Recession in the USA?

Discussion in 'Economics' started by johnstang, Aug 15, 2007.

  1. Will there be a recession in the USA and if you think there will be how bad do you think it will get? I think there will 100% be a recession and I think it will spread to Canada, UK, most of Europe and China.
  2. There is never "100%" chance. This is all guesswork.
  3. What timeframe are we talking about here?
  4. 12 months.
  5. Taking the definition of a recessiong as consecutive quarters of negative GDP growth, then the odds are definitely against it. There are only three ways it could happen:

    Q3 and Q4 are negative
    Q4 and Q1 are negative
    Q1 and Q2 are negative

    Given the relatively strong Q3 forecasts I've seen, I think we can safely rule out the first possibility. Expectations are for a drop off in Q4, but not by a heck of a lot. I just heard something in the lower 2s. Even if that ends up being well off, it should still be positive, so the second possibility is out.

    That just leaves the first two quarters of 2008 being negative to say we'll have a recession inside the next 12 months. Maybe you get to Q2 and see red figures, but it seems like it would take a lot to get to negative from pretty positive in only two quarters.
  6. I'm wondering the same, and also whether the current interventions of the central banks will not impact negatively this assumed recession, should there be a recession. Here are my thoughts about it, I certainly miss many points and I'll be glad to discuss this matter in some depths.

    The mortgage crisis has its origin in USA, though one may wonder the same kind of mess does not exist in Europe, but for now, I will assume it does not. However, Europe market is impacted via the banks and various funds investments in USA, I think though that the market is currently overreacting. Anyway, as of now, the net result is that the EUR is loosing against all currencies while the USD is up, as for the JPY, it is still not very clear what's happening to it.
    I would expect the mortgage crisis to induce a fall in price within USA following a decrease of consumption, it definitely is too early to talk about deflation. In this context having a strengthened USD may be quite detrimental to US economy, since exports will become more difficult. On the other hand, imports will also decrease, impacting all other economies (Europe, Japan, Asia).
    Furthermore, the Fed and the ECB are contemplating a currencies swap, which would strengthened the USD (or so I think):{979B396A-3738-4EEC-8376-3630883C60A9}

    In consideration to all this, it seems the central banks are more preoccupied by the well-being of bankers and hedge funds managers than by the economy of their respective countries. So, the question is: Does a wealthy finance sector ensure an healthy economy ? Or isn't the confusion of these two dimensions at the root of what is called "bubbles", and therefore the direct cause of economic crisis ?

    These are just random thoughts, I am not an economist, and I just wish to understand what's going on here.

    As for the timeframe, I would definitely look at more than 12 months for the whole crisis to really unfold, maybe in the next 3 to 5 years.