Are we heading for another great depression? (Or is this more liberal propaganda?)

none ^ | now | me

[Big Guy and Rusty 99]

Are with heading towards a new great depression? All I hear is talk of economic collapse. The European markets seem to be getting crushed right now. The Dow has not responded to the "miracle of the bailout" and I am not sure what to think. I believe in the magic of the marketplace and that we will be back on track soon, but I want to hear your opinion. It would be really great if there are any economists in the crowd.

[brownsfan]

“Ford - Carter”

Good call. History does indeed repeat.

[silverleaf]

This isn't just talk

Libs forked with our financial system to advance socialist agendas to force banks to issue reparation checks in the guise of loans (wink wink)

Then figured out how to get rich by luring the Saudis and Chinese into investing in this ponzi scheme backed by the full faith and credit of the US govt

And our pansy so-called conservative enablers made speeches warning of “needed” reforms, hired even more libs in the executive branch to oversee the infected financial oversight agencies of government, authorized even more borrowing of money from China and Saudia Arabia to pay for the party, then went home to their ranches to chop wood

This created the “perfect storm” - a black hole that is swallowing the entire world economy

amazing, isn't it?

[kaylar]

Add to your list that Americans (including me) spent almost $30 million this weekend to see a film about talking dogs. :-D (American Carol did not and probably will not make it to my one local theater-one of the downsides to living in a small town.)

[The_Reader_David]

I’d say no. At least not unless an Obama administration manages cause one with a combination of higher taxes as a drag on the U.S. economy and protectionism as a drag on the world economy.

People tend to think that the Great Depression was caused by the financial panic in 1929. Actually, it wasn’t. There was already a severe recession in the agricultural sector going in to the finance bubble bursting, and shakiness in the industrial sector. Add on top of that the disruption of trade caused by the Hawley-Smoot Tariff Act (to which some historians attribute both the Great Depression and WW II (or at least the Pacific theater)), and you had a disaster in the making.

The underlying fundamentals of the U.S. and world economies are strong (hence the run up in oil prices on strong demand). We just have a financial panic. This is more like 1987 than 1929.

[silverleaf]

If my house price goes down by 15% I will have lost all of half of last year’s value gain

[andy58-in-nh]

In the long run, it's not going to matter what we call it, but it is going to be very, very ugly. We face mountains of debt, much of it foreign-owned. The liquidity crisis is spreading, and if one of our large creditors (say, China) decides to prematurely call in its US Treasuries, we are beyond screwed. Massive unemployment (20%+) is now thinkable; still not likely, but within the realm of possibility. 8% out of work would be the low end, from what I am now routinely hearing from analysts, and they are trying to be optimistic. And, at the same time, many additional US bank failures are also judged likely.

If confidence cannot be restored to the markets within the next week, there is a significant chance for a full-fledged panic, and then all bets are off. Have a nice day.

[jimmyray]

Let’s see, an ineffective Republican gives way to a big spending socialist Democrat.

Good thing the current POTUS avoided expensive social programs, and preserved a balanced budget to offset the bug spender...

[kickonly88]

Don’t worry! Even if we are, The OBAMUNIST will save us all!

[silverleaf]

if one of our large creditors (say, China) decides to prematurely call in its US Treasuries, we are beyond screwed

and what makes you think they have not already done this? Along with the Arabs, too

I do not believe the American public is being told the level truth about what precipated this urgency, nor what wil happen as a result, since entire economy's value ($13 trillion?) cannot cover this hyper debt. We have already "spent" over a trillion dollars since July alone, trying to plug leaks in the dam

[jimmyray]

The liquidity crisis is spreading, and if one of our large creditors (say, China) decides to prematurely call in its US Treasuries,

Educate me on this point. The T-bills I have access to cannot be redeemed before the maturity date, but I can try sell them on the open market. Does the bonds that China, et al buy have a redeemable upon demand option?

If not, the big risk would be that they simply refuse to buy more bonds.

[Realism]

one of the downsides to living in a small town

The up side is that us small towners out in the boonies may be isolated from the drama taking place in the ivory towers.

[kidd]

From the wiki article you cited:

German businesses managed to avoid the sort of deep wage cuts that exacerbated American labor relations at the time...German Chancellor Otto von Bismarck gradually veered away from liberal economic policies in the 1870s, finally embracing a full conservative program, including trade protectionism, in 1879.

[WV Mountain Mama]

You are right. And why is it that paulson said that any language added to the "bailout" that would exclude foreign debt would be vetoed? China made "the call". If we didn't buy it, they wouldn't fund our government debt.

Anyone here notice that Chjina bought $200billion of treasuries? Coincidence? No. They offloaded their $hit to us and bought our treasuries.

DWNEWS.COM-- 2008 on 10 years 6:16:6 on 5 (Beijing time for Hong Kong and Taiwan) - News Dovey Ming Pao Daily News / United States House of Representatives passed 700,000,000,000 U.S. dollars program to rescue the market after only 8 hours, the U.S. Treasury's second-largest creditor of the People's Bank of China, the first to welcome the statement that is willing to strengthen coordination and cooperation with the United States, also hope that all countries in maintaining international financial stability . This was the news that, once the United States has begun to raise financing 700,000,000,000 U.S. dollars, China may subscribe for up to 200,000,000,000 U.S. dollars U.S. treasury bonds to help tide over the difficulties the United States and the first class will subscribe 70,000,000,000 to 80,000,000,000 US dollars. (chinesenewsnet.com)

China trends affect the success or failure of the United States to rescue the market (chinesenewsnet.com)

China is the U.S. bond market most of the second largest creditor, holding by the end of July this year, 518,700,000,000 U.S. dollars of treasury bonds, accounting for the United States 2,676,400,000,000 U.S. dollars of treasury bonds 19.3 percent, on top of the list who is 593,400,000,000 U.S. dollars in Japan, but Japan's holdings are Since August 2004 the trend has been decreasing, a decrease of 4 years, 100,000,000,000 U.S. dollars, so China is in fact the United States the biggest buyer of government bonds in recent years, the United States to rescue the market's key to the success of the financing will hinge on the movements of China. (chinesenewsnet.com)

People's Bank of China statement quoted President Hu Jintao's speech earlier that China hopes that the U.S. financial market stability and healthy development of the economy, in line with the interests of the United States and China, but also conducive to global economic stability and healthy development. (chinesenewsnet.com)

Hu quoted the statement in line with the overall stability of the United States and the interests of both sides (chinesenewsnet.com)

Newspaper reporters get the news pointed out that China has committed to purchase U.S. city to save the program needed to finance the amount of 200,000,000,000 U.S. dollars; As the first phase of the program to save the market to raise 2,500 billion U.S. dollars, of which China will buy 70,000,000,000 to 80,000,000,000 U.S. dollars U.S. government bonds. (chinesenewsnet.com)

People's Bank of China statement also quoted Premier Wen Jiabao called on all countries in the face of the financial tsunami, to take positive measures, China will maintain a strong, stable and rapid economic growth, is the largest contribution to the world economy. (chinesenewsnet.com)

[kaylar]

And perhaps from the societal breakdown that I for one predict in 2008/2009 , and probably beyond? I anticipate riots whether “the messiah” wins or loses, and if there’s a major recession on top of the elections....I think 1968 will pale in comparision with what might be coming, possibly as early as November, and probably in summer of 2009.

[andy58-in-nh]

China owns US bonds with a variety of maturities. Current 30-Year Treasuries are not callable for at least 15 years from the first day of the delivery month or, if not callable, have a maturity of at least 15 years from the first day of the delivery month. Some older U.S. ones available on the secondary market are callable within five years of their maturity date. The risk is that in the face of a declining dollar, China will opt to dump what they can and buy no more, sucking more liquidity out of our markets.

[WV Mountain Mama]

I believe you are right. In my opininon, it doesn’t matter who wins. Our government will double its debt with this bailout by the time we get the final bill. Before this bill passed, we needed $2.2 billion of foreign investment a day to fund our debt. If our national debt is doubled, will anyone have confidence to buy our treasuries? No. If no one buys them, government spending must stop. Entitlement programs will end and people will not take it lightly.

[Big Guy and Rusty 99]

BUT the dollar is the highest it has been in about five years?

[andy58-in-nh]

The dollar is only back to where it was against the Euro about one year ago, and at the same value against the British pound in April of ‘06. Also, after strengthening against the Yen during the past couple of years, the dollar is back down to where it was in April of ‘05. So, it’s stronger, but not really that great, especially after the last two months.

[JDoutrider]

The DOW just dived under 10,000...

[edhawk]

“4% of subprime loans are in default, but that means that 96% are NOT!”

If this were truly the case, we wouldn’t see a global financial meltdown going on.
Try 10-12% across the board on subprime based on August payments, and loan default rates on some of the lower tranches are approaching 50%.
Unfortunately the vise still has a few more turns to crank down before we see the bottom of this and it won’t be pretty.
We are stuck in a vicious circle where the one thing that can break it, a rise in home values, has no real catalyst to happen.