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Patrick Gallagher
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The banks and lenders did nothing wrong. And that will be a odd position, but when each bank is FDIC insured, and therefore if they bet it all and win, they win huge, and when they lose, well the nice little government comes in and bails them out, and by them I mean the bank depositors. We made a system where to take outlandish risk was acceptable, and it should not surprise anyone when it backfired. As for the stock market, it will not hit 3,000ish till summer of 2011, that is my guess. Why you ask? Why not? Unemployment is headed up, business is just starting to see the real effects of the contraction. Real estate has a long way to go before it becomes a bargain, but most of all, the majority now believe there is trouble. We are going to get their hopes up for a few months, and then dash them. If you see any newscast, when talking about the economy note how many times they use the word "hope". It is a lot. The item however that just turned, and it has taken 2 years for it to change directions, and that is consumer debt. After decades of taking on more debt, folks are now trying to reduce their debt. This trend is huge, and will not turn on a dime. There is a ton of debt out there, and reducing it by merely 10% will be devastating. I guess the take away, this monster is very big, and it is not going to go away 2 quarters from now. In total the great depression took about 9 years. We are 1.5 years in. There is a long way to go.
Thanks for the comment and interest, even if you think I am wrong!!! ;) Funny that on the definition of recession, I am also going to site You have sited the popular definition, but that only makes it more popular. I suppose that the unofficial "official" body on this is the National Bureau of Economic Research, but it typically takes them 6 months to declare the start of a recession, and by then it is usually nearly over. I think the real point here, as we could argue definitions until we are blue in the face, is that for a field as exact as money is supposed to be (imagine balancing your checkbook), something so basic as a recession or depression is so vague. As for the real estate, I should know better than that. I will justify my position in a full blown post soon.
Toggle Commented Feb 26, 2008 on Recession or Depression? at Financial Reality