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Zwischenzug
29-06-2008, 11:03 PM
I hear a lot about the US recession in the media and in everyday conversation. Do you believe that it would be short-lived and order will be restored to the world economy? Or do you believe like the countless pessimists that are out there, that this recession will deepen and last for many years to come?

Basil
29-06-2008, 11:04 PM
I hear a lot about the US recession in the media and in everyday conversation. Do you believe that it would be short-lived and order will be restored to the world economy? Do you believe like the countless pessimists that are out there, that this recession will deepen and last for many years to come?
Deepen? Yes. Lengthy? Yes. Particularly deep? No.

Carry on!

Garvinator
29-06-2008, 11:08 PM
First up, I would challenge whether there is a recession or not?

Capablanca-Fan
30-06-2008, 12:02 AM
I hear a lot about the US recession in the media and in everyday conversation. Do you believe that it would be short-lived and order will be restored to the world economy? Or do you believe like the countless pessimists that are out there, that this recession will deepen and last for many years to come?
Economists usually define a recession by two successive quarters of negative growth. By this standard, the US hasn't had a recession.

MichaelBaron
01-07-2008, 02:14 AM
First up, I would challenge whether there is a recession or not?

All of the KPI suggest that there is indeed a recession :)

Jim_Flood
01-07-2008, 06:02 AM
Opinions on what constitutes a recession are varied.

The National Bureau of Economic Research considers that a recession is:

"...a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough."

Indicates that diminishing activity as opposed to diminished activity is a recession.

On that basis, talking to the local motor mechanic (people deferring getting their cars serviced) or the local bottle shop owner (takings down $8k per month rather than the 3 or 4k compared with previous corresponding periods), then there are some areas in the economy which are in recession.

And the last time I could be bothered looking at it (11 June), the Bank Bill Swap Rates were:

30 days 7.8017
60 days 7.8500
90 days 7.9000
120days 7.9883
150days 8.0767
180days 8.1767
270days 8.3083
365days 8.4667

I don't think it has improved since then. Funding for business is becoming more and more expensive.

So get in, sit down, buckle up and hang on for the ride because my gut feeling is that you ain't seen nothing yet.

MichaelBaron
01-07-2008, 03:49 PM
Opinions on what constitutes a recession are varied.

The National Bureau of Economic Research considers that a recession is:

"...a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough."

Indicates that diminishing activity as opposed to diminished activity is a recession.

On that basis, talking to the local motor mechanic (people deferring getting their cars serviced) or the local bottle shop owner (takings down $8k per month rather than the 3 or 4k compared with previous corresponding periods), then there are some areas in the economy which are in recession.

And the last time I could be bothered looking at it (11 June), the Bank Bill Swap Rates were:

30 days 7.8017
60 days 7.8500
90 days 7.9000
120days 7.9883
150days 8.0767
180days 8.1767
270days 8.3083
365days 8.4667

I don't think it has improved since then. Funding for business is becoming more and more expensive.

So get in, sit down, buckle up and hang on for the ride because my gut feeling is that you ain't seen nothing yet.


GDP is just one of the KPI for economic performance but i agree - it is a significan one. The question is however - when the US economy fights back..will it be as strong as before or not? To be honest i am not quite sure whether the current problems in the US are permanent or temporary:hmm:

Jim_Flood
01-07-2008, 08:03 PM
The US is more fragmentated than the Oz market.

The first wave of sub-prime hit the investment banks. The 1.5 wave of sub-prime is hitting the credit card/car loan market (why not? the losers who could not afford to pay for the house they were living in certainly were not going to be deterred from spending more money they did not have.)

Wave 1.75 was the Alt-M adjustable rate mortgages which are now being rolled out into higher rates - much like what could/may happen to those in this country who took out fixed rate loans shortly to expire (and so will the owners when they see how much more they will need to pay).

Wave 2 is the US deposit taking banks going down the toilet. Example being South CA's PFF Bancroft. Sold in a fire sale of $US 30.5m. Increased it's loan portfolio to $US4B in.....guess what. Yep, real estate developers. That bank is not alone.

And yet companies with sound footings, such as Duke Energy, are cashed up, little debt but such is the fear that investors flee.

But, but and this is the thing that could really scare the various innocents in Oz. The accounting requirement to mark-to-market. Those unlisted assets which were valued in the books or off them at $100M may need to be revised. Watch the red ink flow if they are required to revalue those little gems in today's market price.

And when that happens, as it must at some stage, watch the consumer rabbit run for the burrows.

And we still have got way to go with Wave 3. Credit Default Swaps.

Asset destruction anyone?