Economist Predicts Upcoming Crash to be Worse Than 2008 - Page 2 - U2 Feedback

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Old 07-12-2012, 05:37 PM   #16
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Originally Posted by U2DMfan
I watched an excellent Frontline episode a while back that closed by commenting that 'the same thing that happened in 2008 could happen tomorrow'. Frontline is a very balanced and objective source. Particularly that (even though some like to accuse everything on PBS of being Leftist) they criticized Obama's big decision in 2009/10.

Specifically because Obama chose Geithner's view over Summers' view that we should have attached some strings to the bailout money and have punished those that fucked everything up. Geithner thought it would scare the market into freezing up. Obama agreed and so the banking industry got all that money and not a thing changed.

Granted, that was to do with the specifics of the banking industry and high risks and all of that...and this seems more about monetary policy? I wish I knew more about economics. But it doesn't take much to convince me that we're totally fucked.
Geithner had a very reasonable point... one that was applicable in 2009. In 2016, if things are more normal, then we could pay for that. Different policies are best for different time periods.
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Old 07-12-2012, 06:24 PM   #17
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Of course, overly loose monetary policy to many Austrians is anything less than a gold standard and a ban of fractional reserve banking. How the latter fits with the free market ideology that they tend to support is something I don't understand.
That's why Austrians are still around because they don't trust the government will actually do what they are supposed to do. A loose monetary policy makes sense in bad economic times and a tighter policy that addresses REAL inflation in boom times but as you point out politics gets in the way. Friedman wanted the constitution to include what is to be done at the reserve so there would be less political influence and many Austrians are skeptical of having a federal reserve system at all.

I think Neo-Keynesianism is the appropriate term for economists today because they seem to like loose monetary policy all the time. The problem I have with that is the lack of savings in the general public and that is often the reason why the middle class is diminishing. If the middle class has mostly debt and little equity it changes the situation from prior decades.
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Old 07-13-2012, 03:31 AM   #18
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for quite some time now we've had one "bubble" after another on the stock exchange (and property markets)
our stock market has become such an intricate gambling system (based more & more on positive & negative predictions instead of being based on actual data) that it would be a fair statement that we can't judge how much of our economy is just "bubble"
this wouldn't even be a huge problem if stocks hadn't become an intricate part of loans, pension plans etc

I do think the world economy right now might still be slightly overvalued
so more problems for financial institutions and (as a result for) governments, leading to higher unemployment and some inflationm, wouldn't surprise me

I can't say it worried me too much though

I'm 36 now
I'm sure before I can retire the economy will go up & down a number of times
value of property will rise and fall
and the job market will ebb & flow along with it all

what I do worry about is whether, by the time I retire, the demography of our country has become so dysfunctional (less and less people working to pay for more and more pensioners) that our social security system will be more or less non-existant
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Old 07-13-2012, 08:46 AM   #19
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Originally Posted by Salome
what I do worry about is whether, by the time I retire, the demography of our country has become so dysfunctional (less and less people working to pay for more and more pensioners) that our social security system will be more or less non-existant
The demographic issues faced by the US are going to be huge, and not just for SocSec's coffers. A large amount of immigration and a system that allows more class mobility than we currently have seems like the best way out of it to me, but I'm not sure it's achievable.
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Old 07-13-2012, 09:09 AM   #20
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Originally Posted by purpleoscar View Post

50% unemployment and 100% inflation is a pretty drastic prediction. I would be quite shocked if that happened.
Not only drastic, but is it even sustainable? At a certain percentage the structure collapses and most would agree that happens before it reaches 50%.
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Old 07-13-2012, 09:55 AM   #21
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I don't worry about it so much. I'm in a lucky situation where a crash wouldn't effect us too much because of the type of work we're in.
At 50% unemployment (I don't buy this prediction at all, but for the sake of argument), it would affect you immensely regardless of how recession-proof you think your job may be because that would amount to almost a total social collapse. With those sorts of numbers, we're all going down, the question is how far down.
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Old 07-13-2012, 10:37 AM   #22
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Yeah, 50% unemployment would be only a stepping stone towards the total collapse of... uhh... the entire world economic system. Not gonna happen. And to say that 100% inflation would come in tandem is absurd. 50% unemployment would cause mass deflation. And one could argue that the unemployment could be caused by the inflation, which is somewhat legitimate. But inflation only happens when printed money is actually spent, which, in an economy not at structural capacity (like every Western economy), will cause growth. When inflation picks up too much, the Fed can easily take money out of circulation.
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Old 07-13-2012, 12:30 PM   #23
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Yeah, 50% unemployment would be only a stepping stone towards the total collapse of... uhh... the entire world economic system. Not gonna happen. And to say that 100% inflation would come in tandem is absurd. 50% unemployment would cause mass deflation. And one could argue that the unemployment could be caused by the inflation, which is somewhat legitimate. But inflation only happens when printed money is actually spent, which, in an economy not at structural capacity (like every Western economy), will cause growth. When inflation picks up too much, the Fed can easily take money out of circulation.
That's true but don't forget stagflation. In someways we are partially there. Prices do rise (even if product containers keep the same price they reduce the quantity of the product), and the unemployment rate when you include people who gave up looking for work is quite high in much of the developed world.

Stagflation - Wikipedia, the free encyclopedia

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Economists offer two principal explanations for why stagflation occurs. First, stagflation can result when the productive capacity of an economy is reduced by an unfavorable supply shock, such as an increase in the price of oil for an oil importing country. Such an unfavorable supply shock tends to raise prices at the same time that it slows the economy by making production more costly and less profitable.[5][6][7]

Second, both stagnation and inflation can result from inappropriate macroeconomic policies. For example, central banks can cause inflation by permitting excessive growth of the money supply,[8] and the government can cause stagnation by excessive regulation of goods markets and labor markets.[9] Either of these factors can cause stagflation. Excessive growth of the money supply taken to such an extreme that it must be reversed abruptly can clearly be a cause. Both types of explanations are offered in analyses of the global stagflation of the 1970s: it began with a huge rise in oil prices, but then continued as central banks used excessively stimulative monetary policy to counteract the resulting recession, causing a runaway wage-price spiral.[10]
The good thing is oil prices aren't going up to shock levels at this point. The only thing that could fuck it up is cap and trade or other energy regulations from the EPA to make energy costs "necessarily skyrocket" .

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Not only drastic, but is it even sustainable? At a certain percentage the structure collapses and most would agree that happens before it reaches 50%.
Yes those kind of stats remind me of Haiti. Of course it's still possible but you would have to have MASS bank failures with people hiding their currency under the mattresses. All banks have to do is increase their reserve currency to around 10% to avoid bank runs from collapsing the economy.
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Old 07-13-2012, 12:46 PM   #24
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As someone who is going to graduate college in ten months' time, let me just say that my country had laid a tremendous base for its incoming workers.
Most of Asia is booming. If I was a young person graduating now I'm not sure if I would stay in the West at all, quite frankly.
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Old 07-13-2012, 12:56 PM   #25
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China seems to be slowing down, though.


China GDP: Slowdown deepens, raises risks to global economy - Jul. 12, 2012
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Old 07-13-2012, 02:20 PM   #26
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Stagflation could be a problem, but it generally arises either from resource price shock or loose monetary policy where the inflation causes the growth to end. The 1970s featured both of these things, and central banks know how to manage it. The Fed has been exceedingly cautious. Given its current line on more quantitative easing, stagnation is a much bigger threat than inflation. Stagflation is also far more likely in an economy starting out much closer to structural capacity.
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Old 07-13-2012, 02:21 PM   #27
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Most of Asia is booming. If I was a young person graduating now I'm not sure if I would stay in the West at all, quite frankly.
I'm happy to stay in the US, and I'd be happy to stay in Canada or Australia, but if I were in Europe, I'd be very tempted to leave.
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Old 07-13-2012, 04:33 PM   #28
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Most of Asia is booming. If I was a young person graduating now I'm not sure if I would stay in the West at all, quite frankly.
Depends on where.

You can happily stay in North America, move to Alberta (particularly the northern half) and live extremely well.
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Old 07-13-2012, 05:23 PM   #29
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Originally Posted by digitize

I'm happy to stay in the US, and I'd be happy to stay in Canada or Australia, but if I were in Europe, I'd be very tempted to leave.
I don't think that even now the US outperforms the whole of Europe combined?

I've been in Asia a lot this year. It's amazing how different 'the feel' is over there. But Asia will hit a serious barrier at some point, I feel. The West exploited other people and the entire planet a lot to get where it is. I'm not sure whether the growth can be limitless.
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Old 07-13-2012, 07:54 PM   #30
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Isn't one of the problems with currency now how weak the US dollar is?
The dollar is at a 2 year high against the euro. Too strong a currency is bad for a nation's exports - e.g. Japan routinely intervenes to weaken the yen when it gets too high.
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