Cornbread Maxwell wrote:eman wrote:When it comes to the economy you can develop a seemingly perfect argument/reasoning for basically any scenario using selective evidence, charts, trends, and reasoning. He merely wrote this article to present a doomsday scenario and presented all the evidence that coincides with such a scenario....since he doesnt take all variables into account, and additionally NEVER mentions any positive aspects of the market (and there are many), he is basically only presenting one side of the story. Is our economy pretty messed up right now...yes...but I HIGHLY doubt well be seeing anything like 1929 in the near future.
Actually - he only took one facet of our economy and described the conditions very accurately. He did not mention many of the other facets that others think could be just as damaging (falling $, rising real inflation, rising real unemployment, rising medical costs, accounting games, etc...)
I have an MBA in economics and have worked in the investment industry for over 10 years now and my father since the mid 60's - both of us are extremely scared at this country's economic outlook. At this point I dont see a way we can avoid something like the great depression. The fact is we are obviously in the minority if you read most business journals - just like in 1929 when the doomsayers were also the vast minority. Just dont say you werent warned.
Right now the Fed is in a situation where they know they cannot lower interest rates to help with market liquidity (because real inflation is higher than they want to admit), so they have decided to pump in more cash to our banking system in hopes of generating MORE DEBT so consumers will continue to spend!!! Do you see the ridiculousness of this??? Debt to income levels are almost twice as high as they were prior to 1929 and this country's financial leaders answer is to make it even higher. This week the Fed agreed to buy over $7 billion in securities from dealers as long as they deposit that money into the banks so that the banks can lend it out - which now ties the Fed to the securities market more than they ever have been in history - all at a time where the DJIA has fallen over 1000 points in less than a month.
Yup, I hear you. I will say that there really is no "right way" to deal with it now. The only way to prevent this would have been to stop the ridiculous lending practices BEFORE this happened. Now that we're neck deep in sh**, there really is no right way out of it. The problem they are trying to prevent now is these lending institutions going belly up. That puts the whole economy down a laundry chute to hell, so I can understand them trying to alleviate how quickly this correction takes place to allow the economy to absorb as much of it as possible.
But, as you point out, this potentially makes the issue worse because these idiot banks will try to stay in the black for the short term rather than use the money responsibly. It's like giving a drug addict more money because they're going broke...you have to have control over how the money is being used or you're not helping the problem.
Fortunately, while I think this will be very bad in many ways, I think there are enough savvy investors out there that will prevent this from going into an unending tailspin like the Great Depression. There will be a correction, and it will impact a lot of people. But I don't think it will be as bad as many doomsday people fear. At least, not as lengthy.
Good time to find a deal on a foreclosed home, though...that's the way I look at it!