what will be the ramifications of a recession in america to the rest of the world?
- Thread starter uberdark
- Start date
I\'m an asset manager for a major US firm. Let me start by saying we aren\'t yet in a recession. A recession by definition is two consecutive quarters of negative economic growth. That said, I believe we\'re headed for one, albeit a shallow one.
We\'ve had the longest bull market run in recent history without even a major correction (a 10%+ downward move in the broad market indices). We are long overdue and indeed we need it to keep us healthy. Without occasional recessions and corrections, we end up in bubbles like we did in the late nineties.
The reason we affect the world markets so greatly is that we are the largest and generally most stable economy on Earth. Our imports and exports (particularly now when we are doing so much more on the import side and sending so many jobs overseas) are crucial to world economy. Particularly in the food markets we are the biggest producer out there and since everyone eats, when that market is affected, the world is affected. Very few markets move truly counter-cyclically with ours. Most of them sympathize which means that they make the same moves our market makes, though they tend to lag our markets in timing.
Since we have been in a 5 year bull market (when markets generally run in historical 4 year cycles from up to down) and since we have so many factors causing uncertainty in our markets these days, the world is preparing for the inevitable downturn.
Oh, and btw. It doesn\'t matter one whit who ends up in office at the end of \'08. Presidents can make policy to prolong or delay market moves, but not really to change them. Cyclical movement is the nature of the market. Any President is nothing more than a victim or a beneficiary of timing when it comes to the economy, they just happen to be convenient targets, particularly for their opponents who are looking for things to pin on them anyway.
Hope that has been helpful in explaining.
We\'ve had the longest bull market run in recent history without even a major correction (a 10%+ downward move in the broad market indices). We are long overdue and indeed we need it to keep us healthy. Without occasional recessions and corrections, we end up in bubbles like we did in the late nineties.
The reason we affect the world markets so greatly is that we are the largest and generally most stable economy on Earth. Our imports and exports (particularly now when we are doing so much more on the import side and sending so many jobs overseas) are crucial to world economy. Particularly in the food markets we are the biggest producer out there and since everyone eats, when that market is affected, the world is affected. Very few markets move truly counter-cyclically with ours. Most of them sympathize which means that they make the same moves our market makes, though they tend to lag our markets in timing.
Since we have been in a 5 year bull market (when markets generally run in historical 4 year cycles from up to down) and since we have so many factors causing uncertainty in our markets these days, the world is preparing for the inevitable downturn.
Oh, and btw. It doesn\'t matter one whit who ends up in office at the end of \'08. Presidents can make policy to prolong or delay market moves, but not really to change them. Cyclical movement is the nature of the market. Any President is nothing more than a victim or a beneficiary of timing when it comes to the economy, they just happen to be convenient targets, particularly for their opponents who are looking for things to pin on them anyway.
Hope that has been helpful in explaining.
Sand Rat
New member
The quick and dirty answer is that the US has the largest GDP of any single nation in the world - (According to the IMF, the entire world GDP in Millions of USD is 72,337,649 - the US GDP in the same form is 13,543,330 - the only block with a larger overall GDP is the EU at 14,953,057). Most calculations show the next largest single nation GDP as China which depending on the calculation used ranges from 11,606,336 as a high to 7,043,000 as a low for 2007.
Having such a large portion of the world GNP in one country gives that country an inordinate effect on the world economy - if the consumers in the US stop consuming, it puts a sweatshop in India out of business, thus depressing the economy in India.
yeah, those presidents always get too much credit and too much blame for the economy.
The economy is a gargantuan, many headed beast. It is unbelievably huge and cumbersome. To think one man has any real sway over it (even in the most powerful office in our country) is a smidge niave.
Yes, I agree that an economic slowdown/recession is potentially bad for the rest of the world, just because that beast I mention is so large. It has a spiral effect on the entire world.
Right now, though, it seems many abroad are taking advantage of the weak dollar (and rightfully so) and buying American products on the cheap, whereas Americans are pulling back thier spending money and not making purchases. Its a small benefit right now that will end up causing big problems down the road.
The economy is a gargantuan, many headed beast. It is unbelievably huge and cumbersome. To think one man has any real sway over it (even in the most powerful office in our country) is a smidge niave.
Yes, I agree that an economic slowdown/recession is potentially bad for the rest of the world, just because that beast I mention is so large. It has a spiral effect on the entire world.
Right now, though, it seems many abroad are taking advantage of the weak dollar (and rightfully so) and buying American products on the cheap, whereas Americans are pulling back thier spending money and not making purchases. Its a small benefit right now that will end up causing big problems down the road.
Smart Ass 
So what a sec: To qoute
Since we have been in a 5 year bull market (when markets generally run in historical 4 year cycles from up to down) and since we have so many factors causing uncertainty in our markets these days, the world is preparing for the inevitable downturn.
So if I follow that statement/ logic so a president can screw up by staying in office two times because in some cases the second term will be one of down turn and everyone can bitch on how the President is screwing up the economy?
So what a sec: To qoute
Since we have been in a 5 year bull market (when markets generally run in historical 4 year cycles from up to down) and since we have so many factors causing uncertainty in our markets these days, the world is preparing for the inevitable downturn.
So if I follow that statement/ logic so a president can screw up by staying in office two times because in some cases the second term will be one of down turn and everyone can bitch on how the President is screwing up the economy?
@ mud duck - yes. Bill Clinton was both a beneficiary and a victim of market cycles. He started office in an economy poised to climb, and ended at the burst of the bubble. He cause neither.
but let me clarify...what I said doesn\'t mean that we have four years up and then four years down. A FULL market cycles typically runs a four year pattern. So we will see a full up/down cycle in the average single presidential term. Whether the president enters office in the trough (good) or the peak (bad) largely determines how his administration is remembered on economic policy. And mainly because reporters aren\'t economists.
but let me clarify...what I said doesn\'t mean that we have four years up and then four years down. A FULL market cycles typically runs a four year pattern. So we will see a full up/down cycle in the average single presidential term. Whether the president enters office in the trough (good) or the peak (bad) largely determines how his administration is remembered on economic policy. And mainly because reporters aren\'t economists.
you\'re right, and what\'s interesting is that Bush entered office in the trough and enjoyed 5 of his 8 years in office with a climbing economy...yet he will STILL be credited with the downturn that we are about to go into because he was in office when it started. (nevermind that he was also in office when the bull started.) Politics don\'t make sense...never have never will. It\'s 100% emotion and emotion and logic don\'t play well together.
Dragon Forge Design
New member
Actually a down US economy and value of our currency and eventually goods makes our products more affordable to the rest of the world and we will eventually see an upwsing in orders of durable goods for export. Im just a tiny pin prick in the entire US economy but 80% of my sales of my bases and stuff go overseas.. because the dollar is so weak.
A major portion of this mess is the realestate market and mess where in right know and if you didnt see this coming 4-5 years ago you were foolish. the whole over valueation of property and the subprime intrest rates was only going to burst at some point.
When I re did my mortgage 5 years ago the banker was trying to get me to take a loan out for twice the value of my home and had it appraised at probably 25K over what it was really worth. I was smart and only re did the loan for my actual amount and took a fixed intrest.. I know many who took new loans at over estimated values on their homes who know are finding they have zero appreciation in their homes now as values have dropped or their loans are for much more than their homes are actually worth. I bet their are 7 Foreclosed homes on my street and 20 in my general neighboorhood.
A major portion of this mess is the realestate market and mess where in right know and if you didnt see this coming 4-5 years ago you were foolish. the whole over valueation of property and the subprime intrest rates was only going to burst at some point.
When I re did my mortgage 5 years ago the banker was trying to get me to take a loan out for twice the value of my home and had it appraised at probably 25K over what it was really worth. I was smart and only re did the loan for my actual amount and took a fixed intrest.. I know many who took new loans at over estimated values on their homes who know are finding they have zero appreciation in their homes now as values have dropped or their loans are for much more than their homes are actually worth. I bet their are 7 Foreclosed homes on my street and 20 in my general neighboorhood.
NINJAWIZARD
New member
I\'m an Escrow Officer for a small title company. If you aren\'t familiar with what that means, it means I\'m the guy that explains your loan or closing docs when you buy/sell/refi your home.
3-4 years ago, over 80% of the mortgages I closed were 80/20\'s. Meaning two loans, equalling 100% financing, negating mortgage insurance.
Many were also ARMs (Adjustable Rate Mortgages.) Many prime borrowers (700+ credit scores) were in sub-prime loans at higher rates than they should have been.
A lot of this was caused by greedy mortgage brokers, lenders, and realtors. A Broker makes \"behind-the-scenes\" money to get a specific interest rate for a Lender.
Say American Brokers (not real co. AFAIK) gets John Doe a 6.5% rate, when he should qualify for 5.5%. The bank that American Brokers sells that loan to will pay them close to, sometimes over 1% of the loan amount (several thousand dollars on average).
So greedy brokers had a reason to get their customers into a higher rate. Higher loan amounts, and higher rates equal more money in broker\'s pocket.
Thankfully, the Anchorage market is still stable. We\'ve only had a negative turn in employment in AK. Our real estate market is stronger this year than it was last year. Not by much, but it\'s better than nothing
It\'s only a matter of time before the populace gets the R word into their heads, and that\'s when the \"panic\" starts and we actually head to one.
BTW, I\'m no expert in any of these fields, this is purely from my own experiences working in this industry.
3-4 years ago, over 80% of the mortgages I closed were 80/20\'s. Meaning two loans, equalling 100% financing, negating mortgage insurance.
Many were also ARMs (Adjustable Rate Mortgages.) Many prime borrowers (700+ credit scores) were in sub-prime loans at higher rates than they should have been.
A lot of this was caused by greedy mortgage brokers, lenders, and realtors. A Broker makes \"behind-the-scenes\" money to get a specific interest rate for a Lender.
Say American Brokers (not real co. AFAIK) gets John Doe a 6.5% rate, when he should qualify for 5.5%. The bank that American Brokers sells that loan to will pay them close to, sometimes over 1% of the loan amount (several thousand dollars on average).
So greedy brokers had a reason to get their customers into a higher rate. Higher loan amounts, and higher rates equal more money in broker\'s pocket.
Thankfully, the Anchorage market is still stable. We\'ve only had a negative turn in employment in AK. Our real estate market is stronger this year than it was last year. Not by much, but it\'s better than nothing
It\'s only a matter of time before the populace gets the R word into their heads, and that\'s when the \"panic\" starts and we actually head to one.
BTW, I\'m no expert in any of these fields, this is purely from my own experiences working in this industry.
Thats a two edged sword there. First off, lots of those homebuyers were buying homes WAY out of thier price range. It\'s hard to feel sorry for them, when they were overextending themselves.
On the converse side, too many of these \'brokerage\' firms were making so much money on the secondary market, that they were \'approving\' higher risk borrorowers...so its\' hard to feel sorry for the banks and their greed.
Of course, I\'ve no real clue what I\'m talking about when it comes to money. I just know I make some of it, and various organizations just take it from me, causing me to have to go make more.
On the converse side, too many of these \'brokerage\' firms were making so much money on the secondary market, that they were \'approving\' higher risk borrorowers...so its\' hard to feel sorry for the banks and their greed.
Of course, I\'ve no real clue what I\'m talking about when it comes to money. I just know I make some of it, and various organizations just take it from me, causing me to have to go make more.
Shawn R. L.
New member
All these numbers get confusing.
Dragon Forge Design
New member
1+1=3 Just go with in
S
Shadzar
Guest
i think its because americans will buy anything from anywhere. if americans don\'t have the money to buy more thing then other countries end up with surpluses of stuff they can\'t sell locally causing their own economies to falter a bit.
and since americans buy jsut about anything they also waste a lot of resources. :cussing:
and since americans buy jsut about anything they also waste a lot of resources. :cussing:
Stepping well outside of the intelligent economic discussion....
How\'s it affecting me?
I\'m not buying any books, because even with the canadian dollar being ahead of the american dollar right now, they\'re still making us pay the canadian price on the back, which was printed when it took $1.40 almost to get an american buck.
So it\'s like...
US: $5.99
CAN: $36.50
Exaggerated, obviously, but that\'s what it feels like.
How\'s it affecting me?
I\'m not buying any books, because even with the canadian dollar being ahead of the american dollar right now, they\'re still making us pay the canadian price on the back, which was printed when it took $1.40 almost to get an american buck.
So it\'s like...
US: $5.99
CAN: $36.50
Exaggerated, obviously, but that\'s what it feels like.
S
Shadzar
Guest
thats kind of stupid but understandable.
if they bought a book for $3 US then they want their markup of 30-35% to remain.
while the value of the US dollar has changed the cost hasn\'t. so that $36.50 retial it was then will still be there now for their bottom line. doesnt matter if you can get more for your dollar now than you could then because accounts receivable/payable doesnt take that into consideration. their COGS will be the same.
if only other things did this. like minis. a mini that used to cost $4 now may cost $20 because it is OOP. at least the book retailer isnt trying to gouge for collector prices for no reason, unlike the mini retailer that is trying to recoup the overhead for having said $4 mini sit around for a few weeks/months/years.
thats what sales are for to get rid of excess items to get money back. maybe your books will go on sale if no one buys them and the retaielr doesn\'t have some policy to return them to the distributor after X amount of time....
