I'm not worried. All this is just hype, things are quite fine in the world. Money does not disappear until value does, and people are still producing a lot of value.
It just occurred to me that folks here younger than 28 have never seen an actual recession (I'm assuming that under-12s could not care less about business news and missed the early 90s bust). It's just been one long boom for you, right?
I suspect the world is about to surprise you in a very unpleasant way.
Sure, I've never seen a recession, but that does not mean that I am unable to differenciate a real problem from a manageable problem.
McCain was right - the fundamentals of the economy ARE strong. A recession starts at the bottom - it starts when people stop spending. It does not start at the top. What is happening right now is just a restructuring. A flesh wound, one could say.
Do you know that Detroit was once one of the wealthiest cities in the United States? Things change.
What you're seeing now is a period of dramatic change. Approach it as you'd like.
I'm sure Detroit's residents will be happy to know that Wikipedia gave them a sound bill of health.
If you'd like to buy some property in Detroit and tell 'em yourself, you can get it reeeeeeeaaaally cheap: http://www.lewrockwell.com/blog/lewrw/archives/022350.html
All these things you speak about are momentary things. They react to short term events.
The problems right now are due to the gambling nature of many American businesses - but it's that same nature that makes American #1 in so many ways.
This is just a correction. It's not a recession. America has been living above it's means and will drop down a notch or two, but the fundamentals are very strong.
Education - good Science & Research - good Investment & Risk Taking - good Intellectual Capital - good Natural resources - good
America is fine, people are just using this bubble cycle as propaganda for an election, and you guys are panicking. Take it easy - go scoop up some stocks at rock bottom prices like the richest man in the world is doing.
Do you know any other country with such a debt to GDP ratio? Do you know what the significance of having that much debt is?
Do you realize that's equivalent to someone who makes $100k a year having ~$70k in credit card debt? That's not "normal"- that's the person that has the Dr. Phil intervention on Oprah.
To you, things may look okay. I'll tell you what's actually happened though, as you've looked outside at your normal life. Over a million people this year have lost their homes. Over a million people are projected to lost their homes next year.
Education: More and more of our jobs are being taken up by H-1 foreigners. I'm the son of immigrants- this isn't meant to be xenophobic- we're not producing graduates capable of tomorrow's challenges. Too many college students are too focused on how they're going to get their next handjob and not on their D in calculus.
Research: Bush has cut funding for science and research dramatically. Don't just make assumptions, look it up. Most academics and professors hate Bush. There's a reason why most schools are liberals now.
Intellectual Capital: Our best asset. Slowly being trickled a way by a generation worrying about what happened on Gossip Girls and Lindsay Lohan's lesbian relationship.
Natural resources: what resources? Timber? grass? food? The only one that matters, oil, is in short supply. We only produce 3% of the world's oil supply, and use 25% of it. Meanwhile, rather than eliminate oil entirely, half the population thinks drilling more oil and adding 4% to our supply 15 years from now will fix our energy woes.
This is not a rant, and I'm not some bitter curmudgeon. I'm a young, healthy 24 year-old, and this is reality.
The debt of our federal government is different than the 70k credit card debt of a person who makes 100k in two ways that somewhat cancel.
First, the interest rate that the federal government can get is remarkably low. In fact, if we include inflation (which seems to be hard to peg right now), I would almost venture to guess that the interest rate might be negative.
On the other hand, it makes me uncomfortable that people compare the federal debt to the GDP because the GDP is a sort of total income for the nation. What ought to matter is the relevant part of the income of the federal government. I haven't found good data on what this income is (anyone?) but I think it is on the order of about 3 trillion. It was about 2.5 trillion in 2006 according to Wikipedia.
Anyway, if we wanted to compare the national debt to consumer debt in terms of a debt load, this is about like having a person who owes about three times his annual income on a mortgage. There are still two main differences. One the one hand, there is no home that this mortgage has enabled us to enjoy. On the other hand, the interest rates on federal debt are lower than the rates on just about any mortgage.
Maybe we can use auto loans and cars.
That includes the great depression. While controls are still in place (thank god) to prevent bread lines, how well you Americans adapt (and how the rest of us react) to the very real possibility that you cease to be a superpower remains to be seen.
All I can say is that Russia was not a fun place to live in in the early 90's.
The irony of your statement, for me, is that just yesterday my local newspaper ran a front-page feature on some local businesses worried about Christmas spending: http://www.theunion.com/article/20081007/NEWS/810079993&...
Even McCain has reversed his stance on the economy (according to his website).
Right now the betting market is strongly weighted toward recession in 2009. Taking the other side of that bet will be quite profitable if it pays off.
I don't think it's just the young though. I think a lot of people have forgotten how bad things can get. The last real recession was in the early 90's for most. Unless you were heavy into tech stocks or worked in the industry, the only thing that you noticed about the dot com boom was the superbowl commercials.
It's amazing how people believe that things will stay the same forever. When we're booming, it will always be that way, when it's bust, life will never get better.
I for one am looking to profit as much as possible on people's ignorance, but I know that won't be easy when I'm having to make my own cut backs.
Merely producing goods is not enough; we need to get them to consumers and consumers need to be able to compensate the producers. To this end, we need a financial system through which wealth can easily and painlessly be transfered. Without a healthy financial system, simple things like employment, commerce, shopping, become difficult if not impossible.
Key point: write all the code you want; without a financial system nobody will be able to pay you for it.
True, we'll get through this eventually, the financial system will change and adapt to new circumstances, such is the nature of the market, (It would happen faster if the government wasn't so insistent on propping up the very institutions that were failing.) but it will take a while, and in the meantime, jobs, commerce, industry, all will suffer, especially those elements dependent on easy liquidity and cheap credit, like startups.
Long story short: You should be very worried. Protect your assets. Focus on tangible goods and increase your productivity. Realize that excessive 'trust' is what got us into this mess in the first place, and weather the storm accordingly.
We need both. If all of the water freezes, the ships are still technically there. The wealth still exists, but there's shit-all the boats can do but wait for the spring thaw if they're frozen in the ice.
1) You should worry when your country produces significantly more "money" than your country produces value. See Bailout Bill (I fail to see the value produced in writing up $700 billion taxed on firefighters and teachers).
2) You should worry when organizations like IMF and the World Bank extend loans to these other countries, jack up in the interest and take up more than half of the country's budget on the interest instead of the principal. Most of the countries we "help out" end up becoming more impoverished after we extend a loan to them, and much of what we build ends up doing more harm than good. Worse, the money does not even exist in the first place.
Seriously, don't be afraid. This is a media recession. If this were a real economic problem, companies would be tightening their belts, buying shares, merging, selling off stuff, and the vultures would be there pecking at carcasses. It's not happening. The papers make things sound bad, but imagine you didn't read the papers. When you go out, things are pretty much the way they always where.
Exactly.
I could do without all of those during hard times.
For planes, there's already a nice inventory of used aircraft backing up thanks to the latest airline bankruptcies. Do you think an airline will be buying new (or any?) aircraft if vacation and business travel drops off a cliff?
Anyone who believes this is seriously believes this needs to read some books.
I don't expect times to get that tough.
But I am sure we have made a lot of pornos because U.S. constitution protects them for the freedom of speech. And it is really risky for any people in Middle East to shoot porns than in U.S.A. . So probably this is one of few things that we make that poor men outside U.S. truly rely on.
Boeing is trans-national with production worldwide
Ford is trans-national with production worldwide
Microsoft is trans-national with development worldwide
Apple is predominantly US based but trans-national
Nike manufactures in China or anywhere sufficiently cheap
Levi is the same
McDonalds gets its meat from Brazil and is trans-national
Coca-Cola is trans-national - in WWII Coca-Cola in germany was scarce, so the local franchisee developed Fanta as an alternative which made its way back after the war.
Let me explain.
A bank has $10.000. The government gives then $2000 for free.
You come to the bank and ask for $1500. They give it to you. Over the next 4 years you work for an employer, giving him about $4000 of value. Of that, you pay $500 in taxes, payback $2000 to the bank and keep §1500 for yourself. The bank makes more money, the government makes more money, and you had to work harder to stay in the same spot.
Debt is a way to make slaves of citizens, but for the economy, it is good because it forces productivity out of people.