I hope HP'ers enjoy some of the view I get by being a US citizen based in Europe. The whole world understands that the planet's economic engine relies on the US as its sparkplug (no matter how much they dislike that fact). And I think everyone outside of the US is getting a wee bit nervous about the upcoming housing-led US recession.
This article mirrors my view - that we're best off deflating the balloon, taking our medicine, then going on to prosper. The fatal error Greenspan made was in taking the easy way out, which created the mother of all disasters. If he had done the right thing in 2001, we wouldn't be in the mess we're going to be in in 2007 - 2011. Oh well. Now let's see what Ben does - is he a short term thinker, or a long term visionary?
Now we are about to discover, with great consequence for the world, whether this run of successful soft landings can continue, or whether the United States, the screaming engine of global growth for the past five years, is heading for a crash.
There are, broadly, three views among economists and, it seems, among Fed officials about what happens next.
The first, an optimistic assessment in keeping with recent economic history, favours the soft landing. The Fed has raised rates by just enough, according to this view, to restrain growth so as to squash inflation back into its box. The Fed funds rate now stands at 5.25 per cent; with inflation in the 2.5 per cent to 3 per cent range, that represents a real rate of about 2.5 per cent, a reasonable amount of restraint.
The second view is pessimistic and fearful. It believes that the Fed has already gone too far. The housing market, the driver of so much demand for the global economy, is off sharply. Many Americans are desperately refinancing short-term adjustable rate mortgages they took out three years ago when rates were at historic lows. They are finding themselves with thousands of dollars less a year in disposable income than they had last year. Debt levels are sky high and the savings rate is negative.
As consumers rebuild their tattered balance sheets, they will cut spending sharply, with catastrophic consequences. High oil prices are making matters even worse.
The third view might be called fatalistic realism. It accepts the second proposition that, on current policies, a recession is coming, but insists that it is absolutely necessary and its says that the Fed, far from pressing on the economic accelerator, should keep its foot on the brake.
For the Fed, and the world, a recession may be the price that now needs to be paid to avert a longer-term catastrophe.
August 18, 2006
The US may be heading for a crash — but it's not the end of the world
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The Arizona Republic recently reported that major restaurant chains Applebees , PF Changs,TGI Fridays and a few others have seen business dip 10 - 15 percent in the last few months. Consumers are tightening their belt, that's for sure. Gas prices and everything that this thread discusses and it is no suprise people are spending less. It has already begun. The spending pipes are shutting down , and they are shutting down fast.
Can anyone share some view about dental visits during recession?
I have a dear friend who owns a dental clinic and I wonder if people generally shy away from dental visits (except emergencies), as a way to also tighten their belts?
Some people consider dental visits as "discretionary spending." I'm just worried about my friend and I hope that she won't get blind sided.
dentists will feel it in the teeth as well
oh, man, that was funny.
"Can anyone share some view about dental visits during recession?"
My grandfather was a dentist during the Great Depression. Although he continued to have patients come in during this time, often his patients could not pay in cash.
Instead they would pay him with food or other things. Would people revert back to the barter system today, if things became bad enough? I think this is the big question.
"Can anyone share some view about dental visits during recession?"
My grandfather was a dentist during the Great Depression. Although he continued to have patients come in during this time, often his patients could not pay in cash.
Instead they would pay him with food or other things. Would people revert back to the barter system today, if things became bad enough? I think this is the big question.
I remember interviewing a woman for a job many years ago. She had been trying to make it as a free-lance writer, without success. She said she wanted to get a money-making position because she was tired of not having enough money to go to the dentist.
Thank you all for the insights. I think you can live without having your tooth pulled (extracted) and just take Tylenol, but not afford to put food on the table.
Guys, first thing first, save the dollar and then, worry about the economy.
That's how the system will react because if the dollar goes into free fall, breaks through bearish trading boundaries like 1.6 USD = 1 EUR, Gold at $850/oz, etc, then the gigs over the the US govt can't borrow anymore money.
So, to prevent the above, the central banks will work in unison to prop up the USD and let housing and ancillary consumer spending go into the toilet.
You can bet that teeth whitening, at least, will slow down. I heard some years ago that dentists were already hurting, since prventative
care and fluoride has greatly lessened cavities.
I'm all for the barter system, but what would you need to offer for a root canal & crown, I wonder?
BP nailed the final nail to assure a recession by removing Alaskan crude from the market just as prices were about to fall. As Greg Palast has pointed out, they have been having complaints from whistle blowers about corrosian and spills for many years. By waiting til now to take action, they increase profits by over $2 million per day(due to higher prices).If the oil had been taken off the market when supplies were slightly better it would have no impact on prices.
If energy had moderated the consumer crunch may not have been so severe.
I guess excessive greed kills the goose.
Asian central banks may sit on thier treasuries even thru a U.S. consumer crash. Thier subsequent purchasing will decline, but this may just mean that marginal upward pressure will occur for treasury rates as stock investors will be supporting the bond market as they dump thier stocks and seek safe havens. All in all with inflation declining,long rates could moderate somewhat.
Another possibility is that the U.S. will manipulate 10 yeaar rates in order to slow the housing meltdown.
U.S. debt is dollar denominated and inflation actually makes it cheaper for the U.S. government to pay back, whereas high interest rates make it more costly.
Cheney has a big position in international bonds that are non-dollar denominated. As the dollar goes down his net worth increases.
"The fatal error Greenspan made was in taking the easy way out, which created the mother of all disasters."
Really Keith - check back with me after oil is $300.
Oh that's right u guys don't want to hear facts.
LALALALALALAL
hey - here's an idea - remove all your teeth.
I know a dentist who's into the S&M thing and has gone on a barter system.
He does a little work on the patient and then the patient bites him. Work a little, bite a little.
Everybody is happy.
For big procedures, he and the patient share laughing gas then he drills hard and goes deep to frequent equally hard bites on the ass.
There's a place for everyone in this world.
Hey guys listen up. Ford has ust announced that there will be deep cuts in production this year. They're going to temporarily close some of their plants here in the U.S. and Canada.
goodbye midwest - we'll miss ya
believe it or not, the biggest housing price declines will be seen in the rust belt, not the sun belt, even though they've had almost no appreciation for the past 20 years (adjusted for inflation)
'May' be headed for a crash?
"Instead they would pay him with food or other things. Would people revert back to the barter system today, if things became bad enough? I think this is the big question."
Interesting that they traded in things that matter - food. Not sure how I will eat my gold coins and if I can get them converted into food or gas.
I am leaning toward the food thing too.
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