« It Wouldn't Be the Same | Main | White Broad »



Feed You can follow this conversation by subscribing to the comment feed for this post.

Mine would rise appreciably if the departure was accompanied by a thorough public pelting with rotten fruit and vegetables. Since it doesn't seem likely that we will be able to pry Mr. Bush out of protective cocoon of self satisfaction for the aforementioned shaming...........probably not so much.

The economic depression has a very real basis in the real world. Forgive the simplicity of this. Remember I am not an economist, I carry heavy boxes of wine for a living.
Huge amounts of our GNP are attributed to the financial sector. Among the largest growth areas in that sector over the last decade has been the proliferation of various financial instruments that in the past would have spread risk and worked to make more liquidity available to the credit market. In our modern world, people viewed these instruments as commodities in and of themselves, buying and selling them, pocketing profit at each transaction without adding one dime to the liquidity markets that the instruments were originally designed to buffer. As you know, the players in this game were legion. Nearly every investor now owns some piece of this puffball through their investments in seemingly unrelated areas. More than a year ago,it became apparent that the ever increasing housing prices that were fueled by easy credit (ie You don't pay off debt, you merely refinance and YOU get to keep the vigorish for a change) were actually a burst bubble. The unprecedented number of subprime mortgages going into default made the value of the derivatives difficult to assess so the buying of these instruments came to an abrupt halt. In this game of musical securities nearly everyone was left holding large amounts of paper they could not unload while arguing truthfully that 95% of the assets (mortgages)these instruments were based on were solvent. Here's the crux- the value of the derivatives those assets spawned had ballooned to 10-20 times the value of the original subprime mortgage market. If only 5% of those mortgages were in default that meant that $1 trillion of the value of the derivatives had become worthless! So, in addition to our normal economic woes, the $1 trillion that has evaporated from our economy grows exponentially through the multiplier effect of spending. Since so many companies managed to be exposed to these instruments the loss is distributed across our economy. The plummeting stock market is an honest assessment of the value of the capitalization of most US stocks adjusted for the evaporated dollars. We need to be aware that the fallout from the commercial credit boom is around the corner. The same boom in housing happened in shopping malls, resorts and office buildings. Similar derivatives were created and kited until the music stopped. The banks involved will soon feel the crunch as recession-struck developers are unable to pay their over-leveraged loans resulting in even more credit gridlock and dropping stock value.

The numbers for my rough calculations are taken from Wiki but the ideas are mine, an amalgamation of clues and hints and disturbing numbers that gelled for me last October. Please, somebody tell me I have this completely wrong. It is no fun being right in something as fucked up as this.

So Tom, you think we are just a nation of depressed whiners?

So Tom, you think we are just a nation of depressed whiners?

No, I think we're a nation suddenly being careful with our money. Businesses are being more careful who they lend to. Lending institutions are being careful with credit. People are being careful about taking on more debt, or spending of any kind, since they don't feel secure in their jobs. The result of this is a dramatic slowing of the economy.

This is not irrational. Quite the opposite, in fact. And it won't change until some measure of confidence returns to all of us.

Depressed? Perhaps. Whiners? I don't think so. Our losses have been real, not imaginary. We'd be insane if we weren't careful.

Well, we Americans have known for a fact that Mr. Obama is going to be the President on Jan. 20th for some time now. One would think the psychological funk would have lifted on Nov. whatever, being as how it's all gonna be better once the illiterate baby-eater is gone. That assumes your America has the foresight to see 2.5 months into the future.

My America does see it. Hence, the funk, which has nothing to do with psychology, and everything to do with wealth preservation.

Or not. Maybe the car lots, malls, and real estate offices will be chock-a-block on Jan. 21. Much like the gun stores are today.

It is unlikely that Congress, a body mostly composed of wealthy, conservative men, is going to allow anyone to reduce your wealth. Currently, the biggest problem in that area is the financial sector who lost sight of the fact that safegaurding their clients wealth was more important than making a play for a big bonus. I am guessing that you are a laizzes-faire kind of guy. So you will probably not agree that the only way you can pin this mess on government is through their lack of oversight of Wall St. Join us here in the reality based world and admit that conservative executives in many sectors brought us to this pass- not President elect Obama. (btw the only things I'll like writing more than that will be redacting "elect" and the soon accurate "former President GW Bush."

It is unlikely that Congress, a body mostly composed of wealthy, conservative men, is going to allow anyone to reduce your wealth.

Anyone besides themselves, you mean.

I'm a bit sanguine about the whole situation, long term. Short term however, there will be some hurt. The whole thing about economic downturns is that they are usually short, and they are usually relatively shallow.

I keep hearing people talking about The Next Great Depression, and it's either Chicken Little silliness, or unnecessary fear mongering. When we get unemployment figures over 20%, then come talking to me about Depression-esque hardships.

Business goes up, business goes down, and right now it is going down, but in 6 month, 12 months, or 18 months, it will go up again.

All that said, being in retail, I'm seeing the economic situation first hand, and these past couple of months, the commission checks haven't been what they were this time last year. But while not up to snuff, neither are our company's figures horrible. It just means we don't get a Christmas party this year.

But the odd thing is that sales took a dive around the news of the financial bailout. July of this year was one of the best months I've ever had, and then come news of the bailout, and almost instantly, people stopped spending their money.

Even though most of them had the same incomes, with the same bills. But with the news saturation on the financial sector problem on wall street, people got much more careful with their money.

But back to Tom's original question, I think the simple act of Obama being inagurated may have an effect. A change from the old, and a change for the new. For 52% of Americans, a belief in a change for the better.

A "tingle up the leg" press wanting Obama to succeed could change the way economic figures are presented in the media, altering the perception. Half empty becomes half full.

So there may be a bounce. If perception affects attitude enough, it is possible that by simply taking the oath, Obama's inaguration will give a bounce to the economy.

Of course, it may only be the bounce of a sugar buzz that quickly dissipates.

I don't think it's necessarily peculiar to Obama, by the way. I think any incoming President would have largely the same effect. I think it's far more than those who voted for Obama (52%) who are ready for something new. There's a reason new Presidents come in on a wave of popularity well beyond their vote. It's because we're by nature optimistic, and "new" generally implies "better." In a situation where times are as bad as they are now, the "new = better" quotient goes up even more, because new also equals hopeful.

Again, this is not unique to Obama.

I'm just wondering what the quotient is going to be, given how dour we all are. I think it might be high, especially coupled with the arrival of spring and pitchers and catcher reporting.

I find it hard to argue with the first paragraph of your response. You're right that it is much more than that 52%. Dour is a good word, and the emotional uptick from that dourness come Jan 20th may lead to one helluva honeymoon for Obama.

And it would merely be sour grapes to begrudge that, because right now, yeah, the country kinda needs a honeymoon. How long it would last... that's what I'm curious about.

The comments to this entry are closed.