View Poll Results: Are we heading for another depression?

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  • Yes, we are already in a depression.

    10 24.39%
  • Yes, we will probably enter a depression in 2009. (-10% GDP growth or worse)

    16 39.02%
  • No. We will have a severe recession, but no depression. (-4% to -9% GDP growth)

    9 21.95%
  • No. We will have a relatively mild recession in 2009. (0% to -4% GDP growth)

    3 7.32%
  • No. We will make a recovery in 2009 and be out of the recession. (Positive GDP growth)

    3 7.32%
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Thread: Are we entering another depression?

  1. #1
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    Are we entering another depression?

    It took me a long time to ask this question because the doomsayers in the recent past have mostly just been nutcases...but the US economy most likely declined by -5 or -6% per annum in Q4 of 2008, which is absolutely enormous. According to InTrade, the chance that the US economy enters a full-blown depression in 2009 is up to 51.8%, defined as four consecutive quarters of negative growth with an annual growth rate of -10% or worse. The unemployment rate is at its highest point in 26 years.

    Are we heading for another depression? Do you think things will get worse before they get better?
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    Re: Are we entering another depression?

    I wouldn't be surprised to see a recession akin to the early '80s, but I think a full-blown depression is doubtful.
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    Re: Are we entering another depression?

    Capitalism is collapsing under the weight of its contradictions.
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    Re: Are we entering another depression?

    Holy Jehesius, are we really running negative five percent growth? Last I heard we weren't even negative yet. That's bad news if true. Can you link to that data if possible?

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    Re: Are we entering another depression?

    Quote Originally Posted by Kandahar View Post
    It took me a long time to ask this question because the doomsayers in the recent past have mostly just been nutcases...but the US economy most likely declined by -5 or -6% per annum in Q4 of 2008, which is absolutely enormous. According to InTrade, the chance that the US economy enters a full-blown depression in 2009 is up to 51.8%, defined as four consecutive quarters of negative growth with an annual growth rate of -10% or worse. The unemployment rate is at its highest point in 26 years.

    Are we heading for another depression? Do you think things will get worse before they get better?
    It really take a long time for numbers to play out in statistics.. So I am saying you are in a depression already..

    Experts have already said that your recession have really been going on for at least a year already. I have seen some worrying numbers for Europe as well(that can play our near the summer), and if on top of everything Europe hits a recession more severe than expected it will also have a negative effect on the US, which it is not ready to handle.
    Last edited by Maximus Zeebra; 01-12-09 at 06:12 AM.
    Europe is illegally occupied by the US

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    Is the collapse of the dollar inevitable?

    Is the collapse of the dollar inevitable?

    In my Critique of Mathematically Perfected Economy, I write:

    “The basic flaw in the logic of modern socialists (Montagne, Cook, Zarlenga, etc.) is confusion between motivation and capability. ‘He’s privately controlled!’ the socialist sneers at the Federal Reserve chairman, the unspoken assumption being that, were the socialist put in charge, he would immediately open the floodgates of wealth and prosperity for us all. It would be a veritable socialistic paradise, if only the Benevolent One were given the authority to print money! But, the fact is, the Fed is in a box. If a socialist were put in charge, he would be in the same box.”

    In my Critique of Austrian Economics, I write:

    “Rothbard discusses an inevitable ‘distortion-reversion process’ but says little about how it actually plays out. Apparently forgetting his master’s regression theorem, he declares ‘the continuance of confidence in the banks is something of a psychological marvel’ (1970, p. 867).

    “Garrison (2001, p. 44) redefines the Production Possibilities Frontier, PPF, to be
    sustainable combinations of investment and consumption, but says nothing about what is so unsustainable about a credit expansion. Since he defines consumption on the PPF (which is real) to be the same as consumption on the Hayekian triangle (which is nominal), the unsustainability cannot have anything to do with a devaluation of the currency.

    “So we see that Mises, writing in 1949, was really the last Austrian to make much of an effort to explain or predict interest rate spikes. After that, their discussion of this issue, including Mises’ later writings, increasingly took on the tone of a morality play, with the greedy bankers getting their ‘inevitable’ comeuppance.”


    Clearly, the socialists and the Austrians are at opposite ends of the spectrum of views on inevitability. Socialists believe that the Federal Reserve can turn on a dime, veering away from economic collapse towards a socialistic paradise simply by giving the right person the chairmanship. And how would the Benevolent One accomplish this feat? According to the Debt Virus Theory, it is as simple as printing money and spending it directly into the economy, rather than buying Treasury Bills. On the other hand, the Austrians believe that a “distortion-reversion process” is inevitable. Credit expansion is unsustainable and this, apparently, is true no matter how benevolent the chairman of the Fed may be.

    Is hyperinflation the inevitable result of inflation? In America we have only had one bout with hyperinflation and, over 200 years later, the phrase “not worth a Continental” is still part of our language. “In conclusion,” I write in my Critique of Mathematically Perfected Economy, “to Montagne, Cook, Zarlenga and anyone else who claims that they can open the floodgates of prosperity by spending paper money directly into the economy, I say: ‘The Debt Virus Theory is not worth a Continental!’” Debt Virus Theorists’ followers are mostly laymen (for obvious reasons) and, when I wrote this, I fully expected any American with a passing interest in economics to be familiar with the expression, “not worth a Continental.”

    Indeed, the collapse of the Continental was inevitable because, having spent Continentals directly into the economy (mostly for soldiers’ wages), the Continental Congress had nothing in their portfolio with which they could buy them back. They were, in fact, benevolent men who had no desire to see their newly-won nation racked with hyperinflation, but they could no more recall the paper money that they had printed than Frankenstein could recall his monster.

    But surely the Federal Reserve is smarter than the Continental Congress! Until as recently as last year (2007), I would have responded to this question with a begrudging “yes.” As much as I dislike the United States having a central bank (I advocate free banking), I will admit that, by buying only Treasury Bills, the Federal Reserve has given themselves a portfolio with which they can buy back dollars in the event that inflation should threaten to turn into hyperinflation. Unless the Federal Government itself collapses – by losing a war, for instance – there will always be a market for T-Bills. Selling T-Bills for cash and destroying the cash is a painful, recession-inducing process, as evidenced by our experience during Reagan’s first term, but it can be done. Contra Rothbard, hyperinflation is not inevitable under a central bank.

    So what has Ben Bernanke done to make me question his intelligence, if not his benevolence? He polluted the Fed’s portfolio with AAA-rated securities, which I have mocked as being “about as marketable as the chocolate-covered cotton balls that Milo Minderbinder was trying to foist on people in Catch 22.” Everybody knows that, in spite of their impressive-sounding AAA rating, these securities are really just packages of sub-prime loans that nobody wants – what I defined in my Devil’s Dictionary of Economics, as “worthless crap.” If people wanted them, in the sense of being willing to pay cash for them, then we wouldn’t be having a credit crisis in the first place.

    Bernanke’s actions have made the question of hyperinflation a murky one. The Austrian’s depiction of hyperinflation as being the inevitable fate of central banking has always been cartoonishly simplistic, and it remains so. However, economists of all schools must now admit that hyperinflation is at least a possibility. If the dollar appears to be losing its status as the world’s reserve currency, what will the Fed do about it? Sell their AAA-rated securities for cash and destroy the cash? But what if nobody is impressed with the AAA rating and won’t buy their securities at any price? Then the Fed will be in the same position as the Continental Congress: Benevolent men who have no desire to see their beloved nation racked with hyperinflation, but who have no more ability to recall the paper money that they have printed than Frankenstein had to recall his monster.

    Of course, not all of the Fed’s portfolio is in AAA-rated securities and not everything with an AAA rating is worthless crap. They still have lots of T-Bills and there is a market for at least some of their AAA-rated securities. This is why the question of hyperinflation has become so murky. The bottom line is that nobody – not even Ben Bernanke – really knows what the Fed’s portfolio is worth these days. For this reason, I would be very leery of any economist, from any school, who speaks confidently about the future of the dollar. Is the collapse of the dollar inevitable, as the Austrians claim? Or are we at the dawn of a socialistic paradise, provided only that we install the Benevolent One in the Federal Reserve’s chair, as the Debt Virus Theorists claim? The answer is certainly somewhere between these extremes, but where exactly I cannot tell you.


    REFERENCES

    Garrison, Roger. 2001. Time and Money: The Macroeconomics of Capital Structure. New York, NY: Routledge

    Rothbard, Murray N. [1962] 1970. Man, Economy and State. Los Angeles, CA: Nash Publishing
    Is the following quote reckless in the extreme? Then read my 2008 paper about monetary theory:
    http://www.axiomaticeconomics.com/in...e_collapse.php
    Quote Originally Posted by JP Hochbaum View Post
    No tax raises needed, just have the federal government spend the money into existence.

  7. #7
    Another day in paradise..
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    Re: Is the collapse of the dollar inevitable?

    We are is such a bad depression that people are selling Obama tix for 8 grand on ebay....


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    Re: Are we entering another depression?

    I know a few people who are convinced that we are actually going to hit a drepression far worse than the great depression. I'm convince we will be in a depression but try to remain optomistic that it won't get that bad.

    The "Great Depression" many people lost money they had in their savings. Today most people don't have a savings and are deep in debt with credit. Because of this I believe there may be a chance it will be worse than the great one. There may be a massive domino effect where the debts can't get paid and employment may seem to vanish into a black hole. (so to speak)

  9. #9
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    Re: Are we entering another depression?

    Yes, I think things are going to get a lot worse.

    Too much debt out there. edit Just noticed creative saying the same thing, much more eloquently than I.

    Seriously, how many people do you know who own their own house (i.e. without a mortgage)? How many own the car they drive? I'm sure everyone knows a few, but it seems to me that for every one of these people who were fiscally responsible there are a dozen who got a house they couldn't really afford, a new car they couldn't really afford, a boat they couldn't really afford, a plasma TV they couldn't really afford, two vacations every year they couldn't really afford, and the list goes on.

    It definitely has the potential to get really, really bad. Unemployment is going to keep going up as one business after another cuts or goes broke.

    I live a few miles from several malls, and one of them is made up entirely of dept stores like Macys, Dillards, Neiman Marcus, Saks, etc. I'll make a bet right now that the entire thing is going to be gutted and shuttered pretty soon.
    Last edited by Joby; 01-13-09 at 08:58 PM.
    down for you is up

  10. #10
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    Re: Are we entering another depression?

    Quote Originally Posted by creativedreams View Post
    I know a few people who are convinced that we are actually going to hit a drepression far worse than the great depression. I'm convince we will be in a depression but try to remain optomistic that it won't get that bad.

    The "Great Depression" many people lost money they had in their savings. Today most people don't have a savings and are deep in debt with credit. Because of this I believe there may be a chance it will be worse than the great one. There may be a massive domino effect where the debts can't get paid and employment may seem to vanish into a black hole. (so to speak)
    All the growth(the tiny growth) in the west the last few decades is built on debt.. Money borrowed is less effective spent than money earned.. Isnt that what they say? So the fundamental value we got for it was actually decline, the correction is coming.
    Europe is illegally occupied by the US

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