heh - hard times means - watch your portfolio current yield as a defense/fall back position.

 

[Rustic23]

Bennevis,
While your post is grim, and I am no economist, from what I can see many of the things you posted do not seem to have a correlations with the Great Depression.

1. We had a steel industry
2. We made lots of stuff
3. The Auto Industry was leading the world (sales did collapse in the depression but I believe strong prior to it)
4. There were few pension plans (don’t know for sure)
5. no medical, however Medical expense was a small portion of ones spending
6. same as 5
7. See thread “Another article on our inability to save” this forum. Saving rate may be a dubious statistic
8. See thread “which job to pick” 23 years old choice of two jobs neither appear medical $60,000
9. No IT in the great depression, choose another industry to compare it with. Anyway, not sure who expected the boom and where? IT collapsed after dot com did not know about the boom (I currently manage 6 programmers) we have an opening for a web/.net programmer
10. Not a great depression problem
11. SAME AS GREAT DEPRESSION! Also the same for King Tut, Caesar, and just about any other era in world history
12. Not same as Great Depression, and besides while there has been corruption I don’t think you could call it rampant. Total corrupt corporations/ Total number U.S Corporations. I think it would be a very small percent.
13. Same as Great Depression! Did you see those flappers! What are their mothers thinking!
14. Not same as great Depression, but to some extent we were trying to catch to Europe.
15. Could be the Same Hoover was a Republican, and not real popular. I am not enough of a historian to debate this one. (I can debate the others because as Marshac said, we can make up the Stats! The only way to win!!!)
16. If you have not noticed just about all politicians since Hoover have been doing this! In fact some say what caused the Great Depression was Hoover’s not moving in that direction.

Now. I don’t have a clue if we are headed for another ‘Depression’. The great depression was caused by over production. (and I am sure a lot of other things we will learn about from others on this board) On that front it does not appear that is a problem. If it is, think what a great position we are in. We don’t produce anything so we won’t be letting go all those people and cause a depression.

 

[Nords]

Obviously I hope I'm wrong, but is America headed for another depression ?

Sounds like the only depression going on here is the cabin fever caused by a Pittsburgh winter and pent-up longing for the start of baseball season...

Did I mention that Hawaii has an unemployment rate below 3%? And that tax receipts are 11% ahead of predicted, indicating another high-grossing year of blockbuster economic activity?

How does the government measure job creation when their survey method has an accuracy range of +/ - 100,000 jobs? How do they measure the trade deficit when we export far more intellectual property & profit than we import?

If I got depressed about anything, it'd be the use of crappy inputs to produce crappy outputs that are promptly torn apart by frantic political maneuvering.

Maybe you need a road trip to soak up some sun and a little spring training...

 

[tryan]

2) Bad monetary and fiscal policy.

Given the growing deficit I'ld say we definately have bad monetary/fiscal policy.

Recession ... "BRING IT ON"; made most of my wad picking thru the real estate "sales".  

Depression?  Don't think so, too many pressure-valves added to the system since the great one.

 

[saluki9]

Did I mention that Hawaii has an unemployment rate below 3%? And that tax receipts are 11% ahead of predicted, indicating another high-grossing year of blockbuster economic activity?

Nords, does that mean the state of Hawaii will be returning some of money I left there as part of that business friendly 11.5% hotel tax? If for some reason they don't, I'm just going to have to come back for a couple weeks and start asking around

 

[Gone4Good]

8.   Where are the jobs?   Aside from the Medical field, where are the jobs?

Unemployment rate 4.7%

 

[SC]

I share the same concerns bennevis posted, almost point by point to the letter. Staggering debt - both national and individual. An equally staggering lack of interest by the GOP in any semblance of fiscal sanity. And if trends continue, any job that can be done overseas for cheaper, will be, until their standard of living rises and ours drops to the point where they're the same... unless we try to keep our standard of living artificially high with our military muscle, UGH.

However, I felt just as bearish ten years ago, after reading a book called "Bankruptcy 1995", by Harry Figgie Jr. That was followed by about five or six years of boom times, so I learned my lesson about trying to make predictions.

Like wab said, keep a diversified portfolio. I'm more likely to mess up by trying to forecast what sectors will do well, so I just divide the funds up and hope for the best.

That said, if the dire warnings from the likes of Buffet and Gross continue to fall on deaf ears, I fear the approaching storm will be a bad one.

SC

 

[Lusitan]

I recognize that I have a tendency to be pessimistic when it comes to this subject, but I agree with the OP that the outlook for the U.S. (and the entire West) is dismal.

IMO, it ain't steel or manufacturing jobs or any of the specific points raised - it's the macro-level wealth transfer from the West to the Rest. I think we're in a zero-sum game now.

As the cost of communications and travel shrinks, and as more and more jobs - except for a few physical trades (e.g. plumbing) and the most menial service jobs ("want fries with that haircut?") - can be done overseas I predict the standard of living in the Rest will rise while the standard of living in the West will fall (or at best stagnate) until we pretty much equal out.

Not much one can do about it other than own a piece of the multinational corporations that will benefit most, practice living below your means, and get your retirement savings beefed up as quickly as you can!

(The good thing about being an economic pessimist is that, if you're wrong, you won't feel too bad ... and I hope I am!)

 

[Bruce]

The future is so bright I have to wear shades! 8)

1. The United States still produces about 100,000,000 tons of steel a year, about the same amount that it did in 1970. The mix of companies has changed but not the amount of steel. What has changed is that many fewer people are being used to produce this steel due to productivity.

2. America's manufacturing share of the US economy is not dropping like a rock. What is dropping is the number of people working in manufacturing. And why is this happening? Because manufactures are using modern technologies and computerized equipment to produce more and better products with less people. Why is this important? You can now buy more products with less money compared to say 30 years ago. Durable goods manufacturing productivity has been going up 4 to 6 percent a year.

The past is another country. I once lived there but have no desire to return.

3. The United States Now produces twice as many cars and trucks than in the 1960s. The only difference is that the auto plants are scattered over most of the country and the names on the buildings has changed.

4. Agreed; replaced with a much better system If you are smart enough to take advantage of it. My destiny is in my hands; the only person I trust with my future because I am the only person who will live it!

5 / 6. I agree with these two items; a way has to be found to provide universal coverage to all at a reasonable price. but it is not going to cause a depression.

7. Agreed that our savings rate in the US is very low. I have not saved a dime in the last 30 years; I still have the same amount of money in the bank that I did 30 years ago. However I have maxed out my 401(k) since 1980, I have money in a traditional and roth IRA and have mid-6 figures of equity in my home. So why is it a bad thing that I have not saved any money in the last 25 years?

8. Jobs? Where are the skills? I work in the medical field in Information Technology and the jobs are not being filled because there are not enough people with the latest skills. The biggest skills that are hard to fill beside the new technology are basic business and social skills! Remember that the current employment rate is over 95%; this is considered full employment where I come from.

9. There are IT jobs out there; but you must make sure to keep your skills current. I have been working in the IT field since 1984 and have had to upgrade my skills 3 times. Most of the people I have talked to are not going into technology because the field has lost its luster and people don't want to work the hours needed to excel in this field.

10. Absolutely. I hope more jobs go overseas. I hope the best and brightest people in every coutry of the world start to work for us. It will just make us stronger in the long run. There is no way to know where the next best invention or discovery will come from; maybe an outsourced job to China or Inda will discover the cure to cancer; remember we are at full employment in this country......if we want to continue to expand, especially with software and other technology we need help to create the technology everyone has great ideas for!

11. Company executives make a lot of money but it is a brutal business; it can take your whole live to reach that position and then you average tenure is usually measure in months and years not decades. Do I think they are overpaid; Yes. Would I want their job; no...I have a life which I enjoy!

12. Corruption is always going to be a problem in any open, free market economy. However it is a very small part of the total economy.

13. I think that this is at most an old cliche. If you look at any time in history, you will always find pockets of moral corruption.

14. This is the biggest misunderstanding of the world economy; it is not always the lowest cost that wins the jobs or has the strongest economy. It has to do with many factors including productivity, research, infrastructure, educations, etc.

15. The President is acting like a democrat; what we need is a good libertarian president to straighten out this country! Borrow and Spend.....

16. No matter who the next president is the economy will keep expanding as it has for the last 200 plus years. Remember as people get older they do get more conservative; my belief is the next president will be more conservative than the current president/

It is dangerous to think like this; people can and will believe this kind of thinking and stuff their money under a mattress where it will not work for them and they will miss the enormous opportunity the economy will provide over the next few years.

Just remember that the economy does not grow in a straight line. it grows exponentially. A poor person in America today lives better than a king or a queen lived 100 years ago. How many people were able to retire early 100 or even 50 years ago? The great people on this board are testament to the power of the economy to raise the economic well being of people over the wrong turn....

No chicken little the sky is not falling!

 

[cute fuzzy bunny]

.

 

[Rustic23]

Bruce,
You said it much better than me!

 

[wabmester]

The future is so bright I have to wear shades!    8)

If I'm not mistaken, I believe that's the same thing Irving Fisher said in October 1929.   

 

[cute fuzzy bunny]

Huh...Amy Fisher also said it in 1992. 1992 is an anagram of 1929. The good news is that its a long time until we have a year with two nines and a two in it. And I cant think of anyone named Fisher. Someone wrap this up as a study and write a paper. Someone with impressive initials after their name.

 

[wabmester]

Huh...Amy Fisher also said it in 1992.  1992 is an anagram of 1929.  The good news is that its a long time until we have a year with two nines and a two in it.  And I cant think of anyone named Fisher.  Someone wrap this up as a study and write a paper.  Someone with impressive initials after their name.

That was utter nonsense brilliant stuff, bunny.   My point was that the Big Bust was preceded by a Big Boom.    Productivity was at an all-time high.    Technology was improving everything.   Everybody was optimistic, and that was part of the problem.    And your point was what?