Results 1 to 14 of 14

Thread: Why this recession seems worse than '70s and '80s

  1. #1
    Elite Member NicoleWasHere's Avatar
    Join Date
    Jun 2007
    Location
    kcmo
    Posts
    14,469

    Default Why this recession seems worse than '70s and '80s

    Why This Recession Seems Worse Than '70s and '80s


    If you think this recession is the worst since World War II, chances are you weren't born or working during the downturns of the 1970s and '80s, you're listening to President Obama too much or you're a white-collar worker in financial services.

    If all three are true, you may even think we’re on the verge of another Great Depression.

    At this point, the only thing that may be true is your age and employment status.


    “The current situation has nothing in common with the Great Depression,” says economist Steve Hanke of the Cato Institute and Johns Hopkins University. “The sooner they [in Washington] stop spinning the bad news story and say nothing, the sooner we’ll be more confident.”

    Hanke is not alone in dismissing what appears to be a potent cocktail of misinformation and doom and gloom, wherein the current recession—now in its 13th month—is already considered worse than the 16-month ones of 1973-1975 and 1980-1982.

    “We were pretty scared in ’82; things looked horrible for awhile," says Bob Stovall of Wood Asset management and a 55-year veteran of the securities business. “I don’t think you can say it’s worse than then; its different. You have changed the landscape but you did that in the Midwest when you forced a lot of rust-belt companies to the wall."

    “This time it's financial firms going out of business, instead of manufacturing ones, and the jobs are going with them," explains Stovall.

    “I do think that's part of it,”says Robert Brusca, chief economist at Fact & Opinion Economics, saying that. “They’re the ones making the pronouncements. People in the financial sector are getting crushed.”
    They’re not the only ones selling doom and gloom, though.
    “I don’t remember a president talking down the economy as much as President Obama,” says economist Chris Rupkey of Bank of Tokyo-Mitsubishi. “The economy is very psychological. There’s a herd instinct.”

    That herd instinct kicked into overdrive after the sudden collapse of Lehman Brothers, when many say the economy fell off a cliff and a classical cyclical downturn merged with a nasty one-of-kind credit crunch. So yes, economists agree things are bad, but they need to be put into perspective.

    Employment

    At this point, the current recession is worse than those of the '70s and '80s by only one statistical yardstick, and that’s the unusually quick ascent in the jobless rate—from 4.4 percent in March 2007 to 7.6 percent in January 2008.

    “People are reacting so adversely to this is because the job market has become so weak,” explains Brusca.

    But even though the sharp decline in payrolls over the past three months has been stunning, it is not as bad on a percentage basis as one period in 1974-1975, according to David Resler, chief economist at Nomura International. Resler says the economy would have to lose some 767,000 jobs a month over a three-month period from the current employment level to match that miserable performance.

    During the 1973-1975 and 1980-1982 periods the unemployment rate almost doubled (4.6-9.0 percent, 5.6-10.8 percent, respectively), which means a peak of about 8.6-8.8 percent this time around. In further contrast, during a ten-month stretch in 1983-1983, the jobless rate was above 10-percent.

    Nevertheless, that’s nothing compared to the Great Depression when the unemployment rate went from 3 percent to almost 25 percent in four years and national income was halved, notes Hanke in a recent column.

    Growth

    Thought it may be little consolation for the millions of unemployed, GDP is considered by economists to be the best and broadest gauge of a recession.

    That may seem also peculiar since the economy actually grew in the first two quarters of this recession, but some of that had to do with the Federal Reserve's early and aggressive interest rate cutting and the federal government’s first stimulus plan which quickly put money into people’s pockets.

    Given that backdrop, GDP contraction thus far has been modest. It’s down 1.1 percent vs. 3.1 percent in the 1970s period, says Chris Rupkey.

    And though the economy shrunk at a 3.8 percent annualized rate in the fourth quarter of 2008 and is expected to decline another 4.0-6.0 percent in the first quarter of 2009, imagine the reaction today to the 7.8 percent plunge in the second quarter of 1980 or consecutive swoons of 4.9 percent and 6.4 percent in 1981-1982.
    "Half of the workforce until now hadn't seen more than 16 months of recession—total," quips Resler. The past two short (eight months) and relatively shallow.

    During the 1990-1991 recession, the deepest quarterly GDP decline was 3.0 percent; in the 2000-2001 one it was 1.4 percent.

    “GDP hasn’t been that weak because the productivity increase is one of the best,” says Brusca. “You get a quarter or two that really knocks the level down,” he adds, and it looks like we’re at that stage now.

    This time other fundamental factors are playing a bigger role than the past.

    “Consumer spending will be bad,” says Resler. “We haven’t three consecutive quarterly declines in consumer spending since the 1950s.” He’s definitely expecting a repeat of that.

    It’s Still Bad

    Comparisons aside, no one is saying the current recession isn’t a painful one, and some see very little reason for optimism.


    “I can't identify anything than looks good,” says Dean Baker, co-director of the Center for Economic Policy And Research, adding that business investment—which appeared to be holding up—posted its sharpest decline in 50 years in the final quarter of 2008.
    “I'd be shocked if we have growth this year,” says Baker, even though he expects the Obama administration’s stimulus plan to have a sizable economic positive impact.

    So may the words of the President and his advisors, say economists.
    “It’s not surprising that politicians exaggerate this,” says Resler, who predicts “The tone of the message is going to start changing immediately; now that we have the stimulus in hand, you enhance it by saying positive things.”

    Tunnel Thinking

    For all the comparisons with other recessions, exaggerated or not, the most meaningful one may be its duration. It is also the toughest.


    The consensus is this recession will end sometime between the second half of 2009 and the beginning of 2010. The pessimists say wait till next year—period.

    David Jones, CEO of DMJ Advisors, is among those who see “hints of stability.” By that he means, the rate of decline in areas like retail appear to be slowing.

    “We'll see the same thing happening on the housing side in the next couple months,” says Jones.

    “I'm just waiting for the shift in people’s expectations,” adds Rupkey.
    © 2009 CNBC.com

    Why This Recession Seems Worse Than '70s and '80s - Real Estate * US * News * Story - CNBC.com

  2. #2
    Elite Member louiswinthorpe111's Avatar
    Join Date
    Oct 2005
    Location
    Middle America
    Posts
    14,009

    Default

    “I don’t remember a president talking down the economy as much as President Obama,” says economist Chris Rupkey of Bank of Tokyo-Mitsubishi. “The economy is very psychological. There’s a herd instinct.”

    Unlike Bush, who pretended the economy was "sound."

    I do think a lot of it is psychological. But the fact that the media talks about it 24/7, doesn't help. That's all you hear about. And Obama has to address it.

  3. #3
    Elite Member
    Join Date
    May 2008
    Posts
    4,250

    Default

    And though the economy shrunk at a 3.8 percent annualized rate in the fourth quarter of 2008 and is expected to decline another 4.0-6.0 percent in the first quarter of 2009, imagine the reaction today to the 7.8 percent plunge in the second quarter of 1980 or consecutive swoons of 4.9 percent and 6.4 percent in 1981-1982.
    Actually, GDP declined 6% in the fourth quarter. The 3.8% was the preliminary figure, it was revised to 6% decline after more data came in.

    In the recessions of the 70s and early 80s, there wasn't the credit crunch that we are dealing with now. There wasn't the turmoil in the financial markets, nor was housing nearly as bad.

    I hope that we are near the bottom, but I'm not confident that we are.

  4. #4
    A*O
    A*O is offline
    Friend of Gossip Rocks! A*O's Avatar
    Join Date
    Oct 2005
    Location
    Being Paula
    Posts
    31,675

    Default

    Many of the journos promoting the doom and gloom haven't lived through a recession either. Everyone needs to take a deep breath and look at the situation objectively. I think we are at the bottom and we'll bounce along it for a while but then things will begin to slowly recover.
    If all the women in this place were laid end to end, I wouldn’t be surprised - Dorothy Parker

  5. #5
    Elite Member Grimmlok's Avatar
    Join Date
    Oct 2005
    Location
    In WhoreLand fucking your MOM
    Posts
    55,359

    Default

    LOL no, you aren't at the bottom yet. Sorry kids. At most you're in a holding pattern quite low. How far down you go after depends greatly on what washington provides as a plan.

    Obama's plan right now is awful. Don't count on it getting better.
    I am from the American CIA and I have a radio in my head. I am going to kill you.

  6. #6
    Elite Member nana55's Avatar
    Join Date
    Oct 2005
    Location
    dreaming about being on a lake in Ontario
    Posts
    4,084

    Default

    I think why this seems worse and in many ways is, is that so many "regular" folk were invested in the stock market this time. During the last recessions only big time investors were in the market. Now everyone and their brother is, so the drops affects a lot more people. Even people who didn't lose their jobs lost half their investments.
    If I can't be a good example, then let me be a horrible warning.

  7. #7
    Elite Member
    Join Date
    Oct 2005
    Posts
    4,183

    Default

    Quote Originally Posted by nana55 View Post
    I think why this seems worse and in many ways is, is that so many "regular" folk were invested in the stock market this time. During the last recessions only big time investors were in the market. Now everyone and their brother is, so the drops affects a lot more people. Even people who didn't lose their jobs lost half their investments.


    ITA. In a way I feel like the general public has been swindled. It's just been in the last 15-20 years that we've been encouraged to invest our retirement funds in the stock market, the reason given being that presumed long-term 8-10% return is the only way to grow your money enough to beat inflation. We were told that over the long term that is what we could expect. All the people investing their retirement funds in the market drives it up. Once that happens, the big-time investors have a potential for huge profit-taking and I believe that is what they did. The failure of a few banks can't affect the underlying value of solid companies.

    At this point I am hoping and praying that eventually the market will rise again to the 12,000 DJIA level it once was and at that point, I think I will get out. It could take 10-20 years to get to that level again, and I am almost 40 right now. We keep investing right now as prices are low but I just don't trust that it will get over and above 12,000 again in my lifetime. I feel really sorry for people who were on the verge of retirement or already retired because they are screwed.

  8. #8
    Elite Member Sweetie's Avatar
    Join Date
    Apr 2007
    Location
    Den of the roving cunty bitches
    Posts
    24,532

    Default

    It seems worse this time because more people were living beyond their means.
    Now they want to act like steak dinner only once a week just won't cut it.

  9. #9
    Elite Member nana55's Avatar
    Join Date
    Oct 2005
    Location
    dreaming about being on a lake in Ontario
    Posts
    4,084

    Default

    Sweetie that is also true. The young people are spoiled. I was thinking more of my generation who were told the stock market was the place to invest for our retirement. I can't tell you how many of my friends are going back to work after retirering because of losses in the market. They told us not to depend of social security but to invest, invest, invest. Thanks...................we did.
    If I can't be a good example, then let me be a horrible warning.

  10. #10
    Elite Member Grimmlok's Avatar
    Join Date
    Oct 2005
    Location
    In WhoreLand fucking your MOM
    Posts
    55,359

    Default

    the young people are spoiled.. lol. yeah.

    nevermind that it costs twice as much to buy anything (car, house), jobs are short term at best (1 to 2 years), the boomers are rusting overtop of us and wont fucking retire.. now they can't cuz they just lost their retirement funds, jobs shipped overseas, salaries have been stagnant since the early 70's....

    it's damn hard to be young right now. no jobs, salaries suck, everything costs a ton for what you get in return...
    I am from the American CIA and I have a radio in my head. I am going to kill you.

  11. #11
    A*O
    A*O is offline
    Friend of Gossip Rocks! A*O's Avatar
    Join Date
    Oct 2005
    Location
    Being Paula
    Posts
    31,675

    Default

    Well I'm optimistic that the shakedown in the markets has run it's course and things will start to recover. There are signs of revival on Wall Street and people have stopped panicking. But it will take a long time, if ever, to get back to the levels we've seen in the last few years so there won't be a quick fix - 5 years at least. That's what I'm planning for anyway.

    I can only hope that everyone - banks, businesses, Govmints and private individuals - have learned from this nasty reality check and don't make the same mistakes again with unregulated, greedy lending and borrowing way beyond their means. People are already turning back to saving as much as possible, spending the cash they have, not the cash they borrowed and generally focussing on their needs rather than their wants.

    I also think people will diversify their savings and pension plans. It's always been very risky to invest solely in stocks and shares and any investment that "guarantees" more than a 7-8% return at best is probably too good to be true. None of this is breaking news - although a lot of people seemed to be unaware of these basic ideas.

    There's a very good article in Vanity Fair about Bernie Madoff and how he managed to con $50BILLION from wealthy, dumb and greedy investors with the promise of a guaranteed 12%+ return. Many of them have lost absolutely everything and are being forced to decide which house in Manhatten, The Hamptons, Palm Beach or Aspen to sell. Some of the jewellery and art collection will have to go too. Tragic. If someone already has a net worth of $100m why would they NEED to invest it anywhere apart from a high interest bank account? And where has all this cash gone?
    If all the women in this place were laid end to end, I wouldn’t be surprised - Dorothy Parker

  12. #12
    Elite Member KandyKorn's Avatar
    Join Date
    Nov 2005
    Location
    cubicle hell
    Posts
    2,526

    Default

    Quote Originally Posted by nana55 View Post
    Sweetie that is also true. The young people are spoiled. I was thinking more of my generation who were told the stock market was the place to invest for our retirement. I can't tell you how many of my friends are going back to work after retirering because of losses in the market. They told us not to depend of social security but to invest, invest, invest. Thanks...................we did.
    My mom was all set to retire this year and then everything crashed. She's pissed that she won't be able to retire and her investments are now NOTHING. 30 years of investing down the drain. I feel terrible for her because she's worked her ass off all of these years for every cent she saved. What happened to our 'twilight' years?
    I'm not quite drunk enough to really care, but is this her violation of her violation of her violation of her violation of probation or her violation of her violation of her violation of her probation????? ~MontanaMama on LL's latest arrest.

  13. #13
    Elite Member Grimmlok's Avatar
    Join Date
    Oct 2005
    Location
    In WhoreLand fucking your MOM
    Posts
    55,359

    Default

    now she'll join the legions who will stay rusting above others, unable to leave her job and preventing others from moving up.. a whole generation ruined.

    horrible.
    I am from the American CIA and I have a radio in my head. I am going to kill you.

  14. #14
    Elite Member KandyKorn's Avatar
    Join Date
    Nov 2005
    Location
    cubicle hell
    Posts
    2,526

    Default

    Quote Originally Posted by Grimmlok View Post
    now she'll join the legions who will stay rusting above others, unable to leave her job and preventing others from moving up.. a whole generation ruined.

    horrible.
    Exactly. So many that are unemployed and have a college degree, I fear in a few years that we will have to have a degree that cost us $60,000 and work at Subway for $8/hour. Everything is just fucked.
    I'm not quite drunk enough to really care, but is this her violation of her violation of her violation of her violation of probation or her violation of her violation of her violation of her probation????? ~MontanaMama on LL's latest arrest.

Thread Information

Users Browsing this Thread

There are currently 1 users browsing this thread. (0 members and 1 guests)

Similar Threads

  1. Replies: 2
    Last Post: March 9th, 2009, 08:00 PM
  2. Economists: Recession getting worse
    By Mariesoleil in forum News
    Replies: 33
    Last Post: January 28th, 2009, 08:41 PM
  3. The Exxon recession
    By Fluffy in forum U.S. Politics and Issues
    Replies: 12
    Last Post: October 31st, 2008, 10:55 PM
  4. It's official: U.S. in recession (Duh)
    By buttmunch in forum U.S. Politics and Issues
    Replies: 12
    Last Post: October 15th, 2008, 04:48 PM
  5. Replies: 14
    Last Post: December 15th, 2006, 06:18 PM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •