Buckle your seatbelts. The rides about to get real bumpy. US Faces Severe Recession, Feldstein Says RECESSION ECONOMY FELDSTEIN By Reuters Reuters | 14 Mar 2008 | 10:37 AM ET The United States has entered a recession that could be "substantially more severe" than recent ones, former National Bureau of Economic Research President Martin Feldstein said Friday. "The situation is very bad, the situation is getting worse, and the risks are that it could get very bad," Feldstein said in a speech at the Futures Industry Association meeting in Boca Raton, Florida. NBER is a private sector group that is considered the arbiter of U.S. business cycles. Feldstein said the federal funds rate is headed for 2 percent from the current 3 percent. He added that lower short-term rates from the Federal Reserve would not have the same impact in the current downturn, in terms of reviving economic activity. "There isn't much traction in monetary policy these days, I'm afraid, because of a lack of liquidity in the credit markets," he said. The Fed's new credit facility, announced on Tuesday, "can help in a rather small way ... but the underlying risks will remain with the institutions that borrow from the Fed, and this does nothing to change their capital," Feldstein noted. Feldstein noted "powerful forces (that) will continue to drive inflation higher." And while inflation expectations are still relatively well contained, "you wonder how long that's going to last," he said. Copyright 2008 Reuters. Click for restrictions. URL: http://www.cnbc.com/id/23629967/
In the long run, a severe recession could be good since it ends deleveraging consumers -> right now Americans spend ~$1.02 for every $1 that they earn. During a recession, Americans would start spending less, and instead use the money to pay down their credit card debt. At the same time, due to the decreased spending, our trade deficit would be reduced, and the dollar will strengthen. Meanwhile, the downside is pretty severe as the credit crunch is headed for a "NCNB" situation, or "no cash for nobody" scenario, whereby firms will have to pay excessively for project financing or for capex. Either way, hopefully we've learned from the housing bubble burst, and the rating agencies will buckle down on ABS going forward.
You're not taking into account that during a recession people would be earning less. The ratio of earnings to spending won't necessarily change in a recession. The more likely outcome is personal debt gets reduced through personal bankruptcies. The credit markets have been locked down since July, aside from a couple small windows. Your NCNB situation ain't new and it won't be getting better. And frankly, for those of us that have been smart in that business, we have no incentive for it to get better.
could this pending R become the dreaded D? as in depression? i've read a couple of doom and gloom pieces that say that is in the near future.
I've said it before, but manufacturing is really strong in our country (at least compared to recent years). The banks are the ones who really stand to lose, but in my mind, they deserve to. In a global economy, if US banks can't lend, manufacturers can still borrow from overseas. I personally think we are in better shape than in the 1970s, but that is the most similar situation.
what about the wage disparity talked about in this piece? of course considering the source, could this be complete hogwash? http://www.yaledailynews.com/articles/view/23934
It's more likely a little truth padded with a lot of hogwash. If wages are up for everyone, I generally don't worry much about wage disparity. Maybe I'm wrong, but I think those things work themselves out. I fully expect this recession or whatever it is to hit bankers the hardest. People that work in finance and banking make up a huge portion of those making ridiculously inflated wages. In my industry, wages are way up for virtually everyone over the past 5 years. (My company is privately-owned, so executive wage is basically just non-reinvested profits.) Hours are also up, and compounded with increased wages, it's rare to talk to an hourly technician that doesn't make well into 6-figures. Home construction has already been hit, and that effects middle- and low-income workers more, but if they are legal, they should get into industrial construction or ship-building. Those industries are desparate for skilled labor, and many construction workers have those skills.
lol we have liberals on here cheering the recession and some predicting a depression. Take a look at actual numbers, folks - you're severely overreacting. Obama wants to raise taxes in this environment. F'ing clueless
^^ I should clarify this statement. If wage disparity is being driven by protectionism like was being promoted during the Progressive Era, that won't work itself out. In fact a few years of protectionism can mean a huge amount of accumulated wealth, more than can be redistributed during huge redistribution efforts like the New Deal.
No Al Qaeda attacks in the US since the WOT started. Obama wants to pull out slowly (leaving time for AQ to train, according to your logic?) and then have the trained AQ come to the US. F'ing clueless
What is stopping all of the currently trained AQ (hat tip to W) from coming right now? Or are they waiting unitl 2009 to come?
This is what happens when a D student makes posts. The President does not that much control over the economy as much as you think he does
