# Has the recession begun?



## numbercruncher (21 December 2007)

ASF has alot of armchair (and probably pro) economists so I thought running a poll on that topic seldom discussed within in polite circles might be enlightening !

I think it has begun, and will site a few sources whom agree ......




> The global credit crisis and widening subprime mortgage defaults in the US have most economists now talking about the probability rather than the possibility of a recession in the world's biggest economy.




http://www.abc.net.au/news/stories/2007/12/20/2124457.htm




> We know only two things in life are certain: death and taxes.
> 
> Now, along comes Merrill Lynch economist David Rosenberg with the declaration that there is a 100% chance of a recession in 2008.
> 
> One hundred percent, as in it’s going to happen beyond the shadow of a doubt.




http://www.foxbusiness.com/article/recession-sure-thing-fast_414385_55.html




> Bill Gross, founder of Pimco, one of the world’s largest fixed-income managers, has sounded a downbeat note on the US economy by saying it has gone into recession.
> 
> “If I had to be bold I’d say we began a recession in December,” he said in a Financial Times interview, in which he called on the Federal Reserve to bring interest rates down to 3 per cent. The recession would last “four to five months”, he thought, but he added it would be prolonged if the administration and Congress failed to “take some rather unperceived and unforecasted measures in terms of fiscal stimulation”.




http://www.ft.com/cms/s/0/6a7a056a-af37-11dc-880f-0000779fd2ac.html

So whaddaya think ?


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## numbercruncher (21 December 2007)

BTW im mainly speaking about the US currently with the poll, and unless you subscribe to the theory of decoupling one would have to assume that Australias hole in the ground economy would eventually follow suit


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## Whiskers (21 December 2007)

numbercruncher said:


> BTW im mainly speaking about the US currently with the poll, and unless you subscribe to the theory of decoupling one would have to assume that Australias hole in the ground economy would eventually follow suit




I agree it seems pretty likely the US will, but I vote no because I don't see us necessairly following the US, mainly because I believe our system is fundamently more sound than the US which many people have already highlighted is more reactionary.


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## ithatheekret (21 December 2007)

I think the entire situation is extremely precarious .

What we are not being told is that the credit supports for most lien loans have been like a kid on a  sheet of galv. sliding down a hillside .
Come Feb/March when the resets strike , the first tier lien loans will go into further delinquency spirals , effecting close to an entire pool of these loans .
The domino effect can be spread easily into the second line up in the loan pool , which would add further pressure to the deliquency rate .

You can be sure that S&P and Moodys etc. will be on the rerating hunt real soon . This will have a shattering effect on the financial markets as bonds slide from AAA to Baa and Ba , all the way down to Ca etc. effectively turning quality to garbage or junk as it is aptly named .

They've been selling junk for years ! Now they have a pile of garbage !


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## Sean K (21 December 2007)

Is this about the US or Australia? Or, is the assumption that if the US is in recession then the rest of the world is too?


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## ithatheekret (21 December 2007)

I'm assuming the discussion was US related Max .

But , I've got a box a tissues ready for the sneezing fits ...........


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## Real1ty (21 December 2007)

I voted *WE* won't have a recession, as i thought by using WE he meant Australia.

I don't believe we will have one but i think the U.S will.


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## numbercruncher (21 December 2007)

kennas said:


> Is this about the US or Australia? Or, is the assumption that if the US is in recession then the rest of the world is too?




Yes I added after that mainly speaking US, decoupling theorists are welcome to vote accordingly


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## Nick Radge (21 December 2007)

Here's an exercise that may answer your question, regardless of it being Australia or US. Whenever the unemployment rate moves off a low by 0.5% the stock market goes into bear mode.

You can download the data from www.rba.gov.au back to 1977 or so. It has never failed, nor has it in the US. Australia still looks healthy in this regard with record lows still being seen. However, in the US the unemployment rate was 4.4% in March this year. Its now 4.7%. When it hits 4.9%...


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## tronic72 (21 December 2007)

kennas said:


> Is this about the US or Australia? Or, is the assumption that if the US is in recession then the rest of the world is too?




I was thinking the same thing. It's true that in the past if the US sneezed Australia got a cold but it's becoming less and less an issue. OUR Economy is still powering along. Who's gonna supply the materials for the 2.5 Billion Chinese and Indians so they can have mobile phones LCDs and TVs.

The USA "only" has 303,640,541 http://www.census.gov/population/www/popclockus.html

They have 8 times more people that the USA!

We all know the US is close to recession but that doesn't mean the rest of the world will follow suite. In the past, YES. We are living in a much different world now. What about the new Russia? Chine? India? Europe? The pound is still strong as ever. There's a lot of what my brother calls "old money" in Europe, UK & USA.

US Recession is 50/50 atm but a world wide recession could be 5 years away or not at all. 

Merry Christmas.


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## coolcricket (21 December 2007)

tronic72 said:


> I was thinking the same thing. It's true that in the past if the US sneezed Australia got a cold but it's becoming less and less an issue. OUR Economy is still powering along. Who's gonna supply the materials for the 2.5 Billion Chinese and Indians so they can have mobile phones LCDs and TVs.
> 
> The USA "only" has 303,640,541 http://www.census.gov/population/www/popclockus.html
> 
> ...





Agree with what you say tronic, although I think India and China will keep the global economy (excluding US, not sure about them) afloat for the next 10-15years+.

Merry Christmas and a Happy New Year all.


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## numbercruncher (21 December 2007)

No one want to consider that this boom has been facilitated by extremely low interest rates and credit ?

The US is a 9t consumer economy and China a 1t consumer economy ...


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## disarray (21 December 2007)

even if US slowdown means china doesn't need as much raw material it is still modernising and this will continue to require masses of raw materials like iron, copper and oil. add to this the mountains of US money they are sitting on they are going to want to spend it before it devalues too much (like dubai has been doing). australia should be out there marketing to sovereign wealth funds and modernising countries getting them to put their money with us to secure resources for the future, otherwise most of the money bailing out of the US will end up in europe.

we want to market ourselves as a stable, guaranteed supply of raw materials for modernisation and stockpiling while pushing fear, uncertainty and doubt about continued supply of crucial resources - "sure you can get so and so in south africa or tajikistan but look at them? history of instability blah blah where we can guarantee you product to remain competitive against the japanese / koreans / taiwanese etc. etc."

billions of people are undergoing a process of modernisation which is finally  achievable with their relatively stable and secure governments. this process won't stop, people will continue to demand increased quality of life so we need to be out there selling all our dirt and putting the money somewhere sensible to set us up for when agriculture and mining fail us.


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## ithatheekret (21 December 2007)

numbercruncher said:


> No one want to consider that this boom has been facilitated by extremely low interest rates and credit ?
> 
> The US is a 9t consumer economy and China a 1t consumer economy ...







   DITTO , except for essentials , prices will stabilize in some ores , wages will go up .... or else trouble will start for us at home . The boom has been facilitated by monetary policy . But , now the miners who actually had something to export are cashed up , like ZFX .... with all that cash it should do a Packer special ( ie. CPH ) and buy Oxiana , for its cash hoard .


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## ithatheekret (21 December 2007)

Real1ty said:


> I voted *WE* won't have a recession, as i thought by using WE he meant Australia.
> 
> I don't believe we will have one but i think the U.S will.




We will see some softening though ........ I have a bank list at pounce prices below what we've seen to date . PPT is the only other financial sector play that I think is under value on its rising price , didn't have enough cash available to enter earlier . Fixed that though  .


Not investment advice , blah , blah , blah , yada , yada , yada , yada


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## dhukka (21 December 2007)

numbercruncher said:


> BTW im mainly speaking about the US currently with the poll, and unless you subscribe to the theory of decoupling one would have to assume that Australias hole in the ground economy would eventually follow suit




You don't have to subscribe to the theory of decoupling to argue Australia could avoid a recession even if the US has one. We avoided a recession when the US had one last time around. I voted yes for a recession in the US but am undecided whether Australia will have one yet. It depends how deep the US recession is.


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## dhukka (21 December 2007)

tronic72 said:


> I was thinking the same thing. It's true that in the past if the US sneezed Australia got a cold but it's becoming less and less an issue. OUR Economy is still powering along. Who's gonna supply the materials for the 2.5 Billion Chinese and Indians so they can have mobile phones LCDs and TVs.
> 
> The USA "only" has 303,640,541 http://www.census.gov/population/www/popclockus.html
> 
> ...




Tronic, 

You seem to be subscribing to the decoupling theory, a theory incidentally which China itself does not believe. Sure these economies are growing rapidly however that growth is skewed to the export side. Asian economies are becoming ever more reliant on exports to drive their growth. See this thread for more info.


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## dhukka (21 December 2007)

Nick Radge said:


> Here's an exercise that may answer your question, regardless of it being Australia or US. Whenever the unemployment rate moves off a low by 0.5% the stock market goes into bear mode.
> 
> You can download the data from www.rba.gov.au back to 1977 or so. It has never failed, nor has it in the US. Australia still looks healthy in this regard with record lows still being seen. However, in the US the unemployment rate was 4.4% in March this year. Its now 4.7%. When it hits 4.9%...




I would add that employment is a lagging indicator and that by the time the unemployment rate ratchets up by half a percent recessions are usually in full swing.


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## Nick Radge (21 December 2007)

> I would add that employment is a lagging indicator and that by the time the unemployment rate ratchets up by half a percent recessions are usually in full swing.




Maybe, but its alignment with equity market peaks and troughs is quite amazing.


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## dhukka (21 December 2007)

Nick,

That is interesting. According to John Hussman of Hussman Funds  stock market declines usually begin before the onset of a recession. He is talking about the US market of course:



> *Financial Markets Anticipate Recessions Before They are Obvious *
> 
> _- Hussman Investment Research & Insight, October 3, 2000.
> 
> ...


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## numbercruncher (21 December 2007)

Google search volume for keyword " recession "


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## Awesomandy (22 December 2007)

I'm not sure if this is a sign of an imminent recession, but having talked to a few cabbies in Sydney, most of them say that this Christmas has been relatively very quiet. Shopping malls used to be busy from about the end of October, but this year, it's been very quiet until the start of December. Also, this year, there are much much less parties then past years. My company has cut everyone's bonus by a percentage, because they can't afford to pay us. We also have no Christmas hampers this year: last year, they packed in 2 bottles of wine and some very lovely cheese. This year, we've got a small box of Cabury chocolates, and I'm working in a multi-national company. I don't know how other states are going, but in Sydney, signs are not good.


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## dhukka (22 December 2007)

Barry Rotholtz at the BIG PICTURE had an interesting post yesterday citing Paul Kasriel's work on Interest Rate Spreads and Leading Indicators as a predictor of Recessions: 



> *Wonk Attack: Interest Rate Spreads & LEIs*
> 
> I have previously mentioned Paul Kasriel's work with interest rate spreads and leading economic indicators.
> 
> ...


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## chops_a_must (22 December 2007)

I think there are a few things people are forgetting. One: we are mainly a consumerist nation, driven largely by retail and service industries, not mining. Two: we are one of the most indebted countries in private sector debt, of anywhere in the world. Any type of credit crunch will hit us very hard.

And three: because we have been at such dizzying heights economically for so long, any pull back will be like a hard hit anyway. Interesting times ahead.


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## vishalt (22 December 2007)

You guys seriously believe this recession garbage? 

Americans prefer to buy $500 iPhones and Blackberry's rather than $80 Nokias/Motorolas, Christmas spending has been strong and retail sales report just came out higher than forecast. 

Amazing, recession? Lets just forget the Dow and the ASX literally went up in a straight line for one year and the media/money managers needed some excuse to scare the panties off you and cause a correction.

And what retail spending slowdown in Australia? Go down to Paramatta and shopping hubs in the city, David Jones, MYER, Jb Hi-Fi all packed to the rim, we've also had a year where Australians bought more consoles than ever before. 

It takes many months of faltering retail spending to consider it a recession - and that would just be a consumer recession anyway, resources looks like it'll be strong for a very long time.


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## Miner (22 December 2007)

Yes in USA as per Allan Green Span. 
As per economics reports in press - Japan is already in recession.


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## wayneL (22 December 2007)

vishalt said:


> You guys seriously believe this recession garbage?
> 
> Americans prefer to buy $500 iPhones and Blackberry's rather than $80 Nokias/Motorolas, Christmas spending has been strong and retail sales report just came out higher than forecast.
> 
> ...



Businesses that foresee economic cycles (both booms and busts) are the ones that prosper in the long term.

Most businesses climb aboard a boom and imagine things will never change... real dumb. They go broke in busts.

People buying **** today doesn't necessarily mean people buying **** tomorrow. A wild animal senses the approaching winter and starts growing a winter coat.

Read up on Kondratiev... or any Austrian economics texts, winter is coming.


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## vishalt (22 December 2007)

It's Alan Greenspan. 

Japan still continues to fight deflation and its central bank policy of 0% interest rates murdered growth. It's very hard for that country to grow as it has an aging population, tricky immigration policies, and its companies poison pill each other so its too hard to do M&A there. 

If you read press reports since 2003 there have always been mentions of a US recession. 

Still not here!


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## numbercruncher (22 December 2007)

vishalt said:


> Americans prefer to buy $500 iPhones and Blackberry's rather than $80 Nokias/Motorolas, Christmas spending has been strong and retail sales report just came out higher than forecast.




Oh ... that wouldnt happen to be the report from ShopperTrak RCT that showed sales were down .4pc compared with 06 and traffic was down 8.9pc for the week ending dec 15 ?


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## wayneL (22 December 2007)

vishalt said:


> It's Alan Greenspan.
> 
> Japan still continues to fight deflation and its central bank policy of 0% interest rates murdered growth. It's very hard for that country to grow as it has an aging population, tricky immigration policies, and its companies poison pill each other so its too hard to do M&A there.
> 
> ...



Because credit has been expanding... ludicrously. You may have noticed some problems in this area lately.


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## dhukka (22 December 2007)

vishalt said:


> You guys seriously believe this recession garbage?
> 
> Americans prefer to buy $500 iPhones and Blackberry's rather than $80 Nokias/Motorolas, Christmas spending has been strong and retail sales report just came out higher than forecast.
> 
> ...




Are you talking about last Christmas? Inflation adjusted consumer spending has been flat for the last 3 months. November Christmas shopping was decent. December has been the worst in 5 years, 3 consecutive weeks of negative chain stores sales growth so far in December. December will take back November's gain. Then we get into 2008 with slowing employment growth, rising defaults on Mortgages as more of them reset and now rising defaults on credit cards, falling home prices and a significant drop off in Mortgage Equity Withdrawls. 

Remember you don't need consumer spending to fall off a cliff for a recession. Real Consumer Spending didn't go negative at all in the last recession, all you need is a slowdown in growth.


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## wayneL (22 December 2007)

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/21/bcnrecord121.xml



> Private investors cash in shares in record numbers
> 
> By Paul Farrow
> Last Updated: 12:17pm GMT 21/12/2007
> ...


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## Uncle Festivus (22 December 2007)

Recession - maybe, lawsuits - just the beginning! Why does a $400m loss sound insignificant these days?

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/21/cnbanking121.xml




> Barclays set to do battle with Bear Stearns






> ...........When the Enhanced fund spectacularly collapsed in July, Barclays was left without its principal amount, and was forced to include a worse-case scenario loss - thought to be around $400m - in its £1.3bn sub-prime write-down in November.
> 
> Sources suggest that since the fund's collapse, Barclays has done all that it can to find out what the residual value, if any, is of the Enhanced fund.
> Bear in return is understood to have blocked such measures, leading to the lawsuit, in which Barclays is seeking the return of the principal amount plus damages and costs.
> ...


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## Flying Fish (22 December 2007)

OMG 34 negatines and 6 undecided. lol guess its game set amtch  thanks for comming positibve people lol


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## Awesomandy (22 December 2007)

dhukka said:


> Inflation adjusted consumer spending has been flat for the last 3 months. November Christmas shopping was decent. December has been the worst in 5 years, 3 consecutive weeks of negative chain stores sales growth so far in December. December will take back November's gain.




And from what I can see, no shopping centres in Sydney is going to have 24 hour trading this weekend. They had those in the past few years, and the malls were still packed at 2am. So, it appears that, somehow, this year is just not worth the effort.


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## trinity (22 December 2007)

talks about recession but what I do not understand is how someone can take home US$68M paycheck this holiday season ...



> Goldman's Blankfein collects $68M bonus
> Payday in restricted stock, options and cash marks biggest ever for Wall Street CEO




http://money.cnn.com/2007/12/21/news/newsmakers/blankfein_bonus/index.htm?cnn=yes


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## finnsk (22 December 2007)

vishalt said:


> And what retail spending slowdown in Australia? Go down to Paramatta and shopping hubs in the city, David Jones, MYER, Jb Hi-Fi all packed to the rim, we've also had a year where Australians bought more consoles than ever before.



I go shopping in Wahringah Mall on Sydneys northern beaches what I se is a lot of people walking around with very little or no shopping in there hands or shopping trollies, also parking is very easy at this time which is not normal.
At Woolworth and Coles there is no queues at the cash registres, which buy the way is great, also you see managers standing out side there stores and looking a bit worried.
Yes Jb Hi-Fi at Wahringah Mall is busy but not sure if customers is actually are buing other things than cds, movies ect.
I would think it will be the same in many other shopping centres in Australia.


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## numbercruncher (22 December 2007)

> Consumer confidence has plunged to its lowest level in 12 years, stoking fears of an economic slowdown to come.
> 
> The GfK NOP barometer of UK confidence, released this morning, scored minus 14 in December, down from minus 10 in November.This is its lowest since December 1995.




http://www.guardian.co.uk/business/2007/dec/21/retail2


Seems consumer confidence is plunging everywhere !


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## dhukka (22 December 2007)

dhukka said:


> You don't have to subscribe to the theory of decoupling to argue Australia could avoid a recession even if the US has one. We avoided a recession when the US had one last time around. I voted yes for a recession in the US but am undecided whether Australia will have one yet. It depends how deep the US recession is.




Just to clarify I actually VOTED for the second option _"No, but it will soon"_ in terms of the US economy. I'm thinking 1st or 2nd quarter next year. Still undecided on OZ, depends on depth of US recession.


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## numbercruncher (22 December 2007)

Yes our outcome will depend alot on the depth of it in the US.

I read a few punters saying that the low USD will off set the damage with greater demand for made in USA, but if consumer demand is falling in many other western countries I dont see Chindia consumers picking up the slack .... I mean look at the average incomes in some of these places.

Sovereign wealth funds can pump as much as they like into US corporations if they like, but if the consumer is retreating (along with their real incomes via inflation) the only medicine will be the very poison that got us here in the first place, low interest rates and pathetic lending standards ! ... 

Next year is going to be interesting im sure !


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## sassa (22 December 2007)

numbercruncher said:


> Next year is going to be interesting im sure !



A pun?Interesting in the sense that the Americans will probably continue to lower interest rates instead of increasing to fight inflation as well as increased rates here to fight the same devil.
But to the topic-

Guest Commentary, by Richard Benson 
The economy's last hurrah 
December 07, 2007 
Richard Benson is president of Specialty Finance Group, LLC , offering diversified investment banking services.


As 2007 wounds down, it’s time to reflect on how bogus government statistics along with Wall Street media hype have impacted the psychology and perception in the financial markets. Sheer disappointment is one way to describe what the financial markets will experience as the existing belief in a Goldilocks economy is challenged by sobering facts and a hard landing, yet to come.
The US Economy is in terrible shape! Our government has been psychologically manipulating the American people every time they publish blatantly false data on employment and income that makes our economy look stronger than it really is. If the average American realized how bad things were, they might try to save more. But spending would collapse if they did, so the goal of the Bush Administration seems to be to hide any signs of a recession as long as possible.
The big reason the economy is going over the cliff is not the direct result of the sub-prime mortgage debacle and the hundreds of billions in investor dollars that have been lost, although this is a major contributing factor. The reason, we focus on, is that the economy is already in recession as a direct result of homeowners having had that ATM ripped out of their house. Stories like the homeowner who purchased a home for $100,000 years ago but got carried away in the frenzy of the last decade by doing 4 cash out REFI’s, running their mortgage balance up to $625,000 while living large, are last year’s stories. That $800 billion a year in Mortgage Equity Withdrawal ("MEW") has come to a sudden end and with the average homeowner no longer living large off the house, the economy is left with that "big sucking sound". 
The US economy is continuing to weaken in many areas: The US Treasury has received lower income tax receipts forcing state and local governments to cut back because they’re coming up short; capital gains on home sales are falling as home prices fall; property tax receipts are also declining as assessed values go down; weak retail sales mean lower sales tax receipts; corporate profits are down, along with corporate taxes paid; and, many self-employed workers may be employed, but they’re not making anything or only half of what they used to. 
Moreover, America is not the only country with an economic problem. The housing bubble is turning out to be worldwide, with a major impact on England and much of Europe. The biggest economic losers include the emerging markets, especially China. Don't believe for one second those Wall Street touts selling the notion that the emerging markets have "decoupled" from the US economy and their growth will lead the world forward without the American consumer. That’s hogwash. Where do you think their trade surpluses and big sales gains (driving investment in plants and equipment) came from anyway? From the American consumer and MEW! Take $800 billion of easy spending away from the American consumer and you're going to see a lot of blow back in lost sales by the emerging market countries, including China. 
As the recession takes hold, I see this holiday shopping hype as the Economy’s Last Hurrah, but it’s not just the American economy that’s going to hear that "big sucking sound" in the New Year!


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## numbercruncher (22 December 2007)

I agree with all that Richard said in that article ..... there is one more absolutely MONUMENTAL liability the USA faces and is woefully unprepared for, one that seldom if ever gets mentioned, their upcoming social security obligations to a Generation born at a rate greater than that at any other time in human history, aka the Baby Boomers ....




> Taxpayers owe more than a half-million dollars per household for financial promises made by government, mostly to cover the cost of retirement benefits for baby boomers, a USA TODAY analysis shows.
> Federal, state and local governments have added nearly $10 trillion to taxpayer liabilities in the past two years, bringing the total of government's unfunded obligations to an unprecedented $57.8 trillion.
> 
> That is the equivalent of a $510,678 credit card debt for every American household. Payments on this delinquent tax bill must start soon if financial promises to the elderly are to be kept.
> ...






> Americans' government obligations are five times what people owe for mortgages, car loans, credit cards and other personal debt.




http://www.usatoday.com/news/washington/2006-05-24-retiree-taxpayers_x.htm


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## numbercruncher (22 December 2007)

This is article good reading to, written a year ago with many things actually coming into fruition since publishing .... 





> Is Cheney Betting On Economic Collapse?
> By MIKE WHITNEY
> 
> Wouldn't you like to know where Dick Cheney puts his money? Then you'd know whether his "deficits don't matter" claim is just baloney or not.
> ...




http://www.counterpunch.org/whitney07052006.html


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## Real1ty (23 December 2007)

numbercruncher said:


> Yes our outcome will depend alot on the depth of it in the US.
> 
> *I read a few punters saying that the low USD will off set the damage with greater demand for made in USA*, but if consumer demand is falling in many other western countries I dont see Chindia consumers picking up the slack .... I mean look at the average incomes in some of these places.
> 
> ...




I also believe that the U.S will go into recession but i think we will avoid it.

I think it's a very valid point about the U.S$ and at this early point is one of the reasons i believe that a recession there won't be a long drawn out affair.

You are correct about consumer spending but the U.S$, while not making up for this completely, will certainly have a  positive effect on exports.


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## Flying Fish (23 December 2007)

Real1ty said:


> I also believe that the U.S will go into recession but i think we will avoid it.
> 
> I think it's a very valid point about the U.S$ and at this early point is one of the reasons i believe that a recession there won't be a long drawn out affair.
> 
> You are correct about consumer spending but the U.S$, while not making up for this completely, will certainly have a  positive effect on exports.




Really how will we avoid it?

We might just get by on agriculture but even then you have to ship and move it..........


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## dhukka (23 December 2007)

An interesting article from Paul Kasriel on the likelihood of a US recession. His proprietary econometric modeling technique is signaling a high probability of a recession. Unlike other models, his has never given a false signal. Although there is a first time for everything.  

*Probing The Probabilities of a 2008 Recession*


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## numbercruncher (23 December 2007)

Here another interesting read, a paper discussing " Is the US Bankrupt " ?



> Many would scoff at this notion. They’d point
> out that the country has never defaulted on its
> debt; that its debt-to-GDP (gross domestic product)
> ratio is substantially lower than that of Japan and
> ...




http://research.stlouisfed.org/publications/review/06/07/Kotlikoff.pdf


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## nioka (23 December 2007)

Maybe we will have a Keating recession, "the one we have to have". But if we do the recovery will take us to new highs. All you need to know is where is the low. Like kids in the car "are we there yet?"


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## Mofra (23 December 2007)

The general consensus amongst the Aussie bank & fundie chief economists appears to be the US spending most of H1 in recession (assuming they are not already in one technically? Damn lagging economic indicators) however most agree Australia is likely to avoid the worst of it.

Either way we should know how much the Bush administration's efforts to draw out the ARMs resets peak month from April 08 will effect the credit crisis shortly. In Australia it has already created a radical re-think of treasury operations for all major players - inter bank warehousing is growing astonomically as treasuries are adopting mountains of prime debt (in Australia it really should be called a credit _quality_ crisis) to re-balance their book quality.


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## numbercruncher (7 January 2008)

> Jan. 4 (Bloomberg) -- The U.S. economy may be on the verge of -- or already in -- a recession, based on the increase in 2007's unemployment rate, economists said.
> 
> The jobless rate rose to 5 percent in December, the highest in two years. The figure was 0.6 percentage point higher than March's 4.4 percent, which was the lowest reading of the expansion that began at the end of 2001.
> 
> ``*Since 1949 the unemployment rate has never risen by this magnitude without the economy being in recession,*'' John Ryding, chief U.S. economist at Bear Stearns Cos. in New York, said in a note to clients. ``We now put ourselves on recession watch.''




http://www.bloomberg.com/apps/news?pid=20601109&sid=aROBkKxFM.RM&refer=home


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## numbercruncher (8 January 2008)

> NEW YORK (CNNMoney.com) -- Martin Feldstein, the Harvard economist credited with being one of the fathers of the Bush administration tax cuts, says the U.S. economy is now likely to slip into a recession, and that avoiding one will take a new round of tax cuts and interest rate cuts from the Federal Reserve.
> 
> Feldstein is president and CEO of the National Bureau of Economic Research (NBER), the organization charged with determining when the economy is in a recession and when it is growing. He told CNNMoney.com that he had thought the chance of a recession was about 50-50 even before last week.
> 
> But he said he now believes a recession is likely, as he pointed to both a report from the Institute of Supply Management showing manufacturing activity in decline for the first time in almost a year, and Friday's December jobs report that showed a jump in the unemployment rate to a two-year high.




http://money.cnn.com/2008/01/07/news/economy/feldstein/index.htm

Woot some of the reputable people are coming out of the wood work and adding 6 cents worth, This fella says odds are greater than 50/50 EVEN if the Fed keeps cutting rates , maybe these guys are starting to read some Internet blogs lol ?


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## numbercruncher (10 January 2008)

> Goldman Sachs has become the second Wall Street bank this week to declare the US economy is headed for recession this year.
> 
> The bank's chief US economist, Jan Hatzius, argues that the latest economic data shows recession has now arrived in the world's biggest economy - or will shortly.
> 
> Hatzius, whose warning comes a day after economists at Merrill Lynch issued a US recession alert, added that the Federal Reserve will now cut interest rates from the current 4.25pc to as low as 2.5pc by the end of this year.




http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/01/10/cnsachs110.xml


Some more topguns joining the Bear Brigade ....

Wow 2.5pc Interest rates, that'll hook us up with a nice dose of Inflation, RBA might have to go up by about us much as they go down ?


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## cashcow (10 January 2008)

wayneL said:


> Because credit has been expanding... ludicrously. You may have noticed some problems in this area lately.




Ladies and gentlemen, we have a winner!


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## Wysiwyg (10 January 2008)

Nick Radge said:


> Here's an exercise that may answer your question, regardless of it being Australia or US. Whenever the unemployment rate moves off a low by 0.5% the stock market goes into bear mode.
> 
> You can download the data from www.rba.gov.au back to 1977 or so. It has never failed, nor has it in the US. Australia still looks healthy in this regard with record lows still being seen. However, in the US the unemployment rate was 4.4% in March this year. Its now 4.7%. When it hits 4.9%...







dhukka said:


> I would add that employment is a lagging indicator and that by the time the unemployment rate ratchets up by half a percent recessions are usually in full swing.




Both comments proving true!!!!!!


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## numbercruncher (11 January 2008)

Finally someone having a crack at quantifying the effects to Australia ...




> Recession will hit Australia, says Goldman
> 
> 
> INVESTMENT giant Goldman Sachs has downgraded its forecast for Australia's economic growth by almost $100 billion over two years. Goldman Sachs is also the second Wall Street bank in a week to warn of an impending US recession.
> ...




http://business.theage.com.au/recession-will-hit-australia-says-goldman/20080110-1lb2.html


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## ithatheekret (11 January 2008)

Yes , Wys well brought back .

..... and every housing market collapse with depth , has ALWAYS led to a recession or worse . It's the levels here that really worry me , we've never witnessed one as expansive as this .
Unfortunately it hits many small businesses on the boundaries of the sector hard too , another type of domino effect .


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## kingbrown (22 August 2008)

Maybe worth reviving this old thread as i think its a bit more relevant nowdays ?

*Board fears recession and the blame game*
Peter Martin 
August 20, 2008 
WHAT'S driving the nine members of Australia's Reserve Bank board? Their deepest, most primal fear. It's that Australia will slide into recession and their fingerprints will be all over it.


The board members are worried Australia's banks made things hard for them last month by pushing up rates all on their own 
and they are also worried that economies worldwide are weakening. 
Very worried.

http://www.theage.com.au/national/board-fears-recession-and-the-blame-game-20080819-3y8i.html


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## xoa (22 August 2008)

Thanks to runaway inflation, most people's real wages are already in recession. Rate cuts might postpone a technical recession until next year though.


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