Economy , going to get a whole lot worse ?

I don't doubt it. This country is a train wreck. When they start shutting down entire branches of the military (Joint Forces Command) to save money, you know we're in trouble. It's like a fire sale to try and stave off bankruptcy. Luckily, I'm already broke.

I do not doubt it either!

Sure looks like the US have struggled big time the last couple of years, and I seriously doubt this is the end to it.

Luckily we have not experienced something even close here in Norway. Guess we can thank high prices on our main export items - oil, gas, metals and fish. Unemployment went up quite a bit in late 2008, but have since then pretty much recovered to what it used to be - around 2-3%.

Guess we will have to wait and see.

That article is about 6 months late.

The economy is in a vegetative state, kept barely alive by extraordinary measures.

Mayan calendars aside, 2012 is going to be a hell of a year.  Commercial property is imploding, and 2012 is when the Alt-A, Option-ARM and corporate bond apocalypse begins.  They'll pull down the prime market, too.  I don't think the government will be able to prop things up a second time, either.  I have no idea how that's going to turn out.

Nothing will get better until the real property mess is sorted.  There's still a small window of opportunity if they changed the bankruptcy laws to allow mortgages to be modified down to market value.  Won't happen, though, and I'm not going to get into politics here.

Anyhow, the article is fairly good.  I've pulled out of the stock market and went with government bonds, cash, real property, and some personal property.  Also cut all the debt I could and am going to take it very easy on spending over the next 18-24 months.

No finance reforms since the last meltdown.  Next recession is just around the corner (hope we get out of this one first).

I need to find some tangible areas to place my money before inflation smashes my IRA into pieces.

Goodness! the pessimism in this thread.

things are never as bad as you think but never as good as you think.

Take a tempered view and diversify across asset classes: equity, debt, commodities and real estate.  Just remember if you are young, time is on your side. 

Quote:

Originally Posted by chesebert 

 

 

Take a tempered view and diversify across asset classes: equity, debt, commodities and real estate.  Just remember if you are young, time is on your side. 

 

 

Heh, tell that to the people who wanted to retire in 2008-9.

Quote:

Originally Posted by The Monkey 

Heh, tell that to the people who wanted to retire in 2008-9.

1. continue working for 5 more years?

2. should have gotten out when the market rebounded (before May)?

3. should have saved more when younger?

4. did they not learn the lesson of the tech bubble, considering these folks were well on their way to retirement even then (if not, they are way too young to retire - keep working).

I definitely don't think this is going to be the end all be all, we have had worse recessions we just need another world war(Come on korea)

I don't think it will. I have a few good reasons too, heres the first one, all the stimulus money that was put away for construction projects will finally start to see action at the end of this year or early next year, and construction is suffering just as bad or worse than almost any other industry. I know, my dad is a structural engineer, and 40% of them are out of work in California. Second, while we overall lost jobs last month, the private sector gained jobs, and hasn't lost jobs in something like 8 months. Our GDP has is still growing and companies are still trying to get a feel for all these new reforms and are a little hesitant, but private companies combined in the united states have something like 2 trillion dollars in capital at their disposal right now. Why they aren't spending it is because investors still haven't decided if the market is stable enough to do big projects.

If there is a second dip, chances are it won't be national, but local. Smaller towns could dip into another recession, but it would be hard to see a place like NYC, Chicago, or Los Angeles bounce back within the next year or year and a half. The reason being is that there isn't a huge consumer market in those small towns, so companies are less likely to expand or reinvest in areas that once failed during the recession as quickly as they would for example a big city. If I am rebuilding a company, I am making sure that the my bigger market locations are successful before i try to get every last cent out of the rural areas. Of course any place in California might be doomed.

So my advice? If you are looking for a job, try and find a way to retrain yourself if u aren't in something technical. Volunteer to help people, so when your at your interviews, you can say you have done something positive with your time out of work. Don't loaf around if you can help it. As long as your productive, there will always be a way to get by.

Scott, the unemployment rate is fiction.  It's gamed and massaged, and doesn't count the underemployed or those who have simply given up on the market.  When you simply add the "uncounted," unemployment rates are closer to 20% and closing in on Depression levels.

The problem with the stimulus and reserve capital is that it pales in comparison to the real estate bubble.

This only shows the insanity through 2006.  It's come down a little, but nowhere near the baseline, where it should be.  It's not just that the properties are overvalued, it's that the overvaluation was used to prop up the economy the past 10 years.  Values went up and up, so people took out equity loans to buy more stuff and pay for things.

The problem now is that all that "free" money from equity lines is gone.  It's not coming back.  The jobs created by that money being spent are gone.  It was the equivalent of going on a mad spending spree with a credit card and then not paying it back.

Also, the overvaluation of well, pretty much everything, made a mess of the banks.  Banks get to lend based on the value of the assets they have.  Sounds fair, but the banks went crazy lending money based on phony asset values.  If I remember, banks get to loan out $8 for every $1 they have.  Now, if you have a $1,000,000 house on your books, you should be able to loan $8,000,000.  But if the value of that house falls to $300,000, then you can only have $2,400,000 outstanding.  If you have $8,000,000 outstanding, you're underwater and will be taken over by the fed.

It didn't get much attention, but the banks gamed FASB awhile back.  FASB sets the standards for GAAP, which are accounting standards.  The old rule was that you had to value assets at the market value, or "mark to market."  If you had an acre of land and all the other property around it sold for $25,000 an acre, you had to value your acre at $25,000.  Makes total sense, right?  Well, the banks had that rule changed.  The wording is slippery, but it boils down to "I can value things at whatever I feel like."  So that $25,000 acre surrounded by thousands of $25,000 acres can now be valued at $1,000,000 if you feel like it and the independent auditors can't ding you for it.

Put succinctly, every single bank in the United States is a zombie bank.  They have overvalued assets on their books, tons of bad loans, and are lending out money on assets without value.  It's been this way since the crash in 2008.  The entire financial sector is the Night of the Living Dead.

The "stimulus" and all that stuff is irrelevant.  Back around the crash, the fed stopped telling us how much money is in circulation.  There's only one reason for that - they're running the presses like crazy.  I've seen a few estimates that the money supply has nearly tripled.  Think about that.  There's a good reason why China and other US debtholders aren't terribly happy with us.

When the money supply goes nuts, you usually get inflation.  The creepy thing is that there's some deflation going on.

Anyhow, it's not good.  All the demand for goods and services that the false equity created are not coming back.  Everyone was borrowing against a complete fiction, and that fiction finally fell apart.  The only way out is to directly address the bubble.  That means having bankruptcy courts readjust property values and mortgages to real market rates.  It also means tight financial controls to keep people from making liar's loans then repackaging them as "AAA" rated crap to sell to others.  And lots of other stuff.  But there hasn't been any reform or any attempt to fix the real problems.

I thought long term stuff are on the books based on their historic value and are not marked to market prior to the change in FASB rule a few yrs back.  Marked to market for CMO is a thing of recent invention.

am I wrong?

I still believe there is just one way to really fix this problem - change chapter 13 of the god damn code to allow write down of primary mortgage.