castledoom.com

[Batchman]

So what do you all think? Just how bad is the economy? Are we entering a Great Depression large enough to even dwarf that of the 1930s? Or will it be much less significant than that?

Is there any way to avoid it? (Not will we be able to avoid it, but would there be any possible way, if we weren't stuck with the current two party system?)

Just how bad is the future of both the American and the world economies?

And if we are moving into a global depression of a size never before seen, what will be the fallout of it?

Will this be what it takes to shake America up enough that we refuse to continue along with business as usual? Will it be what finally pushes the American public to sack everybody on both sides in Washington, and start over again?

Will we see a new American currency that returns to the gold standard, when all is said and done? What will credit be like as the new economic future begins? As things stabilize, will there again be loans for housing? Cars? Personal credit?

America still has tremendous resources. We still have incredible knowhow. Will these allow us to weather the depression, and eventually return to the spotlight as the most powerful nation on Earth? Or have we squandered everything we once had, morally, mentally, and physically to such an extent that there is nothing left for us except to take our place amongst the 3rd world nations, never to be a major power again?

Just how do you see this all playing out?

[Batchman]

As for me, I think the huge weight of personal, government and business irresponsiilities over the last few decades are indeed going to make this a full fledged depression, very possibly of the magnitude of the Great Depression, or even worse.

I also think that the American economy is tied in with the world economy tightly enough that it is going to create a world depression.

What I am not sure of is how long it will take us to crawl out of it, in comparison to how long it will take others in the world to crawl out.

I am actually still positive there could be a way to avoid this, if one could come up with just the right plans, policies, and technology ... but I think the chances of coming up with them are a billion to one ... and the chances of the government allowing them to be put into place are another billion to one long shot. It is possible, but it will not occur.

But I wonder ... as the US currency becomes worthless, what happens to several of the huge American industires that are the most advanced in the world? In these areas, I just don't know enough to even make a guess.

Hollywood? People are still going to need an escape. I have to figure Hollywood will continue, and it survived the last depression pretty darn well. But I would guess things are going to have to scale down a lot from where they are now.

Health Care? What happens to the most advanced (and most expensive) health care system in the world, as all our credit, financial, and insurance systems collapse in bankruptcy?

Banking and Finance? What are the futures of these industries? What were the causes of the problems that have brought them down? Who has been to blame? And what kinds of systems will be in place as America rises again from the ashes?

The Internet and Telecommunications? With the infrastructure all in place, will these continue largely as they are now? Or are there so many costs involved that they will suffer collapse for years or decades, as well?

I've babbled on far longer than I intended, and far less cohernently than I had hoped, so I am going to shut up for a while, after one final question ... and wait to see what others have to say.

Will this massive depression eventually lead to a return to our early roots of liberty, freedom, and a responsible capitalism, or will it lead to our becoming a fully socialist state that is largely uniform with the rest of the world? Will America return to the ideals it was formed on, or will the unique experiment end a failure through the loss of heart in its ideas?

[s_stabeler]

what really matters is what happens to the $700 billion bailout, as if that works, then banks will start lending to each other again, ending the crunch. however, I do not think there will be a return to business as usual, since banks aren't going to risk lending to sub-prime people at such low rates again, if at all.

what I see happening is not the end of cheap credit, but the end of cheap credit for poor customers. I.e. around current rates for those with the best credit scores ( 750-800) while rates increasing for those with lower credit scores. in other words, as it should be.

oh, and depending on the fine detail, the bailout might actually make money. how come? well, a) the US government will likely pay around 20 cents on the dollar, so if more than 20% of the loans get paid off or sold for a higher value, the government makes money b) the government is considering taking an equity stake in the banks that get the bailout. that would likely lead to a profit, as bank share prices increase.

[broomdalf]

Oh ho ho, the bailout isn't going to end the crunch, it is only going to serve to erode away any semblance of value left in our currency. We can't exactly make $700 bil appear overnight without pulling it out of nowhere, and forevermore ensuring that banks never need to invest responsibly again.

Its not like banks will all the sudden stop loaning out money; they make money on most of their loans. What we need to have happen is what has needed to happen for the past couple decades: An end to the extremity of this "ownership society" pushed, where the gov't encourages the giving of debt to people that will never pay it off and such... Sub-prime mortgages shouldn't happen. These people should live in apartments. Nobody is "entitled" to reap more than they sow, which is being done by both ends of our spectra; those buying houses beyond their means and those lending out the money are equally responsible with the government that never reigned in institutions it created to ensure irresponsible morgages. On a side note, they really could have picked cooler names than "Fannie Mae" and "Freddie Mac"

And its not like this is going to stop a recession: Our economy needs recessions. They breed out the inefficiencies that grow during good markets. But if we muddle and stagnate instead of recessing, we could very well end up like Japan, with its intertwined government and business having been sinking since the early 90s.

There is no way this $700 bil is going to come back. We have more housing than we need, far too many of the houses being forclosed are investment properties, and many properties are still overvalued. What we really need is to stop building so much, and start building better. You'd think we could better invest the money we don't have in things like solar heating and thicker insulation, vapor barriers and central air. Things that will pay themselves off, even if it takes a while.

Its okay, the stock market is crashing...

But a depression? No. There's well enough money to avoid anything worse than a nasty recession, especially if Uncle Sam is careful with his meddling... [/rant]

[s_stabeler]

broomdalf, you are half right. indeed, sub-prime mortgages should be very carefully doled out, if at all ( some people are sub-prime not because they are a bad credit risk, but because their credit history hasn't transferred from another country, things like that)

oh, and likely the credit crunch will at least be loosened by the bail-out, as banks, etc will know that they can lend on the moneymarkets and actually get repaid. also, banks will need to replace the debts they sell to Uncle Sam, won't they? so they'll need to lend out more money, ergo, credit will be slightly easier to get.n however, I doubt ir will be as easy to get, as banks don't have as much money as before.

[Che]

It is to early in the game... to know what will actually happen.

Will the bail-out rescue "Wall Street", or, will adding to the debt
only slow-down the process :dunno:

At what point, will the failure of US financial institutions, start a world-wide collapse :think:

When will foreign financial institutions... quit selling the US "pawn-tickets" :hug:

World tensions... Iraq; Afghanistan; Russia-former USSR republics/NATO; N. Korea;
Iran; Venezuela and Bolivia; China, can all have major impacts on the on the world-wide
flow on $$$$$.

[broomdalf]

*phew*

It's a good thing that the markets have realized the good that Big Brother's intervention is going to do them, and the stock markets have been recovering as a result...

[JuntaJoe]

Sarcasm usually doesn't translate well to the written form, but I think you pulled it off this time, broomdalf.

[bannie]

Only upside I see from any of this is that the price of oil has plummeted in the last few weeks

[JuntaJoe]

Of note for you young people this is actually good news for you if you wish to begin trying your hand at the stock market.

Buy low, sell high

Everyone is panicking and selling. They should have been selling when it was quite high this spring.

Stocks purchased this fall will generally be lower than true market value. Money invested right now might still take a few more hits, but the bottom is close. Losses incurred on purchases now will be small. Yet in the long run those stocks purchased now will see great gains in the next few years.

No matter all the highs and lows of the stock market there is still an overall gentle rise in the very long haul. Roughly 10% over the last century per year. So short term drops and rises are irrelevant unless you are trying to cash out.

Yes, the current crisis is troublesome for new mortgage holders and retirees, but everyone else is generally fine. The only real issues for most people is the costs of food and fuel that have been rising recently. There is also concern for those who carry too much credit card debt, but then that has never been a good situation for anyone.

So all of you young people should go open a discount brokerage account and go buy some generalized fund shares. Funds that have a broad spectrum of market coverage. Ignore the modest losses you may see in the short term. Simply see those lower prices as an opportunity to buy more cheaper. Forget trying to "time" the very bottom. Not even experts can. But since we are already deep into the trough the bottom won't be too far away. Even if the bottom doesn't rebound for a while you shouldn't worry. It just means you can buy more cheap fund shares. Eventually the market will begin rising again and all those cheap shares you bought will see solid gains.

Buy low, sell high

It's time to buy.

Jumping in now when you are young is a great way to get a nice little beginning boost that will pay off generously decades later.

Skip the plasma tv purchase and delay buying those other toys you may be eyeing. Start your portfolio and retire rich instead.

[ExarKun]

yeah I been doing that for awhile, some things I get cause i've needed them, like the PC after mine craped, which that cost me more than I liked, but i've been taking 10-15% and working with my cousin who does this for a living working on my portfolio. I figured need to grab on early, hell long before this crazy stuff happened.

[JuntaJoe]

It's called "dollar cost averaging" for those of you starting out.

In simple terms it means when the market is high your portfolio is growing in wealth and when it is low you are adding more shares to take advantage of when it gets high again.

10% is a real good number for young people.

Look into "spider funds" too. It's where the fund buys exactly the same number of shares of every company on the stock exchange instead of focusing on particular stocks. These funds have extremely low associated costs for the company that offers them and they generally charge no annual fees. You make money on the total market instead of on a particular sector. It is well known that it is the market that rises in the long haul and not necessarily a particular company or sector.

Vanguard is a real good company that offers them.

[JuntaJoe]

Very interesting parallel:

http://chronicle.com/temp/reprint.php?id=477k3d8mh2wmtpc4b6h07p4hy9z83x18

[ExarKun]

Well I work with my cousin, I read some of it but like I said he does this as a living, sorta... his real job used to be vice president for an oil company till he retired at 40. Now he does this on the side just for something to do.