The Recession Megathread

[sadboy]

ffffffffffff

[Tricky]

What do you mean by "forecasting how bad it could get", surely these experts you mention should be able to tell how bad it will get.

 

This has always been a bit of a mystery to me, we now seem to have financial experts all over the place telling us how bad it will get, but where were these experts 12-18 months ago as none of them seemed to predict this global recession.

 

I saw one chap interviewed last night on telly, he is being credited as the only financial expert who predicted this recession.

 

So why should we believe these experts this time.

 

What I mean is: The 'experts' in the media are staying broadly optimistic that this will be a severe but short recession. The people who are informing this view are bankers and politicians. And I personally do not believe these 'experts'.

 

The guy on the telly was probably Jim Rodgers. He is a trader, he has no vested interest in anything, he just puts his money where his mouth is. He is not the only person to have foretold this disaster, Christ even StarSparkle did, but he was one of the few to receive media exposure for doing so.

 

So the media is still employing the same people to inform their comment and these people are still getting it horribly wrong. They are being far to optimistic because it is in their interest to be so. Those that are calling the doomsday scenario have nothing to gain by it by and large, and that gives their view more weight in my opinion. And they've been proved right every step of the way.

[Dimitri 11]

So the media is still employing the same people to inform their comment and these people are still getting it horribly wrong. They are being far to optimistic because it is in their interest to be so. Those that are calling the doomsday scenario have nothing to gain by it by and large, and that gives their view more weight in my opinion. And they've been proved right every step of the way.

 

In short what is the doomsday scenario that is being predicted by some?

 

What are good alternative media sites to read up on what is happening with the financial crisis, bearing in mind that I find a lot of the threads on House Price Crash a bit heavy going?

[Titanic99]

 

The guy on the telly was probably Jim Rodgers. He is a trader, he has no vested interest in anything, he just puts his money where his mouth is. He is not the only person to have foretold this disaster, Christ even StarSparkle did, but he was one of the few to receive media exposure for doing so.

 

 

No it was this chap here, the full article is in the Guardian of today. He does predict a bad future, but not the disaster others are predicting.

 

It is an interesting read, it seems easy in hindsight to predict it, I'm just amazed so many got it so badly wrong (and not just this country).

 

"They called him Dr Doom. He was the economist who three years ago predicted in detail a collapse of the housing market and worldwide recession - and was roundly ridiculed for it. Emma Brockes asks Nouriel Roubini what he foresees now.

 

It was the New York Times that dryly labelled him Dr Doom, in a profile last year that identified Roubini as an unlikely hero of the financial crisis. In 2006 he made an address to the IMF in which he predicted that, among other things, the US economy was at risk of a housing bust and deep recession that would have dire consequences for the rest of the world. Today he smiles demurely and says other people predicted it, too, but no one was as specific as Roubini, nor as grave, nor as subject to what passes in the sober world of economics for ridicule. At the time, his speech was received as the endearing quirk of an incorrigible self-dramatist, and even now some say he got lucky. When asked about Roubini, the economist Anirvan Banerjee told the New York Times, "Even a stopped clock is right twice a day."

 

Mention of this makes Roubini rapidly jettison his modesty. He accuses economists who predicted growth in the build-up to the crisis of being as naive as Goldilocks and says, "They totally got it wrong. To say I was just lucky is nonsense. I made specific predictions that turned out to be right. Exactly." He cites a paper he wrote in February last year called 12 Steps To Financial Disaster, "in which every single step is exactly how the crisis unfolded during the past six months. Every single thing. I said two major broker dealers are going to go bust and there's not going to be any major independent broker dealer left in the next two years. It took seven months for Bear Stearns and Lehman to be gone. It's not a fuzzy case of me saying there would be a financial crisis. I was very specific. And I got it right. So." He shrugs and smiles tightly at the burden of being right in the face of widespread stupidity.

 

Why Roubini got there first had to do, perhaps, with his personal and professional backgrounds, and with what he calls his "holistic" approach to interpreting economic data. He was born in Istanbul, moved to Iran as a baby, then to Italy, where he grew up. He speaks four languages fluently (Farsi, English, Hebrew and Italian) and has worked around the world, including two years as a policy adviser to the US Treasury. What first tipped him off were similarities he noticed between developing parts of the world and the behaviour of the US economy. To his astonishment, he saw a pattern of economic movement in the US that by 2005 made it look like "an emerging market economy", with the same "irrational exuberance" that in his opinion could be followed only by a huge bust. "You look at history, you look at political data, you look at models, you look at comparisons," Roubini says. "This crisis is not a black swan event - a random outcome from a random distribution. This case is a build-up of vulnerabilities over time that will increase and provoke a crisis. There were tens of different signals that would eventually lead to a tipping point. The fact that there would be a crisis was totally obvious to me." With some sarcasm, he says, "People believed in the nonsense that home prices could rise every year by 20%. If that's not a bubble, what's a bubble? It doesn't take a genius."

 

The danger signs in a period of irrational exuberance look obvious in hindsight, and Roubini reels them off in a steely monotone, without pausing for breath: "People believing things they should not believe and trusting people they shouldn't trust... no market discipline, internal mismanagement, massive conflicts of interest within financial institutions, the SSC [state Securities Commission] not doing its job, entire brokerage units going bust, Bear is bust, Lehman's is bust, Morgan Stanley and Goldman Sachs are now converted into bank holding companies. What's the biggest scandal? Lehman? Madoff? They're all part of the same phenomenon."

 

From an academic point of view, the question of what will happen next is fascinating because, says Roubini, it is "uncharted territory. Totally unorthodox monetary policy." He sees the size of the bank bail-outs as a necessary evil, but thinks they were pushed through without sufficient conditions or transparency, "with no real voting rights or board membership or other forms of control. I think the terms of some of those rescues have been excessively generous." When it comes to it, he says, "Who is getting all this money?"

 

It is tempting to turn to Roubini for answers as to a fortune-teller and with the same credulity that got us into this mess in the first place. But his track record makes it irresistible and he isn't shy of offering more predictions. The first is that, in his opinion, we might as well write off 2009 completely. Financially speaking it is, he says, "lost". In the game of Worst-Case Scenario, Roubini looks at the world's advanced economies and considers those most at risk of going bankrupt - of becoming the next Iceland - to be small western European nations. "If a big institution in Switzerland or the Netherlands or Belgium or Ireland were in trouble, the country doesn't have the resources to bail them out."

 

Britain is in as bad a state as the US and is further hampered, says Roubini, by "fiscal constraints" and the need for a European consensus that makes aggressive bail-outs more difficult to implement. In terms of the housing market, he sees it falling in both America and Britain this coming year by a minimum of 15% and possibly by as much as 25%. "Just to get back to where housing prices were before this bubble started, they'd have to fall in real terms by 50%. So we're half of the way there."

[greenrat]

Thought we were about due for a megathread on this as it is affecting more and more people as the weeks go by.

Everyone in my immediate family (all different sectors) are facing redundancy. No sector seems to be safe, it's all very well working for the council or signing on and being paid by the state but the thing that's been troubling me is how does the state make its money when all the private companies are collapsing. I was always under impression the UK economy was based on services, for example banking and insurance - well they've gone lady chest parts up haven't they. So what's going to happen

 

The media seem to be making this out worse than it is. The real fear is that companies can use the credit crunch to get rid of people even if the company is not using money. Companies should be forced to donate any extra profits from job losses to the government or even better charity.

[cruxtilIdie]

So how does that work then?

 

Let's say it costs £10 to eat in and £30 to eat out, so surely that means you have £20 to spend on summit else.

 

That's assuming you have £30 to eat out in the first place.

[Dave650]

The media seem to be making this out worse than it is. The real fear is that companies can use the credit crunch to get rid of people even if the company is not using money. Companies should be forced to donate any extra profits from job losses to the government or even better charity.

 

In my opinion the media are underestimating it. I reckon the whole country is going to have to tighten it's belt post WW2 stylee

[cruxtilIdie]

It's down to a number of contributing factors. I am one of the one's who blames the banks greed though, while times were good they were happy to rip you off.

 

There has to be some personal responsibility here as well, the banks may have encouraged borrowing but they didn't force people to get into debt, did they? So you know have the reckless being biled out by the people who have saved IMO.

[cruxtilIdie]

But why let the media tell people how everything is worthless and if you carry on spending you'll be doomed and go straight to hell? Surely they should keep a positive attitude on things so people keep spending. If people keep spending businesses keep going and the economy doesn't collapse. Am I missing something?

 

You can only spend what you've got and people have been living on debt for the last few years that couldn't be sustained and what we are now seeing is the inevitable correction.

[Dave650]

There has to be some personal responsibility here as well, the banks may have encouraged borrowing but they didn't force people to get into debt, did they? So you know have the reckless being biled out by the people who have saved IMO.

 

Aye but it goes deeper than that, we are talking about the economy and the lending between countries, the banks have all stopped lending to each other. We've all been living on credit and spending our cash with other countires, our only earners as a nation (insurance, banking etc.) have gone tits up, as stated on the this thread already (I think) we exhausted our natural fuel supplies in the 90s and that fat tool gordon brown has sold all our gold supplies at their lowest value a bit more recently, he's now pumping billions of our money into a dead industry.