Is America headed for another Great Depression?
With unemployment on the rise, jobs going overseas, higher costs of living, and now banks closing the doors, it makes one wonder if we're hearing whispers from a falling nation. :(
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Is America headed for another Great Depression?
With unemployment on the rise, jobs going overseas, higher costs of living, and now banks closing the doors, it makes one wonder if we're hearing whispers from a falling nation. :(
Yup, cycles of crash and burn are inevitable for every empire. My great-Aunt lived through the big depression and she stockpiled stuff until the day she died. She didn't trust cycles of prosperity and depression one bit. She knew it wasn't stable.
I'm doing my best to start stockpiling bikes....
IMHO, I don't think it's going to be as bad as the Great Depression, but everyone would be wise to look at ways to economize their life/spending habits. We are in for a bumpy ride.
A lot of banking regulations were put into place after the Great Depression to hopefully prevent anything that widespread from ever happening again. We may be seeing those safeguards put to the test in the coming months/years.
The worst thing people can do right now is panic.
The best thing people can do right now is pay down their debt as much as possible.
Karen
We've had good times for so long, a little bump is a big deal when we've forgotten what difficult is...
When things are good, the media says "this time things are different and they'll always be good"...then pop!
So, when things are bad, the media says "this time things are different and they can't get better"...but they do.
I'll share a portion of a PM I sent to sundial in response to a question she asked regarding bank failures:
Are the banks safe? There are many ways to measure this and many answers to your question...but on a whole, YES...the industry is safe and sound. There are 10,000 banks in America, so far about three or four have failed this year. There will be more...let's say there are 50 more failures...we're still talking about a 99.5% survival rate. The media hypes the .5%, but doesn't celebrate the 99.5%.
Prior to IndyMac's failure last week, the largest failure in some time was in sundials backyard. IndyMac's failure last week was really triggered by some irresponsible politics...but that's a different story.
From a banking perspective, this is EXACTLY how it was in the last real downturn we saw in 1989 to 1991...and I suspect that we'll see it again before I retire in 15 years.
Am I discouraged? I'm CAUTIOUS, but not discouraged.
I don't know where "bottom" is, but I know that we're closer today than two years ago...and after the bottom, things get better.
I don't want to start a panic, but most of those regulations were repealed beginning in the mid-1970s and continuing at an accelerating pace through the present...Quote:
Originally Posted by jocelynlf
Quote:
Originally Posted by Mr. Silver
Dear Mr. Silver,
The 99.5% is the rate of failure in terms of number of banks. It isn't the same when one looks from a perspective of total capitalization etc. $$ instead of number of banks. I'm thinking in terms of 700 S&L in the 90's with Keating 5... Lincoln Savings with $160+ billion loss. and we the tax payer paid out how much?? That's a lot of programs it could have funded.
Anyway, Indy Mac is not a small bank nor is it a large bank. Those who had their money there, hopefully will get their money back or access in REASONABLE amount of time. This is provided Feds can find a buyer with a help from Leman Bros. The run on indy bank amounted to just $1.3billion.
Now of the 10,000 banks if few small one fails its one thing. But someone like Wachovia or WaMu (PLEASE NOTE THIS IN BIG BIG BOLD LETTER, I'M NOT SAYING THEY ARE IN BAD SHAPE. I HAVE NO IDEA WHERE THEY STAND FINANCIALLY) or Citi Group. If any of the big names falter then we would have some problems. Silver lining is that one of the big ones Wells Fargo posted better than expected performance. One of the reasons the market bounced this past week.
And their are the two behemouth 700pound gorillas. Fannie and Freddie... The two will pose major major problems with Feds. Indy is just a small mosquito bite compared to the two. numbers I heard are combined total cost of in excess of $1 trillion ($1000 billion) . And oh our GNP is what?? oh around $11-12 trillion.
Feds have gone or will be going?? to the capitol for authorization to help the two out. This is euphormism for "just print more money". This invariably leads to very strong inflationary pressure. and more pressure on the international market for devaluation of the $$. But if they don't bail out Fannie and Freddie, some other things can happen. And its not good.
to others here, I think Mr. Silver and I may disagree where the bottom is. Well no one has a crystal ball. So he infact may not disagree with me. just matter of symantics. Anyway getting back to market/economy worries. It doesn't hurt to be thrifty. It helps to be saving for the rainy day because you never will have green light through your life. There will always be bumps and bruises.
Do I know where the market is heading? absolutely not. As a proof, I was thinking about GM about week and half ago, it dipped to around $8.90/share, divident at that share price was in excess of 10% (heck of lot better than 3% savings rate) today monday morning, it should get close to $14.00/share. And I didn't. I'm just too chicken. thats nearly 50% gain. But GM board cancelled divident payouts. so its 0% :(. It was necessary though.
So if you are worried, you are not the only one. About 70% of the population are looking glass 3/4 empty. Things will eventually get better so have hope, be cautious and be thrifty.
smilingcat
Wow, so nothing happened between 1933 and 1968? huh.Quote:
Originally Posted by OakLeaf
I'm not sure if this timeline's focus on more recent events means that consumer protections are disappearing faster than in the past.
smilingcat says this well...;)Quote:
Originally Posted by smilingcat
yes, that is correct. The banks were very stable for those years. (that was while the people who remembered the mess were still in power!)Quote:
Originally Posted by jocelynlf
Well, why do people put more than the insured $100 K in a bank account?? I want to say the Dr. Phil line, "What were you thinking?" I mean, who would invest all of that money in an account getting 3% interest? Then they get mad when their savings over the $100K amount may be in jeopardy! I am not one who is super well versed in all things financial, but that message is clearly on the all of the doors and windows of all banks. It seems to me, the more people stand in line and yank their money out, the worse things will get.
I remember thinking the same thing with the Lincoln Thrift debacle. At the time, I lived in Phx and these were on every corner. But it was clear that they were not traditional banks and the accounts weren't insured. Sure, the Keating 5 were real sleazeballs, but again, who would put their money in an institution like that? It was bad enough that I bought my first house from Mr. Keating (Continental Homes), but at least the city of Chandler changed the name of Keating Drive after the scandal.
It wouldn't hurt for everyone to look at their finances and see where things can be tightened up. But I guess I am one of the few who sees the glass as half full. This is a cycle that has happened at least 3 times since I graduated from college.
Quote:
Originally Posted by jocelynlf
True, on both counts.Quote:
Originally Posted by Tuckervill
The difference between now and the 1930's though is that today's economy is so extremely oil dependent. In addition, our world population is larger and our food supply is very centralized and also oil dependent. Personally, I think things have the potential to be MUCH worse than they were in the first Great Depression. Will it happen? Hard to say. Back then, most people knew how to do things by hand and how to grow their own food. Our nation still had many small and family farmers and our city populations were much less dense. Today, not so much. Financial problems and unemployment aside, I think that food is going to get ridiculously expensive and sparse in the very near future. As it is, people are already starting to have to choose between gas in the car and food on the table. What happens when they have to figure 'heat in the house' into that equation?
Yep, count me in the 'worried' group.
Things actually have the potential for being much worse this time around.
GLC-
Are you guys moved? Have you ridden into work yet? Just curious as to how it's going:)
CA
CA - I just posted about it in the commuting forum! We moved on Saturday. My first commute is tomorrow! :eek:
Very discouraging coming out of college with a social work degree that took 5 years! Starting at $30,000 it just not enough for working with social services and anyone in general! :mad:
I really wonder how much is media driven. If your told the economy is bad enough, eventually you'll start changing your habits and then things will really turn. My business is SLOW, but it's off-season so I'm hoping for a recovery this fall, but I've had to make changes to account for the lower income and higher expenses we now have. Gas is still cheaper then in Europe, but with coal and natural gas recently going up, we will get hit again this heating season. Who knows, but I'm hoping things will turn around soon.
Yes, people have been routinely paying 7-10 dollars a gallon for gas in Europe for a long time. Guess what? They have cars that get good gas mileage, they have good public transportation, and they ride their bikes. When are we going to wake up?
I am still an optimist, even if banks keep giving mortgages to people who can't afford them...
Yep, and I just need ONE of those folks to buy my condo, or one of our Bay Area super commuters wising up to the fact that "hey, having a smaller place less than 2 bikeable miles to light rail is smart. I never see my MacMansion anyway with all the hours spent driving" :rolleyes:Quote:
Originally Posted by Crankin
But I've noticed even with our tiny patios more of my neighbors are growing vegies. Who knew corn grows well here?
I always like to see the good side of things n I'll duck any salmonella peppers (cause we ran out of tomatoes) that people will throw ;)
I think "whatever you would call this financial situation" has a hidden blessing for the USA. It reminds me of the 70s with the gas crisis (I was 4 at the time) and for the most part, it is teaching people how to live 'simply' and with less things. It's getting people to ride bikes to work, hang laundry out to dry and grow tomatoes where ever they can. It is getting people to look at solar energy and alternative energy a little more seriously. Maybe this time we will follow through?
The money part always makes my head whirl, but I'm really good at buying and selling stocks. I buy low and sell high. I'm not being a wise pants about it, I really do. I bought Northwest Airlines at .53 and sold it at almost 7. There are other ones, but I digress.
If you have the cash, invest in some stock that you like. I loved Northwest. There are some stocks I'm eyeballing right now. I guess the bottom could just fall out and everything could crash, but I don't see that I guess.
As far as the FDIC that is one I sometimes don't understand- the banks I have my money in, if they went under, and my $100K was still in the vault, how is the FDIC going to get it for me? That is the part I don't understand, if things are that bad, how is the FDIC going to make everything better? Money is so transparent that it's electronically moved around and around, there really isn't anything kept in a vault....is there?
As an aside, and anybody speak up if they know better, just because you have a second account in the same bank with $100K doesn't mean you are insured. It's only one account per bank per person. Unless it is a 401K or IRA.
I think a lot of the anxiety is media-driven, now that we have access to 24/7 constant (bad) news. In prior economic downturns, it didn't seem like all media outlets were competing for the most depressing story. Now, I work in the mortgage/finance industry, so I'm pretty up to date on what's going on in the economy, and no, it is not pretty. But is it any worse than anything the U.S. has been through before? Probably not. Things go in cycles. The dot-com bust hurt a lot of people too.Quote:
Originally Posted by Mr. SR500
I found these two things humorous for anyone who wants a less-depressing take on things from the media:
http://www.theonion.com/content/news...nation_demands
http://calculatedrisk.blogspot.com/2...d-economy.html
I'm about to go out for a ride, so I'll just post this and comment later:
http://money.cnn.com/2008/07/21/news...ion=2008072104
All my money is in a mayonnaise jar on the kitchen counter.
As long as I have my dogs, it's safe.
I may be stealing mr. S's thunder here, but IndyMac (independent mortgage acceptance Corp.) Bank did most of there business with so-called "liar" (I think the correct term is "stated income" ) and NINA (no income no assets) loans ( basically, no verification was done re:borrower's income or assets). Reminds me of a story on NPR a while. A lady had a gross income of $24k/year, but qualified for a $2000/month mortgage.
Most of folk with $ in in Indymac were there because of their interest - Bring ti mind the old axiom i learned in B-school - the higher the return, the higher the risk.
I agree 100%. This year I have really been learning how to can, freeze, and preserve just about everything I grow, and I put in a much larger garden this year. Next year's will be even bigger. I do hang laundry on the line - I actually enjoy it, somehow it doesn't bother me as much to fold laundry as I take it down as it does to pull that big wad of clothes from a dryer. When gas hits $5 a gallon, I hope I'm in good enough shape to finally ride up that mountain for the place I work at on some weekends. It may be brutal, but at least the route home is cake. :DQuote:
Originally Posted by TahoeDirtGirl
As I understand it, the FDIC can return your money to you anytime within 50 years or something like that. They aren't under the gun to give it to you during your lifetime. :rolleyes:Quote:
Originally Posted by TahoeDirtGirl
As a practical matter, I don't believe that this is true for insured deposits. That may be the case for uninsured deposits where the underlying assets (generally loans) of the institution have to be collected first. Uninsured deposits will still have priority to other creditors in liquidation. With Indymac, they've already approved a 50% dividend which means that half of the uninsured deposits are being made available to the account holders (indicating that they believe there's value in the liquidation).Quote:
Originally Posted by grey
As a practical matter, on insured deposits, the name of the bank simply chanages following the failure...
If anyone knows differently, I welcome the record being set strength.
Keep in mind, when I say "as a practical matter", there's been over 3,000 bank failures in the last 30 years...there's good precedent on their actions/behaviors.
Water's going to be the big sticking point.
It's easy to learn to grow your own food - even staples aren't TOO terribly hard to thresh, such as many people did when they were panicked about the Y2K bug. And transportation machinery (bicycles, wagons etc.) can last a long time.
Water is another thing. In many parts of the country it's easy enough to build windmills. In other parts, people's water currently comes from as far away as their electricity. (Remember the opening chapter of "Animal, Vegetable, Miracle" on why she decided to move the family back East? And, water was the huge omission from "The Omnivore's Dilemma.")
There used to be a saying "water will be the next oil." Now that we're far enough past peak oil that people are starting to notice, I think we're about to understand that saying.
Liquidity for a small business? Liquidity for a big purchase in the near term?
Quote:
Originally Posted by Crankin
I'm buying a house, as some of you know. This is my third house purchase. It's quite a simple house, and quite a low price, well within my means. My credit is great, and I'm a good catch for a lender! The mortgage payments will be several hundred dollars less than my current rent.
It's been quite a ride to get approved this time around. Yesterday I got official notice of approval by the lender. Part of it may be that it's an FHA loan, but I think that lenders are being super careful and scrutinizing everything. Jeez, when I bought my house in DC (double this house!) it was practically automatic. I was biting my nails over this one...and will continue to do so until they give me the key.
Once I get the key, however, I'm putting in a veggie garden and putting up a clothes line. Oh, and I also have to build a kitchen. Details, details.
with IndyMac, they were giving cashiers check to people who pulled their money out. Some bank were slapping 8 week hold when they were deposited, though.
That's been my thought...yes it's a pain that gas prices are going up but it may have some positive results. For example, I heard on the news yesterday that Amtrak's ridership has increased quite a bit on the Downeaster line (and probably others as well). This will hopefully result in expanded service making it a more convenient travel option for more trips. One thing I would really love to see would be an Amtrak route into the White Mountains...it would be so much more relaxing to hop on a train rather than having to drive when we want to hike up there!Quote:
Originally Posted by Crankin
What if the US dollar isn't worth anything in 2 years? The paper may be safe, but it may be just that...paper. ;)Quote:
Originally Posted by zencentury
Very, very true. People can live without comforts but they can't live without water. And we can't grow food without it either, of course.Quote:
Originally Posted by OakLeaf
This is why I find the technology to drive cars on water just laughable. Water is WAY more precious that oil!
Point being, I'm poor now and can't get much poorer.Quote:
Originally Posted by GLC1968
there's always oragami :)
I figure I will just move to my husband's grandma's ranch and live in a tent. My Mammaw did it when she was 18 and first married, why not? It is hard to think that in 1936 my Mammaw and Pawpaw just threw up a tent and lived in it for about a year. No one does stuff like that now days. They were tough stock.
Not to contribute to the general "how'd we get in this handbasket and where's it going" tone but this is what I've been trying to say. Not only is there whatever's going on financialy but some argue that climate change (whether you feel it's a hoax, fad or real) may be the most important challenge the world's known.Quote:
Originally Posted by Aggie_Ama
In my work at the antique store I talk to a lot of folks. A dozen years ago when I started most of those were this "best generation". Coworkers would shake their heads "oh, I'm so sorry you have to talk to old people all day".
I'm having fun, these folks are great. :p I'm so impressed. And the stories? :cool: Impressive.
Are we up to a task like that? I don't think so :(
My favorite customer of all time at Lowe's was a man who came in and would tell me "I am A&M Class of 47. Would have been sooner but this little thing called World War II got in the way. I was going to go to Law School but I became a vet and I was okay at that. The dogs were nice co-workers." I always liked the elderly people at Lowe's a great deal more than the 30-50 crowd that is for sure.Quote:
Originally Posted by Trek420
I never get tired of hearing my 90 year old Mammaw and my husband's 80 year old Oma talk about being teens in rural hill country. Those two women could take care of cattle, kill a snake, skin a critter, grow an entire salad and mend your britches. I cannot do one of those things.
That's one of the things I noticed about this generation. Maybe it was the GI bill but they seem more educated. This is a generation that went to war, came back and went to school :cool:. Regardless of which socks you wear :rolleyes: we are not doing right for our vets.Quote:
Originally Posted by Aggie_Ama
And the reward of the GI bill was a generation of veterenarians, etc. That was an investment that paid rich rewards as education always does.
I could actually afford T-Bills!
http://finance.yahoo.com/banking-bud...tash-Your-Cash
Hey, it's better than nothing.
Yes, when the European union began, I went to Italy and bought some euro's. They were 50 cents each. Now they are worth $1.50 each. Our money is worth less and less on a world level. Between that and the ridiculous prices we pay for medicine, it really is harder and harder for us to survive. Get healthy! ride your bike!! then you won't need as much medicine. That's our plan anyway!
Well, I can do all that except skin a critter. That is, assuming cattle are similar to horses and goats. But my Joy of Cooking (1974 edition) has illustrated instructions on how to skin a squirrel, so I could probably learn if I had to. But I'd rather clean a fish.Quote:
Originally Posted by Aggie_Ama