Let's turn it up a bit, shall we? How enthusiastic are you about global conditions? No War Greenspan Knighted The difference this time is that Alan the Good is very concerned about the wildcard economic effect of a war on Iraq, which some economists think could trigger a global economic meltdown, with $100 oil and a collapse in consumer spending.
There is going to be a collapse in consumer spending whether there is a war or not. What do GM, AT&T, Merrill Lynch and JP Morgan Chase have in common? They will all be backrupt in the next year or two.
How many American's have been knighted? Does this meen that Alan will be called in to protect the Queen if needed?
You can start by an incredible debt load, increase in poverty stats, stagnant employment growth, housing bubble. Need I go on?
The increase in the number of households below the poverty line is an EFFECT of the last recession from which we are emerging. Also, as noted in the Census Bureau report released this week, this increase was not as bad as the increases seen in the two previous recessions. The housing bubble is pure speculation at this point and makes many people nervous because of the recent stock market bubble. People are wondering, "Well, it happened with stocks why not with real estate?" A valid concern, I'll admit, but I really wonder if we'll see a bursting of the real estate bubble since incomes haven't been coming down for the richer half of the country (in fact, incomes went up for the top 20% according to the Census Bureau report). Stagnant employment growth? We seem to be emerging from the latest recession but companies haven't been hiring back a lot of the employees they laid off. Unemployment was so low before the recession began that I really wonder if 5.9% or whatever we're at now will cause us to dip back into a recession. I doubt it. Debt load? Well, you got me there. That's one thing that I really wonder what the long term impact will be. You're talking about personal and household debt, not federal, right?
> The increase in the number of households below > the poverty line is an EFFECT of the last > recession from which we are emerging. We are not emerging from anything. If we were, companies would want to borrow money to fund new development - and if that were the case, interest rates would be going up. But no one wants money (except people refinancing their homes) so the price of money goes down. > The housing bubble is pure speculation at this > point and makes many people nervous because > of the recent stock market bubble. It is a bubble because housing purchacing has become a fad - a new place to put investment money. Real housing value increases come from real causes - such as an area experiencing population growth because wealth is generated there. You will see house purchacing go way down if interest rates go up (not that I think they will) or if the fad goes away on its own, as fads are wont to do. > You're talking about personal and household > debt, not federal, right? Don't forget corporate debt. A number of companies have so much debt they can never pay it back, from obvious targets (Amazon or Tyco) to the big guys (GM and IBM, who both have serious pension problems).
I claimed we were emerging from a recession, which by common consensus is two or more quarters of negative growth in GDP. According to the government numbers on GDP we had 3 consecutive quarters of negative growth last year. In other words, we were in a recession. The fourth quarter of 2001 and then the first quarter of this year were both positive. Also, the initial estimate for the second quarter of this years was +1.1 (I think more refined numbers for the 2nd quarter come out tomorrow). So these last three quarters count as "emerging from a recession". Your observation on the low interest rates may indeed be correct, but that does nothing to refute the claim that we are emerging from a recession. Whether we will experience a double dip recession later this year or early next year is a valid concern given the recent data and the impending war. You're right that many investors have shifted money out of equities and into real estate. Some by buying houses and others by investing in REITs and real estate funds. While I agree that real value comes from real causes I would claim that strong demand is a real cause. Demand is nothing more than what a buyer is willing to pay for a particular good or service. If I am willing to buy a house for $200,000 that just last year was only worth $120,000 and others are willing to do likewise that does not a bubble make. This is not a fad. I think there are many factors at play here. One is that buyers are willing to pay a higher percentage of their income on housing than buyers from a previous generation. Another potential factor is the increase in income disparity that was shown in the recent Census Bureau report. These $500,000 homes in the DC area where I live are being bought by those in the top income quintile (at least, I hope, or else somebody's going to be in some serious debt) and that top quintile is the only one to have seen an increase in income recently. So the top fifth income earners are outbidding one another on homes and this is one cause for the skyrocketing house prices. Slobs like me in the lower quintiles have to make do with apartments. If I weren't so convinced ideology rots the brain the whole thing would make me running back into the arms of leftism.
I bet you a dollar that not any of those companies listed will be bankrupt in the next two years. Is it on? I used to work at JPMorganChase and while there are some people there who are a little slow they have too much money to go bankrupt anytime soon.
And you'll be incredibly rich from selling those stocks short and from buying into their competitors. Put your money where your mouth is, big boy.
> I bet you a dollar that not any of those > companies listed will be bankrupt in the next two > years. Is it on? I will take that bet. > Put your money where your mouth is, big boy I do! It isn't useful to have information unless you act on that information, right?
> I claimed we were emerging from a recession, > which by common consensus is two or more > quarters of negative growth in GDP. Technically you are right, but I think historically this will all be seen as one recession with the same root cause. A few quarters of weak growth do not change that. > If I am willing to buy a house for $200,000 that > just last year was only worth $120,000 and > others are willing to do likewise that does not a > bubble make. It doesn't if people have more money to spend on such a house. It does if people are paying more just because they are afraid of spending even more if they wait (and this is what realtors are telling people, at least in my area). > One is that buyers are willing to pay a higher > percentage of their income on housing than > buyers from a previous generation. I also thought this was the case, although the current numbers indicate that people are playing a smaller part of their income to mortgages than in years past. I still think this is right, and the numbers are skewed by the extremely high number of refinances going on.