Thread: Depression in 2009? Not really.

I agree completely... I was thinking about this recently as well.

It certainly seems that there will be no real depression... nothing that will cause tons of people to commit suicide by jumping out of buildings, etc. Just a slow down of all the luxuries we enjoy, but really don't need.
I doubt society as a whole could really go through a depression like in the '30s again, because of all the advances in technology and whatnot. We're certainly not going to run out of food or anything.

Officially, the economy is not even in a recession yet which is defined as two quarters of negative GDP growth. The stock market has been dropping like its anticipating a depression. In the end, we'll just have to scale down our lifestyles assuming the credit markets unfreeze.

I'm not too sure about this perspective.

I work with people who have no clue about finacials. Granted I'm not the most educated on this topic but The common wal mart worker can barely make it.

The company I work for has had layoffs galore. some departments have cut over 75%


That means less money going into the economy.
Ex:
So i buy 1 starbucks a week as opposed to five. That means that business loses 80% of business.

Because it doesnt affect us in the middle and upper classes as much we do not feel the pinch.

If we're not buying starbucks then they cant work.

If they dont work then there are less stores to operate.

If the stores cannot get credit they close down and put Middle class workers out of work (accountants, IT, managers)


I hope I'm wrong but I don't see things getting better anytime soon.

Yes ^eagle^ I agree.

Ultimately consumption drives an economy. We are seeing consumption reduce as employment creeps up and people lose money in their managed funds. Reduced consumption will cause further unemployment and delinquent debtors and this has the potential to become a huge downward spiral.

Now I don't know how to solve this problem but if it isn't managed well by those in charge of world economies the potential exists for a depression and in a world which is so connected it would be felt hard.

But for those wanting to get into the fastlane nothing will change. Ultimately if you find a need which arises during a severe downturn in the economy you will do fine. Find a successful entrepreneurial premise and you are off........

On Friday night I went to the "hot restaurant/bar" which opened about 1 year ago. We got there around 8:30pm. The place was frigteningly empty for a Friday night.

The dining room had 2 parties dining and the bar had maybe 5. This is for a place that should hold 200-300 people and typically is very very crowded. We asked the bartender about it and he alluded that the place won't survive if things continue like that night.

Originally Posted by PhxMJ

On Friday night I went to the "hot restaurant/bar" which opened about 1 year ago. We got there around 8:30pm. The place was frigteningly empty for a Friday night.

The dining room had 2 parties dining and the bar had maybe 5. This is for a place that should hold 200-300 people and typically is very very crowded. We asked the bartender about it and he alluded that the place won't survive if things continue like that night.

Exactly!

In the 1930's The government did all sorts of intervention to stop the leaks but it had the unintended effect of putting private businesses out of business. They could not compete with the government funded programs.

Does anyone know what pulled us out of that 12 year long depression!?

I do!

Take a guess.

Originally Posted by yveskleinsky

...And here's some other questions I have:

2. Why hasn't anyone discussed the second wave of the subprime mess? ...Most buyers who had these sub-prime negative amortization loans have loans that are set to adjust at the 2 year, 3 year or 5 year mark. We have already seen the first wave of the 2 and 3 year loans blow up, but the 5 year ones are still out there.

And as far as middle-class to upper-middle class not being affected, I suppose I chalk a lot of that up to that the middle to upper middle class largely lives paycheck-to-paycheck and on credit cards anyhow, so that's a whole other time bomb that's set to go off. In other words, their spending is not an accurate reflection of their financial solvency.

I tried a few months ago to post a research report with some frightening figures but the file was too large... the peak of resets just recently occurred in spring - summer of this year (2008)

now we have to wait and see how these resets will be absorbed by the population... defaults and foreclosures were already trending higher, so odds are that they will continue in the same direction after these recent resets take hold

now, the fear of rising defaults has now fallen to the alt-a markets which were once seen as invincible to defaults. This segment has show big cracks recently...

my accountant recently confided in me that too many of his clients were living paycheck to paycheck.... he won't disclose who and where, but I know a lot of his client base are large retailers and manufacturers... and according to the accountant, whom I respect greatly: "it's gonna get fuglier out there"

now, you nailed integral part of the economy right now: credit card debt. A lot of the CDS is leveraged with and against credit card debt and this market is contracting but the media has not thrown it all over the news yet... in my personal opinion, I believe this is the bomb under the sewer lid that hank paulson is sitting on trying to avoid it from blowing into the street....

there's not enough transparency on the macro level to determine what's hidden behind the balance sheets since CDS are primarily "off-sheets" transactions....

it's important to realize that middle class (not upper class) is leveraged to the hilt via visa/mc/amex... the big scare has already hit this population living off the credit card debt when credit lines were being pulled... it started with the Heloc's and then now the credit cards.

Originally Posted by PhxMJ

If Bear Sterns, Lehman, and AIG were doing it, ....
Question is, how much exposure do the remaining players have and can they weather that impending storm.

I can talk for days about this, but a lot of it is hypothetical since the CDS markets have not been fully disclosed and just finally the other day the full disclosure of Lehman's cards showed when the courts by law posted them for the bidding block

the lack of transparency makes it difficult to put a finger on true values hence the violent recent sell off in the markets, and among other reasons i.e. banks' liquidity...

the CDS markets might actually have been quelled with the recent bail out and the fact that some of the obligations are simply being written off. An example is that JPM picked up some unbelievably huge assets on the real cheap and probably cheap enough at this point to offset any of the collateral damage brought on by the CDS bets they made....

that is an optimistic point of view.... just that nobody knows how realistic until they show the cards.

Originally Posted by ^eagle^

...
Does anyone know what pulled us out of that 12 year long depression!?

war .

and here's another really good question:
there is one single major similar factor in common btwn today's market and the 1930's market that sparked the huge declines... what was it?

Originally Posted by rockjon

Officially, the economy is not even in a recession yet which is defined as two quarters of negative GDP growth. The stock market has been dropping like its anticipating a depression. In the end, we'll just have to scale down our lifestyles assuming the credit markets unfreeze.

BINGO! as crappy as the stock markets are, they are a true reflection of the financial sector which is the main driver for equities.... for a long time, the stock market held a terrible disconnect from the media driven news... but all of a sudden, it took Hank to get on his knees and beg for the markets to realize a shit storm has already started blowing wind. (pardon the pun, heh)

Originally Posted by kimberland

And I thought farmers work almost entirely on credit?
They borrow money for seed and fertilizer
and then repay it with the harvest.

Wasn't that one of the reasons given
for the fertilizer stock downgrades?

But no, I don't think North Americans will go hungry.
I think more people elsewhere might go hungry though.

north america will not run out of food. we just won't let it happen.... but the harsh reality is that there are already food shortages around the world where it was once unthinkable that would happen due to excessive pricing (mostly because of transportation costs and ferts)

btw, I cannot believe how bad POT and MOS got decimated.... I used to hold TNH and TRA... wow, what a fast and furious ride that was...

Originally Posted by PhxMJ

So if people believe we are in a depression, what is a "real depression" as described in the 1930's? An implosion?

the "depression" is very real and it's happening to very developed nations.... the 1930s version started in Europe and it's happening again...

Bloomberg.com: News

celandic Shoppers Splurge as Currency Woes Reduce Food Imports
By Chad Thomas



Oct. 13 (Bloomberg) -- After a four-year spending spree, Icelanders are flooding the supermarkets one last time, stocking up on food as the collapse of the banking system threatens to cut the island off from imports.
``We have had crazy days for a week now,'' said Johannes Smari Oluffsson, manager of the Bonus discount grocery store in Reykjavik's main shopping center. ``Sales have doubled.''
Bonus, a nationwide chain, has stock at its warehouse for about two weeks. After that, the shelves will start emptying unless it can get access to foreign currency, the 22-year-old manager said, standing in a walk-in fridge filled with meat products, among the few goods on sale produced locally.
Iceland's foreign currency market has seized up after the three largest banks collapsed and the government abandoned an attempt to peg the exchange rate. Many banks won't trade the krona and suppliers from abroad are demanding payment in advance. The government has asked banks to prioritize foreign currency transactions for essentials such as food, drugs and oil.
The crisis is already hitting clothing retailers. A short walk from Bonus in the capital's Kringlan shopping center, Ragnhildur Anna Jonsdottir, 38, owner of the Next Plc clothing store, said she can't get any foreign currency to pay for incoming shipments and, even if she could, the exchange rate would be prohibitively high.
``We aren't getting new shipments in, as we normally do once a week,'' Jonsdottir said. ``This is the third week that we haven't had any shipments.''
Bankrupt
Iceland's 320,000 inhabitants have enjoyed four years of economic growth in excess of 4 percent as banks and businesses expanded abroad, buying up companies from brokerages to West Ham United soccer club. Now, the three biggest banks, Kaupthing Bank hf, Landsbanki Island hf and Glitnir Bank hf have collapsed under the weight of about $61 billion in debts, 12 times the size of the economy, according to data compiled by Bloomberg.
The central bank, or Sedlabanki, ditched its attempt to peg the krona to a basket of currencies on Oct. 9, after just two days, citing ``insufficient support'' in the market. Nordea Bank AB, the biggest Scandinavian lender, said the same day that the krona hadn't been traded on the spot market, while the last quoted price was 340 per euro, compared with 122 a month ago.
``There is absolutely no currency in the country today to import,'' said Andres Magnusson, chief executive officer of the Icelandic Federation of Trade and Services in Reykjavik. ``The only way we can solve this problem is to get the IMF into the country.''
Imports Dependency
The International Monetary Fund sent a delegation to the island last week. Prime Minister Geir Haarde said on Oct. 9 his country may ask it for money after failing to get ``the response that we felt that we should be able to get'' from European governments and central banks. The state will also start talks with Russia over a possible 4 billion-euro ($5.5 billion) loan.
Iceland's rugged, treeless terrain, a barren stretch of volcanic rock, geysers and moss, means the country imports most food, other than meat, fish and dairy products.
Magnusson said last week that one of Iceland's largest supermarket chains was unable to get any foreign currency to make purchases abroad and another retailer's electronic payment didn't go through. Iceland will begin to see shortages of ``regular goods'' by the end of the week if nothing changes, he said.
``We are struggling to make the economy survive from hour to hour,'' Magnusson said. ``There is an enormous amount of capital that wants to get out of the country.''
Sedlabanki told lenders on Oct. 10 that residents who want foreign currency should first prove they need the money for traveling by providing documentation for their trip.
Essential Goods
Wholesalers are demanding that importers pay before any goods are shipped, said Knutur Signarsson, head of the Reykjavik-based Federation of Icelandic Trade. Under normal circumstances, wholesalers abroad would extend credit for 30 to 90 days, he said.
``Many of them ask us to pay cash before they send the goods to Iceland,'' Signarsson said. ``Because of the situation, Iceland has become a country that no one trusts any longer.''
Bogi Thor Siguroddsson, owner of Johan Roenning, an import and retail business which has about 7 billion krona ($71 million) in annual sales, says he's instructed his purchasing managers to only import the core goods, including light bulbs, lamps and electrical cables, they need to serve their customers.
``It's enough to have the credit crisis,'' he said. ``Then you have the currency crash. Unfortunately, we have shown that we can't handle it ourselves.''
Food Inflation
Icelanders, whose per capita gross domestic product is the fifth highest in the world, according to the United Nations 2007/2008 Human Development Index, will have to tighten their belts.
Shoppers are paying more for the goods they do get. The cost of fruits and vegetables, nearly all of which are imported, have gone up about 50 percent in recent months, said Steinunn Kristinsdottir, a 33-year-old Reykjavik resident who was leaving the Bonus store with her cart full.
``This situation really has been a bit troubling for people,'' she said. ``They don't know what's going to happen.''
To contact the reporter on this story: Chad Thomas in Reykjavik, Iceland, via the Helsinki newsroom at cthomas16@bloomberg.net.
Last Updated: October 13, 2008 01:47 EDT

memenode, thanks for sharing your thoughts about the current situation.

Given that your perspective is so different than mine, allow me to ask you this:

What are you doing about it?