If this is a whole new ball game as both of you have suggested, then neither of you are any more experienced than the rest of us."
That is a good point. To try to put things in perspective, where JF and bentway are coming from is that this has a similar feel to when the wheels feel off during the 1970s. Some things are similar, we were coming off of good times in the 1960s and early 1970s, the world economy was booming, the government was into heavy deficit spending. There are a lot of differences, though. So it won't be the same.
What bothers me most is that we don't know what's going to happen......which feeds into the fear of the unknown. Repeating the mantra over and over again: "I have never seen it this bad so watch out below"....only exacerbates that fear. Isn't this very much like what the neos used to scare us about the terrorist threat? It feels that way to me. Now I have learned from personal experience that our imagined fears are much worse than the reality.......esp. when we have time to dwell on those fears. And the media loves to feed into them as well. That's why I am reacting the way I am.
So, based on their experience, they are expecting a long and protracted set of problems. You don't, based on your own experiences. Which one is right? No way to tell. The big question is, will this force a structural change or nor? If so, we are looking at a long recovery. After all, that is what the Long Depression and what we went through in the 1970s and 1980s was all about. If not, then you are correct and we should recover in short order.
Actually, the changes in LA were structural. Up until the 1990s, LA was very much a growth market. In a typical year, LA was producing anywhere from 50k to 100k housing units to handle its population growth. That growth fell off a cliff in the early '90s and never recovered. Why? LA had gotten too big and was rapidly losing its quality of life. In addition, it has some serious income disparity issues that still have not been addressed. Bottom line: it took LA county 8-10 years to fully recover fully from the recession that engulfed it in 1990 and it only stabilized when housing stabilized. The OC and SD counties recovered much faster because their housing markets stabilized earlier. The same thing is happening now......SD county and the Inland Empire are leading the way; LA is the laggard.
And while I agree that the US has some structural problems within our financial system, I think most of the trouble was caused by greed and lack of regulation. Those issues need to be addressed but I don't see them precluding the US's position as the economic powerhouse of the world mainly because there is no one to replace us.....at least not yet. Now if the great unwind means we go back to a cash and carry economy, then yes, the problems become structural and it will take the US a much longer time to recover. However, I don't think anyone is suggesting a cash and carry economy.
As for longetivity of recovery, I think more than anything else that depends on psychology. Even if 10% of the people are unemployed, 90% are still working. That means they are still making money. However, if out of fear, they choose to sit on that money, then recovery will be prolonged. That's why I take issue with the gloom and doom thesis that seems to pervade everything these days. "We don't know what's going to happen so most likely the worst will happen." Its why Obama talks up "hope" so much. Its why LA took so long to recover. Not only did the city suffer a massive economic disruption but a destructive 'quake and riots that lasted for two weeks with over a thousand structures burning at its peak throughout the metro area; not just in the ghettoes and barrios. You want to talk about people depressed...they were in LA. People were fighting to get out.
Its from that experience I've learned to rely on the facts and try to keep the pervading psychology from bringing me down. IMO it accomplishes little particularly when no one knows what to expect. In fact all of this is my opinion and I am sticking to it. ;-) |
