Nearly all bubble TV economists didnt see 2008 coming, and now there making there picks on when it will end, they wont get that right either ! I have found the best commentry on the situation, and there pick is that we are in the 3rd innings of 9.. http://www.itulip.com/forums/showthread.php?p=31714#post31714 First part of interview is Free, second part you need to be a member ( thats up to you).. I am not a sales person for the site either, just a subscriber.
CEO of golden snax made a comment recently that we were mid-way through the whole credit crunch process. Assuming that this started in August '07, and it is now March '08, giving us about 9 months, means it should be another 9 months until its over and things have re-adjusted. That would bring us to January '08, and a new presidential administration. I would listen to his opinion.
There is no earthly reason why it would only last a few months. It has to last until debt s get back to a manageble level, both public and private, IMO. Until then either the dollars you measure in will be being made worth less, to inflate it away, or it will remain until the nation learns to live within its means. Perhaps some of both. Just my opinion, but its certainly as valid as any snack food CEO's.
Read the article, the main tool to the FED to reduce debt is inflation. The Fed needs to inflate the debt away. Thats why the $USD is falling as its a critical source of inflation when other asset prices (house) are falling. Cost push inflation. The hope is that this inflation ends up in wages, and higher wages means that asset prices will stable and debt easier to manage. This is also why the FED cannot have the stock market falling, that would be two large assets classes deflating. The Fed also cant have monies going into hard currencies like gold and other commodities, they want these funds in the financial system (Stocks, bonds) not in commodites. The recent sell of was a signal from the FED to watch out, they are targetting you. The problem is that inflation will not get into wages if the employees do not have the bargining power to demand higher wages. Stable employment is critical to inflating debt away. If you cant inflate the debt away then the economy deflates and adjusts downwards in GDP and asset prices. The employment numbers each month are critical....
I agree with a lot of that, but there has been, and is no wage inflation, because globalization has forced wages to appear to remain the same in dollar terms at the same time as the dollar has been cut in value by 50%. I don't see any imbalances have changed significantly as result of the debasement, so therefore I see no reason it doesn't continue to a breaking point where no foreigner wants to hold US dollars. At that point, you'll get your cost inflation, but I suspect the wage inflation will not materialize because of the globalization pressures, and the net result will be a drastic decline in the standard of living while everyone pretends all is "OK".
Dear thriftybob, I said wage inflation expressed by the article is a way out. This is what happened in the 1970's. The article concurs that it also is unlikely , unless its by decree from a USA President. But there are head winds to allowing wage inflation... - Economists dont like wage inflation - Globalisation like you say - Unemployment, thus no bargining power to the employee - Wall street dose not like wage inflation - stocks earnings slows - Inflation headline needs interest rates like the 1970's. Ever wonder how people paid those 20% mortgages, you got it wage inflation. The USA President must say, 'to hell with wall street and the establishment, wages are going up'... Not likley. Debt deflation and asset price deflation is on the menu I am, sure of it !! Read Article dude...
IMO, they will try to prevent deflation to their dying breaths... Here is an article I think describes the situation in a simpler, better fashion. I like the idea that its a view of it from the outside. I think we have a distorted view, looking from the inside. So many of the numbers they are feeding us are distortions of the truth, its no wonder they are having problems dealing with it, because they are now assuming the data distortions are reality. The real cost of everything is rising, but wages are only rising a portion of the pretend cost inflation numbers. AS I see it, the reality is that our standard of living is being massaged downwards via debasement of the dollar. http://falkvinge.com/2008/03/why-us-is-collapsing.html
THE END TO THIS RECESSION (IF THEY DONT MESS UP ANYTHING AND KEEPING THINGS CONSTANT) WILL BE FINAL QUARTER OF 2009 OR FIRST QUARTER 2010. ALSO, THEY NEED TO REGULATE MORE THE SUPPLY SIDE OF THE ECONOMY, THAT IS THE ONE THAT BRINGS PROSPERITY IN THE LONG RUN. DEMAND ONLY BRINGS INFLATION. WE HAVE TO WAIT!!!!!
(It must be bad if capslock is here) To the OP: Economists DID see this coming, so did many others, although the timing was generally out for most observers (except the magical hindsight traders). As to the exit from this particular downturn, it all depends on (obviously) when the economy bottoms. That could be quite far off, as there'll probably be a small, artificially manufactured bounce just before the election which will disrupt the cleansing process.
The Business Cycle is nothing more than passing the hot potato around in hopes that you're not the one holding the bag of sh*t in the end. Tech stocks -> real estate -> gov't bonds -> ?? Corporate bond holders, IMO will be the bag holders in the end as yields will surge (look at Thornburg's proposed debt package) and create the bubble of all bubbles. Gordon Gekko, while a fictional character in a movie, sums it all up. -It's all about the buck, the rest is just conversation. -It's a zero sum game, somebody wins somebody loses. Wealth isn't lost or made it is merely transferred from one perception to another. This is going to be the biggest re-distribution of wealth in the history of the world. We have big groups of human beings at different levels of conciousness and that presents a very dangerous situation.