Recession/Depression: What a crashing economy will do to us

[Retroboy]

Here's a motivational topic for you.

So our Canadian Prime Minister is hinting that there may be an actual depression coming, and I'm thinking if it does come it'll be a world-wide one. Now "depression" is a pretty big and bad word, and a quick Wiki on "Great Depression" (http://en.wikipedia.org/wiki/Great_depression) shows how bad it can get. I don't expect and certainly hope that we won't be in the same straits as four generations ago, but what I'm wondering is how this economy is going to affect us, both on an individual basis, and collectively with respect to our generation (which is arguably two generations given the age spread of this forum).

Assuming that proposed economic stimulus packages don't work, discuss what a failing economy might mean for you and your generation.

For example, I already know that my own thoughts about eventually retiring at age 55 are likely in the shitter now, Christmas is going to be a little smaller around our house, and water-cooler talk in my IT office is showing increasing concern about another downturn in that industry.

-- Retro

[Energizer Bunny]

http://i482.photobucket.com/albums/rr186/marccarvell/depression.jpg


Recent analysis from Merrill Lynch:
Is this like the Great Depression? Is this like Japan?

Our unequivocal answer: No.

In our view, the differences to the Great Depression are too many to take any comparison seriously. During that period:
- central banks reduced - not increased - money supply,
- the government was a tiny share of the economy (under 5% in the US),
- thousands of banks were allowed to fail,
- the gold standard initially prevented currency adjustment and was then followed by a global trade war and protectionism, and
- there was an unstable political landscape.

We highlight three differences to the Japan experience:
- Everything is happening much faster; 14 years of Japanese experience have been replicated over 18 months.
- Policy reaction is a lot more aggressive.
- Investor perception of the Japan experience it is often a caricature. Events that happened over many years and with significant time-lags are presented as one. One example: contrary to popular belief, the rate of inflation did bottom after the Bank of Japan embarked on quantitative easing.

Sorry, a little OT, but pertinent nonetheless. A recession is something all of us will go through probably at least 2 or 3 times in our lives. A depression is something one is unlucky to experience at all. The effect of the latter is totally different to the effect of the former by severl degrees of magnitude. We're definately getting a recession, but I'm not convinced we're facing a depression yet.

A recession can and will be a tragedy for a large number of businesses that fail and for people who lose their jobs. However, its not something that I think is likely to have a formative effect on an entire generation.

A depression on the other hand is not only likely to result in a paradigm shift in the views and stances of generations, but may very well trigger the sort of change in economic thinking which might actually make all the talking about getting rid of Keynsian economics an actual reality. To be honest I don't really know what would happen in a depression but hopefully we can get out of this spiral before we wind up there.

For me, well from an employment perspective myself and my other half are fine at the moment, but we both work in indiustries tied to the success of the local economy. We have mortgages to pay etc etc so the loss of one of those jobs would affect us deeply. A bigger concern to me is that our currency is extraordinarily weak at the moment and I am growing increasingly concerned that there may be a run on sterling. That would basically turn the UK into the next Iceland and that is not something I even want to contemplate.

Sorry, that was something of a rambling answer.

[Ammon Ra]

I am in a line of study/work that already has a shortage of personnel (Industry, engineers, etc), which makes me feel relatively safe, ontop of the fact that i hae taken a very broad "jack of all trades" engineering course meaing that i'm not locked or specialized in one particular area of engineering (Automotive, mechanical, electrical, programming, etc).

In that regard, i know that my future will be acceptable, when compared to the many thousands of people who go study something in the humanities, like "Arty, language, philosophy", or similar "Garbage" subjects. only a quarter of all history graduates will find a job in that area, while 100% of engineering, medicine, & law people will find a job within a year. But i digress.

If a world-wide recession, or even depression does happen, my generation will feel it the hardest as we're just entering the labour market at the edge of a dark and ominous valley.

However, I doubt that a depression similar in any way to that of the late 20's is possible. even if the stimulus packages fail to to stop the recession, a depression is not the likely outcome. Governments would probably be more willing to drive their country into historic debt by government spending to avoid any depression-like state

[Bowkers]

I don't think it will turn into what the 'Great Depression' was. The way it is being handled etc is quicker and is putting some, admittedly not a lot, of confidence back into the stock markets across the world. This coupled with a combined effort from the different governments across the world, shows that they are united-the Great Depression was in my eyes a very individual thing, that each individual government sought to control by themselves.

They say 2009 will get much worse than this. I am anticipating a 'bottoming out' of the housing market in late September. Then it will start to slowly increase. However it will be some time until the markets are anywhere near to the level which we were, for so long, used to.

[snrjefe]

I can see a long-term depression reviving the extended family in the US. Recent graduates unable to find jobs, retirees struggling with fixed incomes during inflationary times, and young families losing a job and not being able to afford housing, or people just unable to afford their home any longer. As such, grandma moves in with son and his family, daughter moves back home with her parents and so on. I've already had a couple of neighbors move back to the mid-west to be closer to family in case things get worse.

[Moe]

retiring at age 55
/me points and laughs at the crazy person

[absauston]

Obama has a plan like FDR did. Give the American people jobs on public works projects. No whether he follows through with that, time will only tell...
@ Moe
My dad is retired at 57 and lives quite well.

[Exetus]

Technically, I could retire at the age of 40, due to military service and I would receive a pension for the rest of my life which, by the time I make rank and then retire, will be equivalent (if not a little more) than I make now. I don't plan on not working, but with my accumulated savings, IRA and TSP (and hoping that my bank doesn't go under) I should have a decent amount locked away to tap into should I need it.

That being said, I think that retiring at 55 is plausible for plenty of people who are in the correct fields that have guaranteed pay and will always need to exist. I do note, however, that only a small portion of the people are or want to be in the military.

Absauston - I think what Moe is really saying, is not that our parents are the ones in real trouble, but more us. We've already depleted Social Security by most reports, indicating that there will be little to no benefit for those of us that now comprise up-and-coming middle-agers and younger. That ability that people once had to retire at younger ages is going away quickly and even though my parents are both retired and have excellent pensions and retirement savings, it's not the comfort zone that it once was to the workforce. Had they not adequately prepared themselves to retire over the last 30-some-odd years, they certainly wouldn't be in the good position that they are now.

[Imperial Honour]

Recession? Its currently forecasted that while our growth rate in Western Australia will be lower then the usual trend we have had for the past few years we will not really experience negative growth, just growth at a slower pace. Which is better then the forecasts I've heard for some of the other States\Territories and Nation as a whole. Apparently agriculture helped keep the NATIONAL (Western Australia's growth rate was around 3% or higher IRCC) growth rate just above 0%, at which Western Australia has been doing alright with (agriculture) as well as with mining and other industry (our drought was no where near as wide spread, so no where as danger you could say, as those the East have\are experiencing).

[absauston]

I think what Moe is really saying, is not that our parents are the ones in real trouble, but more us. We've already depleted Social Security by most reports, indicating that there will be little to no benefit for those of us that now comprise up-and-coming middle-agers and younger. That ability that people once had to retire at younger ages is going away quickly and even though my parents are both retired and have excellent pensions and retirement savings, it's not the comfort zone that it once was to the workforce. Had they not adequately prepared themselves to retire over the last 30-some-odd years, they certainly wouldn't be in the good position that they are now.

True that.

[Demonic Spoon]

economic problems are nothing new. We'll go through a period for maybe a year or so where we have economic problems, and then the economy will begin growing again. It's cyclical. There's no way to stop it, virtually no way to improve the situation, but plenty of ways to totally botch it.

That said, there are two things to worry about

1) World leaders going gung-ho and fucking up the economy with a bunch of horrifically inane changes

2) The national debt (in the US anyway) after we're done throwing money at every problem.

[ÜberJumper]

There's a recession???

[KON Air]

We'll go through a period for maybe a year or so where we have economic problems, and then the economy will begin growing again. It's cyclical.

Uhm... no, it is not. Especially with the "I think the previous the credit will be repaid so here is another credit for you" mentality is a bell curve at best... it will never touch zero but it will come so close you won't be able give a value.

Crash is unlikely there are three scenarios I favour the most;
1- Teh end of Liberal Economy, imho it is the best thing that can happen to the entire world from whichever angle you are looking at it, expect if you dedicated your life to making a killing via to inflation.
2- Go raid somewhere, WW3 if you must name it, extremely unfeasable with the mess of Iraq, first "Corn Flakes Ambargoe" and then "They will have to sell the oil/trade with someone". I don't think anyone has the balls, brains or will to pull another "Colonization 2" anymore. And "Emperialist Expension" proved to be too costly for it gains.
3-Revolution, though I always dismiss the probablity of a true Proletarian revolution, they are going fast towards having nothing to lose, including the chains.

[BananaMaster]

Students in architecture related fields of study are hit hard by the economic depression, especially those soon to graduate from a five-year program and realize that most of their "design" education is not applicable to the job environment in the United States. I mean sure, you can argue that its always been like this in America where architecture is seen as more of a social service than an art or a combination of the two. However, the conservative mindset in the building industry fostered through the last decades has certainly given the impression that U.S. architects can only design domestically, while "star" architects abroad are able to design with extravagance. The time it takes to be a licensed architect, plus the requirements of testing through IDP and ARE, will definitely be stumbling blocks for students in high financial debt. For me, I'm heading off to grad school [assuming I get in the universities that I applied for] when my fifth year of undergrad ends.

Having worked the last two summers at a service firm in southern California and gained some valuable experience, the least hit sectors in the architecture industry are predominantly service based firms catering to designing hospitals or campus expansions for universities [i.e., Kaiser Permanente, UC systems, Cal State, etc.]. They are also considered the most stable in the industry, yet "design" kinda takes the back seat due to strict codes and other considerations. Stability doesn't always mean job safety for all. An intern that I worked closely with and knew fairly well spoke about two employees who had worked at the firm for quite some time. They were laid off after I left for school, probably cuz they were the "least" essential to the firm...ouch.

[Moe]

My dad is retired at 57 and lives quite well.
Your dad didn't have to deal with problems like a disproportionate age pyramid or baby boomers. Our generation will not be able to retire at 57.

[ÜberJumper]

The Canadians will Moe.

My wife is retiring at 55 with an indexed pension that'll pay her around 3000 a month (in current dollars) after 30+ years of government service.

Regular folks without government jobs will still be able to retire at 55 if they manage their money correctly.

[Bowkers]

Nope-I think they are trying to increase the age of retirement in England to 75. Which is basically- 'work til you die son.' Referring back to the thread-I cant see a depression happening- of course I am sure before the Great Depression, they said the same thing, but I am confident, that the housing market will pick up some time late next year.

[Moe]

Uber: You're not part of my generation though, old man :p

[Ash]

Regular folks without government jobs will still be able to retire at 55 if they manage their money correctly.

Not if they're over 40 and their savings plans just lost 1/3 or more of their values. Not that all pensions and retirement plans are in stocks, but great deal of them are.

[ÜberJumper]

Oh, and the Canadian Pension Plan was sorted out a few of years ago by our government and looks to be in good shape.

Ash:

They'll still be ok. I know my RRSP's lost a lot, but they'll also gain back a lot as well.

[Starfisher]

My wife is retiring at 55 with an indexed pension that'll pay her around 3000 a month (in current dollars) after 30+ years of government service.What makes you think she'll actually get a pension payment, or that she'll get the full payment? The assumption you're making is that Canada won't go through painful fiscal hard times. If it does, pensions are probably going to get cut to some degree. Teacher's pensions are part of the parastic bloat that has already bankrupted New Jersey, and they will almost certainly have to be cut back if the state is to have any sort of fiscal future.

If there's anything this past year should be teaching people, it's that assuming anything is too big too fail, that your retirement <magic great deal plan> is going to be there, is a really, really bad idea. Also, to be blunt, the vast majority, if not all, private companies will never offer a pension plan like that. The only reason the government can do it is because it can rape taxpayers in order to keep its unrealistic promises. When faced with keeping equivalent promises, private companies go bankrupt and everyone loses.

Basically, if you're not a retiring auto worker, the chances of you being able to secure a pension and easy retirement at 55 are nonexistent unless you work somewhere that can force the general public to pay it for you. And even that isn't a sure thing, because eventually the general public stops wanting - or being able - to do it.

bowkers: "Work till you die" was the way of the world up until the 70s basically. Most pension plans in the middle of the century were predicated on the idea that people were going to retire at 55-60 and then die at 65. Not live till 95 while requiring millions in health-care to get there. The fundamental assumptions behind the social promises made to the last generations have become invalidated, and something has to give. Society has to adapt or collapse like anything else.

As for the thread, my company just forced everyone to take two weeks off and cut pay next year by 10%. "Work force management" will take place if revenue dips below 15% of this year's total. I'm already looking around for other jobs, and I'm starting to think I should broaden my search to basically anywhere in the country, just in case. I don't think this crises is going to fix itself any time soon. We still haven't even been hit with all the ARM mortgages. They were still popular into 2006 and take 3-5 years for the rates to adjust, which means we still have three more years of foreclosures ahead of us.

[ÜberJumper]

Starfisher:

It's a unionized government job :-D

But it's 30 years away and yes a lot can happen. Assuming that the world continues, and the economy recovers (even modestly) she'll be getting her pension on time and on schedule. She's also garunteed her job for the next 30 years (she's got permanent employment status meaning she can't be fired unless she screws up royally). The Canadian government has all kinds of "Temp" employees that can be culled if they need to reduce staffing, but my wife's been with the government long enough to get past that.

I'm pretty lucky... the company I work for provides software to hospitals, and software always needs support. Unless there's a major failure on our company's part that results in it shuttering its doors (which is a possibility for any public company) as long as I keep doing my job (and not posting on Internet forums when I should be working) I'll be here longer than most.

I'm not too worried about recession, although ask me that after western society has completely collapsed :-D

[Troubleshooter]

@Uber: There's one more variable... taxes. I fully plan to be retired by 55, and I have a road map to follow to get there. (I'm 34 now) Funny, one of the pillars of my plan is managing taxes via mortgage interest deductions... so my taxes help me pay for assets that *cough* Usually *cough* go up in value.

If the USG cancels or fundamentally alters the tax code to squeeze more tax money from people, they will likey hit home owners and investors first since retiring baby-boomers will be less likely to fall into those demographics as they age.

I don't know much about the Canadian tax structure, my family up there have some very odd tax problems. :p

As for the OP, I doubt this will reach depression era hurt. People are rightly worried about their jobs, but outside of that there's no talk about going hungry. Smaller Christmas isn't exactly a hardship, its just not what we are used to.

[Retroboy]

as long as I keep doing my job (and not posting on Internet forums when I should be working) I'll be here longer than most.
Allow me, please, to present for the thread's avid consumption, irrefutable evidence that Uber will be requesting government-sponsored financial unemployment assistance in VERY short order.

http://hwcommunity.com/~retroboy/Images/Proof_I_say.gif

:spin:

===============================
Now, to serious business:

Smaller Christmas isn't exactly a hardship, its just not what we are used to.

The problem is that many have lost their sense of relevance so much during these good times of entitlement and splendour that they believe that not getting all the Christmas stuff they're used to IS a hardship.

This mental set is part of what I'd like to explore in this thread.

-- Retro

[Moe]

I'm not too worried about recession, although ask me that after western society has completely collapsed :-D
I know, let's start the Relicnews Bunker!

[Bowkers]

I know, let's start the Relicnews Bunker!

Let me guess moderators and above only huh?

With regards to smaller Christmas, I havent noticed it this year-in fact my Christmas presents that I'm giving to people have got increasingly more expensive. In actual honesty, the economy hasn't really affected me massively, other than what I read in the papers. I guess that's prehaps my mentality of looking at it from a student's point of view who hasn't yet gone out into the outside world :/

[Troubleshooter]

This mental set is part of what I'd like to explore in this thread.

Well, that's a horse of a different color. I'm probably not the type to go on about how bad things are... I will say that I was just at a place with a "toy for tots" bin that was almost totally empty... that made me sad. It's really not that bad people!

[ÜberJumper]

Retro:

I know I stopped spending on silly stuff this summer after I got a HUGE raise. We were all set to buy a new car too. I did this partially because the Media had impressed upon me that Americans spent far too much on Credit.

So, my wife and I, looked at our debt load, got our credit cards all paid off (we were silly really, we had money in savings that wasn't making nearly as much in interest as we were losing to our credit cards). That alone saved us about 200 a month in payments.

Right there we would have had enough for a decent new car (even not counting the 1200+ a month raise I got), but we said to ourselves "ok, we've got two decent cars, and one of them is 9 years old, the other is 4 years old, do we really need another one?" We can totally afford one, but we decided not to get one. Now, we're further building up our bank accounts and spending conservatively.

This was BEFORE the massive problems in the stock market and since then I've heard much about how consumer confidence was low, so people weren't buying things. I wonder if the media's repeated hammering of the credit issue also effected other people's willingness to buy things. That combined with the "Green push" might have pushed people off buying a new car until better Electrics are on the market (that did contribute to our deciscion not to buy a new car as well).

Is it just me or were other people re-evaluating their purchasing BEFORE the market's starting failing?

[Retroboy]

Is it just me or were other people re-evaluating their purchasing BEFORE the market's starting failing?I don't think it was a general trend across all ages, Uber. I think you just coincidentally passed through one of the optional cusps of life that usually hits harder and earlier when you have kids. The many that don't pass through these cusps often end up owing until they die, and usually blame the rest of the world for their own personal finance management inabilities.

-- Retro

[Demonic Spoon]

Uhm... no, it is not. Especially with the "I think the previous the credit will be repaid so here is another credit for you" mentality is a bell curve at best... it will never touch zero but it will come so close you won't be able give a value.

Give me a break. We've always had economic problems. Periods of slow economic growth (Or negative growth) are inevitable. They ALWAYS happen. EVERY time, the economy recovers and begins growing again.



Not if they're over 40 and their savings plans just lost 1/3 or more of their values. Not that all pensions and retirement plans are in stocks, but great deal of them are.

They lost values, but unless the company that handles the pensions invested virtually everything in a company that is going bankrupt, the stocks will rise again and thus pension values will rise again.

[Inst]

Man, that sucked. Incidentally, I'm wondering how many of you guys are laughing your asses all the way to the bank as deflation kicks in and their savings become worth a hell of a lot more.

I know someone whose family binged on lobsters once the lobster market crashed due to low demand and economic uncertainty. 5 lobsters for a family of three.

I'm starting to realize why the Japanese didn't act faster when deflation kicked into their economy. If the electorate is composed of a large amount of savers, then deflation is a real party. Of course, the hangover is a bitch.

[No Surrender]

Give me a break. We've always had economic problems. Periods of slow economic growth (Or negative growth) are inevitable. They ALWAYS happen. EVERY time, the economy recovers and begins growing again.
The thing with that kind of logic is that it implies there's nothing that can be done to decrease the frequency of growth slow down or dampen its effects. It's like saying "well, I have Malaria. I always will have Malaria and it hasn't killed me yet". We should always be looking for ways to improve the economy. Each failure should be taken as a call for fine tuning and improvements. Complacency in any field is death.

[Troubleshooter]

Each failure should be taken as a call for fine tuning and improvements.
QFT.

I'd bet that the way bonds are rated and how complex securitizing of traditional paper will be brought to heel now.

The problem is that in good times, banks make bad loans... its a truism that haunts banking because it works on human nature rather than principals. I think that other sectors of the economy work in similar ways... boom times will always happen, as will busts, but thats no excuse for not trying to mitigate the factors that lead to worst outcomes.

[Retroboy]

Inst: we had five lobsters for a family of four last week. We usually do it every quarter. That's what you get for living on the east coast of Canada. :)

Demonic: you shouldn't just assume the stocks will regain all their value overnight. Apparently it took over 10 years for the stock markets to recover from some major declines. Have a look at this logarithmic graph of the Dow Jones Industrial Average, from the years 1930-1950, or the years 1965 to 1982. In both of those cases, there was effectively zero net growth over those long, long intervals. the DJIA is not 100% indicative, but it's a pretty definite measure of the economy.

http://upload.wikimedia.org/wikipedia/commons/thumb/c/cd/DJIA_historical_graph_%28log%29.svg/800px-DJIA_historical_graph_%28log%29.svg.png (http://upload.wikimedia.org/wikipedia/commons/c/cd/DJIA_historical_graph_%28log%29.svg)

[Noir]

The City is cutting payroll, which means less job opportunities for me. Of course, there's probably going to be more federal positions once that New New Deal starts moving.

So it'll probably, hopefully be a wash for me. :p

[Demonic Spoon]

The thing with that kind of logic is that it implies there's nothing that can be done to decrease the frequency of growth slow down or dampen its effects. It's like saying "well, I have Malaria. I always will have Malaria and it hasn't killed me yet". We should always be looking for ways to improve the economy. Each failure should be taken as a call for fine tuning and improvements. Complacency in any field is death.

But who is going to be making the improvements?
People learn from failure. Improvement will already come. People who took out loans they couldn't afford will learn they can't do that. Banks that made loans that were bad will be more cautious in the future. That's inevitable.

Government bureaucrats, however, are not going to improve anything. Trying to micromanage the entire economy is an exercise in futility, even moreso when they're government bureaucrats.

The reason I don't think reshaping economic policy is going to work is because doing so is saying that a private businessman knows less about what's good for his business than some congressman.

Personally I think the best thing the government can do to help the economy is by improving education. Poor schools contribute to dumb, irresponsible people who make bad financial decisions...also contributes to sloths that leech off of society at worst, or at best aren't as likely to become successful.



Demonic: you shouldn't just assume the stocks will regain all their value overnight. Apparently it took over 10 years for the stock markets to recover from some major declines. Have a look at this logarithmic graph of the Dow Jones Industrial Average, from the years 1930-1950, or the years 1965 to 1982. In both of those cases, there was effectively zero net growth over those long, long intervals. the DJIA is not 100% indicative, but it's a pretty definite measure of the economy.

I am aware of this, but they will recover. Only the people who are about to retire now will see a massive issue...in which case they may have to delay their retirement a couple years. Shrug.

[roflmao]

The reason the great depression is considered "great" is because it lasted an eternity, not because the economy went downhill over night. Comparing the current recession to the great depression doesn't lead anywhere.

[Retroboy]

Only the people who are about to retire now will see a massive issue...in which case they may have to delay their retirement a couple years. Shrug.Er... no.

- Young couples who parked their cash in a medium-yield, medium-risk investment account would see a significant loss. Their ability to make larger purchases or finance a house (if that market hadn't crashed too) is severely compromised. Their rainy day fund is gone, and god help 'em if they don't have health insurance and one of them gets sick.

- Charitable organizations would experience a major loss both in terms of their treasury if invested and the contributions they receive from good-times philanthropists.

- Many people who balanced their debt against their stock portfolio valuation would see a significant rebalancing toward the former. They might not be able to handle their debt load.

There's a lot more people than just older folks who are being slammed by the decline in the market value.

-- Retro

[Bowkers]

I totally didn't read that til Retro picked up on it. The current climate affects all people. Not just people who are about to retire. It affects employers, employees, their families. their houses, their pets... you get the picture.

Going back to the idea of my mental state, I would say 80% is like, 'it'll pick up' and the other part of me is thinking 'what if it doesn't' I am confident in my government's policies, despite me not being a Labour supporter, I am from England, I believe they and the international community can pull us through this.

[Demonic Spoon]

Erm, the economic crisis started in the housing sector, and housing prices plummeted. It's easier than ever to buy a house.
Also, who the hell would put a "rainy day fund" in the stock market?

A "rainy day fund" is basically savings you can depend on. No one should be depending on the short term stock market for dependable savings.

Also, I never said or implied only old people had issues. I was referring SPECIFICALLY to pensions when someone mentioned that people 40+ would be unable to retire.

[Bowkers]

Maybe for middle to upper class people-what about people who have a mortgage, or need to remortgage their homes? The housing market is slowing up-noone is buying a house- in fact some estate agents I know are selling a couple of houses a month-basically not enough people are buying.

[Demonic Spoon]

Yes. Supply too high, demand too low. Cue drop in prices.

Houses are a commodity and like any other they are affected by supply and demand. This will benefit some and hurt others; nothing new.

[Bowkers]

It's easier than ever to buy a house

So how therefore, is it easier :S It's just like normal-people who have money to burn can just buy more, or a larger house. The lower class, or the people that cant afford a house, are still in no better way, what with the economic crisis, and at a time when confidence with the banks are at the lowest since the early 90s'.

[KON Air]

Yes. Supply too high, demand too low. Cue drop in prices.

I find your computer game economic simulations disturbing. A lot of estate business already got itself into a situation that selling below inflated prices will net a loss and the market scaringly narrowed. Not to mention the chain of loans that were made while building houses.

[Starfisher]

House prices are down, but it's harder than ever to get a mortgage. The effect is actually balancing things out, and probably making it harder to sell a house - even though you chopped 20% off the asking price, the person you're selling has to put down much more than they would have yesterday. The housing correction is not just an oversupply issue. It was also an overdemand issue, in that people who couldn't actually afford a house were becoming part of the equation. They're gone, making it ever harder to find buyers, which makes it harder to sell houses, price drops.

I think housing is going to take a looong time to recover. Several years to a decade. There's just too much inventory and not enough people capable of buying - many of whom won't be capable of buying for a very long time.

[Demonic Spoon]

So how therefore, is it easier :S It's just like normal-people who have money to burn can just buy more, or a larger house. The lower class, or the people that cant afford a house, are still in no better way, what with the economic crisis, and at a time when confidence with the banks are at the lowest since the early 90s'.

If you can't afford a house, then why should you be buying one?

Yes, banks are going to be less likely to give you a loan...not based on how poor you are but based on your credit rating (Although poor people tend to have bad credit ratings). This is good, as loans to people with bad credit ratings started this whole mess.



I find your computer game economic simulations disturbing. A lot of estate business already got itself into a situation that selling below inflated prices will net a loss and the market scaringly narrowed. Not to mention the chain of loans that were made while building houses.

Yes. Price crashes will do that. People who shouldn't have been buying houses (Due to easily available credit) kept the price high. Obviously when this backfires, the businesses that relied on it will have problems.


I think housing is going to take a looong time to recover. Several years to a decade. There's just too much inventory and not enough people capable of buying - many of whom won't be capable of buying for a very long time.

Good. As you and I said, the people who shouldn't have bought houses...bought houses, which kept price high.

[KON Air]

This is good, as loans to people with bad credit ratings started this whole mess.

Actually even with high no-return rate in short-mid terms the whole mortgage thing was sustainable, untill housing prices skyrocketed (selling teh house to cut loss or even profit at worst cases was the failsafe of the whole system) and banks having alternate means to find cash rather quickly. Also not to forget that some dude from Texas declare a Crusade against a Jihad and burn zirrillions of Dollars from rotation... and failing to establish profitable trade relations...

...and even destroying some of the profitable trade relations.

[Bowkers]

Due to easily available credit

Therefore the banks fault. I agree with you, with regards to why the hell buy it if they have no money, but the fact the banks were so willing to give money out, leaves me questioning the banks decision not the person who shouldn't have bought the house.

Starfisher, I also agree with your prediction-however I would like to suggest that the 'bottoming' out process could be as soon as late next year. However the prices haave dropped so heavily that I cant see them increasing to the level of last year for a good 5-10 years. Something I am grateful for.

[Bowkers]

mini bump as two interesting articles came up regarding this on the BBC today.

First:

Outlook for 2009 in the UK (http://news.bbc.co.uk/1/hi/business/7799886.stm)

Doesn't look promising does it? :(

And this doesn't help either:

Jobless figures (http://news.bbc.co.uk/1/hi/uk/7802461.stm)

I know this is true as I have struggled to find a job for what seems forever, but is only 6 months. If it gets worse-I face more debt, I am a student, and I am genuinely concerned for the future.

How about you guys?

[l337raceryo]

Yeah this kinda sucks hearing all of this when I'm in the middle of getting a degree, but there seems to be a big initiative towards alternative energy sources and that's going to be right up my alley. So who knows? If worst comes to worst, give me a stack of books and my garden. I'll ride it out.

[The5thElephant]

The long run solution to this problem is people realizing that Credit is evil and useless, you should spend the money you have, not the money you think you will have.

Social security, pensions and all this other stuff is a load of bullshit. It's because we never educated people in how to save money and invest safely. A proper way to do it would be you get a job, you make money, you don't spend all your money, you live off what you have left when you retire. If you can't do the basic math, it's your own damn fault.

[BmB]

There's a recession??? Exactly. There's all these people fretting and everything's horrible and the world is crashing except nobody outside USA's car industry seems to give a damn or be affected by it.

To be frank I've started to think it's all just a lot of hot air.

[Bowkers]

erm have you seen all the companies going bust. The UK has been horribly affected. This isn't just hot air. This is more than a prick on the surface. My family over Christmas were saying that this was the worst they had seen it whilst alive. Which is spanning a long time.

[Synthmon]

The recession is slowly starting to take effect all over the place, really, but it's funny how it's branded as a huge crash and violent losses of money. I mean, when I read the news, I picture these violent losses of money everywhere and people going bankrupt out of nowhere. It appears, however, that the entire problem is a sluggish behemoth, slowly but surely engulfing everything until we're all living on bread crumbs.


Social security, pensions and all this other stuff is a load of bullshit. It's because we never educated people in how to save money and invest safely. A proper way to do it would be you get a job, you make money, you don't spend all your money, you live off what you have left when you retire. If you can't do the basic math, it's your own damn fault.
Well, maybe you have to do basic maths. Social security, pensions, and - not that I aim this at your post specifically - stock markets are financial instruments put in place in order to create a mobile market. The crisis is by and large created due to risky financial instruments gone astray in the financial sector (at least as far as I've understood); as such it's easy to say rid the instruments. However, the second you start dismantling the financial sector - i.e., tell people to go save all their money by themselves, invest safely and so on (for, if anything, risk is half what the financial sector is about) - then the huge masses of money being moved about starts to slow down, and all of a sudden the West finds themselves in a huge economic slowdown, since nobody has any cash what-so-ever for an investment.

And when I then realized that 5th might well have been sarcastic, well... I just did him a favour to elaborate his argument, eh?

[BmB]

No I haven't. I've seen one bank go bankrupt. ( :p ) And that was horribly mismanaged anyways. Then some economists on TV have been telling me that the world is surely going to end.

And that's it. That's my experience of this whole thing. And it's starting to enter the realm of old hat. It's been what, three months now?

[Bowkers]

Alot has happened in the UK-building societies going under-for example, Northern Rock. Banks have merged-HBOS and Lloyds. These are a direct result of this 'crisis'. Large national companies have closed-for example, Woolworths, Zavvi and MFI. Others are predicting major losses, like Marks and Spencers and Debenhams. These companies going under would be horrible for the economy of the UK. The car industry of what's left have equally been affected. In sport for example, Suzuki, Subaru and Honda have withdrawn from their prospective sporting events citing financial difficulties. Football teams are struggling to keep afloat. This 'crisis' is affecting all aspect of life. Food prices have doubled over the past year. This storm is here to stay for a year, maybe even 18 months.

[Skullcap]

Woolworths, MFI and Zavvi hadn't been making profits for quite a few years now since alternatives were cropping up all over the place, and well as I always seem to notice, specialised stores are going to fold first before others due to there specialities.

MFI for examples is heavily kitchen and bedrooms, with the markets of housings being so low, there is less people moving house and requiring new kitchens and bedrooms, and even the ones who are able to move can find cheaper alternatives than MFI, which tbh, has been expensive compared to other places.

Woolworths to was quite similar, tho very popular on the highstreet and with families it was very much a jack of all trades shop which tried to everything but succeeded at nothing. Alot of time I could find things in Woolworths much cheaper elsewhere.

Zavvi was music and DVD shop, another sort of specialised shop in my view, you have HMV and online retail outlets which can get you them cheaper or have a wider range of stock aswell, and with internet use you have downloadable music for ipod and the other portable music, so they lost out profit in those markets.

To be honest, I'm not really to worried, fuel prices have gone down, which is a big plus, VAT rate has also dropped, which is another good thing, but shops have compensated for the drops anyway. As long as the fuel costs continue to drop and return to levels which were 2years or so, then the costs of items will also drop off making it easier.

In the end, my opinion is, if the shops were struggling without any impact of a recession in the UK, then it shops they either have to update the market view or products to be in line with what other places are providing, and if that means stores which have been around for years going bust and dissapearing, then so be it, it'll be better for us in the long run as others will take there place providing a cheaper and better service in the long run.

It maybe a harsh opinion, but the weaker companies will fall by the wayside and the stronger ones will do well and provide what they have and then prosper when things get back to normal, and while the companies do prosper, competition will be planning for when prices and the economy does return a normal state and we'll see quite abit of fun in the market again.

From my side of the pond in the UK, I don't see what all the fuss is about and it seems to a degree abit of a usual American over-reaction to the entire situation, maybe thats abit stereotyping, but it does seem when something does go wrong, America does seem to make it out as the end of the world, when really it isn't.

Also, I'm going to point a few fingers when Americans also say about there car market falling apart, well, if in the first place you hadn't promoted and designed family cars to be pick up trucks and humvees and by all accounts the most fuel inefficient vehicles on the road, then you wouldn't be in the situation you are.

People want fuel efficient, ENVIRONMENTALLY friendly cars, not gas guzzlers which need refueling every couple of hours, so I don't have much sympathy there when it comes down to that point.

Maybe I'm being harsh, but in my eyes, alot could have been prevented along time ago, and it takes to the market is, mind my language here, skull-fucked, to realise what kind of cock ups have been made along the road.

But that seems to be the way of things, something really bad happens and aload of policies, rules and changes are put into place. The banking market will be different, a hell of alot different and the mistakes which have been made will be dealt with accordingly, and well, as its been shown recently, some of the corruption under it all gets digged up, specially in regards to the big stock market which was involved with a scam.

So really, if people need a cold hard slap of reality and to be shook up to have things better, then so be it, in the long run it will be better for us all if a broken or corrupted economy is fixed now, when things can be done, or later when everything is to late.

On a note, I've nothing against the Americans, just alot could have been prevent if people had the eyes open and looked alittle deeper than putting fingers in there ears and closing there eyes and continuing to do what they did.

A question to you all in this regards then, why do you think it took untill now for everyone to see a broken economy and now start panicking?

Surely the rise in fuel costs and earlier reviews of housing and mortgage markets had shown weakness?

If no one noticed it, or dare I say turned a blind eye to it, then who should be accountable for the blame, working people, families, or goverments and finacial audits and economical analysists?

I can't believe for one moment that no one saw any of this coming untill the beginning of this year or the year before. :coffee:

[Vaarok]

I think that a recession would be good, but many of the efforts to stem it will in fact only exacerbate it. For example, the public works projects. Much like the National Recovery Administration of FDR, or the WPA, these programs take government money that's taken away from the population and apply some of it randomly to things the government thinks look promising, rather than allow people to keep it, invest it, and rekindle the economy while feeling more secure about their financial situation.

Here in NY state, we're actually at the tipping point of a long progression towards the inevitable correction. The city's skewed the state economy so badly and the state government mismanaged the state funds for pet projects so often, that I think there'll be a massive turnaround in the next election, some fiscal conservativism, and a rebound after a few years.

As for the national recession, I think it's really just a reality check, just like the housing bubble bursting. The thing that worries me is that it's going to be regarded as a catastrophe that must be stemmed by massive action and result in all sorts of ham-handed government manipulation by the president-elect and the democratic majority rather than simply waiting and letting the market adjust itself.

I also worry that some of the crisis might be manufactured by large interests to leverage marketshare, much like the corn ethanol boom-and-bust was manufactured.

As for me, well... (http://www.youtube.com/watch?v=I4s0nzsU1Wg)

[Mr Carrot]

Just to make a quick correction here Zavvi (which is not specialised, it was Virgin Megastores after all) and a few other media outlets that are going down the pan is not directly because of the recession, Zavvi was actually outpeforming HMV on the high street, it was Woolworths media distribution arm/wholesaler) Entertainment uk getting cutup which fucked them.

Entertainment UK supplied Smiths and Zavvi among others and actually made a killing (and had been propping up the retail arm since 2006) , as such it was hacked up right at the start by the administrators leaving Zavvi floundering, Smiths had the name to pick up alternatives right away but alternate wholesalers were waiting for christmas trading figures on Zavvi before making contracts in the new year. As such it had to borrow to fund short term contracts to make up the stock shortfall during the busiest shopping period of the year.

long story short, if they find the 40 million within the business they will carry on trading as the existing model is sound even in the poor trading environment, its important to note that alot of these firms in the UK have crap business models and deserve to go to the wall but a number of firms can survive administration during this tough period.

[TheWickedGerman]

Exactly. There's all these people fretting and everything's horrible and the world is crashing except nobody outside USA's car industry seems to give a damn or be affected by it.

To be frank I've started to think it's all just a lot of hot air.

It´s not. Just few month ago we expected a godd economy growth rate here(dont recal numbers), now they say it will ba decrease.

German car industry is also hit, and companies already started to stop hiring people, let alone thise who already announced to loose their job.

After dcreasing unemplyoment for a long time , numbers will go again up beyond 4 millions next year experts say. And effects would be a lot worser, if our economy hasnt done so well the last years. Lots of companies c an faced the coming struggles better due to their spending cvuts and stagnated wages over the last years. People just started to hope for real wage increases that isnt nullified or worse by infaltion and high fuel costs.

@Moe:
You are expecting to retire with 68? Good luck.

As long as you dont get a pension because you are a civil servant you´re screwed.

My dad wokred 51 years, but he couldnt live from his retirement pay if he hadnt saved asome money on his own and some income from a house in berlin he owns together with his sisters.

As civil servant you get much higher pensions, even if your colleague works as normal clerk and you´re a civil seravnt, but doing the same, you´re get much less money when retired.

[**Spetsnaz**]

Erm, the economic crisis started in the housing sector
i dont agree.
the effects were first noticeable in the US housing sector. that much is true.
the trouble is that banks have created a bubble, as they always do, this time in real estate.
In order to keep the bubble growing they had started to give mortgages to people that werent qualified (people on welfare etc).
Furthermore, papers, called derivatives, were traded on stock exchange markets with these (bad) mortgages as warranty (so we can easily spread the problem)
In surplus of this, the good "managership" is completely lost in most banks - how else can you describe companies that have borrowed 30$ for every $ they own? (just an average, some go up to 50$ of debt for every $ of capital)
Finally, the bankrupcy of Lehmann Brothers has acted like a propulsion rocket to make sure that the crisis could really go ahead & make more casualties, for which our thanks, Mr Bernanke & Mr Paulson. (that bankrupcy resulted in 0% trust between banks and thus effectively stopping all loans of banks to each other and greatly reducing the number of approved credits to normal industries, so that now other, like say, Chrysler, can also go bankrupt)

the problem didnt start in the housing sector. All what we experience today is started by the greed of the banks, for whom 500 million $ profit just isnt enough - it needs MORE profit :-/ always MORE & MORE (which off course isnt realistic and therefor bubbles are created, not because of good managership, but because of the pressure upon them by our capitalist system destroying a lot of basic morale in people)

anyways, back on topic, i suspect the first signs of economic recuperation to become visible by the third or 4th quarter next year. Simply because companies cant postpone investments forever and all the rotten apples will (hopefully) be destroyed by this crisis, so that the trust inbetween banks can be renewed.

This, under condition, that no more big banks go bankrupt and that the US gouvernment can keep it together (ie no bankrupt AIG, Fanny Mae, freddy Mac, GM, Chrysler, <insert large global company here>.
For each of those failing, you can add at least several months extra to the world economy of recuparation time (not so much because Singapore will be hit hard if freddy Mac goes under, but because anew, the trust inbetween banks to loan each other money will be gone, and the result of this will be felt by all customers of the bank, especially big enterprises, which will then reduce workforce to cut costs, which will mean less products sold, which....)

so it could be going upwards by the end of 2009, IF no more big shocks arrive (big bankrupcies, war (india/pakistan, israel/arab territories, Al Quada, etc)

thats my opinion as a bank employee.


@Moe:
You are expecting to retire with 68? Good luck.

As long as you dont get a pension because you are a civil servant you´re screwed.

My dad wokred 51 years, but he couldnt live from his retirement pay if he hadnt saved asome money on his own and some income from a house in berlin he owns together with his sisters.

As civil servant you get much higher pensions, even if your colleague works as normal clerk and you´re a civil seravnt, but doing the same, you´re get much less money when retired.

completely true. further more, i dont expect to receive any pension anymore, as i dont see that system surviving until i get to go in pension (im 32)
and i dont exactly fancy a life of working until the day i die, but thats the way its looking right now :-(

we need a revolution of some sort, thats for sure. the time of free capitalism without restrictions is over (imo)

[l337raceryo]

completely true. further more, i dont expect to receive any pension anymore, as i dont see that system surviving until i get to go in pension (im 32)
and i dont exactly fancy a life of working until the day i die, but thats the way its looking right now :-(

This is going a off topic, but I never gotten the idea of retirement.

Why work away the best years of your life, just to wither away at some old person house? Yes there's a lot of elderly people who can manage to live the same way they can live as they were young. But coming from a black heritage, a family with a history of diabetes and high blood pressure, the odds are that I am not going to be a very healthy person once I hit my elderly years. I am taking steps to prevent such an outcome, but I am not holding my breath.


So here's my theory. Instead of working for 60 years, non-stop, with the dinky vacation thrown in for sanity sakes. Why not take little mini retirements? Work 5 or so years, save up a pile of money, and then retire for a year or two. Sure you may not reach the higher tier of money making in a company doing this, but if that's not your goal to begin with then it's no big deal.

I know people really cant afford to do this because they're up to their foreheads in debt, but it's something I'm trying to do. I mean honestly you really don't need to own much to have a fulfilling life. I never understand why people drop $4,000 on a canoe they only use once, when they can rent one for $50. Or spend $50 on rental fees at Blockbusters, when they can rent out the same movies from the library.

[Radical]

@**Spetsnaz**

Just one tiny question - why was the Fed sucking its thumb while "capitalism was destroying morale in people"? Isn't the government supposed to protect its citizens from themselves and all that?

Funny how free market economy is always blamed as the inevitable culprit every time the government fails to keep the economy in check.

@l337raceryo

There's a book called the "4 hour work week" that covers mini-retirements - the book itself is full of bull, but does have a couple of good points here and there.

[Vaarok]

I strongly disagree with the idea that restricting capitalism is the solution. The housing bubble was largely forced upon the banking industry by the Clinton government push to make loans and penalize those that didn't. Because the banks were forced to make dubious loans, they sought to cast them in a more lucrative light by overvaluing the loans, selling them as speculatory paper on the investment market, and promoting the overvaluing of the properties themselves.

Syndicalism, where the government tries to bend reality to conform with a political talking point or campaign promise, almost always ends in ruin or a rapidly corrupting hegemony.

This leads to things like the auto industry unions hamstringing the businesses that employ them because they've bought politicians who pass foolish laws, and then creating another massive correction in the economy when the legal constraints can't hold back reality.

A tight grasp holds on well until your hand tires, something slips free, and you must grab at it. A loose hand doesn't tire and is ready to dampen out the worst extremes without smothering anything in the process.

Lastly, I find government pensions a horrifying prospect. A Ponzi scheme based on the .gov coercing future generations to pay you seems dubious at best and vaguely immoral. Plus, I can think of about a million better places to trust my money than .gov stewardship.

[Retroboy]

So here's my theory. Instead of working for 60 years, non-stop, with the dinky vacation thrown in for sanity sakes. Why not take little mini retirements? Work 5 or so years, save up a pile of money, and then retire for a year or two. I've actually investigated this, and there's several reasons why it's not often well received, if it's an actual option at all. (And many countries won't allow you to keep a full-time job past seventy.)

The biggest reason is the cost to your company of replacing you at work. People can generally get away with an absence of two weeks because any medium-priority issues can be deferred and because it's accepted that everyone gets two weeks of straight vacation. But if you have a scarce or even reasonably valuable skill set, or if you have a good knowledge of all of the things that are required to do your job effectively, it would cost the company a hell of a lot more money to hire a temporary replacement or consultant than it would to just have you keep working for a year. Further, the job may drift over time if it does require anything more than standard menial labour, and you'd have to catch up on your return, possibly resulting in you being less efficient for the first bit. So the company isn't likely going to look kindly on a mini-retirement unless they're highly progressive.

Second, there's an assumption that the work will even be there for you in a year. That's a pretty big risk if, for example, your manager moves on and his replacement wants someone else that is guaranteed to be around. There's no legal assurance that the company can't dismiss you and no obligation on their part to keep you on the books when, hey, here's a young energetic and highly available buck that can do the same thing you did when you were around, but for two-thirds of your salary.

Next, there's the appearance of dedication. Everyone is expected to take their vacation. That's an industry and legally imposed standard. But if you're the type that takes lots of sick leave or takes extended personal leave without a compelling cause such as a sick family member, when it comes time to discuss promotions, you likely won't be in line for one. And that'll make it tougher to financially recover from your last mini-leave.

And finally: if you're less healthy at seventyish, what makes you think companies would even WANT to hire you? You'll have higher absenteeism, you could keel over any day, and you'll be a drain on their health plan. In essence, you're not hireable, so if you lose your current job, about all you can do is some low-paying overnight security stint at an abandoned warehouse or something.

(Note that taking a maternal or paternal leave doesn't come with the same degree of stigma, but it also generally doesn't help anyone's career.)

So in a nutshell, if you have a job at a company that's willing to let you take such a leave and you're guaranteed not to be adversely affected by it, of if your skills are so in demand tht you can write your own ticket and just start somewhere else on short notice, more power to you and I'd cheerfully take such sabbaticals without pay. But if you don't it's probably not wise unless you're willing to compromise greatly on stability if not pay grade. And (bringing things back into the thread's theme), given the state of the economy I'd bet less companies would be on the embracing side of this work option.

-- Retro

[Kirjava]

When the revolution comes, Vaarok will be first against the wall!

;)

[Radical]

I strongly disagree with the idea that restricting capitalism is the solution.

I'd beg to differ - there are two kinds of regulation - the unthinkably dumb one that virtually every government in the world practices and the right one, where you admit that companies will pursue self interest and are ready to cheat, lie, steal, kick babies in the face and do drugs to have their way and that it's up to you to prevent that.

I find it ridiculously amusing that governments openly admit that they have a capitalist economy and feign ignorance and surprise when companies do something amoral - hello? What were you thinking!? That they're going to play nice?



Lastly, I find government pensions a horrifying prospect. A Ponzi scheme based on the .gov coercing future generations to pay you seems dubious at best and vaguely immoral. Plus, I can think of about a million better places to trust my money than .gov stewardship.

We have that system here, and it's awesome! But only if you're the government that is, since you can get a special discount on pensioner votes for just $20! Everybody else - the pensioners and the stupid dolts paying for it are basically screwed over. HARD.

Currently the pension rate (the percentage of average pay you get once you retire) is declining, being partially fed through the national budget since its own budged is insufficient and might be a part of history by the time I retire - just after it finishes milking me for what I'm worth.

Gotta love socialist policies...

[Energizer Bunny]

Define amoral. Aside from cases of fraud (Madoff etc) I am curious as to what amoral actions have led us to this crisis? I am not aware of any recessions that have resulted from amorality.

[TheWickedGerman]

The problem in germany is the age-structure. Less birth´s means less people paying into system whiel more and more old people enter the system. And they get older and older, receiving lomger the money.


I can think of about a million better places to trust my money than .gov stewardship.

In germany, all pensions are managed by goverment(except additional provate pension you can make). So it doesnt matter if you trust the goverment to handle it.

Those for civil servants are safe, alot higher and not taxed when they are payed out.

Those for us normal mortal people, they are not safe(We had big reserves in the 70ies, and they looted it for the holes in their budgets for years, until penions had to be could and the ammount they take away from your wage for those pensions was raised again and again) and they will be taxed by income tax when you get them.

Time to apply for a job as civil servant. To get their pension, a normal worker has to work a few hundred years i believe.

[Radical]

Define amoral. Aside from cases of fraud (Madoff etc) I am curious as to what amoral actions have led us to this crisis? I am not aware of any recessions that have resulted from amorality.

Oh, dunno. Market speculation, land speculation, off-shoring, cartels, offering stupid people loans when you know they can't pay them off, etc, etc.


The problem in germany is the age-structure. Less birth´s means less people paying into system whiel more and more old people enter the system.

I like to call that brilliant statesmanship at its best. I mean, how hard was it to consider that birthrates might fall?

It's truly amazing how governments can put the fate of millions of people on a faulty assumption that's sure to backfire sooner or later.

As a side note, we're in the same boat - average pensions are about $300-500, civil servant's $2000+.

[Mr Carrot]

those issues of themselves are not moral or amoral the are the result of two different issues insufficient or ineffective regulation by central banks and governments and equally they are the result of true capitalism not being practised thanks to various lobbying and political interventions which would prevent such anti-capitalistic lunacy from taking place.

The real amorality is selling global financial security down the river for a few votes.

[TheWickedGerman]

Our goverments reacted to changed demograohics. Just 20 years too late. Also we would be standing much better now if they hadnt looted the pension money they had in surplus when we had a lot of working people with many children with fe old people. Then they had only reacted about 10 years to late(Ok, numbers are guesswork now)

Personally i blame emanzipation. Those stupid woman who want to work instead of getting cute little babies. Damn you!

[Radical]

Our goverments reacted to changed demograohics.

Who said my government did? We're still using the same pension system left over from socialism. Apparently, what was good for holding power in a socialist dictatorship is also good for holding power in a democracy. Go figure.

[sang]

kind of topic but last night i was watching a tv show about this and then afterward i watched some thing about the moon landing being faked and then it hit me. It said that in two years japan will fire a rocket to map the moons surface and if we did go to the moon there would be things still there such as moon buggies. The USA dose not want us to find out so they start this so maybe they will not be able to do it. What! its no stranger then some other ideas i have seen why this has been happing.

[**Spetsnaz**]

admit that companies will pursue self interest and are ready to cheat, lie, steal, kick babies in the face and do drugs to have their way and that it's up to you to prevent that

thats what i meant, but he said it better. Right now, we live in an age, were MONEY = GOD. period. Not for everybody, for the majority for sure.
The power to keep this evil in check should be the gouvernment. We pay taxes to our "social-democrat" gouvernment so they can assure us basic services, so we dont depend completely from the rich people who would surely dump us in poverty if they could (like in the 19th century, child labour, 16 hour working days for minimal wages, sweat shops etc etc): the gouvernment should assure infrastructure, health care, security, justice for all, etc etc

well, the amount of taxes we pay has NEVER decreased (all europeans will agree i think) but the level of services provided by our gouvernment has decreased significantly (well at least in belgium, and i think elsewhere too): for example, every town used to have a hospital. a good one. right now, since like 10 years those are all being closed to have 1 mega hospital somewhere because "its not economocal viable"... ?! how come it was possible for 40 years then? what the hell do we pay you for? another example is the complete lack of good statemanship, like preventing this crisis, as Radical said. this falls into justice, which is another core task of the gouvernment - assuring law & order...which in case of belgium is an epic fail. and i think it isnt just belgium: starting from a certain level all politicians are corrupt. With a capital C. off course they know companies are exporting weapons to Pakistan jihadis, or invading other countries just to steal their oil, polluting the earth/water/air to make monster profits, but hey, i get paid a nice bonus for my new political campaign next year....

in my experienxe, specifically for belgium, it doesn make 1 flying s**t of difference who is prime minister, the problem never changes.

the "base corruption" (lets call it that) always remains and is imo inherent to the capitalist system.

its true however (thanks radical) that we cant take out the market system. thats is not what i meant. just the system, this capitalist system, that thrives on profit.
off course there must be incentives, but they should change from $$$$$$ to something else.

right now, too much criminals are in top positions. people who only care about their bonus (based on stock course) and dont care about anything else.

i hope its understandable for you guys what i mean

gr

S

[Synthmon]

What's with this anti-government spookyness? You live in a bloody democracy. There's no ulterior motive in the governments actions, well, at least there isn't in European states, and anybody who innately distrust everything stateside have obviously missed something. To the contrary, it's the banks and private companies that through the lack of government regulation started spending their client's money in risky ventures.

[sang]

You live in a bloody democracy

Thats what they want you to think. :lol:

[Synthmon]

Obama can fool me any day mate.

[Coey]

Ooooh me too! Obama can do whatever he wants to me.

[Radical]

@**Spetsnaz**

Don't get me wrong, I don't support social systems at all, because it usually breaks over my back and means higher taxes.

What I'm saying is that yes, the government should regulate, but the right way. I find this current crisis is in a large part due to the failure of governments to properly regulate.

I don't blame banks for much of the problem - sure, they're greedy, sure they'd go quite a bit to get their way, but that's to be expected, not ignored. The government is there to make sure situations like this don't happen, not to serve as a sinkhole for tax money.

If you agree that you live in a capitalist system then you should know what to expect, and react accordingly. While it's somewhat acceptable (read: not at all) for regular Joe to be completely oblivious of how entities in a capitalist economy act, it's utterly unacceptable for a government regulation agency. And no, I refuse the accept "but they're only human" excuse - either do the job properly or don't do it at all.

As for social security - we've had free education, free healthcare and state funded pensions for about 60+ years now, first in socialism and now in a democracy. About 1.4 million out of 4.5 million people work. Our percentage of highly educated people is 7%. Free healthcare recently stopped being completely free because there's not enough money. Pensions have been declining and will likely disappears altogether by the time I retire.

In short, it's what I'd call the complete capitulation of a social services system, and from what I hear, Croatia is not alone in this.

The only way out of this mess is capitalism, not socialism or any combination of it. But a very specific, regulated-only-where-it-needs-to-be capitalism.

What you and a quite a lot of other people are experiencing is that democracy cannot work without active participation of the people. And no, voting every 4 years is not active participation. Politicians will not feel themselves accountable until somebody demands they be accountable.

[TheWickedGerman]

Radical goverments is a typo. I wanted to say goverment(the german)

Edit:
Radical when you say free healthcare what do you mean?(Its OT but im a bit confused, also i foget that question in the other thread).

Nobody pays for it and its soley tax financed? Or like in gemany.

Thosw who work for an employe pay a % of their wages for healthcare(the gov keeps the money direct for itself, you never see it, like taxes, and give it to the insurance comapnies)un less you earn more than 4000€ a month tor you ran your own company, hten you can insure yourself for a priavte company.

Your employer pays the same ammount for the insurance was it not taken from your wage(additional costs for him).

But iof you´re unemployed, your insured for free(the goverment pays also the minmum fee for the pension insurance(which is so low that they could stop it, because if you are unemployed too long or dont maje enough money your end off in the social programm when you´re old.)

[Energizer Bunny]

Oh, dunno. Market speculation, land speculation, off-shoring, cartels, offering stupid people loans when you know they can't pay them off, etc, etc

There is nothing illegal or amoral about any of those that I can see. The last point (lack of repayment capability) is arguably negligent. Please provide some actual detail as to why you feel something such as off-shoring is

a) Amoral
b) Responsible for this recession

[Radical]

As far as I know, it's financed through a mandatory 15% "medical tax" paid from each employees salary. Only recently have there been some changes, such as prices on checkups, hospital stay and some other things. Every citizen is covered by the plan, but I don't know what falls under it.

I do remember that invalids and people with some extremely rare diseases are continually asking for donations, so I assume that's not covered.

EDIT:

@Energizer Bunny

I don't. But ask any social(ist) about it and he'll be sure to mention them to you. My only qualm is with business ventures that enrich only the entrepreneur while society bears the cost. I see lending money with interest and land speculation as such, but only because I believe there's an alternative.

[Energizer Bunny]

Is there a realistic alternative to credit though? While it does come back to bite us in the ass occasionally its an absolute essential to society as a whole. I can't really see how the economy would work without credit.

[Radical]

Is there a realistic alternative to credit though? While it does come back to bite us in the ass occasionally its an absolute essential to society as a whole. I can't really see how the economy would work without credit.

To be quite honest, neither did I, until I ran into a pretty interesting concept - Interest Free Money. Basically, the government treats its own currency like any other service it provides and charges a tax on it, but with a little twist - those that spend their money are not affected because this "tax" is due at the end of month/year. So the only people affected by it are those that hoard money. This includes banks as well, which would be forced to lend money so as to not suffer a loss.

Unlike most other systems, this one was actually tried and found to be functioning. If you want, I suppose I could search for an article about it.

[Energizer Bunny]

Never heard of that system. Are we saying that this tax effectively replaces the notion of interest? If so, why does any party that is not the government get involved with lending? There seems little benefit since you have the risk of paying tax if you're holding funds and no benefit at all if you're lending them. It seems like a lose-lose scenario. I'm at loathe to pass any judgements based on a couple of paragraphs, but my initial overiding thought is that it sounds like a system that will encourage borrowing and discourage saving, which surely is going to only further accentuate the over-leveraging problem we're currently experiencing(?). If you have an article I'd be interested.

[Retroboy]

Something about that Interest Free Money system doesn't work, though. There are solid and strong reasons why a family has to have a rather large rainy day fund - medical bills, a senior that's about to become someone that's no longer self-reliant, college tuition for young'uns, that big dream ticket item they've always wanted - and of course a house. All of these require saving up over multiple years if you don't have a perfectly reliable credit rating, and I really don't think it's appropriate to charge a fee for someone who chooses to park their liquidity instead of relying on a third-party to provide any excess beyond their daily needs.

It sounds interesting, but it also sounds scary and would need some thought about how to allow people to self-manageable credit versus debit balancing. I'd feel better if I'm in control of how I wish to use my personal finance.

I'd like to see that article - and maybe it could spawn a spin-off thread as it's an interesting sidebar.

-- Retro

[Radical]

If I understood your question correctly, you're asking why would banks lend or hold money or even exist anymore?

Well, they could always charge a small handing fee for their services and fund themselves through that.

The point of the system is to encourage money circulation. This is not to say that savings would be discouraged, since you could still invest in stocks or bonds, but not hoard money.

Here are the articles:
http://userpage.fu-berlin.de/~roehrigw/kennedy/english/
http://www.sunshinecable.com/~eisehan/woergl.htm

The first one covers the system itself and the second talks about the experiment.

@Retroboy
Not necessarily, banks could offer a special account in which money does not lose value and withdrawal is limited (saving account??). However, the bank would be allowed to lend this money, which it would have to in order to avoid a loss.

EDIT: Of course the bank wouldn't pay the person for saving in this account.

EDIT #2: Yet another idea is to buy an alternate currency, whether foreign or local, thus shifting the "bad" money on to another entity.

[Energizer Bunny]

Ok, this is a slightly different concept to the one I first thought. Its basically one town imposing its own monetary policy when then co-exists with the national monetary policy.

At a conceptual level, I get it. For those who haven't read the article it seems to be based around the accepted economic principle that velocity of money x money supply = GDP, so by driving the former up you can spend your way out of recession. The authorities in this instance accepted that Austrian currency was in short supply and velocity had slowed to a crawl, dragging down the economy. To combat this they effectively introduced their own form of bank note which they then issued in place of regular currency. The result (and reason some claimed a success) was that public spending went up, and unemployment down - i.e. the natural signs of increasing GDP.

Only the first link works for me, and its a staunchly pro Worgl piece and so doesnt really dwell on any problems, but I can see a few:

1. This is a small town arguably acting in a microcosm for a relatively short period. The experiment only ran for a year.
2. As a monetary policy, its hugely interventionist. Prices are never allowed to fall. The natural result of printing money should be rapid inflation, but the article claims this did not take place. I don't really understand why (and there is insufficient detail to deduce it), but I'll hypothesise that it was due to either the extremely short timescale (a one year timelag for inflation to kick in is perfectly realistic) or due to the bizarre dual currency system that was operating in the town at the time.
3. The last point is, I think, the crux of the whole issue. You have a small town operating, alone, with two currencies in circulation. One, a national currency, in short supply and another, a local currency, in great supply. The result, I suspect is that people continud not to spend the national currency just as they had before, but were happy to spend away their new currency because of its abundance. A monopoly money effect if you will. If somebody gives you the equivalent of $10k in some new cureency, the natural reaction is surely to go and burn it in the shops while you can, but save your regular cash.
4. This is before you even get into the issue of negotiating with parties outside the town. How would an economy continue to function as a microcosm if its currency is not recognised elsewhere? If for the sake of arguement the whole country had adopted the system, an exchange rate would have been set against the new currency that would have massively devalued it.

Printing money is not and has never been the solution to an economic crisis. Trying to stimulate public spending is what all economies do in tough times (rate cuts etc) but the printing of money only acts as a short term stimulus. Had this experiment been allowed to run for longer, I cannot see how it would have resulted in anything other than the same outcome to other nations that print their way out of trouble - hyper inflation.

I didnt see much of the notion of interest rates changing, but perhaps there is more of this in the first article.

[Radical]

I don't think that there was a massive printing of the new money, but rather, a set amount so that there'd be no inflation or deflation to speak of.

The 10k you mentioned would indeed be spent, but the business' receiving it would inherit the problem - either spend it or have it lose value. Hence, money would circulate much faster.

[Lomax]

Today I bought a wholemeal bun for 50 Eurocents. That's 1 DM for a bun. And still, the myth lives on that the Euro didn't make stuff massively more expensive in Germany.

[Vaarok]

This Interest Free Money theory is that same idiotic Marxist idea of Value Theory cast in a new costume. Value-added is how an economy functions. Money isn't worth what money's worth, money's worth what having money can allow you to do plus the profit you'll make, which you pay part of back in interest.

By restricting the amount of money, you don't control the other half of the equation, which is assets and value, you just restrict how much of it's readily marketable for cash at a time. So you're basically begging for privately issued securities like bonds and stocks to be used in lieu of this fantastic limited (or perhaps we should say crippled) "money".

http://bastiat.org/en/capital_and_interest.html

The government corruption thing just rings of another Bastiat essay, by the way.

http://bastiat.org/en/the_law.html

[BmB]

But wouldn't the solution then be to just print more money? Instead of, you know, arbitrarily saying "you owe this much to ultimately nobody and thin air".

[Radical]

@Vaarok
Actually, it's not Marxist. The idea was first developed by Silvio Gesell (http://en.wikipedia.org/wiki/Silvio_Gesell), a merchant.

Have you read the articles I posted?

@BmB

No, that'd cause hyperinflation. The beauty of this idea is that you don't have to consistently print more money, you have a fixed amount that doesn't leave circulation (because it's in everyone's interest to get rid of it) and in fact, judging by the Worgl experiment, circulates several times more rapidly than regular money.

If I understood correctly, the point was to prevent shortages of money because people hoard it.