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Matt D
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Is A Second Great Depression Coming?

Wed Feb 28, 2007 2:31 am

Some people seem to think so.

This guy seems to make an awfully strong argument supporting the idea. The parallels between now and 1929 are indeed chilling.

http://www.lifeaftertheoilcrash.net/...rchives2007/WhitneyDepression.html

http://www.europe2020.org/en/section_global/190207.htm

I realize that there is plenty of bias in both articles. I'm not taking a stand one way or the other, but I thought it would make for an interesting read and subsequent debate.
 
AsstChiefMark
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 2:44 am

I often don't see eye-to-eye with you, Matt. But, this time I do.

The rich people who are debt-free and have cash in the bank (or buried in the backyard) will by fine. The poor will die off or fade into silence, which is what the rich folks want. The middle class will become the new poor. Does that sound about right?

Mark
Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Damned MSP...Red tail...Red tail
 
ArmitageShanks
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 3:04 am

There are steps in place to prevent the market from crashing like that again. There are automatic systems in place to physically shut down trading for periods of time if a certain amount of change occurs.

We might have a great downturn in the economy but we will not have a sudden crash like that.
 
UH60FtRucker
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 3:12 am

Quoting AsstChiefMark (Reply 1):
The poor will die off or fade into silence, which is what the rich folks want.

Mark, you know I respect you... but this has to be one of the more ignorant (not to mention a vastly sweeping and generalizing) comment you've made recently!

It's this kind of exaggerated generalizations that pretty much negates any intelligent debate.  Yeah sure

-UH60
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TedTAce
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 4:26 am

Didn't we do this thread last year, and the year leading up to W's re-election?

The economy doesn't work like it 'used to'. Using statistics and crunching the #'s I'm sure you can say that the depression is in place and has been occurring for the last few years. The problem is that while things aren't great, they are not horrible, and there is little chance anything like a 'earth stopping' (US economy stopping) event is going to occur. Trust me if this economy tanks as bad as predicted we will be worrying about fallout and finding radioactive free food more then money.
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prosa
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 4:41 am

As the old joke goes, economic forecasters have predicted ten of the past five recessions.
"Let me think about it" = the coward's way of saying "no"
 
Falcon84
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 4:50 am

Quoting ArmitageShanks (Reply 2):
There are steps in place to prevent the market from crashing like that again.

The market is not the entire economy. A Depression can still happen no matter what speedbumps are put on the Stock Market.


I haven't read the whole thing yet, but a few thoughts come to mind.

-If thise is true, Alan Greenspan is one of the great traitors to the American people of all time.

-Everyone who crows about this great economy will be eating crow, as the whole thing has been built on massive deficit spending by this government, and masive credit spending by the American people.

-Those who constantly claim that it's a desirable thing for the richest Americans to reep windfall after windfall while the rest can barely make it, will be eating those words, as the richest keep a lavish life, while the rest of us fight for our economic survival, and in some cases, for our very survival.

If this happens, Mr. Bush will not only be remembered for Iraq. And all the presidents and Congresses since the days or Reagan will have had a hand in this collapse.
Work Right, Fly Hard
 
AsstChiefMark
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 4:54 am

Quoting Falcon84 (Reply 6):
-Those who constantly claim that it's a desirable thing for the richest Americans to reep windfall after windfall while the rest can barely make it, will be eating those words, as the richest keep a lavish life, while the rest of us fight for our economic survival, and in some cases, for our very survival.

Too bad you're already on my RU list.

Mark
Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Damned MSP...Red tail...Red tail
 
WellHung
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 5:14 am

Quoting AsstChiefMark (Reply 1):
The poor will die off or fade into silence, which is what the rich folks want.

The rich get rich by taking advantage of the poor. They want the middle-class to die off, so they can get that bigger piece of the pie.
 
andessmf
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 5:19 am

OK, let me see if I can clarify parts of the ideas espoused by these two articles. These articles are biased, BTW, but they do provide some inkling as to what may happen, all related to the housing bubble.

Quoting AsstChiefMark (Reply 1):
The rich people who are debt-free and have cash in the bank (or buried in the backyard) will by fine. The poor will die off or fade into silence, which is what the rich folks want. The middle class will become the new poor. Does that sound about right?

No. From personal experience, most of the rich people got rich little by little, not by 'get rich quick' schemes that crept up during the housing bubble.

Quoting ArmitageShanks (Reply 2):
There are steps in place to prevent the market from crashing like that again.

This is not a stock market crash, this could be a crash of housing prices and the related spending associated with it.

Quoting TedTAce (Reply 4):

The economy doesn't work like it 'used to'

Yes it does, it has worked a certain way for many years, we forget that and have corrections to turn it back to they way it was prior.

As to housing, this is essentially what occurred. (I am in construction and deal with residential properties as well, so I will limit myself to what I have personally experienced.) The housing bubble was not limited to the US, this was essentially a global phenomena.

The dot.com bubble wiped a lot of wealth from normal people, remember that the NASDAQ lost 75% of its value. During this initial correction, 9/11 occurred, further endangering the world economy. The FED responded by cutting interest rates, exactly when housing was finally recovering from its last crash.

As housing prices started to rise, several things occurred. Normal people started to feel wealthy, from the paper wealth their home equity insinuated. For example, in 2002 we refinanced our house. We took some money from our equity for home improvements and used a 15 year loan. With the lower interest rates, our payment went up some, but not much, but we could save a lot of money that a 30 year loan charges. So we took $15K from our equity, but saved $100K over the previous loan from less interest paid. Our you could say that we saved $85K overall.

This then started to get corrupted. As home prices kept rising, mortgage lending standards got looser. After all, if you could no longer afford your house payment, it was very likely that your house would be worth more than you owed on it. Then some started to speculate in houses. (Investment would mean that you planned on renting for profit, which was nearly impossible with the rise in prices.)

This is where 'flipping' started to become rampant. Plenty of people took equity money from their house to 'invest' in other properties. After all, you only needed to hold on to the house for a short while before you could realize a sizable gain. Or they would take money out of their house for other expenses, forgetting that they would have to pay it back sometime, soon.

This rampant speculation gave an 'apparent' demand that was not a REAL demand for housing. So plenty of builders geared up and built for this apparent demand. This apparent demand gave the impression of higher demand for housing, so higher demand = higher prices. This becomes a nasty cycle and then quickly turns into a bubble. It was so bad that in some areas in was 50% cheaper to rent an equivalent home than to purchase it.

This party actually ended in 2005, but momentum has carried it on so far. Remember that it can take years for planning and permitting before you even build something. It is normal for the entire process to take 3 years. This is why you still see so much construction around still.

I'll continue with my explanations as the thread develops.
 
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bwest
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 5:19 am

Frightfull scenario... and how would this affect the rest of the world? How will the "new" economies like China & India react? What will Europe do? It will be interesting to see if they manage to "fill the gap"? Or will they crumble as well?
 
andessmf
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 5:30 am

Quoting Falcon84 (Reply 6):



Quoting AsstChiefMark (Reply 7):



Quoting WellHung (Reply 8):

Define 'rich'.

Quoting Bwest (Reply 10):
Frightfull scenario... and how would this affect the rest of the world? How will the "new" economies like China & India react? What will Europe do? It will be interesting to see if they manage to "fill the gap"? Or will they crumble as well?

This is/was a global issue. The DOW is down because of China today. Everything is interconnected now. What would happen to China if suddenly the US can't buy so much of their product? What if the demand for oil goes down, would the price rise of fall?
 
N174UA
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 5:36 am

I say YES because....

- the savings rate of Americans is now negative (1.04, or for every $1 earned, $1.04 is SPENT). Last time it was this bad was around, oh....say 1929....

My advice?
- keep 6 months of living expenses in the bank. Make sure you are cash flow positive! Most people are one or two paychecks away from personal bankruptcy.
- pay down (or pay off) all variable rate debt. If the Fed has to increase rates to pay interest to foreign debt holders, the interest paid on loans will skyrocket.
- Identify areas of personal spending that you can reduce in order to boost your personal savings rate.

- the RATE (not the total amount) at which budget deficit spending increases.

I say NO because...

- Looking at all of the recessions/depressions over the past 70 years since the Depression, the duration of each has been minimal, compared with the Great Depression. Economic downturns are all part of the cycle, and should be expected.

- Economists (especially the Fed) look at a much broader range of economic data to guage what is going on at the individual and corporate level. This in turn allows them to make better decisions regarding a.) monetary policy and b.) interest rate, specifically the rate charged to other banks for lending.

- The doctrine of targeted inflation has worked well....what I mean is that the Fed wants to keep inflation pegged at a specific level, so as to not overheat or put the economy in a recession. This helps businesses plan growth both in the short term, but also in the long run, when it comes to capital expenditures (plants, equipment, etc.) and employment levels.

The Chinese economy has been RED HOT for a long time now, and that has been unsustainable. India's economy is already showing signs of a slowdown (cover story of the Economist a week or two ago) and China is experiencing it now. Specific to China, they have seen 100 years of economic growth (real GDP) in only 30 years, and the past 5-7 years has been at rates close to 10% annually.
 
speedbird747BA
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 5:41 am

Quoting N174UA (Reply 12):

Thank you David Bach. Well thats who you sound like at least.  

Dow down over 500 points. Wow, pretty bad.

Quoting PROSA (Reply 5):
As the old joke goes, economic forecasters have predicted ten of the past five recessions.

  

Wealth is too widely distributed nowadays, it is split into too many stocks, too many bonds, and put into too many hands. If this is beacuse of China, trust me, China will be under some damn hard scrutiny from Moodys and S&Ps.

Cheers,
Kyle

Edit: changed 'for' to 'from'. Typo

[Edited 2007-02-27 22:00:13]
How long do I have to climb, up on the side of this mountain of mine?
 
AsstChiefMark
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 5:42 am

Quoting AndesSMF (Reply 11):
Define 'rich'.

1. People who work for shits and giggles. They could live off their treasure trove if they had to.
2. People who can buy a $30,000 car on impulse and don't have to think about how they'll pay for it.
3. People whose houses have a bathroom for each day of the week.

Those are a few examples.

Mark Big grin
Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Damned MSP...Red tail...Red tail
 
N174UA
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 5:48 am

Quoting AndesSMF (Reply 11):
What if the demand for oil goes down, would the price rise of fall?

Fall. Specifically, the world price for a barrel of unrefined light sweet crude. With key economies slowing down, the demand for oil will also fall, thus lowering price.

Quoting Speedbird747BA (Reply 13):
Thank you David Bach. Well thats who you sound like at least.

Sorry, not sure I've heard of this person. Not sure if that was an insult or a compliment.
 
speedbird747BA
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 5:53 am

Quoting N174UA (Reply 15):
Sorry, not sure I've heard of this person. Not sure if that was an insult or a compliment.

David Bach wrote several 'be rich by the time you retire' books. What you said sounded just like some of his advice. It wasnt a compliment, definitly wasnt an insult. Just an observation.

Cheers,
Kyle
How long do I have to climb, up on the side of this mountain of mine?
 
MaidensGator
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 5:56 am

Quoting Speedbird747BA (Reply 13):

Wealth is too widely distributed nowadays, it is split into too many stocks, too many bonds, and put into too many hands. If this is beacuse of China, trust me, China will be under some damn hard scrutiny for Moodys and S&Ps.

Huh????
The first thing we do, let's kill all the lawyers.
 
Yellowstone
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 6:02 am

Quoting Speedbird747BA (Reply 13):
Dow down over 500 points. Wow, pretty bad.

I have to agree with Benjamin Graham (author of The Intelligent Investor and mentor of Warren Buffet) here. It's kind of silly that we think of a 500 point drop in the Dow as a near catastrophe. That's like saying that a store discounting a $125 item to $120 is a major price reduction.
Hydrogen is an odorless, colorless gas which, given enough time, turns into people.
 
Falcon84
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 6:13 am

Quoting Yellowstone (Reply 18):
It's kind of silly that we think of a 500 point drop in the Dow as a near catastrophe.

It's not a catastrophe. I don't think anyone is saying that. But it should set the alarm bells off that things aren't as rosy as some people think they are.
Work Right, Fly Hard
 
andessmf
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 6:25 am

Quoting Falcon84 (Reply 19):
It's not a catastrophe.

No, it isn't. And I don't even believe the deficit spending is that big of a deal. What I think is big is that a lot of people, not all rich, worldwide spent a lot of money on speculative housing ventures that are no longer appreciating, but depreciating and becoming an overwhelming financial drain on them. And from what I gather from the news, China is not happy with speculation.
 
speedbird747BA
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 6:27 am

Quoting Yellowstone (Reply 18):
I have to agree with Benjamin Graham (author of The Intelligent Investor and mentor of Warren Buffet) here. It's kind of silly that we think of a 500 point drop in the Dow as a near catastrophe. That's like saying that a store discounting a $125 item to $120 is a major price reduction.

Well man it can snowball from here. I doubt it will, but it can. Besides, tose 500 points can devastate one particular industry, ie the biomedical industry.

Cheers,
Kyle
How long do I have to climb, up on the side of this mountain of mine?
 
Klaus
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 6:28 am

One of the problems is that there is substantial volume which is leveraged multiple times over; If that wobbly pile gets a shove in the wrong place, the repercussions could be quite dramatic - quite possibly resulting in yet another tax-funded bailout at the last second to prevent the worst, but the success of such measures may still depend on the overall situation which might have its own pent-up pressures do deal with at the same time...
 
kalakaua
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 6:28 am

I hate it when people panic. It's so... immature. amateur.
Gravity explains the motions of the planets, but it cannot explain who set the planets in motion.
 
luisde8cd
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 9:27 am

Quoting N174UA (Reply 12):
keep 6 months of living expenses in the bank. Make sure you are cash flow positive! Most people are one or two paychecks away from personal bankruptcy.

Sorry but having too much cash on a savings account is the perfect recipe to lose the value of your money.

I would suggest investing in low-risk bonds and funds.

Saludos desde Caracas,
Luis
 
speedbird747BA
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 9:32 am

Quoting Luisde8cd (Reply 24):
I would suggest investing in low-risk bonds and funds.

Ahhh Sacndinavia is wonderful.

Go with Moodys AA at least.

Very good advice Luis.

Cheers,
Kyle
How long do I have to climb, up on the side of this mountain of mine?
 
AeroWesty
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 9:44 am

Quoting Luisde8cd (Reply 24):
Sorry but having too much cash on a savings account is the perfect recipe to lose the value of your money.

I would suggest investing in low-risk bonds and funds.

Well, in the U.S., each bank account is insured to $100,000, so unless the government defaults, you don't lose the value of your money if you keep less than $100,000 in different banks. In times of rising interest rates, bonds aren't always the best value, since the underlying value of the bond has to lose money in order to maintain a competitive return on the secondary markets. For instance, if you bought a bond at par today that paid 4% interest, and interest rates doubled tomorrow, the street value of your bond would fall by half, and you'd have to wait until the bond matured or interest rates fell again to recoup your initial investment.

As with anything, know what you're buying, and make it appropriate for your own goals and needs. To recommend keeping your cushion for living expenses in a volatile security wouldn't be prudent. You'd want those funds to be available immediately without the risk of a loss to access them.
International Homo of Mystery
 
Jalto27R
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 10:38 am

Wasn't one of the major reasons for the economic collapse in the 1930's the banks falling back on their customers money, and having to close? Is it not true that if your bank is FDIC approved, you are insured up to 100 grand on your account? I seem to think one too many mistakes would have to be made for something like this to happen, and that certain people on this board would be more than willing to see it occur just to point the finger politically speaking. How very, very sad.
 
JAL777
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 10:42 am

Quoting Jalto27R (Reply 27):
Is it not true that if your bank is FDIC approved, you are insured up to 100 grand on your account?

Yes... although that's never really been tested in a substantial way.
 
Jalto27R
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 11:06 am

How exactly does the FDIC work? Do they have that amount of money prepared, or is it a credit sort of deal, where they just promise you it? Just curious.
 
AsstChiefMark
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 11:43 am

Quoting Jalto27R (Reply 29):
Do they have that amount of money prepared, or is it a credit sort of deal, where they just promise you it?

A banker once told me it's all done on paper. If all hell breaks loose, a lot of people are going to have a tough time trying to withdraw all their cash. He said it'll be first come first served. In a nationwide or worldwide disaster, some people aren't going to get paid. And it'll be much, much worse if the electronic banking system is disrupted.

Mark
Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Damned MSP...Red tail...Red tail
 
MaidensGator
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 12:07 pm

Quoting JAL777 (Reply 28):
Quoting Jalto27R (Reply 27):
Is it not true that if your bank is FDIC approved, you are insured up to 100 grand on your account?

Yes... although that's never really been tested in a substantial way.

Actually it was in the 80's when about 1,000 Savings & Loans went under. The Feds had to ante up over $100 billion in guaranteed funds.

Quoting Jalto27R (Reply 29):
How exactly does the FDIC work? Do they have that amount of money prepared, or is it a credit sort of deal, where they just promise you it?

There isn't near enough cash in the world to cover all the bank deposits. The government just guarantees the deposits to instill confidence in the banking system. The whole monetary system relies on confidence; once people lose it, as Mark said, all hell will break loose.
The first thing we do, let's kill all the lawyers.
 
sw733
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 12:25 pm

The dow went down bad one day...who is to say people don't freak out and bump it back up 500 points tomorrow? Then everyone will be saying we're all on our way far, far up.

The stock markets of the world fluctuate so much, it's ridiculous. It's interesting, but ridiculous - and this coming from someone who has studied economics for a very, very long time.

Lets see what happens in the next day or two
 
AsstChiefMark
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 12:31 pm

Quoting SW733 (Reply 32):
who is to say people don't freak out and bump it back up 500 points tomorrow?

Ain't looking that way. Asian markets are down between 2% and 6% already...and they've only been open for a few minutes.

Mark
Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Red tail...Damned MSP...Red tail...Red tail
 
sw733
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 12:39 pm

From CNN Money, spoken by Harry Clark, CEO of Clark Capital Management: "Although some analysts have been calling for a pullback of about 10 percent for the market, Clark said a smaller drop is more likely. "We'll probably see a decline of about 4 or 5 percent and then it will be done," Clark said, noting that a lot of the selling will be washed out within the next week or so as the shock wears off."

I think we're heading for a slum, sure...but not a depression. Even if we go down 1,000 more points, or 2,000 more points...it may be a little tough, we may see a little tighter finances, but far from a depression...I just don't see it happening. I hope I'm right, or I'll move back to Namibia and hide in the desert with my TV that is suddenly worth 0.00002 cents  Smile
 
cairo
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 1:21 pm

Quoting AeroWesty (Reply 26):
unless the government defaults, you don't lose the value of your money

Hahahahahaha.

Price of a loaf of bread in 1930s Germany: 5 000 000 marks. People started transacting in currency by weighing it instead of counting it. The situation was so bad they sought a radical leader to restore order.

An FDIC promise to pay you $100 000 for your $100 000 deposit is fine, unless a loaf of bread which today costs a dollar turns out to cost 100 000 dollars when you make your claim with the FDIC.

Only unencumbered real property is possibly foolproof to a financial collapse. Any kind of paper asset, including cash and bank accounts, is completely worthless.

Cairo
 
AeroWesty
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 1:37 pm

Quoting Cairo (Reply 35):
Hahahahahaha.

Price of a loaf of bread in 1930s Germany: 5 000 000 marks. People started transacting in currency by weighing it instead of counting it. The situation was so bad they sought a radical leader to restore order.

Clearly, we both knew exactly what I was speaking of which was where to place emergency funds, not investing for a catastrophic event.

Even so, In the scenario you laid out, the point I made makes even more sense than the suggestion to invest in volatile securities which would rapidly lose their underlying value as inflation kicked up interest rates.

Occasionally, having an understanding of the topic helps prior to posting.
International Homo of Mystery
 
andessmf
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 2:00 pm

Quoting Cairo (Reply 35):
Only unencumbered real property is possibly foolproof to a financial collapse

But this is where the problem lies, and I could bet that I will be proven right in the next several months, regardless of where the stock markets are heading.

Essentially, property values worldwide shot up in the last few years, w/o any actual reasoning behind this valuation. Many banks started to lend money using overvalued real estate assets as collateral, much like the tulip mania. This year some of these loans will start resetting in mass, causing great financial pain to those who used non-standard loans to purchase a home or homes.

There has never been such a asset bubble worldwide, so the effects of this will be hard to gauge in the future.
 
AeroWesty
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 2:09 pm

Quoting AndesSMF (Reply 37):
This year some of these loans will start resetting in mass, causing great financial pain to those who used non-standard loans to purchase a home or homes.

Already happening.

Quoting http://www.nytimes.com/2007/02/28/business/28mortgage.html:

Freddie Mac Tightens Standards

The easy money is making a quick exit out of risky mortgages.

During the housing boom that ended in 2005, money was poured with abandon into exotic home loans that let people buy homes with little down or without verifying their incomes. Now, lenders, financiers and buyers of mortgages are pulling back.

In a sign of that wariness, Freddie Mac, one of the largest buyers of mortgages, said yesterday that it would tighten lending standards and stop buying certain kinds of risky home loans made to borrowers with weak, or subprime, credit records.

The move comes as default rates are rising, smaller lenders are starting to fail and investors are shunning bonds backed by mortgages.

The pullback will be most severely felt by minority and poor home buyers and owners, who will face trouble in refinancing adjustable rate loans that they can no longer afford. Those looking to buy homes with a small down payment or none could also be forced to pay higher interest rates and may not be able simply to declare their income without providing documentation like tax returns and paycheck stubs.
International Homo of Mystery
 
andessmf
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 2:21 pm

Quoting AeroWesty (Reply 38):

I know its happening.

What do you think the future holds after this bubble plays out?
 
Pope
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RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 2:40 pm

Quoting WellHung (Reply 8):
The rich get rich by taking advantage of the poor. They want the middle-class to die off, so they can get that bigger piece of the pie.

That's absolutely BS. I can't think of a single person I've hurt in making my money. I've personally sacrificed my own financial success to help my employees. During the last down turn we didn't fire a single person because of economic reasons, we continue to pay 90% of our employees health care cost and kept 2 employees on full pay and benefits when they underwent serious medical problems. Our health plan cap's employee's total out of pocket yearly spending on health care at just over $700 no matter what - including prescription drugs, hospital, doctor's visits, diagnostic tests, etc . . .

Our receptionist (the lowest paid employee at my company) earns $40,000/year with full benefits including medical and 401k. Just this week we made an additional 3% across the board contribution to every employee's 401k plan (in addition to the existing 3% contribution and 50 cent match on the first 6% of employee voluntary deferrals).

This notion that success is a zero sum game is just and unsubstantiated whine of people who can't cut it in the marketplace.

Over 50% of my income disappears in various taxes and yet people say I'm not paying my fair share. Note that this is in addition to the 34% corporate tax rate my company pays on its income.

Just once I'd like an employee who thinks its unfair that I earn what I earn to have to sit behind my desk and face the decision I face on a daily basis. To sleep with my cell phone always on and check my e-mail at all hours if a problem arises. To not be able to let someone else handle a difficult problem. To leave the office and be able to disconnect completely. To never be able to go on a vacation that places me truly out of the loop. To have to worry about how we were going to make the next Friday's payroll (fortunately that hasn't been the case for several years now). To personally have risk my family's financial future to guarantee millions of dollars of corporate debt.

Though I have certainly made mistakes in my business life, I know that I have never EVER done anything to hurt an employee or further my success at their expense. Furthermore, it's my opinion that most small business owners can say the very same thing. If anything, they've probably been too kind and kept people that shouldn't have gotten as many chances as they got.

Everyone in this country has the opportunity to build a company from nothing into a world class organization. What they do with that opportunity is up to them. But to say that the rich are rich because they've screwed the working class is a bullshit generalization that is personally insulting to thousands if not millions of business owners who have busted their asss to employee millions of employees in a manner that allows them to realize the american dream.
Hypocrisy. It's the new black for liberals.
 
AeroWesty
Posts: 19551
Joined: Sat Oct 30, 2004 7:37 am

RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 2:40 pm

Quoting AndesSMF (Reply 39):
What do you think the future holds after this bubble plays out?

Well you have to remember some fundamentals of economics. What you own and want to sell is only worth what someone is willing to pay for it. Secondly, you can only hold onto what you can afford to maintain. A suggestion was made earlier that only fully paid real property will see you through a severe economic crisis, but what if you can't afford to pay the taxes on it any longer? It gets sold out from under you. You assumed, I believe, that Cairo meant real estate, when really it should be taken as "real property excluding real estate".

Now with that clarification, to answer your question about real estate, one only has to look at the Houston real estate market. In the 80s, when Houston collapsed, condos that were selliing for $60,000, suddenly were worth only $20,000. A lot of people walked away from them. Some people kept paying on their 60K mortgage. The ones who walked away were left with nothing, except what they could take with them, and those who stayed, eventually made out okay. The people who came in and bought at 20K, did spectacularly.

There will always be people with liquid assets. Some will always be willing to exchange their assets for your distressed merchandise. So if there is a true "bubble", I see a lot of bottom-feeding going on before things get better.

Still, those without real estate, but with other appreciable assets, will make out better.
International Homo of Mystery
 
CaptOveur
Posts: 6064
Joined: Thu May 06, 2004 3:13 am

RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 2:41 pm

Quoting Matt D (Thread starter):
Is A Second Great Depression Coming?

No, we learned a lot in the last 70 or so years about how to control the market and money supply.. Also a lot of the problems that led to the crash have been dealt with. Things like independent auditors, and regulations on what brokers can tell people have made the markets a lot safer. Also, if the crash gets too bad there are stops in place that temporarily shut down the market to let people calm down..

How to regulate an economy like ours is kind of a learning process, but it would take something pretty out of the ordinary to throw us into another depression.. or even to put us into a mess like we had in the late 1970s. Right now all we are facing is a housing bubble bursting and a market correction. Don't look at the number of points the NYSE fell, look at the percentage. We have a shitload more market volume and diversity today than we did in 1929.

Quoting Matt D (Thread starter):
Some people seem to think so.

Proof that a lot of people are ignorant

Quoting WellHung (Reply 8):
The rich get rich by taking advantage of the poor.

You realize the government considers you "rich" if you make more than something like 40k a year.

Quoting Jalto27R (Reply 29):
How exactly does the FDIC work? Do they have that amount of money prepared, or is it a credit sort of deal, where they just promise you it? Just curious.

You will get the money pretty quick. thats the nice thing about the federal government, if they need cash they just print it. That is how the government has never defaulted on a debt. There are inflationary implications if this happens, but you do get your money.

Quoting AsstChiefMark (Reply 30):
A banker once told me it's all done on paper. If all hell breaks loose, a lot of people are going to have a tough time trying to withdraw all their cash. He said it'll be first come first served. In a nationwide or worldwide disaster, some people aren't going to get paid. And it'll be much, much worse if the electronic banking system is disrupted.

If a run on the bank happened, yeah they don't have a lot of cash on hand. But with the feds reserve requirement the banks have a lot of the cash needed on deposit with the federal reserve bank. The rest can be borrowed from other banks or from the Fed if needed. This was one of the safeguards put in place after the great depression. The bank can have the currency on hand in the amount of time it takes the armored car to get from the terminal to the banks door if need be. Also, they *can* close the doors to the building if they have to.
Things were better when it was two guys in a dorm room.
 
andessmf
Posts: 5689
Joined: Wed Jan 25, 2006 8:53 am

RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 2:50 pm

Quoting Pope (Reply 40):
Just once I'd like an employee who thinks its unfair that I earn what I earn to have to sit behind my desk and face the decision I face on a daily basis

I know how you feel. My wife and I both have parents that are in the top 1%. We can inherit two businesses that would easily allow us to earn close to 7 figures a year. But we are not sure if we are willing to make the sacrifices that it would entail. We sacrifice enough right now to make little over 6 figure income a year now.

And I have seen in my industry (construction) plenty of business owners who left the business and work with someone else (2 in our office) to avoid the responsibilities of the higher position.

Quoting AeroWesty (Reply 41):

I know a lot about economics, and when I don't, I ask. You are certainly a wealth of information.
 
RJdxer
Posts: 3523
Joined: Thu Nov 09, 2006 1:14 am

RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 3:17 pm

Quoting Falcon84 (Reply 6):
Those who constantly claim that it's a desirable thing for the richest Americans to reep windfall after windfall while the rest can barely make it, will be eating those words, as the richest keep a lavish life, while the rest of us fight for our economic survival, and in some cases, for our very survival.

You know Falcon, it just gets tiresome to hear you cry about how the rich have it so well and the rest of the population is basically eating beans for a living. Next time you're in the grocery store look around. Next time your in a department store look around. Take a trip to Ethiopia and try finding something on that scale anywhere. We did our taxes today. After ringing up all the interest dividends and capital gains, I had to pony up a nice big check, in my world, but I didn't think twice about it. That big fat check doesn't represent everything I made this year, far from it. I worked for the same company you do. Now I work for its old subsidiary, so I'm not getting rich from my paycheck. But I learned years ago how to put away a few bucks every paycheck and while it hasn't made me rich, I'm sure comfortable. So why don't you stop complaining about how the other half lives and and intoning they should somehow be taxed down to your level and just get busy raising yours?

Quoting Luisde8cd (Reply 24):
Sorry but having too much cash on a savings account is the perfect recipe to lose the value of your money.

I would suggest investing in low-risk bonds and funds.

I would suggest investing at least some of it in gold bullion. Not certificates, but the real gold coins that you can keep in your safety deposit box or in your home safe. Gold may not never make money for you but it has never lost money either.

Quoting AeroWesty (Reply 26):
For instance, if you bought a bond at par today that paid 4% interest, and interest rates doubled tomorrow, the street value of your bond would fall by half, and you'd have to wait until the bond matured or interest rates fell again to recoup your initial investment.

Had to give kudo's to my dad once we opened up his books after he passed away. He bought tens of thousands of dollars worth of bonds in 1982 and 1983 when they were paying 13% interest rates. He was pocketing the money all the way up till he passed away. I have them now and it's a sweet deal. Too bad the government has a buyback option this year and I think they will probably exercise it.  frown 

Quoting AeroWesty (Reply 26):
You'd want those funds to be available immediately without the risk of a loss to access them.

 checkmark 
Unfortunately it is against the law to keep actual cash in a safety deposit box. You need to have a small safe at home with at least enough cash to get through a couple of months. Or gold and cash combined. Forget any kind of paper other than money, it will be worthless until things settle down.

Quoting SW733 (Reply 32):
The dow went down bad one day...who is to say people don't freak out

Well I for one have been expecting a correction and I'm kicking myself today. I have one stock that has been rising steadily and last week I was on the verge of selling it but got greedy. Now I'm banging my head on the wall, since last Thursday when it peaked it has lost a fair amount of value every day. It still is nowhere near it's 52 week low but I should have sold it last week.

Quoting Cairo (Reply 35):
Any kind of paper asset, including cash and bank accounts, is completely worthless.

Perhaps, in a total world financial meltdown, but if that happens, money will be the least of your problems.

I just wish I had also heeded my instincts and bought CAL stock in August when it was trading around $20 a share and sold it last month when it was a little over $50.  banghead 

I don't think any big depression is right around the corner. Especially don't think any big stock market crash will happen. As stated there are too many safeguards in place to allow that to happen again. For one thing the average Joe can't buy as much stock on margin as they could back in the twenties. That doesn't mean the average Joe can't put himself deep in debt or that he isn't, that's a wolf that's getting hungrier everyday, but from a stock market perspective it really can't happen again.

I sure would have hated being a day trader today. As Cousin Eddie said in Vegas Vacation: "Come on, Clark, the night is young... they're giving away free hot sandwiches at the blood bank. "
Warm winds blowing, heating blue skies, and a road that goes forever. I'm going to Texas!
 
Boeing7E7
Posts: 5512
Joined: Sat Jul 31, 2004 9:35 pm

RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 3:35 pm

Here's a thought for depression wishers:

Baby boomers will retire in droves starting this year, look around, perhaps there are more retirement parties this year then you recall of late. Someone has to replace these people, and there are fewer people in the post boomer generation. This will likely result in a decrease in the unemployment rate. Due to boomers retiring, new housing will slow but it will level in about 20 years as boomers die off and their homes increase the supply. The larger problem is the price that will be paid for homes for the next 10-20 years, but at the end of the day, inflation will catch up. Result, typical economic hicups for the next 20 years. No different then the last 20.

Enough with the doom and gloom threads. My God the hype over this, oil and Global Warming is reaching hysterical proportions.

Must mean all the self serving baby boomers who screwed everything that twiched in the 60's, destroyed the family in the 70's, bankrupt Corporate America in the 80's, and bankrupt politics in the 90's must be on their last hoora! Who's the real me generation?

Man I love being a tweener watching this circle jerk.

[Edited 2007-02-28 07:38:40]
 
AeroWesty
Posts: 19551
Joined: Sat Oct 30, 2004 7:37 am

RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 3:38 pm

Quoting RJdxer (Reply 44):
Gold may not never make money for you but it has never lost money either.

Gold is an interesting commodity. I've never really tracked it that well, but I used to work with a broker who swore up and down until his dying day that gold will always appreciate in value in relation to the cost to mine it, and that cost will never go down. Gold stocks took a big hit today, somewhere around 7% they said on TV, but I expect them to rebound. Gold itself maintained rather well today, even though it's up $40/ounce in the past 30 days. The other thing that was interesting today was seeing the charts of stocks for companies who mine other minerals and metals. Some have quadrupled in the past year. As a result of today's rumblings in the markets, my eye is going to be on minerals and metals more than it has been in the past.

Quoting Boeing7E7 (Reply 45):
Must mean all the self serving baby boomers who screwed everything that twiched in the 60's, destroyed the family in the 70's, bankrupt Corporate America in the 80's, and bankrupt politics in the 90's must be on their last hoora!

You forgot "and left me holding the check for it".  Wink
International Homo of Mystery
 
MCOflyer
Posts: 7088
Joined: Tue Jun 13, 2006 5:51 am

RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 3:39 pm

Aerowesty,

Thanks for the learning experience. I think we'll have one but not as bad as the 1929 one.

MCOflyer
Never be afraid to stand up for who you are.
 
Boeing7E7
Posts: 5512
Joined: Sat Jul 31, 2004 9:35 pm

RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 3:46 pm

Quoting AeroWesty (Reply 46):
You forgot "and left me holding the check for it".

No doubt. I think people my age are going to be less impacted than the 30 something group. I fall into that post boomer, pre x-er group that's post Vietnam and pre-MTV. It's odd watching baby boomers call Generation-X the "me generation". Talk about pot, kettle and black.
 
RJdxer
Posts: 3523
Joined: Thu Nov 09, 2006 1:14 am

RE: Is A Second Great Depression Coming?

Wed Feb 28, 2007 3:50 pm

Quoting AeroWesty (Reply 46):
Gold itself maintained rather well today, even though it's up $40/ounce in the past 30 days.

That's why I never bother with the gold stocks, or gold certificates. I buy the real thing. It's not hard to store, I've yet to lose a dime long term, and when you figure in inflation, well you just can't beat it for being stable. I'm a big believer in it myself, or can you tell? wink 

Quoting AeroWesty (Reply 46):
As a result of today's rumblings in the markets, my eye is going to be on minerals and metals more than it has been in the past.

 checkmark 
Still wish I'd bought that damn CAL stock though!  crying 
Warm winds blowing, heating blue skies, and a road that goes forever. I'm going to Texas!

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