Will There be a Depression?

You hit the nail on the head about construction.

Last time we had a major credit tightening was in the 70's which led to a big recession.

I worked for a home builder who went belly up due to the very tight credit market. It was my Dad's company.

Home builders and Construction companies have to be feeling the pain right now because I think the credit crunch is going to be very slow to recover no matter how successful the bail out is.

Watch for rates to climb and lenders to be careful as a fall out from what has transpired this week.

I don't see any credit bubbles rising from the ashes very soon.

 

Sishir,

I should say that while I don't think there's going to be a depression without the wrong kind of intervention, home construction isn't going to recover soon. I think we're going to see a fairly long-term resistence to people tying up majorities of their net worth in a house. I'd expect high-end housing to continue to fall, and building to not return soon.

Sorry.

 

There will be a great design/build industry for someone who can figure out how to transform those 1000 small bank buildings on every corner into a sustainable use.

Food Co-ops or consignment shops or Soylent Green outlets.

I'll go on record that there are some hard times ahead for Americans. Whether you call it recession or depression is subject to the definition. But we have made ourselves into a service economy with no real engine of value creation.
You need manufacturing to take land labor and materials and produce something that is greater than the sum. We've been creating monetary value though stocks and real estate and they only appreciate while the pyramid is being built. The unlimited growth model is fundamentally flawed.

Without easy credit the US model is fundamentally screwed.

 

I just bought some chicken wire. We plan raising chickens and farming the backyard... may even be able to pick up a dairy cow cheap from a neighbor.

 

Accurate description of our economic model.

Maybe mega-churches will buy the bank buildings and convert them to houses of worship?

 

I'm more optimistic than you about the results, but I think you're onto something.

My blog post from earlier today:

http://pitchforkandmusket.blogspot.com/2008/09/why-crash-will-happen-and-why-its-good.html

 

i love this little scare tactic to push forward for a govt bailout. it's one of my favs.

 

It also happens to be true - is there a specific aspect of it that you are disputing?

 

I feel a bit depressed after reading this thread.

 

Did you get my email?

 

So should I get all my money out of the banks and mutual funds and "hunker down?"

 

How will the bailout help the stock market? Won't the bailout lead to a decline in the dollar, thus a decline in investment in the US stock market?

 

Weslinder

Cool. Americans will save and not spend. All their savings will produce manufacturing goods that they don't consume. The goods will only be consumed by persons outside the country. They will just kick the butts of all those Chinese and Indians working at $50c per hr in large corporations, with our American "can-do" or whatever.

Let's pretend that all of these producers of goods not consumed by Americans are at the small business level without any public stock, therefore we don't need the stock market or big banks. The local credit union, noted for it high pay and great benefits, will do just finde. There we took care of that messy problem of banks, stocks, credit markets, government regulations. No need for any of that.

Let's forget about anybody over 45 or 50 or whatever. BTW let social security implode, too. Libertarianism/economic conservatism rules!

 

I will check it as soon as I get home. Thanks, I have been worried about you. I wrote before the storm, but it was returned.

 

It's just an observation of what I think is going to happen, and I don't think we can do anything to prevent it. It's not political, it's an observation. And I still believe in the ability of Americans to produce. Japanese companies still believe in the ability of Americans to produce, and others, too.

You are exagerating my claims. Americans will continue to consume, and consume a lot. A few percentage-point drop in consumption leaves us as the world's greatest consumers, but it gets it back to reality.

The stock market will rebound. The smaller, less-exposed companies will float the economy along, profit, employ people, and invest those profits and wages. Big business is going to take a hit, but it's not going away.

Obviously, the drop in the stock market and excess of the past generation is going to make more retiring baby boomer parents dependent on their children than previous generations, children of baby boomers will have to sacrifice some of their wants to take care of their parents, and other social changes. I'm prepared for that, and while it's not really a positive, I don't think it's that much of a negative.

 

the odds of it actually happening.

 

What is your basis for this assumption? As I said before it's already starting to happen and companies are pulling back from the CP market. Do you have any basis whatsoever?