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Forums - General - The Worst Is Over For Economy

SamuelRSmith on 18 July 2009
TheRealMafoo said:
You have got to be kidding me. I would like to know how we can keep losing jobs, and grow GDP.

Well aggregate demand can increase through Government spending, and the unemployed spending money that they don't have.

Aggregate supply can increase with fewer workers because of technological advancements.

 

Not that I think this is happening, mind you, I was just answering your question from a hypothetical point of view. Technological advancements would be minimal due to the decrease in investment, and the unemployed can't be living off debt atm simply because the banks won't let them anymore.

Government spending, though..... we all know what's going on there.



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NJ5 on 18 July 2009

The stock market knows little about the economy and financial problems. Did the stock market predict these problems at all? No. It crashed when the problem blew up in everyone's face. QED.

As for Cramer, that guy's a joke. His investment advice is good if you want to lose money.

 



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NJ5 on 18 July 2009

I'm not saying it doesn't correlate. I'm saying its predictive ability is not good. Check out a list of false stock market rallies during the great depression:

http://www.ritholtz.com/blog/2009/04/great-depression-rallies/

Some 30-100% rallies there which all blew up later.

 



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NJ5 on 18 July 2009

I would also like to know what data there is to say delinquencies are down.

Foreclosures were up 15% in the first half of 2009 (and broke a record):

http://money.cnn.com/2009/07/16/real_estate/RealtyTrac_foreclosure_report/index.htm?cnn=yes

Credit card charge-offs and some measures of delinquencies are also rising:

http://www.bloomberg.com/apps/news?pid=20601087&sid=ap_I2MWa2QMo

13.86% of credit card customers at Bank of America aren't paying their credit card debt.

 



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NJ5 on 18 July 2009

Here is a real analysis of the bank results:

http://finance.yahoo.com/news/Bank-profits-not-as-apf-2931947201.html?x=0&sec=topStories&pos=main&asset=&ccode=

-- Mortgages: Bank of America's second-quarter revenue was bolstered by a spike in mortgage refinancings as interest rates tumbled early in the quarter. But rates have been climbing lately, and analysts expect that surge in refinancings to taper off. And more people are defaulting on mortgages.

-- Credit cards: Credit card losses tend to track the unemployment rate, and banks are expected to keep losing money on credit cards as more people lose their jobs. JPMorgan Chase, Citi and Bank of America all have huge credit card operations.

-- Investment banking: By far the quickest recovery in the banking business has come in the investment banking sector, helping Goldman Sachs earn $2.7 billion in the second quarter. Some of the rebound has come from the big stock market rally this spring. Companies also did well because there's less competition since Lehman Brothers and Bear Stearns went under.

Analysts say that besides the problems with loans, bank earnings may suffer because the country has less of an appetite for debt.

-- Commercial real estate: While home foreclosures are increasing, the commercial real estate market is expected to keep causing loan losses for banks. Rising store and office vacancies are cutting into landlords' and developers' cash flow, and leading them to default on their mortgages.



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Khuutra on 18 July 2009

Would the worst of the problem be over if everyone believed the worst of the problem was over?



HappySqurriel on 18 July 2009

I just thought I should add this being that the trouble in the housing market is one of the underlying problems in the economy:

http://3.bp.blogspot.com/_CQyU4ayBifw/Sl4b5EsOroI/AAAAAAAACUY/l08xOEo-dIg/s1600-h/CreditSuisseResetMarch09.jpg

As you can see from this graph, we're not really past the worst of this yet and as more and more of the Option ARMs and Unsecuritized ARMs reset there will be more foreclosures and more banks facing bankrutpcy.



NJ5 on 18 July 2009
Khuutra said:
Would the worst of the problem be over if everyone believed the worst of the problem was over?

No... the problem could be made even worse by people taking on more debt believing happy times are here again.

The group of people who are broke is still increasing, and their bank balance isn't gonna improve by wishing upon a star.

 



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Khuutra on 18 July 2009
NJ5 said:
Khuutra said:
Would the worst of the problem be over if everyone believed the worst of the problem was over?

No... the problem could be made even worse by people taking on more debt believing happy times are here again.

The group of people who are broke is still increasing, and their bank balance isn't gonna improve by wishing upon a star.

Hrrrrrrrmmmmmmm.

Would the worst be over if Tyler Durden lead an anarchist revolution and blew up the major banks and credit card companies and destroyed all their records?



NJ5 on 18 July 2009
Khuutra said:
NJ5 said:
Khuutra said:
Would the worst of the problem be over if everyone believed the worst of the problem was over?

No... the problem could be made even worse by people taking on more debt believing happy times are here again.

The group of people who are broke is still increasing, and their bank balance isn't gonna improve by wishing upon a star.

Hrrrrrrrmmmmmmm.

Would the worst be over if Tyler Durden lead an anarchist revolution and blew up the major banks and credit card companies and destroyed all their records?

Probably, almost by definition :P

 



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