This Is Going To Be A Bad Recession
GDP fell .3% in the 3rd quarter of 2008, compared to 2.8% gain in the second quarter. While a recession is technically defined as two consecutive quarters of negative GDP, everyone can see the party is cashed. Marketwatch wrote, "Economists expect the economy to contract in the final three months of this year and the first three months of 2009, with the nation's unemployment rate pegged to rise near the 8% mark." Housing bust + oil shock + financial crisis + rising unemployment + high levels of personal debt and low saving rates = sad America. This can mean only one thing. Now is the time to enact my plan for WPA-style moon-farming programs.
GDP falls 0.3% in third quarter on dive in spending [MarketWatch]
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I think Christmas will bring the GDP up, and so we will once again avoid a recession.
Gasp no way how did we not see this coming. I am so shocked. I think we should stop all regulation of business and go shopping with the last of our cash to jumpstart the economy. Its our cristian and civic duty. Go Mccain were #1 were #1 were #1
Not for our family this year.
We made a pact to give donations to charities in one another's names because they are suffering the most right now.
Once the credit markets loosen and businesses start to work properly, people will become more confident in the security of their jobs and of their investments and then people will start to spend again. It's not going to happen overnight, but it seems that the credit markets are starting to thaw, and Wall Street is reacting favorably to that. This will help get businesses going again and start the slow process of putting the economy back in drive. Not that things are good right now, but I don't think it's going to get as bad as people think. Governments around the world are working quickly to try and cushion the fall, and it seems to be working, albeit slowly.
@Bladefist: are you insane!? WHat company do you work for? Here on wall street its insane.... I honestly dont see how you can be so optomistic... yes the entire 2 months of black friday sales and junk might help, but I dont think it will be anything like a solution...
@frodo_35:
Why use cash when the banks are going to forgive 40% of your debt? Us the plastic baby ... Its the American thing to do!
Like there's such a thing as a "good' recession?!
Part of the problem is the media damn-near advocating for one. Too many shouting heads.
@Bladefist: Did you even read the article? Consumer spending is down by record amounts, decreasing at a record pace.
Assuming we all do our patriotic duty and go and buy HDTVs and other stuff made in southeast asia, and that miraculously that causes our GDP to break even somehow, what do you think is going to happen around the end of the first quarter next year when people have to pay the bill for all the stuff they couldn't afford
Denial ain't just a river in egypt, my friend.
@OldSpinDoc:
I sort of agree with you. The media has been blabbing about this and shouting gloom and doom for awhile now, which is scaring people rather than educating them as to what is actually happening and assuring them that the world is not going to end.
"While a recession is technically defined as two consecutive quarters of negative GDP, everyone can see the party is cashed."
That's a myth. Recessions are called by the National Bureau of Economic Research (NBER) Business Cycle Dating Committee.
Read this: [www.nber.org]
@Etaripamai (XBL): I live in the midwest. While we have economic pains from the coast, it's not nearly as apparent. You may live it everyday, to us, its news from a far away land. I'm not saying it wont make it here, but we aren't in panic mode.
@lpranal: Last year we have
similar articles. And Christmas sales went up.
@AMetamorphosis: Well, thats noble. I see the money through, make sure it gets to the people in need. I've worked in non-profits before, and Its disgusting where the money goes (in bigger organizations).
@DismalScience:
Excellent point, and an interesting read regarding the breadth of factors that are used to officially call a recession.
You wrote "a recession is technically defined as two consecutive quarters of negative GDP".
Contrary to this conventional wisdom, it is the National Bureau of Economic Research (NBER)] who is the semi-official authority and tracker of the business cycle, and they define recessions as:
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough."
They probably won't even declare a recession until after its over
@Bladefist: Not sure where in the midwest you are blade, but in the wealthy chicago burbs, my talks with best buy account managers revealed that they aren't even doing seasonal help this year, but instead are cross training employees from less popular holiday sectors (appliances to home theater, etc). I don't think it's going to be a merry Christmas for retailers.
@AngrySicilian: Kansas City. It's just my prediction. I typically predict optimistic, because I am an optimistic person when it comes to America. And pessimistic when it comes to our government. I think Americans will continue to shop for loved ones and the same rate as before. If im wrong, I'm wrong.
Actually I would like to work on the moon. I think it would be a nice change of pace.
@Bladefist: and yet, the GDP growth in Q4 last year was anywhere between .6 and -.2 (depending on who you ask [useconomy.about.com]), DESPITE consumer confidence being much higher in 2007 than it is now (october last year was in the 90s, this year it's in the 30s).
I also live in the midwest and couldn't disagree with your rosy outlook on the effect of the recession here. There's a few businesses that have folded recently in my city, and home prices are definitely still sliding
You are right! And we are working with charities we can directly assist ...
It will be nice to thumb our noses @ all the retail giants this year ... and I already feel more Christmas spirit than I have in years :-)
@AMetamorphosis: Tsk Tsk. If only you had bought a McMansion, a new car every year for everyone in the family (yes that includes the dog) and racked up thousands of dollars in CC debt by buying the latest gadgets and going on the nicest vacations.
I feel the same way as you. I bought a home I could afford (10% down and 30 year fixed) at a low point in the market, have a car that I bought used and paid in full at time of purchase and my husband and I are waiting until we have 20k in savings before we decide to have kids. Feels like we are missing out on all of the goodies because we decided to be responsible.
@Bladefist: also I'd like to point out that many incorrect articles are written every year about any number of things, and your assumption that their incorrectness ensures our economic stability is a fallacy Non sequitur
@Bladefist: Ok, Thats understandable, I am no longer filled with rage, but still... thats a pretty naive statement, that the hidays will save us all... idk, possibly adjust so its not like "full scale" but, I dont think it will change anything drastically.
@Etaripamai (XBL): Also the election will have been determined. That will take away some of the uncertainty.
@Bladefist:
Agreed. I think once the election is over, people will become more confident, especially if Obama wins. Not necessarily because he will do great things, but the fact that it's a change. The current policies clearly don't/didn't work. Whether Obama's will or not is arguable, but I think the mere possibility of positive change will make people more confident in the direction of the country and the economy.
@Bladefist: for what it's worth, I'm optimistic overall as well. Optimism for me, however, takes over where facts leave off. The facts and numbers give pretty clear predictions for the short term, economically (within 6 months to a year) but after that, I think anyone who claims to know the future is full of BS. On the plus side, I think America will emerge out of all this smarter, more productive and this time, everyone will benefit from our recovery, not just the wealthy few at the top. How's that for optimism?
@lpranal: The media, the "experts" always seem to be pessimistic. In the past few months, whenever the GDP has risen, there has been 0 talk about it. Rising GDP is boring. It's not news. I'm a software programmer. Not an expert. I believe in the American people, and I believe in the market. As a software programmer, I believe the GDP will increase. Take that for whatever it means. Don't make any financial decisions off my predictions.
@wary_consumer: I think to call it a flat-out "myth" oversimplifies things. Cool read though.
But different economic analyst will look to different economic indicators to parse out economic realities from data. Keynsians can look at GDP alone. Monetarists are probably more interested in the effects of the availability of credit, interest rates, and the money supply.
But for a quick and dirty analysis, Real GDP is a pretty good indicator.
Oh, and I def. agree that the press is not helping things right now. Consumer confidence is right up there as one of the most important measure of our economy's health.
@AMetamorphosis: Actually the article states "These consumers would then get five years to pay off their remaining card debt, interest-free" So it's not forgiving the debt, just providing a 5yr intereset free loan. Still not bad.
Define the 10% unemployment rate in my county. Please define why santa will not be coming to some homes this year. Please define what it feels like to be hungry and see AIG execs go on a ultra rich retreat on the taxpayer dime. Please define what the numbers equate to in peoples real lives and how it feels to sign up for food stamps for the first time. Please define what I should tell the guy I have known has a hard worker all of his life why the new job at wallmart and the part time job delevering pizza will allow him to keep his house but not his family health insurance. I pray these things I am seeing are not hapening to you and I pray they don't happen to me. But I see them happening.
@AMetamorphosis: I too have been living within my means. Up until now, I've supported the bailout as being necessary...but if folks are forgiven large portions of credit card debt, I won't just feel like a fool, I WILL BE ONE. I totally fail to understand what the hell is going on here...
I had to interview my dad for a school project because he had been alive during the Great Depression. I asked him, "Was our family hit very hard/Was it hard to live?", and he replied, "Well, our family was dirt poor to begin with, so we didn't even really notice there was a depression." I'm dirt poor myself and I haven't noticed any major changes. My finances were in a recession long before America.
I just feel bad for those poor suckers who spent most of their lives working, putting it towards a pension, and learning it may go POOF.
The article contradicts itself. First it says we're going to be in a BAD recession but then cites that we're not technically IN a recession. Also remember that oil is seriously down and our dollar is up. Also remember that the market has baked in the expectation that Obama will get elected, and so stock prices are depressed (the market expects capital gains taxes to increase, thus decreasing the expected market return).
As for credit card losses, the banks are VERY aware of these losses and have baked them into their plans. The market has also baked these losses into the stock prices.
@Bladefist: What I think people are forgetting is that we've had much worse GDP downturns in the last twenty years, and there weren't any problems even remotely close to what happened in the great depression era.
The reports of the demise of the American economy are greatly exaggerated.
They're not going to declare a recession until 2011?
I think the secret will be out by then.
@Bladefist: Okay, I was about to respond and say, put your money where your mouth is about Christmas sales this year. But then I realized, if Obama gets elected, some people might be infused with an overwhelming degree of hope and optimisim, and Christmas sales might be okay.
But I will bet you $1,000 if John McCain gets elected, we will officially be in a recession. Deal?
@IamNotToddDavis: Where do you live? a Cave?
We're not just talking about a GDP downturn. We're not just talking about high unemployment. And we're not just talking about a credit buble bursting and a housing deflation. We're talking about all of this stuff happening AT THE SAME TIME.
@Bladefist: As a professional programmer, what would you think of someone completely unschooled in programming assuming leadership of mission-critical software projects.
You'd snort of snicker and run the opposite direction, right?
So apply the same logic to people who actually know about economics saying we're heading towards rough sailing, and unschooled people asserting, with no factual basis, that they're right and the experts are wrong. Any reasonable person would look askance at that guy, right?
Compare/contrast the two reactions, and see if any differences are justifiable.
And regards your comment about wasteful, extravagant non-profits: try volunteering for progressive ones, and you'll see that the run a tight ship. Not all, but generally this is the case, especially the smaller or more grass-roots ones. Which ones did you work with, out of curiosity?
@Bladefist: You're a software programmer and you don't understand physics -- i.e., that the sun makes energy?
What the...
@stevejust:
If you've paid any attention to the news lately, the credit problem is effectively being solved. I'll give you the housing issue, but part of it's simply a correction for over-value in the past couple of years.
For most middle-class Americans who live within their means, the recession arrived long ago. Stagnant wage growth, higher prices for everything and fewer opportunities for better jobs, they've cut back and are living sensibly.
@incognit000: I want to be a moon farmer too!
It would probably be a wonderful change of pace, because everyone would move slower with the lower gravity and moon suits. And everyone knows chaning pace slower is better.
"GDP fell .3% in the 3rd quarter of 2008, compared to 2.8% gain in the second quarter."
The .3% is an annualized rate. The GDP shrank by .075% last quarter.
The biggest sign of a responsible citizen is the ability to adapt to situations. Yes, the recession is here or is coming, depending on your view. No, it won't end for some time. BUT, if you've been living within your means, this just means you can shift the way you spend a little (not buying organic milk, only buying organic milk when you have a coupon, cutting back on going out to eat, etc.) but not eliminating entirely. To the people who weren't living responsibly, they're scrambling to adapt, which they probably don't know how to do.
Or who were on the bottom of the paycheck scale to begin with, they're even worse off because they don't have any fat to trim, and they just have to deal with it as it is.
I put my stimulus check on bills. I live within my means and am ok not much debt,but I am concerned for my children that are just starting out. This could last a good 5 years or more. Even with the 700 bil bail out we are in for rough times. If the markets recover it will just be even worse later as we cannot stave off the piper forever. Ship out jobs, cut wages,raise the prices of housing and energy. The breaking point is here how long will this bailout chewed gum keep the dyke from bursting.
@frodo_35: 10% unemployment? Where exactly do you live? You might want to look around and see if there might be some local factors that are causing such a poor economy right now?
And don't talk about being hungry unless you've got a complete day without eating. We're whining and complaining about things that we have no business about. Our "hungry" is missing a meal. Some of us have gone through days were we choose not to eat so our kids can.
And don't play the "class envy" card. The ultra-rich are going to do things that you cannot. Get over it. If it bothers you that much, go make an example of yourself, get ultra-rich and then DON'T do that.
We as Americans NEED this wakeup call. We're too fat and lazy and wanting everything to just be taken care of. Sadly, I have a feeling that on Tuesday we're just going to be signing more of our lives over to the government.
According to an article @ USATODAY.com ( [www.usatoday.com] )
Banks are now seeking to forgive credit card debt ...
What a fool I've been living within my means, driving a 7 year old car and buying a modest little two bedroom home ...
Perhaps a 50k credit card shopping spree is in my near future.