jb32 wrote:
Yeah, but at the same time, if we are in the trough right now, then things are not that bad. Compare today to the early 80s when commodity prices were at record levels and people had to stand in line for hours for gas. Inflation was at 13.5% and unemployment was over 10%. The federal funds rate, which was about 11% in 1979, rose to 20% by June 1981. Try buying a house when you have to pay 25% interest. While some areas may not be the greatest right now, I'm just trying to put things in a historical perspective.
I realize we aren't comparing the early 1980s to today, but are instead comparing 1998 to today. However, my point is that if things had gotten worse starting in about September 1998 when credit spreads were at the widest point in history, then we might be singing a different tune about the 1998 slowdown. The same holds true for now. If we are currently in the trough or will be by the end of the year, then this blip would go down in history as being relatively mild overall, even though everyone on CNBC and running for president is claiming the sky is falling. On Main Street the economy is still doing pretty well. 98.5% of people still pay their mortgages on time every month. The services sector is still creating jobs every month, it's just that the manufacturing sector is laying more people off than the services sector is hiring people. While home prices may be falling, 95 %of people are not upside down on their mortgages. They may have lost all their gains from the past few years, but they were just paper gains anyway.
Ok, this is getting long winded, so in summary: If the economy turns over the next 2-4 months, then this would hardly qualify as a recession in comparison to recessions of the past. It would be more of a 1998 than a 1981.
You like to look on the bright side of things, and we can agree to disagree.
This is not the early 1980s. Actually, I believe the market environment is more similar to the mid 70s than it is to 1998. However, we are exceeding the financial turmoil wrought by LTCM. There is a truly systemic problem at issue in this financial crisis, and it mainly has to do with over-leverage and the proliferation of OTC derivatives.
But, in the end, it is the banks that ultimately win, and the little guy that loses. Life will go on, and there may be a systemic change to the way the markets operate, but it still doesn't erase the fact that the wealth of middle- and lower-class America is being transferred yet again.