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Politics : Formerly About Advanced Micro Devices
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To: Road Walker who wrote (450591)1/25/2009 3:24:02 PM
From: tejek  Read Replies (1) of 1573930
 
It is a recession and it is mainly about real estate......at least right now.

Real estate was the spark. But now it's about deflated asset values across the spectrum. And the debt they were supposed to support. Most everything was too highly leveraged.

That's typical in every recession. What's different is that housing is playing a much bigger role than in past recessions because of the housing boom. When housing values stabilize, and they will, consumers will be more confident. We talked about this before, recessions tend to be 3 parts psychology and one part retrenchment.

So until the statistics suggest otherwise, I am calling this a recession.

We nationalized much of the mortgage business and a big chunk of the insurance business. Most of the big banks have failed or are failing, have been semi-nationalized, and are working on up-sidedown balance sheets (as assets continue to decline in value). The unemployment rate is sky rocketing, and with each lost job there is a better than 50% chance of mortgage and credit card defaults. This IS NOT a plain vanilla recession... I've been through a bunch of those. This bears a lot closer resemblance to 1929.

Memories can be misleading. That's why I rely on facts. You may well be right but I want to see the facts support your position. They don't right now.

So then, you want to go back to the time before WW II when there was little credit.....no credit cards. It was cash and carry. Housing is bought after you save up for a life time and then you can pass it off to your kids? Is that what you are proposing? Is that what you call the great unwind?

What I want doesn't matter. What I'm going to get does matter. Stimulus or no stimulus I think there is going to be a lot of destruction.

And what does that mean to you?

The question I think is: Does the stimulus package curtail the pain and bring back asset prices, or does it just prolong the pain over many more years? I don't know the answer, and the collective wisdom of all the world's economists don't know the answer.

Then you would like to go to a cash and carry economy. Is that right?

But my gut tells me there is something wrong with throwing gasoline on a fire. We'll know in about four or five years I think.

But that's what FDR did and it helped get the nation out of the Great Depression. Why was it good then and bad now? In fact, Hoover did what I think you're suggesting now and things got much worse.
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