Worries That the Good Times Were a Mirage

Source: nyt

So, how bad could this get?

Until a few months ago, it was accepted wisdom that the American economy functioned far more smoothly than in the past. Economic expansions lasted longer, and recessions were both shorter and milder. Inflation had been tamed. The spreading of financial risk, across institutions and around the world, had reduced the odds of a crisis.

Back in 2004, Ben Bernanke, then a Federal Reserve governor, borrowed a phrase from an academic research paper to give these happy developments a name: “the great moderation.” These days, though, the great moderation isn’t looking quite so great — or so moderate.

The recent financial turmoil has many causes, but they are tied to a basic fear that some of the economic successes of the last generation may yet turn out to be a mirage. That helps explain why problems in the American subprime mortgage market could have spread so quickly through the world’s financial system. On Tuesday, Mr. Bernanke, who is now the Fed chairman, presided over the steepest one-day interest rate cut in the central bank’s history.

The great moderation now seems to have depended — in part — on a huge speculative bubble, first in stocks and then real estate, that hid the economy’s rough edges. Everyone from first-time home buyers to Wall Street chief executives made bets they did not fully understand, and then spent money as if those bets couldn’t go bad. For the past 16 years, American consumers have increased their overall spending every single quarter, which is almost twice as long as any previous streak.

Now, some worry, comes the payback. Martin Feldstein, the éminence grise of Republican economists, says he is concerned that the economy “could slip into a recession and that the recession could be a long, deep, severe one.” In Monday’s Democratic presidential debate, Barack Obama made the same argument: “We could be sliding into an extraordinary recession,” he said.



Read more: http://www.nytimes.com/2008/01/23/business/23leonhardt.html?_r=1&ref=business&oref=slogin

Ok let's dosome simple math. You make $100 per month. You spend $110 per month using credit. In addition you owe $1,000 in other loans such as car or mortgages. You lose your job. You now get a job for $80 per month. You use more credit to get by. Etc.

Simple math for what is going on. It sucks, but many people are going to start to have to do without SUVs, 4,000 sq.ft homes, tons of toys and shit for their kids, Wii's, eating out, etc. I know many people om here don't live like that, but millions do.

to make up for the loss of one good job and he is proud of that. According to McCain and others the good jobs aren't coming back. What is it, 20 thousand homes foreclosed per month, the question isn't so much about doing without the 4000 sqft home, it is more like doing without a home. Our federal government is so dependent upon making the richest Americans fatter, wealthier and more comfortable that when they finally realized that for the middle class the economy is screaming it was too late to avert disaster. I hope I am wrong, more now, than ever.

Just ask uber-wacko Republican Rep. Michele Bachmann:


This, of course, was the emetic Bachmann explaining why the right-wing plan to give big tax breaks to corporations is so much better than helping working people in any way. Who needs help when you already have two jobs?

When, when will we finally be free of Republican idiocy?

.. . we can be martyrs for our country.

It's sad that the day has come when people are proud of the fact that their community spends so much of their lives working instead of enjoying a balance, but that's the world the Republicans have given us.

..
and now work from home. My spouse will be going back to school for an advanced degree b/c I can keep an eye on the kids. My previous job had me coming to work before my kids were up in the morning and after they went to bed. A lot of it was simply bad management. From my experience, employees unburdoned by the need to actually see their families do put in the extra hours and do benefit from this "devotion" to the corporate machine with pay increases and placement in mid-management positions. The only hitch is that there is something wrong with a person who doesn't want to go home and whatever problems or pathology they have then spills out into the workplace. An unstable/unhappy person can't manage people successfully and productivity suffers and everybody is asked to work above and over to pick up the shortfall. It's an epidemic in our culture. BTY, many of these guys are very immature and have the sensibilities of a 15yo.

n/t

We're at a point where we can't run higher deficits to stimulate the economy.

That's because Bush ran such enormous deficits when times were good.

That $2 trillion Bush has committed to his Iraq blunder would really come in handy stimulating the economy.

more than just a recession. We are at or near to the tipping point and now a recession on top of that. When we should be dealing with emerging problems like global warming, oil peak, drought, world poverty, and other vital problems - we now are facing a recession that is worse because it is coupled with these other growing problems. It kind of seems like the great depression/dust bowl/do nothing government (Hoover=*ss) have come back to haunt us or maybe remind us why we needed liberal government in the first place.

Speculative, my butt. Neocon buddy bankers and corporatist CEOs knew exactly what they were doing from the word go --(global) that is. Deregulation meant anything goes, and it went. They financed the mergers, acquisitions, outsourcings, and corporate relocations that erased American jobs. They plundered a sovereign nation on pretext, and, when that churn didn't reap the large rewards they expected in terms of heroic grandiosity and riches beyond compare, their greedy asses turned rogue and created those great "new" mortgage loan products to "help"-- NOT!

"had reduced the odds of a crisis."

More like it created a giant ball of crisis, and when it would eventually pop, everyone hooked into the global financial system is going down together. That's really the only possible outcome if the means to the end is relentless growth though. We still live in physical reality. We can't escape that, no matter how clever we are. As we build a universal world, where everything is the same everywhere, if something goes wrong anywhere...

Did anyone pay attention to Michael Moore's 1989 movie Roger & Me?

Was there an economical 'upturn' in those communities? or Tell me, when did those communities come out of the recession they 'slipped' into?

Why do you think they are talking about 'bubbles' failing in the economy?

When CEOs are entitled to tens of millions of dollars even as they are fired for incompetency or involvement in fraud and back dating stock options.

This is what Ben Bernanke called moderate????

When banks don't even have 10% on reserve because the crap they thought they were borrowing against (again and again) was worthless.

Oh come on, it was a free for all. The fed with the help of the WH ignored all regulations and common sense and let the corporations, financial firms and the thieves that controlled them run wild. We got Enron and Arthur Anderson, toxic toys, poisoned food, war for profit and a VP who takes bribes. Not to mention a totally dysfunctional government.

What we are suffering now is the hangover.

Merrill Lynch: House Prices May Fall 30%

From MarketWatch: Merrill Lynch says U.S. nationwide home prices may fall 30%

Merrill Lynch forecasts nationwide U.S. home prices could decline 25% to 30% over the next three years ...

And Bloomberg quotes Rosenberg: U.S. 2008 Growth Forecast Cut in Half by Merrill

``Rising unemployment, $6 trillion in lost housing wealth combined with slumping equity valuations, and the lack of participation from the baby boomers for the first time in three decades likely will result in the worst consumer recession since 1980,''

From the Fed's Flow of Funds report, household real estate assets totaled $20.99 trillion at the end of Q3 2007. So a 30% decline in prices would reduce "housing wealth" by about $6 trillion (Merrill's number).

Posted on Calculated Risk http://calculatedrisk.blogspot.com/

as a wanking dead man.

as a wanking dead man.

:eyes: