Tipping point for the downturn regarding the US economy.

Say there was one point you would like to emphasise as being the tipping point for the US economy entering it's downtrend that it is on for some time now clearly what would it be?

Cheers.

 

I see a few:

1) When someone decided that house prices would go up forever and therefore:

a) financial houses should be allowed to box up manure and sell it as something like Collateralizes Debt Obligations

b) Instead of putting 20% down, even the nearly unemployable can get a house with 3-5% down, and then even borrow that including points and other costs...

2) The Western World confused "free trade" with "eliminate most tariffs and controls and let Chinese factories, Indian services, and 3rd World fish farms outsource millions of jobs at 15% of the pay and without worrying about the environmental consequences and not have to buy much from us"

I don't worry about trading with Australia. But when you sell to China, it is mostly raw materials and equipment used to create more factories so you have fewer jobs at home. They are boning up on Western technology, because now automobiles and jetliners are also within their sights. How will Boeing and Airbus compete in 10 years???

 

It will be when the gubmint issues every adult citizen in the US a Treasury Check for 1 Million USD.
That'l be us tipping over the edge into the abyss.

 

Regarding the steepness or severity of the downturn, definitely the failure of Lehman Brothers Sept 15 and the chaos that ensued through their collapse (enhanced margin accounts in London locked up, default on bonds and all OTC trades)

This - in hindsight - seems to have set off a chain reaction reaching into Iceland, Eastern Europe including Russia etc.

I think that day marks the point of going from discounting a textbook recession to discounting a (not so textbook) depression.

One can still be amazed how the media and large parts of the public focus on blaming Bernanke and Paulson for now having to bail out the entire US economy, but nobody attacks them for letting Lehman fail in the first place.

 

That would pretty much do it.

 

getting smarter by the minute

 

How can Mercedes, BMW and Porsche still compete, after being in business for +/- 75 years? Will they still be around in 10 years or will the Chinese rule the high-tech car market? Or will Western European cars always be a notch above the Chinese junk that is a mix of stolen technology and half-science?

Would you rather have an accident in a SUV from China or a Mercedes SUV?

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August 9, 2007

The beginning of the credit crunch.

 

via Ritholtz

Five phases to the current down-cycle
from The Big Picture by Barry Ritholtz

Interesting analysis via David Rosenberg of Merrill Lynch:

"There have been five phases to this current down-cycle – the first four are still in full swing, but it is the fifth that will very likely emerge as the most difficult stage of this economic downturn and bear market:

• The first wave was the end of the housing cycle when starts peaked and began to roll over in the first quarter of 2006.

• The second wave was the end of the home price bubble when the Case-Shiller index began to deflate in the first quarter of 2007.

• The third wave was the end of the credit cycle when the interbank market froze in August 2007.

• The fourth wave was the employment cycle, which peaked when payrolls did in December 2007, prompting the Fed to reluctantly embark on an aggressive policy easing course.

• The fifth wave will be the end of the consumer cycle and the beginning of what may well prove to be the most significant recession since the mid-1970s, and while delayed by the tax rebates, this phase seems to have commenced in June when U of M consumer sentiment collapsed to its lowest level in 28 years."

Rosenberg has been consistent in terms of warning about an economic slowdown over the past year, and dates the likely start of the recession to January 2008. Going forward, he is more concerned with Deflation than Inflation .

 

the the tipping point was when the us gov wrote a blank check to one man to redistribute what little wealth we have among the financial elite

AMericans follow that up by instead of marching on the Capitol and hanging every traitor in site we elect a Marxist to lead us into oblivion

If anyone believes that americans have anything but a bleak and painful future for the next 20 years I have a greAt hedge fund Im starting up and need Investors 100k min with a 20 YR lock in