Do you think there is no borrowing during good times? I would venture a guess that the amount of borrowing now is much less than during any period in the last 20 or so years. It’s just that government is doing it, not private interests. Why does it somehow negate what I’m saying that our exports have increased? To me, it just shows that the market is adjusting to changed circumstances. I would be a whole lot more worried if I saw no change in the markets. It really is amazing how fast they are adjusting—a whole lot faster than government is adjusting. Here in Orlando, home sales are up because prices have dropped so much. I would never have guessed that real estate would adjust so fast.
This recession was not caused by a freezing of the machinery of production, hence little change in output or employment.
What really happened is that people who thought they had a lot of wealth now realize they don’t. For the most part, those folks were the wealthy since by definition people who have wealth are wealthy. I fail to see why the disappearance of wealth should cause the economy to buckle on the order you’re talking about. You’ll see people spend a little less, that’s true, but retail sales have not fallen off a cliff as you might expect. For the most part, the decline is going to come in the area of investment, since the wealthy invest a lot of money, and now they won’t. But investment is not what drives the economy anyway. It’s consumer spending that drives the economy. A decline in investment might actually be good for the economy in the long run, since it will undoubtedly lead to higher economic returns to capital. The truth is that we’ve over-invested in capital during the last 15 years or so.
And even the decline in wealth has not been all that catastrophic. The stock market is at about 2003 levels, as is the real estate market. Folks forget that the reason the market has dropped so much is that it went up so much in the last few years. If you did not buy the Dow on Oct. 1, 2008, then you did not lose 40%. If you bought it earlier, then you probably lost less. It’s only if you bought at the peak that you took that bath everyone talks about. And because the market went up almost as fast as it came down, there weren’t that many people who bought at that peak. If there is the beginning of a recovery in the next several months, the stock market will probably recover some of its losses and we’ll have a positive wealth effect.
Don’t be so negative. The idea that this is somehow worse than the last several recessions is largely in your head—at least at this point.
Look--if you want to bury your head in the sand--so be it. The economy has literally gone off a cliff since late September and continues to accelerate to the downside. Show me ONE economic statistic indicating a turn around in sight. Just one. Bump this thread in one year and let's see who is close to right.
BTW-—Retail sales HAVE gone off a cliff—I’m in corporate management for a retailer in 22 states. We have gone from +5% YoY comps to -11% YoY in 6 months—and we sell groceries! You’re kidding yourself. The #s for retailers as a whole show a -5% (Nov) & -8% (Dec) for December and that’s before factoring in inflation AND expansion of stores AND before backing out a Walmart with slightly positive sales.