Global economic crisis

[tropicana]

Listening to The George Noory Radio show late at night while im at work... i heard this excerpt the other night:
its good words of advice even if it doesnt come to pass...

ECONOMIC DOWNTURN
discussed on the radio a few nites ago....
it will continue to be rough for the foreseeable future..
no one, not even the US President with his stimulating talk, no one will get through this untouched...


the U.S. (and Canada and the world) is not in a typical recession. Instead, the crisis more closely resembles a depression, in which we can expect an extended period of economic contraction accompanied by deflation.

the largest players in our banking system are insolvent. Their current situation was brought on by a combination of factors, including exposure to trillions of dollars of mortgage backed securities, derivatives, and default swaps, and bailouts and stimulus packages will only postpone the inevitable, not resolve the nation's financial troubles. What got us here, decades of excesses, decades of imbalances, you can't just stop them by saying, 'OK, we're determined and we're going to think positive.

What is on the horizon then? The US currency will continue to be devalued by the ongoing 'printing press' policies of our government, and we can expect an inflationary environment. Real estate prices will fall even further, perhaps not reaching final lows until 2012 at the earliest. There will be multiple "lurches down" in the stock market, noting the DOW might fall by as much as 75% from its current level. The retail sector could be wiped out as the "religion of consumerism seems to be dying," he said. At the extreme, the U.S. may even break apart, conflict with Mexico, and perhaps another world war.

Parts of the country will become "suburban wastelands" due to water and energy issues, Listeners were pleaded to to adjust their attitudes and lifestyles accordingly, and to accept the reality that the current economic downturn is not short term -- it's the new norm. It is recommended people pay down debt and live within their means. Dont spend what you don't have.

-justin-

[Derek Ortt]

Just how can we have inflation AND deflation at once?

That idiotic statement made by Coast to Coast renders the rest useless

[gtalum]

George Noory is a scaremongering conspiracy nut, but I don't see where he claims there will be simultaneous inflation and deflation. He does suggest the possibility of so-called stagflation, which we last saw in the 1970's. Stagflation is reasonably likely, and it's a tough cycle to break. I don't foresee the situation getting any worse than it did in the 1970's, though. The bad mortgage paper, which is what has caused the major banks to become insolvent, is pretty much out in the open now. I suspect the federal government will end up holding much of the bad paper, which is bad for taxpayers but will allow the banks to move forward and lend again. The best case outcome if the feds do buy up the bad paper is that they can unload it and break even or possibly even make a small profit, ala the Savings and Loan crisis of the 1980's.

This will not be the Great Depression redux, if only because we have a good understanding for what happened then and are, globally, being much more proactive to prevent it.

[Derek Ortt]

Here, Gtalum,

the U.S. (and Canada and the world) is not in a typical recession. Instead, the crisis more closely resembles a depression, in which we can expect an extended period of economic contraction accompanied by deflation

The US currency will continue to be devalued by the ongoing 'printing press' policies of our government, and we can expect an inflationary environment.

now which will we have?

If I had to choose between the two, I'd take the inflation as the economy usually will not be in prolonged recession during inflation, as people rush to buy goods before the price rises. The opposite is true during deflation, as nobody buys as the price falls

[gtalum]

My bad, I missed that line. I even reread the quotes.

Suffice it to say Noory is a moron.

[Derek Ortt]

and we are now just above 7000 after faling another 112 today

the NASDAQ... well... it is stuck at about 80% off of its all time high

[zaqxsw75050]

Here, Gtalum,

the U.S. (and Canada and the world) is not in a typical recession. Instead, the crisis more closely resembles a depression, in which we can expect an extended period of economic contraction accompanied by deflation

The US currency will continue to be devalued by the ongoing 'printing press' policies of our government, and we can expect an inflationary environment.

now which will we have?

If I had to choose between the two, I'd take the inflation as the economy usually will not be in prolonged recession during inflation, as people rush to buy goods before the price rises. The opposite is true during deflation, as nobody buys as the price falls

I don't know if this is the case with this article, but I heard people talked about we would have a deflation in near term, but the gov't will overprint money and have too much money when the economy start to recover and then it will turn into bad inflation (possible hyperinflation in some extreme forecast) down the road if the gov't can't get the excess money supply out of the system fast enough. I think that theory maybe what the article mean.

[Derek Ortt]

the thing about deflation, is that it is almost always a death spiral to the economy.

It is very hard to have a recession during inflation (think about it... why wait to buy goods when the prices are rising)... unless we have Weimar inflation that totally renders the money supply worthless (then of course, goods cannot be bought)

[Derek Ortt]

Here is a comedic attempt at explaining the situation

http://www.as-is.cc/

I stopped reading after he said deflation is beneficial. This guy is a cluster bleepedy bleep bleep bleep

[zaqxsw75050]

No doubt that deflation and hyperinflation would mean a disaster for the economy, just look at Great Depression and Wiemar Republic. I think the problem now is how to combat deflation while not to overshoot the limit that could lead to hyperinflation.

[MGC]

This morning on Fox News, the gang that discuss the stock market and economy all agreed to be in cash. Some of them expect the DOW to challenge the 5000 level in the coming months. Given the choise, I'd rather live in a inflationary economy than a deflationary one. Thing are looking more and more like a deep recession or mild depression for 2009. There is little faith in what the government is doing. Hold on to your hats.....MGC

[DanKellFla]

Both can happen at the same time where the deflation is in the form of falling prices and the inflation is in the form of the value of the dollar falling against other currencies.

FWIW, as unfair and unequitable as it is, I think the government needs to buy all the toxic assets at a reduced price and renegotiate the loans. Similar to what the FDIC chairwoman did was IndyMac loads. (You shared the profit on the house with the gov. once you sold.) Every other action so far has been just putting chewing gum in the leak. Yes, that neighboor down the street is going to get a deal. But that is better than ALL of us living through a decade of a recession/depression.

[zaqxsw75050]

Dow trade below 7,000

[Ed Mahmoud]

The temporary deflation will be followed by inflation. It seems unlikely that enough lenders will buy the trillions of dollars in new debt the so called stimulus plan will entail. The Federal Reserve will 'buy' that debt, and only has so much reserves left, so it will have to print money, which is inflationary.

As the OMB and others have noticed, the stimulus bill will cause short term growth, compared to the base case, again, in the short term, and will hinder growth in the long term, because private business will have to compete with the government for credit to grow their businesses, and will pay more for their credit.

[Ed Mahmoud]

The new budget ends the IDC deduction for oil and gas well drilling.


IDC is the business expense it takes to drill an oil or gas well. The clearing of land, the cost of the drilling fluid ('mud') used to drill the wells, the cost of the rigs used to drill a well (several thousand a day for the smallest onshore rigs, about $50,000 for offshore 'jack-up' rigs). The cost of pumping cement to hold pipe in the hole, the cost of measuring the properties of the rocks with a well site geologist and/or by lowering sophisticated instruments into the well on a 'wireline'. The cost of pumping acid or high pressure sand slurry to make the well produce more oil and gas.

Half a million for the simplest onshore wells, several million for a Dallas area horizontal Barnett Shale gas well, tens of millions for an offshore well.


It is a business expense, and was deductible as a business expense from pre-tax profit, reducing the bite by 20 or 30%.



I don't see this helping to end the economic crisis.


This won't completely kill the US oil and gas business, but in a time of low prices, it will sharply curtail it. Oil for gasoline can still be imported from Iran and Venezuela and Saudi Arabia, although at a higher price as falling US production limits supply. Natural gas is transported by pipelines, and must be produced in North America. To import it, an expensive process of pressurization and refridgeration is required to liquefy it, so it can be shipped by tankers. I can only imagine what the cost of heating homes with natural gas (or electricity, some of which is generated by clean burning natural gas) will be.

[Brent]

Dow closes at lowest level in 12 years

DOW
6762.82
-300.11
-4.25%
NASDAQ
1322.85
-54.99
-3.99%
S&P 500
700.81
-34.28
-4.66%

[Derek Ortt]

we are approaching a 60% loss from its peak

We are headed to where er were headed only twice before... the Great Depression and the .com burst. The dperession dropped the DOW about 90% and the .com burst dropped the NASDAQ about 80 %

[cycloneye]

Below is a recap of all the days market action.S&P closed at 700,not below of that.

http://www.cnbc.com/id/29464700

[lurkey]

Did you know that DJIA is made up of 30 companies (which closed 6763.29 today) including General Electric, General Motors, American Express, Citicorp, JP Morgan Chase, Bank of America (all companies receiving bailouts) and Chevron and ExxonMobil (see Ed's comment about IDC deduction).

Just something I noticed. . .and wondering why we pay attention to just 30 companies . . .and not to something like the S&P 500

[gtalum]

Just something I noticed. . .and wondering why we pay attention to just 30 companies . . .and not to something like the S&P 500

Not that the S&P is doing any better...

The Dow is a decent broad-based indicator of large-cap blue chip companies. The companies on it change based on the current makeup of the US economy.