How long will the recession last? Watch

Crazster
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(Original post by trance addict)
^ sorry i don't know much about economics :p:
TBH, this recession (IMO) is looking to be a decade long. Yo have China/India's effect of prices diminishing as they are so reliant on oil, you have the bursting of the super bubble on housing (or so Soros says) and to top his off you have a FED already with low interest rates and struggling with inflation. Europe is also worried about inflation, which would lead to moves that hurt growth prospects. Lets not forget that US debt is still on the rise, and when money is tight in a recession and the dollar depreciating more (even Japan/China looking to dis invest in US bonds) you have the makings of a big cyclical downswing.

This is all how I read the facts, you may have your own conclusion.
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fieryiceissweet
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(Original post by Crazster)
you have the bursting of the super bubble on housing (or so Soros says
link to source please?

(Original post by Crazster)
Yo have China/India's effect of prices diminishing as they are so reliant on oil,
what effect would a major breakthrough in renewable energy have on the "recession" which we seem to be heading to?
i mean something like being able to make a car that runs on water that costs less than £30k brand new
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Crazster
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(Original post by fieryiceissweet)
link to source please?

http://www.npr.org/templates/story/s...oryId=90328243 I typed it into google, there was a better piece in the FT months ago.

what effect would a major breakthrough in renewable energy have on the "recession" which we seem to be heading to?
i mean something like being able to make a car that runs on water that costs less than £30k brand new
the effect would be muted. A new technology that is much more efficient then oil, who's infrastructure can be built quickly and the other infrastructure (aka. all the cars) changed too?
The problem is, even if a car can run on water, the power still comes from mostly oil/coal/gas power plants. A huge switch to nuclear would take many, many years.

I forgot to add that the US government can't spend its way out of this recession, it's just in too much debt ( look at the stimulus's check and the lack of effect they had).
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Johan C
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(Original post by Crazster)
I forgot to add that the US government can't spend its way out of this recession, it's just in too much debt ( look at the stimulus's check and the lack of effect they had).
Maybe - just maybe - the consequences of other shocks masked the effect of the stimulus cheque ? The consensus among economists was that $150bn would have a measurable positive impact on the economy.
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Inter-Company
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(Original post by Crazster)

I forgot to add that the US government can't spend its way out of this recession, it's just in too much debt ( look at the stimulus's check and the lack of effect they had).
it did not have a 'lack of effect' :rolleyes:

As said;

(1). it was largely muted by other factors in the economy

and

(2). it did still somewhat help consumer spending within the country (but due to (1) obviously not as much as expected)
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Crazster
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(Original post by Inter-Company)
it did not have a 'lack of effect' :rolleyes:

As said;

(1). it was largely muted by other factors in the economy

and

(2). it did still somewhat help consumer spending within the country (but due to (1) obviously not as much as expected)
other factors such as? I heard most of it went to paying down debt
"Other factors" sounds so good, lets deal in less vague terms
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Crazster
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(Original post by Johan C)
Maybe - just maybe - the consequences of other shocks masked the effect of the stimulus cheque ? The consensus among economists was that $150bn would have a measurable positive impact on the economy.
heating up the economy heats up inflation, and that 150 billion would just be more debt the US would be piling on (and before we go into if it would have an effect these "other factors" need outing - until then i'll stick to it was an ineffective policy as everyone drowns in debt). I wonder if they are brazen enough to put out that much of someone else's money.

Spending out of the last oil recession didn't work so well, and with oil this high - exacerbating everything I hope people arn't looking to make history repeat itself (consensus - who's consensus? which think tank (link would be appropriate)
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Drogue
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I thought the stimulus had a large effect? The problem being inflation - the Fed didn't expect as much of it as quickly as it came. Now, the Fed's in a better position re: inflation, since the US doesn't have the union power Europe does and has a society that is far more happy to let wages be decided by the market. As such, while it has worse prospects than Europe, I can't see it falling as hard, since it can keep interest rates lower. But it'll be more hit by gas and fuel prices.

I've no idea how long the recession will last. It depends how much of the price inflation is passed into wages, how long commodities prices rise (I bet less than most people think - the flip side of speculators is that they don't make the price go higher than it otherwise would, they just make it adjust quicker), whether China and India can keep their growth rate up and consumer mood in the UK - if they public keep spending and keep expecting things to end up ok, we'll have a longer, slower downturn in both housing and the economy as a whole, whereas if they get panicky and worried about their jobs then it'll be shorter and sharper.

Crazster: the argument "other factors can't be considered unless you can name them" is silly. It's precisely because we don't know what other factors affected US growth that you can't say whether the stimulus had an effect. Moreover, lots of times we know there have been bad external factors but cannot name them, as they could include simply a worse-than-expected reaction to current conditions. The question is, would it have been worse without the stimulus, and I'd argue that it clearly would be - things were starting to freeze up and so extra money goes a long way towards unsticking it, even if they spend it paying off debt and thus feel more comfortable about their ability to withstand any further shocks.

Also, I'll move this to another thread.
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londoner21
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At a guess, recovery will start late Autumn/early Winter but prepare to watch the FTSE 100 fall substantially before that happens.
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Inter-Company
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(Original post by londoner21)
At a guess, recovery will start late Autumn/early Winter but prepare to watch the FTSE 100 fall substantially before that happens.
indeed, despite the FTSE entering a bear market many say it needs to fall by a further 5-10% minimum before sustained recovery can begin
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Inter-Company
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(Original post by Crazster)
other factors such as? I heard most of it went to paying down debt
"Other factors" sounds so good, lets deal in less vague terms
before i begin, grow up - if you want to have a adult debate/conversation then do so but please don't reply with childish 'other factors can't be considered unless you can name them" as its just silly/isn't needed

the level of US debt has had very little if any effect on the affects of the stimulus package, higher than expected inflation (which at the time the Fed did not forsee) has taken its toll on consumer spending - yet even after the recession like stats that have come out, be that employment data or house prices via the case-shiller index (which on the whole did fall btw but in certain area (re: away from subprime) actually held steady) consumer spending has still held up - i would dread to think where US growth prospects would be had this stimulus package not actually come in

many factors as drogue said we cannot know them as 'lots of times we know there have been bad external factors but cannot name them, as they could include simply a worse-than-expected reaction to current conditions.'
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Johan C
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(Original post by Drogue)
Crazster: the argument "other factors can't be considered unless you can name them" is silly. It's precisely because we don't know what other factors affected US growth that you can't say whether the stimulus had an effect. Moreover, lots of times we know there have been bad external factors but cannot name them, as they could include simply a worse-than-expected reaction to current conditions. The question is, would it have been worse without the stimulus, and I'd argue that it clearly would be - things were starting to freeze up and so extra money goes a long way towards unsticking it, even if they spend it paying off debt and thus feel more comfortable about their ability to withstand any further shocks.
Couldn't have put it better myself.

Could people stop obsessing about the speculators ? From business radio to the FT quoting a GSachs report to Central Banks, everyone's saying they really don't explain the sustained oil price rise. Of course Drogue I know that's not what you were saying at all, just needed to vent once and for all.
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Inter-Company
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(Original post by Johan C)

Could people stop obsessing about the speculators ? From business radio to the FT quoting a GSachs report to Central Banks, everyone's saying they really don't explain the sustained oil price rise. Of course Drogue I know that's not what you were saying at all, just needed to vent once and for all.
i know EXACTLY what you mean!

people think that they study economics at university and then hear a lecturer perhaps make a comment about the UK economy or read some gloomy report in the paper by GS for example and thats it, the stimulus package hasn't worked or the world is going to combust as oil prices are too high b/c they say so :rolleyes:

if people actually did some research on the topic, looked at different stats and formed a more structured opinion perhaps the above comments (re: fiscal package) would not have been made
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Johan C
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(Original post by Inter-Company)
i know EXACTLY what you mean!

people think that they study economics at university and then hear a lecturer perhaps make a comment about the UK economy or read some gloomy report in the paper by GS for example and thats it, the stimulus package hasn't worked or the world is going to combust as oil prices are too high b/c they say so :rolleyes:

if people actually did some research on the topic, looked at different stats and formed a more structured opinion perhaps the above comments (re: fiscal package) would not have been made
Yup.
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Inter-Company
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haha LMAO at the neg-rep crazter (or who ever it was) :rolleyes:

at least if you have something to say about my posts reply to them and discuss like adults instead of thinking neg rep will somehow make you feel like you know something and are a man - clearly it doesn't as you remain anonymous and shows you off as a coward that you are
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Drogue
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Firstly, could we quit it with the personal comments. There's no need to tell people to grow up or presume you know why they make a certain comment. There's generally a reasonable discussion around many things.

Also, I've made rants before about people who come out having a go at people about anonymous rep. Rep is there to say if something seemed like a good post or a silly one. If people think a post is silly, they can neg it. I've no idea where the idea of signing it comes in, I rarely sign my rep either pos or neg. Actually, I've done it a lot more lately, but mainly to give context, generally I prefer it to be anonymous.

(Original post by Johan C)
Couldn't have put it better myself.

Could people stop obsessing about the speculators ? From business radio to the FT quoting a GSachs report to Central Banks, everyone's saying they really don't explain the sustained oil price rise. Of course Drogue I know that's not what you were saying at all, just needed to vent once and for all.
True, although speculators have a very similar effect to short-selling: they adjust the price quicker. If we expect commodity prices to rise in the future for real factors, it'll usually rise with those factors. Speculators just buy a lot now, causing the price to rise faster to it's true value. The same way short-selling hastens the fall of a share price and makes it adjust quicker to it's true value - as people holding the shares may well not be bothered to sell them. However, with both cases, overshooting is quite common, especially if things are bought or sold because people think they will go down, not in reaction to changes in real factors. There's no doubt that commodity prices needed to rise - we have increased demand that isn't likely to subside particularly quickly and a much lesser increase in demand. However because everyone expects them to go up, some speculators are buying because they think it will go up, even if it's not warranted.

Hence speculators are part of the problem in some sense, as they can create bubbles in a way people dealing in futures to get a set price wouldn't do. There's no coincidence, in my mind, that the housing boom took off partly because buy-to-let and the idea of houses as investments grew so hugely. There were fundamental reasons for house prices to rise, but as we're seeing now, there were also elements of a bubble. That bubble was partly caused by speculators, just as this one is. However with both, I'd even argue moreso with commodities, the main factors are fundamental.
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Johan C
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(Original post by Drogue)
True, although speculators have a very similar effect to short-selling: they adjust the price quicker. If we expect commodity prices to rise in the future for real factors, it'll usually rise with those factors. Speculators just buy a lot now, causing the price to rise faster to it's true value. The same way short-selling hastens the fall of a share price and makes it adjust quicker to it's true value - as people holding the shares may well not be bothered to sell them. However, with both cases, overshooting is quite common, especially if things are bought or sold because people think they will go down, not in reaction to changes in real factors. There's no doubt that commodity prices needed to rise - we have increased demand that isn't likely to subside particularly quickly and a much lesser increase in demand. However because everyone expects them to go up, some speculators are buying because they think it will go up, even if it's not warranted.

Hence speculators are part of the problem in some sense, as they can create bubbles in a way people dealing in futures to get a set price wouldn't do. There's no coincidence, in my mind, that the housing boom took off partly because buy-to-let and the idea of houses as investments grew so hugely. There were fundamental reasons for house prices to rise, but as we're seeing now, there were also elements of a bubble. That bubble was partly caused by speculators, just as this one is. However with both, I'd even argue moreso with commodities, the main factors are fundamental.
Fair point.
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Johan C
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(Original post by Bloomberg)
July 10 (Bloomberg) -- The U.S. economic expansion may slow to the weakest pace in six years in the fourth quarter, after the impact of federal tax rebates fades, according to a Bloomberg News survey.
I guess that's settled then. http://www.bloomberg.com/apps/news?p...wT8&refer=home
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CityMonkey
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(Original post by Drogue)

Hence speculators are part of the problem in some sense, as they can create bubbles in a way people dealing in futures to get a set price wouldn't do. There's no coincidence, in my mind, that the housing boom took off partly because buy-to-let and the idea of houses as investments grew so hugely. There were fundamental reasons for house prices to rise, but as we're seeing now, there were also elements of a bubble. That bubble was partly caused by speculators, just as this one is. However with both, I'd even argue moreso with commodities, the main factors are fundamental.
Hmm.. the problem as I see it was down to liquidity. You can blame buy to lets and 'houses as investments' all you want, but the system wouldn't have been flooded with such cheap money if the central banks hadn't dropped rates so low for so long, in particular the Fed. Couple this with the fact that there was PERCEIVED wealth creation through inflation in asset prices and cheap availability of consumer debt (what everyone seemed to have forgotten was that debt is the inverse of wealth, however had started to discount it as wealth itself). Put this all together, couple it with the fact that there is a big disequilibrium in the wage-price spiral in the sense that the 'wage' part is in a deflationary mode, and the 'price' side is in an (commodity led) inflationary mode, and well it becomes hard for anyone to argue this recession is going to be over any time soon. Finally, to put the icing on the cake as it were, I only see capital inflows that prop up America's big deficit decreasing as a combination of a) historically inferior investment opportunities b) revaluation of Middle Eastern and Chinese (the West's biggest creditors and investors) currencies at a much faster rate than previously. That means the Americans (and Brits) are going to have to learn to live less and less on debt. Oh dear.

Cicero's words seem more relevant now than ever....

The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.
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Chewwy
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(Original post by londoner21)
At a guess, recovery will start late Autumn/early Winter
of this year!? optimistic..
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