Recession.

[zheer]

  Ok those of us that are in-touch with the out-side world, what are your thoughts on the recession and how is it affecting you or people you know. As far as I know it is all due to some greedy bankers lending peopel more money than they should ( here in the uk ). what's the reason for recession in other parts of the world.

[thalbergmad]

I worked in a bank for 20 years between 1983 & 2003. During the last 10 years, all i was required to do was to sell personal loans and credit cards. Staff were targeted heavily to lend as much as possible as well as sell expensive insurance.

The biggest mistake the banks made was to almost remove human judgement from lending. When computer generated credit scoring was introduced, there were very few people that could change a decision and i was not allowed NOT to process a loan request, even if i knew that the customer could not pay it back.

This stupidity as well as lending people up to 6 times their salary to buy a house, eventually was going to blow up, but too many people were earning a lot of money from mortgages and loans.

I am certain that politicians and people at the top of the banking profession knew this was going to explode at least 3 years ago, but you will not find anyone prepared to admit this. A chain of events is now in force and i expect this recession to last probably 2 years.

If anything sensible comes out of this crises, i hope it is a more cautious attitude towards debt.

Thal

[go12_3]

Indeed, I feel that this recession is affecting us all.  It's a matter of choosing the wants and needs now in order to make our dollars stretch.  It has been affecting my students in which some of them had to quit taking lessons and that is sad for them when they could be learning music.  I have lowered my fees in order to accomodate families with children that can afford lessons.  Hence,  I am grateful for being a teacher, whereas in a regular job, I could be laid off.  I feel for the families that are stuggling financially and wish them the best.  We as a people need to be aware of those that are less fortunate and in need.  Perhaps, this recession will make people all over the world work together in harmony and peace.

[shortyshort]

Both the wife and I are still in work, thankfully.

I have noticed a drop in work, in construction, but only at the middle and lower ends of the market. The top end does not seem to be affected yet.

The wife works in the catering industry.
We all have to eat.

I hope that we will pull through, as no-one would pay to hear me play the piano. 

[morningstar]

Ours was caused by having too much money invested in the US banks when they went bust, as well as banks lending what the masses couldn't afford to pay back. The government is now in turmoil over the current Prime Minister's wanting to hand out $42 billion to Australians which equates to about $950/person. The opposition is fighting it tooth and nail because they believe it will come back to bite the Australian populace on the ass and they will have to repay 10 times the amount to get the treasury back afloat in the near future. Jobs are being dropped left right and centre like in many other countries. The mining industry seems to be worst affected with something like 6000 jobs cut over the last 2 months. They seem to be using the recession as an excuse to clean house, cancelling all the contracts their subcontractors hold and only keeping some of theit own staff.
Think that's all for the moment.

[general disarray]

I've been doing tons of reading on this issue (mainly "The Economist") and talking to lots of folks, including some bankers in my family.

Here's what I've arrived at to describe what's going on in the global economic free-fall.

1)  As Thal pointed out above, the banks began lending money years ago to prospective homeowners who did not have the ability (income) or credit-worthiness to take out the massive mortgages (loans to buy homes) that they were offered and stupidly accepted.

2)  Tons of these bad loans were out there and investment bankers and hedge fund managers "bundled" them up and sold them to speculators.  These bundled-up, super-high risk mortgages were given a fancy name called "derivatives."  No one heard of them before because they never existed before.  Therefore, federal banking regulators worldwide didn't bother to scrutinize them nor regulate them.  As a result, millions of people and institutions globally were buying CRAP at enormously high prices.  Who got rich with this?  Well all those salesmen, known as bankers and brokers and hedge fund managers, got rich.  That's who.

3)  Next step:  all those people who couldn't come up with payments on their mortgages, forfeited.  Suddenly, these "derivatives" turned into what they were from the beginning:  CRAP.  The banks who sold the CRAP were, and are, and will be left with tons of property on their hands that they can't push off onto to someone else, because, now, there's NO MONEY out there.  No one can buy it.  And the banks don't have any money to lend to new suckers to buy it.  Values on property plummet.  The economy crashes.

4)  The horrible step yet to come:  the crash of the credit card market.  Remember all those dumb people who accepted mortgages they couldn't possibly afford to pay on?  Well, they also gleefully accepted many credit cards that they have charged up a storm on and CAN'T PAY THE BALANCES.  The banks, who pushed these cards onto people who had no right having them in the beginning, are being hit with a new wave of forfeiture.   More disaster ahead.

So, to recap, we have the mortgage crisis, first of all, and to see it in a concentrated, pure view, just look at the collapse of Dubai currently underway.  Enormous loans taken out to build a Fantasy Land of indoor ski resorts (in the desert!) and overpriced hotels that have interest payments so huge, no one can pay them back.  Dubai is crashing totally.

The rest of the world is following this pattern.  In the US, the state of Florida is overwhelmed with home foreclosures.  Thousands of middle class people are homeless and actually going to soup kitchens just to get a meal.  In Hawaii, the same situation exists.  Hawaii is like Dubai in many ways.  The very rich swept in and bought up land which they sold over and over again to other speculators, thereby hiking the price with each sale or "flip."  Result?  In my teeny-tiny, one-horse beach town, 6 acres of land sold two years ago for $3.5 million dollars!  Land.  Dirt.  Not even beachfront.  No homes on it.  Result?  The land sits idle.  No one can afford to build on it.  It's being sold again, but no one can afford it.  You can't even grow crops on it.  It's private land.  Useless, overpriced crap while people stare at it, starving.

Coming up next, as I noted, is the credit card disaster.  Just you wait.

Thal thinks this will lift in two years.  I respectfully disagree.  I think the worst will only rear its ugly head in two years.  It will be a Global Depression, rivaling the 1930s.  We have at least six years of this crap to wade through.

Fasten your seat belts.  It's going to be a bumpy ride.

[zheer]

all i was required to do was to sell personal loans and credit cards. Staff were targeted heavily to lend as much as possible as well as sell expensive insurance.

. A chain of events is now in force and i expect this recession to last probably 2 years.

 

  Yes I know, each time I walk into the bank I've got people selling me thingz, I just say I'm not interested and walk away.
  Hmmmm 2 years, possibly but probably a little longer.

[momopi]

  Ok those of us that are in-touch with the out-side world, what are your thoughts on the recession and how is it affecting you or people you know. As far as I know it is all due to some greedy bankers lending peopel more money than they should ( here in the uk ). what's the reason for recession in other parts of the world.

Perspective from someone who's still in education and lives in Third World:

Well, poverty is part of our lives. It's not something we get paranoid of. It's not something we get hysterical about. It's something we live with. So, I guess a lot of people here really take the phrase caveat emptor seriously. We don't just go around and buy and unless we have the money to pay right away. I have a friend who graduated from a top university with a degree in business and accounting. She purposely did not avail herself of a credit card because she knows that she's an impulsive buyer. And being in a unstable economy, no matter how high your credentials are, no matter how "stable" you job is, you'll never know when poverty might hit you.

I'm amazed at the culture of consumerism promoted at First world countries. From small candies to self-help books to housing - they really make an all-out business out of them. And these people in business and advertising are not just concerned about the production of their "brand." These people are highly knowledgeable about human psychology and they used to their advantage in order to sell. They create imaginary needs and desires which did not exist in the first place.

I'm not very knowledgeable about banks and lending... but if people did not rely too much on loans...

You know what I mean. 

[zheer]

And these people in business and advertising are not just concerned about the production of their "brand." These people are highly knowledgeable about human psychology and they used to their advantage in order to sell. They create imaginary needs and desires which did not exist in the first place.

   Yes true, I've read marketing and psychology, the concept of marketing was created by psychologists, the first marketing campain was held in the U.S, yup smoking was made to look cool, the thing that famous and rich people would do was advertised and people believed it and bought it.

[thalbergmad]

I'm not very knowledgeable about banks and lending... but if people did not rely too much on loans...

Well, the banks do not know much about lending either, and thats part of the problem.

Thal

[hornblower]

Hasn't anyone noticed a pattern though? We usually go through a "recession" around every 10 years or so (at least, we do in Britain). It's mainly the most rich and powerful countries that are the worst affected (like the USA) because they invested in failing banks, markets, investments, etc.

I think it's affecting us right now because the government are targeting the general public (i.e. tax payers) to pay the government MORE money than last time to get us out of this situation, unaware that it is putting public people into worst situations than before.

The government has messed up, but they're too ashamed to admit how much damage they've caused and instead of spending time thinking of really useful ways to get us out of this global situation, they resort to getting more money out of normal people.

In the long run...everyone is going to be seriously affected. With the price of food, petrol, homes, education, etc. all rising; by the time the "recession" itself finishes, it's still going to take a long time before the public earn their money back.

[term]

There is a balance between stability and growth. The US economic system is based on growth and will therefore brutally collapse because of the risk involved in giving out loans to stimulate investment and the speculative bubble. It is consequently bound to collapse every x number of years, called the economic cycle.
What you pay for, you get. There's only a trade-off between those two opposites growth and stability, if you want growth, what you get is instability leading to a downfall, if you have stability as in the european nations still tied to the idea of social market economy then the middle class is better off but the country overall is not on top of the pyramid.
Again, there's a dychotomy between rampant lawless capitalism and regulated slowed-down market economy. None is really preferable.
What's interesting though is that social conservatives are the ones promoting market liberalism and the other way round. That just goes to show you how every ideological position is balanced out by its opposite.

This economic situation does not affect me at all as long as the value of the currency remains stable. I think when the situation gets out of control, i won't stay here in europe for long anyway, so i don't really care. I do not bother with the problems of the economy since the only thing i care about is to own something that resembles a small house, have water and something to eat, preferably inside the EU, no problem if outside the EU in a quiet place far from speculative bubbles and big corporations (and preferably also far from any agglomeration of people).

[momopi]

The US economic system is based on growth and will therefore brutally collapse because of the risk involved in giving out loans to stimulate investment and the speculative bubble. It is consequently bound to collapse every x number of years, called the economic cycle.

Similar to what happened in Japan back in the early 90s when its economic bubble burst. Such growth-oriented business are highly speculative and risky. The government actually knows that it's bound to collapse, if things did not go well with all their speculations. They keep assuring people that they will be using measures to control the situation. And people believe. When things get a little better, they would be investing and loaning again. Era of prosperity then after that, another downfall.

Excessive military spending also affected the crisis. It's another failed "speculative" venture. (After all didn't US got rich after the world wars and Japan after the Korean war? These countries profit a lot from the high production led by wars. Too bad things didn't go the same way for US this time.) I hope they won't resort to war business again just to get out of depression.

This economic situation does not affect me at all as long as the value of the currency remains stable. I think when the situation gets out of control, i won't stay here in europe for long anyway, so i don't really care. I do not bother with the problems of the economy since the only thing i care about is to own something that resembles a small house, have water and something to eat, preferably inside the EU, no problem if outside the EU in a quiet place far from speculative bubbles and big corporations (and preferably also far from any agglomeration of people).

You are lucky if you're not affected. But how about the millions of people suffering from the crisis? I'm NOT telling you to change your perspective on this issue. I just want to say that for millions of people, having a small peaceful house, a food to eat and water to drink is far from their daily reality and that this First-world crisis has even more nefarious effects in Third world countries than you'll ever know.

[zheer]

the only thing i care about is to own something that resembles a small house, have water and something to eat, preferably inside the EU, no problem if outside the EU in a quiet place far from speculative bubbles and big corporations

  You know if we all thought this way we would not be in recession today.

[term]

You are lucky if you're not affected. But how about the millions of people suffering from the crisis? I'm NOT telling you to change your perspective on this issue.

No problem if you would. Changing perspective is part of getting a perspective on an issue.  :o)

[ahinton]

The notion that the present recession will last two years or thereabouts must be one of the most risibly over-optimistic ones that I've ever encountered on this forum.

There are quite a few reasons for the present economic situation, of course, but one fundamental to keep in mind is that, notwithstanding the rise and rise (until recently) of the Chinese and Indian economies that was widely predicted to change global economic balances irrevocably, when America sneezes, the rest of the world still catches a cold; it's also perhaps worth remembering that there remains no cure for the common cold...

The sheer professional incompetence of banks and other lending organisations has undoubtedly been a major contributory factor, but it must also be borne in mind that, if banks don't lend, they go out of business; banks cannot survive without lending any more than the rest of us can survive without borrowing (and let it be remembered that many people who complacently think that they are exempt from borrowing are not so, insofar as they receive salaries and pensions from organisations who borrow in order to be able to pay them and are thus complicit in borrowings).

In UK, the "government" appears to hope to achieve economic recovery by baling out some of the banks and largest corporations on whose continued existence the economy to some degree depends; the problem with this "plan" is twofold - firstly, the government has no money of its own but has to rely instead on what it can extract from the taxpayer and, secondly, there could hardly be a more foolhardy time to attempt such an exercise when tax revenue is subject to the following:
1. more unemployment means less income tax paid and more state benefits paid out
2. falling property, land and business values mean less capital gains tax and inheritance tax paid
3. decreasing interest rates (we now have the lowest for over 300 years) mean less income tax paid on deposit interest
4. businesses collapsing mean reductions in share values which in turn means less income tax paid on dividends.
In other words, the government is pledging financial support to banks and other businesses that it will stand no chance of being able to recoup from the taxpayer, so its promises are false ones. The only other way that it can try to get the money with which to seek to achieve this is by - yes, you guessed it - borrowing; it may have to go (second-hand threadbare) cap in hand to the IMF in the hope of securing a loan of several zillion dollars. But would they get what they want? One of the problems has been that lenders have behaved irresponsibly in terms of risk assessment when making loans; as the IMF probably realises this, why would they themselves follow suit by taking such a calculated risk by agreeing to lend vast sums to the UK government that has stood by for years and allowed at least the UK part of this collapse to happen?

Banks have also been very poorly regulated and, whilst over-zealously bureaucratic regulation of businesses (and private individuals) is undoubtedly a most unpalatable restrictive practice, there must nevertheless be good quality regulation of such industries and it must be positive, constructive, beneficial, enforceable and enforced when necessary; what the FSA (the UK financial service regulator) has done since it came into existence is arguably none of the above and the extent to which it is now vilified leaves its own very future in increasing doubt - indeed, given that the UK financial services regulator has changed several times over the years (LAUTRO, FIMBRA, PIA, FSA), there is an increasing public perception not only that UK financial regulation has failed dismally but also that the UK financial services industry is actually impossible to regulate at all.

I am no fan of Enoch Powell (remember him, anyone?) but I do recall his stating many years ago that one major problem that will eventually cause havoc is that almost all global assets are grossly over-valued; what he'd have thought of such over-valuations up to a couple of years or so ago can only be imagined, but there are others such as the financier George Soros who believe that such assets - land, property, businesses, currencies et al - have been substantially over-valued since the end of WWII and others who go as far as to claim that such over-valuation began at the time of the Reformation; if the latter is indeed true, why would anyone expect the world's economies fully to recover in less than several centuries?

I realise that I have barely even scratched the surface of the topic here, but it's a few pennies' worth to be going on with (while there are still such things and pennies left)...

Best,

Alistair

[term]

I realise that I have barely even scratched the surface of the topic here, but it's a few pennies' worth to be going on with (while there are still such things and pennies left)...

Notwithstanding the fact that this topic is vast, it doesn't require lengthy analysis to figure out what the crisis is all about. Why should one know all those details in the first place, and why complaining about so called incompetence? It's cause and effect, there isn't anybody to blame for this really. I think if people were conscious of how where they live affects what they have to endure then they wouldn't say a word.

[ahinton]

Notwithstanding the fact that this topic is vast, it doesn't require lengthy analysis to figure out what the crisis is all about. Why should one know all those details in the first place, and why complaining about so called incompetence? It's cause and effect, there isn't anybody to blame for this really. I think if people were conscious of how where they live affects what they have to endure then they wouldn't say a word.

So you would really seriously seek to have us all believe that it's all abit like climate change - i.e. something that is bound to happen from time to time regardless of what anyone does? Do you similarly believe that recovery from it is just another passive issue in that it will simply happen when it's ready, unassisted by any action on anyone's part? Whilst I would be inclined to concur with your presumed implication that going around merely blaming others for what has happened and is continuing to happen will get us nowhere, any more than punishing errant bankers will achieve anything useful in itself, I have to admit that I find your apparently casual laissez-faire take on this about as unhelpful as it is astonishing as it beggars credibility!

Never mind, though; one may suppose that, in the terms of term, it'll all be over next week, the recovery having happened all by itself!

There's a legitimate place for fancifulness. Discussion of this subject isn't it...

Best,

Alistair

[term]

So you would really seriously seek to have us all believe that it's all abit like climate change - i.e. something that is bound to happen from time to time regardless of what anyone does?

Have you heard about the economic cycle? Think about that and you have the answer.
I stated all the implications of that before, that's why complaining is useless and recessions, collapses and bubbles an inevitable constant.

Do you similarly believe that recovery from it is just another passive issue in that it will simply happen when it's ready, unassisted by any action on anyone's part?

That's certainly what I will do about the crisis. ;)
The action you talk about, what's that? Depending on the kind of action the question can be answered with yes or no.

[ahinton]

Have you heard about the economic cycle? Think about that and you have the answer.
I stated all the implications of that before, that's why complaining is useless and recessions, collapses and bubbles an inevitable constant.

OK, let's address these one at a time. Firstly, of course I've heard of it, just as i've heard of climate changes through the ages, but that doesn't of itself support the notion that economic upturns and downturns occur, like climate changes, unaided by the activities of humankind. I have already broadly agreed with you that complaining, in itself, will solve nothing. The alleged inevitability, however, is no more a reason not to complain than it is not to take remedial actions, since that inevitability is, as I said, merely alleged.

That's certainly what I will do about the crisis.
The action you talk about, what's that? Depending on the kind of action the question can be answered with yes or no.

What you may or may not do about it is up to you, of course and no one in his/her right mind is likely to suggest that you or any other single individual can "do" anything to resolve it; all that you and anyone else can do instead is try to deal with those specific aspects of it that affect you and them personally, as far as is possible.

That said, banks and other lenders and governments have duties towards those who respectively invest in them and elect them. Economic structures are man made, so your suggestion that the booms and busts of economic cycles are by definition beyond the control of humans is tantamount to implying that humanity has deliberately, consciously and wilfully created something over which it can have little or no control; if that were true, might there not therefore be a case for examining what else that humans have created but which they cannot control?

Best,

Alistair

[term]

so your suggestion that the booms and busts of economic cycles are by definition beyond the control of humans is tantamount to implying that humanity has deliberately, consciously and wilfully created something over which it can have little or no control

That's causality. What i'm talking about is the laws governing the economic system we are part of. The most basic one is that there is a cycle, which itself is a consequence of the probabilistic nature of investment & risk taking for the possibility, not the guarantee, of growth or profit. So it's not that humans have no control over the cycles, their very actions create it, and that can not be undone which is why there is a fixed time of recession no matter what. Of course there still remains a smart and a dumb way to go through a recession, but there is no action you can take to actually avoid it unless what you claim is that endless growth is not a capitalist fantasy but reality.

So if recession would not exist without expansion, why complain about the recession? It's something that has to be endured.
And if there is a dualism between cyclical (capital) and linear (planned market) economies, and more regulation leads to less flow of money due to less risk taking, less investment and less creation of (borrowed) wealth, are all the people complaining about deregulation, to which i belong, aware of the fact that that will reduce the living standards during the expansion? - of course from imaginary to real standards, but still.

[ahinton]

What i'm talking about is the laws governing the economic system we are part of. The most basic one is that there is a cycle, which itself is a consequence of the probabilistic nature of investment & risk taking for the possibility, not the guarantee, of growth or profit. So it's not that humans have no control over the cycles, their very actions create it, and that can not be undone which is why there is a fixed time of recession no matter what. Of course there still remains a smart and a dumb way to go through a recession, but there is no action you can take to actually avoid it unless what you claim is that endless growth is not a capitalist fantasy but reality.

At present, I would say that "endless growth" is neither a capitalist fantasy or a reality but I would add that the fact that it is also not a necessity either does not of necessitysignify that every boom has to have a bust to follow; growth followed by a sustained plateau followed by further growth, whilst still technically cyclical, is perfectly possible without the need for recessions. If what you are suggesting is that the boom and bust cycle is deliberately built into the system by the humans that created it, then it is clearly in need of revision (which does not of itself necessarily require wholesale abandonment of capitalism); as those humans who manufacture the products and provide the services upon which the economy depends have (albeit not always at all times) improved the design of those products and services (and had they not done so we would never have developed anything), there is no reason why the design and application of the economy that depends upon such development cannot similarly improve over time, provided that there is the motivation, expertise and determination to do it. To suggest otherwise would be tantamount to tacit acceptance that, whilst humans can improve what the economy relies on, it cannot improve the economy itself - a notion that borders on the risible.

So if recession would not exist without expansion, why complain about the recession? It's something that has to be endured.

I've already state more than once that I am not complaining about it but drawing attention to certain issues that need to be addressed and that complaining in itself gets no one anywhere.

And if there is a dualism between cyclical (capital) and linear (planned market) economies, and more regulation leads to less flow of money due to less risk taking, less investment and less creation of (borrowed) wealth, are all the people complaining about deregulation, to which i belong, aware of the fact that that will reduce the living standards during the expansion? - of course from imaginary to real standards, but still.

What is required is not necessary "more" regulation per se (for that would risk causing damage through oppressive bureaucracy and the kind of "regulation" that achieves little or nothing beyond satisfying the regulators rather than providing benefit to the regulated and those to whom they market their goods and services) but regulation that is intelligent, designed to be beneficial, enforceable and enforced when necessary; we certainly do not have this at present, especially in the UK financial services market place where vast sums of public money have been and continue to be wasted on a regulator that lacks efficiency, teeth and intelligence and is now increasingly being discredited and vilified.

Best,

Alistair

[general disarray]

Why should one know all those details in the first place, and why complaining about so called incompetence? It's cause and effect, there isn't anybody to blame for this really.

This is the most astonishing statement on this topic since the earlier ones that predicted this crisis would be resolved in two years!

If "incompetence" were the only causative issue in this crisis.  But, it's not.  It has been engineered by unbridled greed in the financial/banking industry that continues to this very moment with US bankers actually having the hubris to "party" with the taxpayers'  bailout billions. 

Spare me, please:  ". . . there isn't anybody to blame for this really."

[ahinton]

This is the most astonishing statement on this topic since the earlier ones that predicted this crisis would be resolved in two years!

If "incompetence" were the only causative issue in this crisis.  But, it's not.  It has been engineered by unbridled greed in the financial/banking industry that continues to this very moment with US bankers actually having the hubris to "party" with the taxpayers'  bailout billions. 

Spare me, please:  ". . . there isn't anybody to blame for this really."

Indeed - but part (though not all) of that incompetence is down to the very fact that lenders and others have taken undue risks with their clients' money and by offering unsustainagle deals to many of those clients; it's not all down to greed pure and simple (and it would be bad enough if it were) but to crass non-joined-up thinking, the results of which were for the most part allowed to continue unchallenged by the equally incompetent financial services regulators.

It is now not only banks and other lenders that are seeking to "party" with the money that the taxpayer isn't going to have in order to bail them out and which will therefore be unforthcoming - it's also certain other large corporations and pension funds as well; the problem is that, if these ailing corporations are left to go to the wall rather than being bailed out (even if the latter were possible, which I doubt), the recession will only get much worse as a direct consequence, so really one could say that these large organisations possess sufficent potential power to hold governments to ransom by forcing them into the invidious position of "damed if we do, damned if we don't". Where those governments have actually failed their electorates is by not seeing it coming a long way off.

Best,

Alistair

[term]

This is the most astonishing statement on this topic since the earlier ones that predicted this crisis would be resolved in two years!

I think what you mean is what i already said, that the best you can do is a soft landing, but there's no avoiding the recession. The crisis can certainly not be 'resolved' just like that, how?

I don't even think we actually disagree that there is greed, and that for some it's payday when people lose their houses and their jobs. Is that immoral, were they doing it on purpose? Of course. What i do is looking at the big picture, from there this crisis is just a predictable & expected phenomenon. Bubbles burst, wealth is consolidated in the richest 5%, gap between rich & poor widens and so on (->bailouts). I'm not going to defend a bunch of crooks, it's just that they are not the reason why this crisis happens in the first place, there's a lot of people involved - some of which are irresponsible average citizens.
And that's what happens at the end of every cycle, big or small. It's inherent to the system - and that ties to what ahinton asked:

If what you are suggesting is that the boom and bust cycle is deliberately built into the system by the humans that created it, then it is clearly in need of revision

What they deliberately built in is the idea that in order to have growth, you need incentive, careful or even no regulation, some risk & speculation, so that the whole thing gathers momentum. The rest is a consequence.
Some actually agree with you that there could be growth followed by halt followed by growth, but that never happened. Sounds more like belief to me.

[ahinton]

I think what you mean is what i already said, that the best you can do is a soft landing, but there's no avoiding the recession. The crisis can certainly not be 'resolved' just like that, how?

Well, on this we most certainly agree!

Some actually agree with you that there could be growth followed by halt followed by growth, but that never happened. Sounds more like belief to me.

It sounds far more like lack of proper initial structuring and subsequent monitoring to me. The problem is that, if nothing major is done, the boom and bust cycles will not only continue but they will, as I have suggested previously, become ever greater in scale and scope and ever more frequent in occurrence; can you imagine what it will be like to have the entire value of countries like USA, UK and China wiped off the markets in a single fell swoop at 11.00 and put back on again by 16.00 on the same day, not to mention the effects that will have on everyone the world over? If the system that we have and the ways in which is is operated and regulated are not overhauled in the right way soon, then this is just the kind of thing that may well happen.

Best,

Alistair

[loonbohol]

In my point of view.
The most simplest explanation is that.
THe gov't does not support the businessman.

[morningstar]

In my point of view.
The most simplest explanation is that.
THe gov't does not support the businessman.

Ours does-or used to anyway. The rich get richer and the poor get poorer.

[javacisnotrecognized]

If the system that we have and the ways in which is is operated and regulated are not overhauled in the right way soon, then this is just the kind of thing that may well happen.

Best,

Alistair

For this to happen, you would have to decide on how the economy should ideally function down to the smallest detail.

And you'd have to get everyone to agree to it.

[gerry]

  Ok those of us that are in-touch with the out-side world, what are your thoughts on the recession and how is it affecting you or people you know. 

At a time like this, I and many of the people I know are grateful to have music in our lives. Three or four hours at the piano makes it possible for me to deal with the vagaries of life.

[ahinton]

For this to happen, you would have to decide on how the economy should ideally function down to the smallest detail.

Pretty much so, yes - or at least the principles of how it should function, anyway.

And you'd have to get everyone to agree to it.

Indeed so - or to those principles, anyway - and, as I stated, if that doesn't happen, the "boom/bust with increasing frequency, scale and scope" scenario is the almost inevitable and uncontrolled/uncontrollable alternative, for which people will need to fasten their seat-belts and see how long they can handle the sheer velocity of the ride; never mind A Short Ride in a Fast Machine (because this one would not lilely be short), maybe Alkan had something visionary in the finale of his Symphonie from just over a century and a half ago (though was it a ride TO hell or a ride IN hell?)...

Best,

Alistair

[javacisnotrecognized]

Pretty much so, yes - or at least the principles of how it should function, anyway.

Alright, when can we expect them to be finished being written ?

Indeed so - or to those principles, anyway - and, as I stated, if that doesn't happen, the "boom/bust with increasing frequency, scale and scope" scenario is the almost inevitable and uncontrolled/uncontrollable alternative, for which people will need to fasten their seat-belts and see how long they can handle the sheer velocity of the ride; never mind A Short Ride in a Fast Machine (because this one would not lilely be short), maybe Alkan had something visionary in the finale of his Symphonie from just over a century and a half ago (though was it a ride TO hell or a ride IN hell?)...

Best,

Alistair

Fair enough; I will get to work on it.

[ahinton]

Alright, when can we expect them to be finished being written ?

I deliberately and consciously said nothing about when anything would happen or which of the scenarios that I outlined is the more likely to materialise, but it remains my view that, unless and until a general consensus is reached in respect of the need substantially to overhaul many of those things within the operation of capitalism that have either been unwarrantably taken for granted or allowed to run riot or both, the expanding boom/bust alternative will almost certainly prevail; that is not, nor is it intended to be read as, an anti-capitalist statement per se - far from it, in fact - but all that most of us can now possibly hope to try to do is presume that the more writing that appears on the wall the more likely it may become that greater global efforts be made to achieve such a consensus.

Best,

Alistair

[term]

if nothing major is done, the boom and bust cycles will not only continue but they will, as I have suggested previously, become ever greater in scale and scope and ever more frequent in occurrence;

Isn't that something that marx predicted? As far as i know, he also said this is inherent to the system which is what i think, too.
So if what needs to be changed is our economic philosophy or some basic principles of our economy, and i assume you partly mean that by proper structuring, then where should we be going? There can only be these two opposites (liberal - conservative), both have been approached.
So if this is not merely a belief, where is that golden way growth + stability? There have to be at least some specifics you have in mind other than 'proper' or 'right'. By the way, it's very difficult make a distinction between overly oppressive and too soft regulation because it is based on estimations & opinions. If regulators are wrong, what then? This isn't as easy as it sounds.

[ahinton]

Isn't that something that marx predicted? As far as i know, he also said this is inherent to the system which is what i think, too.

Up to a point, but I do not think that he took into account the entire panoply of issues that are pertinent to our present-day experience (and why should anyone expect him to have done so, as that would surely require an impossibly exceptional visionary).

So if what needs to be changed is our economic philosophy or some basic principles of our economy, and i assume you partly mean that by proper structuring, then where should we be going? There can only be these two opposites (liberal - conservative), both have been approached.

One thing that needs to happen for starters is that banks, who can have little or no realistic practical existence outside the world of lending and borrowing (that is the necessary and inescapable bread and butter of their businesses), ensure that far more care is taken in assessing risk and continuously monitoring any changes in their clients' risk attitude and changes in risk definition brought about by market conditions; this requires adequate and continuous staff training, development, supervision and, ultimately, regulation. That won't alone slove all the problems, of coruse, but it will help. There seems to be scant evidence that some bankers are adequately educated and qualified or that they maintain proper disciplines in the field of what is called "continuous professional development", without which errors of judgement can almost be assured. Another is that regulation needs to have better understanding and take more effective control of financial fraud of all kinds (although even this burgeoning industry has not been the principal cause of the problems that we now face).

So if this is not merely a belief, where is that golden way growth + stability? There have to be at least some specifics you have in mind other than 'proper' or 'right'.

A good start could be made by suitably qualified independent assessors figuring out exactly why what goes wrong does go wrong when it does, for although historical precedent deos not nor can be expected to have all the answers, it will certainly have plenty to be going on with; it's the old "learn from one's mistakes" argument.

By the way, it's very difficult make a distinction between overly oppressive and too soft regulation because it is based on estimations & opinions. If regulators are wrong, what then? This isn't as easy as it sounds.

I never said that it was easy!  - and it is, in fact, made more difficult still by reason of the constant change in market conditions, laws and a myriad other changes of circumstance, needs and asirations. In UK, however, all too many of those directly involved in the day-to-day operation of financial services regulation have insufficient education and qualifications in financial services and economics as well as inadequate understanding and experience of running businesses so, when taken together with the fact that their budget is (or at least has to date been perceived as) the bottomless pit that is government tax revenue (supplemented by statutory fees paid by regulated organisations), it is not difficult to conclude how the kind of lazy, complacent civil service mentality that has so far pervaded that regulator has left the way open tothe commission of all too many misdemeanours, professional misconduct, poor risk management and assessment and the rest.

Best,

Alistair

[thalbergmad]

One thing that needs to happen for starters is that banks, who can have little or no realistic practical existence outside the world of lending and borrowing (that is the necessary and inescapable bread and butter of their businesses), ensure that far more care is taken in assessing risk and continuously monitoring any changes in their clients' risk attitude and changes in risk definition brought about by market conditions; this requires adequate and continuous staff training, development, supervision and, ultimately, regulation.

Absolutely, but but i feel that staff training has been of the wrong kind. I went on dozens of training courses in my last 5 years in the banking industry, but it was all geared to sales and nothing else.

When staff are heavily targeted to sell lending products and are under constant threat of disciplinary action, they will do some pretty irregular things to get people to borrow. I am happy that i did not and turned whistleblower instead.

Banking is one industry that should go backwards in time, where bank managers could actually make a decision, where computers were not used to make decisions and staff were actually allowed to use their brains.

Thal

[richard black]

Banking is one industry that should go backwards in time, where bank managers could actually make a decision

Too right.

As for the likely length of this recession, it strikes me that while we were in the business boom a year or two back no two people agreed on how long it would last (predictions from 'experts' varied between about the next 10 minutes and forever) and it evidently caught most people by surprise when it all went horribly wrong. My personal prediction regarding the recession is that there will be a similar pattern in that way.

[ahinton]

Absolutely, but but i feel that staff training has been of the wrong kind. I went on dozens of training courses in my last 5 years in the banking industry, but it was all geared to sales and nothing else.

When staff are heavily targeted to sell lending products and are under constant threat of disciplinary action, they will do some pretty irregular things to get people to borrow. I am happy that i did not and turned whistleblower instead.

You are right and good for you for having done that; I hope that you were not persecuted too severely for your pains.

Banking is one industry that should go backwards in time, where bank managers could actually make a decision, where computers were not used to make decisions and staff were actually allowed to use their brains.

It's already going backwards in some senses - and big time - but, to achieve what you advocate here, bank managers would have to be able to manage banks as well as make decisions, computers would need to be operated by people who knew how to use them including a proper understanding of their virtues and limitations and, above all, staff would have to be vetted to ensure that they possesses brains before they were employed by banks in the first place; all that is surely asking far too much, is it not, if the present status non quo is anything at all by which to go?

I have to admit that I would hate to have my annual income for life restricted to a mere £650K as is the case with Sir of Good wins...

Best,

Alistair

[gerry]

I went to buy a toaster the other day and they were giving away free banks with each purchase....

[shinerl]

HUH???!!!

[morningstar]

HUH???!!!

It's a joke. Humour?

[gerry]

I guess you don't remember when you used to open a new account at a bank and you got a free toaster. I guess it's an age thing.

[argerichfan]

I guess you don't remember when you used to open a new account at a bank and you got a free toaster. I guess it's an age thing.

These days, some banks give you a free jump drive with a new account.  Why just the other day, one was offering a 512MB.  Whoopie, it's difficult to buy one under 1GB now.

When did banks offer toasters, if I might ask?  Were they pop-up? 

[thalbergmad]

I have to admit that I would hate to have my annual income for life restricted to a mere £650K as is the case with Sir of Good wins...

Indeed, I would struggle to manage on this, with the increased prices in Banjos.

Thal

[gerry]

When did banks offer toasters, if I might ask?  Were they pop-up? 

Of course - it was during the 60s. Banks would often offer choices of blenders, toasters and such to lure customers. Many people opened small accounts at several banks just to get the freebies. Sorry the joke (which I thought was pretty clever) had to be belabored so.

[ahinton]

Indeed, I would struggle to manage on this, with the increased prices in Banjos.

Understandably so, although with deflation almost certainly just around the corner, you may well find that the price of banjos will fall along with everything else; how often do you actually buy banjos, though, if I may ask?

Actually, my remarks about Sir Frederick Goodwin evidence a misunderstanding of the facts to the extent that, when I stated how hard it would be to manage on a gross annual pension of £650K as he will have to do, I need not have done so, since I have nowlearnt that his actual gross annual pension income is £693K which, of course, makes all the difference between managing and struggling...

Best,

Alistair

[thalbergmad]

how often do you actually buy banjos, though, if I may ask?

About 3 a year on average, but none for the last 8 months due to the fall of the pound against the dollar.

American banjos are the best. I don't buy any of that Korean rubbish.

Thal

[ahinton]

About 3 a year on average, but none for the last 8 months due to the fall of the pound against the dollar.

American banjos are the best. I don't buy any of that Korean rubbish.

I didn't even know that Koreans made banjos. That's an awful lot of banjos you get through, though, Thal (unless you are building a collection for some reason); I hope you don't get through pianos that quickly, for that could prove a very expensive exercise indeed, even in the present climate...

Best,

Alistair

[mattgreenecomposer]

Well this was a post I missed...
Someone said the credit card bust is next.  We already see that happening in the USA and I totally agree with you there. But if you think thats bad.... there is a much bigger problem awaiting the glorious people of planet earth and that is the printing of the US dollar.  Thanks to our wonderful clueless new representatives in the white house and Congress we have successfully printed a bailout that will cost 1.2 trillion dollars.  (another 9 trillion is in the works BTW)  Our currency will soon become weak, and our interest alone on our national debt will be more than the entire countries net worth.  In fact the debt is so great that China won't buy our debt anymore.  Then we've got a real problem!
I hope you have a nice piano, cause your gonna be selling it for food.

Here is a great/funny little clip on the subject!

[ahinton]

Well this was a post I missed...
Someone said the credit card bust is next.  We already see that happening in the USA and I totally agree with you there. But if you think thats bad.... there is a much bigger problem awaiting the glorious people of planet earth and that is the printing of the US dollar.  Thanks to our wonderful clueless new representatives in the white house and Congress we have successfully printed a bailout that will cost 1.2 trillion dollars.  (another 9 trillion is in the works BTW)  Our currency will soon become weak, and our interest alone on our national debt will be more than the entire countries net worth.  In fact the debt is so great that China won't buy our debt anymore.  Then we've got a real problem!
I hope you have a nice piano, cause your gonna be selling it for food.

Here is a great/funny little clip on the subject!

But who would buy that piano and with what? I wouldn't worry overmuch about what America is doing about this in isolation, for the same kind of thing is happening here in UK and elsewhere; the UK figures are not so large (but then Britain is a much smaller country with a far smaller population than US), though we're at it as well and look set to be at it for the foreseeable future in terms of bailing out not only high street banks but also large corporations and possibly pension funds. We're just in the process of printing some £75bn and another equivalent sum is said to be on the way - and this is in a climate where we now have the lowest interest rates in Bank of England history - i.e. in more than 300 years -and they are set to go to zero next (zero interset rate has been tried in Japan and failed, so it will be interseting to see what happens if Britain becomes the first country to venture into the uncharted waters of negative interest rates)...

The trouble is that no one seems yet to have pointed out that, although these desperate measures are suppoed to "kick-start" the economy and get sensible lending going again, lenders will not only back off from lending because of perceived bad risk but because they'll be unable to make sufficient profit out of loans at such low interest levels, so lenders will be discouraged from lending for reasons rather different from what has happened in the past. Likewise, an economic recovery is reckoned to be dependent upon a reasonable amount of saving, yet not only have increasingly fewer people any moeny to save, they have less and less incentive to do so by means of deposits becuase there is almost no interest available on such savings now and such as there is is still taxable.

The other - and perhaps more significant - problem is that all this money that the government purports to pledge to these organisations is unlikely to be paid to them. The government has no money of its own - only the money that it can extract from its taxpayers. In a climate where unemployment is increasing, businesses are going bust and the housing market is falling and all are set to continue to do so for the foreseeable future, the following will happen 9and indeed is already happening):
1. income tax /social insurance take will decrease from employers, employees and the self-employed (the quaintly named "National Insurance Contributions" are just another tax on work, since they do not insure anyone against anything and are largely compulsory rather than voluntary)
2. inheritance tax and capital gains tax take will also decrease due to falling asset values (houses, businesses, investments, etc.)
3. income tax take on deposit savings will decrease beause of less savings and lower levels of interest to tax
4. taxation on share dividends and other investment vehicles will reduce due to falls in their values
5. the government will have to pay out far more (from such tax as it can still take) in state benefits for the unemployed.
It is therefore necessary to ask where the money is supposedly to come from for all these bail-outs. The government could try to borrow it from IMF, I suppose but, as calls on IMF funding are already being made from many other countries in similar trouble, Britain will just have to take its place in the queue if it decides to attempt this route; in any case, it would be hard to see why IMF would lend money to a country where the risk is so great as it is in Britain's case. In addition, there is no guarantee that these bail-outs will actually achieve the economic stability that they are supposed to promise.

Much has been made of poor banking regulation and reckless lending and borrowing but, whilst these are certainly significant factors that have led to the present and future crisis, all banks everywhere would go out of business if they did not lend money; whilst much has also been made of the problems arising from inappropriate mortgage and business lending, governments themselves have borrowed on a massive scale and most of them are unable to repay those debts on demand - in fact it was recently stated (although I cannot vouch for the truth of this) that only one of the world's 200+ countries, Norway, could actually repay its debts on demand from its own resources - so, in a climate such as this, it is pretty obvious that anything that might be made to take on the appearance of a successful solution will in reality be no more than a smokescreen that will achieve nothing more effective than building a small dam to keep out the Pacific Ocean.

The state of the US dollar has also to be considered in more general terms rather than in isolation. Less than a year ago, the British pound stood at just over $2.11, yet recently it has dipped on occasion below $1.40; a couple of years or so ago it was around €1.53 but it has recently been close to parity. Most commentators say that the British pound is falling, which it is, but others have been saying the same for the US dollar which has nevertheless been gaining considerable ground over the British pound. The truth of the matter - which few seem to mention - is that all the major currencies are falling; it's just that some are falling faster than others. There is increasingly less guarantee that the British currency can even survive at all in the long run; if it does finally fail altogether, all that additional banknote printing will have been a waste of time and resources. I very much doubt that Queen Elizabeth II has ever given though to the possibility that her image on British coins and banknotes might actually disappear for good and I suppose that one could feel some sympathy for her if this does indeed occur in her 80s following a reign of almost six decades...

Best,

Alistair