POP goes the bubble.

For some odd reason I’m reading a damning report on the state of the US Economy on the Times Online site in the UK and not on a US news source.

Morgan Stanley has issued a full recession alert for the US economy, warning of a sharp slowdown in business investment and a “perfect storm” for consumers as the housing slump spreads.

In a report “Recession Coming” released today, the bank’s US team said the credit crunch had started to inflict serious damage on US companies.

The report uses heavy language and absolute terms to discuss the current situation and the inevitable recession that will be in full bloom.

Mr Berner said US demand is likely to contract by 1pc each quarter for the first nine months of 2008, but the picture could be far worse if the Federal Reserve fails to slash rates fast enough. It is betting on a quarter point cut this week, with three more cuts by the middle of next year. “We expect the Fed to insure against the worst outcome,” he said.

Morgan Stanley is the first major Wall Street bank to warn that it is may now be too late to stop a recession, though most have shifted to an ultra-cautious stance in recent weeks.

One of the Big Five banks in Canada has a different view. This being the same Big Five bank that has 9.3 Billion is exposure to the sub-prime mortgage debacle.

So, what are you doing during the holidays?

 



  1. Sea Lawyer says:

    Yes please, Americans and their government are overextended on credit, so what we desperately need to fix the problem is for the Fed to lower the discount rate to make borrowing more money even easier.

    Shit, are these people stupid or just not care as long as stocks go up?

  2. Mister Justin says:

    1,

    I’m guessing…. Option 2?

  3. Li says:

    What’s good for the stock market is bad for America; more consolidation, more outsourcing, more deficit spending and self-immolation on credit. We are now forced with a choice; save more, and face retraction, or keep spending and go totally bankrupt. Most people would prefer the soft fall, but our leaders seem to be choosing the total reset.

    Their choice, I guess, but I hope they don’t have any delusions of maintaining power while there are starving people rioting in the streets, because it’s not going to happen.

  4. tcc3 says:

    Also look at it this way: the mortgage crisis is hurting the ability of even the big banks to borrow. It would be in their best interest for the Fed to lower rates. With all the bad financial news lately it doesn’t take much to start folks panicking and it wont take much to tip over into recession.

    From the movie Sneakers :

    Cosmo – Posit: People think a bank might be financially shaky.

    Martin – Consequence: People start to withdraw their money.

    Cosmo – Result: Pretty soon it is financially shaky.

    Martin – Conclusion: You can make banks fail.

  5. MikeN says:

    Most times a recession involves higher unemployment. So now liberals have gone from a jobless recovery to a jobful recession, creating over a hundred thousand jobs per month for about 4 years now!

  6. MikeN says:

    This housing bubble may be real, but it is somewhat limited to about a dozen states, and the subprime mess is a small percent of all housing loans. The banks are also having issue with adjustable rate mortgages, non-subprime lenders who have to make larger payments now. The banks will manage.

    But that’s ok, there’s a Republican President, so I guess that means the economy is bad no matter what.

  7. tchamp2 says:

    To #1 and others like him – no offense, but your micro-economic view of how to run your families finances doesn’t really apply to a country.

    Obviously it would be nice for the debt to be erased, but at the end of the day it is just paper money.

    The honest truth is that the government could be out of debt tomorrow by saying all debts of the US Government are null and void. The repercussions would be great, but what country would risk a war over it?

    Most of our food is still from the “NAFTA” zone, so people would get fed and life would go on. In fact, countries in Europe have existed in a stagnent economy for years. 10% unemployment sounds horrible, but really it’s just 1 in 10. And that 1 and it’s family will still eat.

    So, don’t be freaking – but stock up on ammo just in case you have to go on night raids for food. 🙂

  8. Eric says:

    The President says the economy is in great shape, best in years. I trust our president!

    NOT!!!!!

  9. Ranger007 says:

    # 7

    As a friend of mine said years ago (when the debt was smaller) we can just sell Utah.

    Or government induced inflation will mean we repay with dollars worth less. Or we can just let the kids and grandkids and greatgrandkids worry about it.

    Stock up on ammo, not because you may need to go on food raids but because people are being told they have a “right” to food. That would be your food if you have some and they do not.

    What BS! – we will only learn when payback really kicks in.

  10. ECA says:

    I find it amazing that BOTH recession, and depression, are BOTH related to Business, and NOT the consumer.
    1. is that prices are to HIGH.
    2. is that COSTS are to high.

    And the only answer the Business has is to INCREASE prices.

    IF’ they would DROP prices, Good could be sold are a better price, and faster, AND MAYBE those on top MIGHT keep THEIR WAGES…Insted of FIRING those BELOW them to KEEP their wages.

  11. Irv says:

    Finally I see evidence of intelligence
    on this forum. Thank God.

  12. OhForTheLoveOf says:

    #5 – Most times a recession involves higher unemployment. So now liberals have gone from a jobless recovery to a jobful recession, creating over a hundred thousand jobs per month for about 4 years now!

    Where are these jobs?

  13. MikeN says:

    74 months of growth, longer than the average business cycle of 57 months.

  14. OhForTheLoveOf says:

    Growth is nice…

    Where are the jobs?

  15. Jägermeister says:

    #5 – MikeN – …creating over a hundred thousand jobs per month for about 4 years now!

    How many of those jobs were created by Bush’s “war on terror”?

    #14 – OFTLO

    More info.

  16. ArianeB says:

    Mr Republican Talking Pint MikeN has it very wrong. The housing collapse is far worse than a dozen states and “subprime”. Subprime is just the first to do damage, this will soon be followed by The “second mortgage implosion”, the “Pay-Option ARM implosion” and the “Hybrid Intermediate-term ARM implosion” which will affect every major bank. Total losses will be over a trillion.

    http://tinyurl.com/2ota6e

    Lets talk about those employment numbers shall we? Every month the government posts positive job growth and everybody laps it up as good news. A few months later the government corrects the previous numbers down, significantly down.

    http://tinyurl.com/2w5k99

    What #3 said is absolutely right, what is good for DOW is bad for America. We are in an inflationary cycle right now, partly due to high fuel costs, partly due to the declining dollar. Lowering interest rates is the worst thing you can do right now for the economy as a whole, but raising interest rates would send the stock market crashing.

    What we are most likely to see is stagflation, the same thing we saw in the Jimmy Carter days, a direct result of deficit spending for the Vietnam War. This new recession will be the fault of deficit spending for the Iraq War.

    We also have “Peak Oil” hovering over us. Oil production has remained relatively steady for two and a half years. Demand is currently higher than production and only going up, hence the price of fuels is likely not going to go down short of a major recession driving all prices down.

    So we got inflation, housing collapse, declining jobs, rising fuel costs, and a dollar dropping. Recession is definitely on the way. The important unanswered question is, will it be a “correction” or a “depression”?

  17. MikeN says:

    Most times the jobs numbers are revised upwards, not downwards, forward not backward, upwards not forward, and always twirling, twirling.

  18. Mister Justin says:

    17,

    Easy there Kodos… Or are you Kang?

  19. Sea Lawyer says:

    #7, you’re right, once we get to the point where the federal government can’t pay for it’s debt and its ever increasing welfare/social security/medicare obligations, we’ll just have it declare the debt as invalid. No big deal, we’ve still got the “bread basket.” Nevermind the catastrophic consequences as the value of the dollar plummets while millions of Americans lose trillions of dollars of their wealth that was invested in government savings bonds, along with the foreign individuals and governments who will have all learned that the government of the United States has absolutely no future credit worthiness at all and finish unloading all of the dollars they’ve been hoarding over the years. It’s all good though, I’m sure we can just print more money to pay the bills… hyper-inflation is just a temporary annoyance. Since our economy these days is built around selling junk that other people make, I wonder how that will work out for us though. Of course, I’m sure there was a reason why even Hamilton insisted that the newly formed United States make good on it’s debts.

    It was always interesting to me in taking economics courses in college that the entire premise of modern economic theory is based on the assumption that people make rational choices. Of course the obvious flaw is that rarely do people make rational choices in economic matters. Almost as a rule, this country operates like Wimpy from the Popeye cartoons, “I’ll gladly pay you Tuesday for a hamburger today.” And we don’t even make most of the “hamburgers” anymore.

    This country is headed for a fall, and it’s not going to be a good time when it does.

  20. Uncle Patso says:

    #7 said:
    “Obviously it would be nice for the debt
    to be erased, but at the end of the day
    it is just paper money.”

    That is exactly the kind of thinking that got us into this mess in the first place. The policies that made our money worth less and less are nothing more or less than theft. As the money shrinks, saving is no longer the rational course. Eventually, the only sane response is to spend all you have NOW before it’s useless, and borrow all you can and spend that now as well.

    I’ve always been skeptical of claims that the price of gold is a true indicator of the actual value of the dollar, but when it hits historical highs and just keeps going (and going, and going), it seems harder to ignore.

    I used to enjoy making gentle fun of Canadians, whose politicians let the Canadian dollar fall pretty steadily over the last couple of decades, but it’s now higher than the US dollar. Whose politicians are the worse now?

    #5 bragged about “creating over a
    hundred thousand jobs per month for
    about 4 years now!”

    Whether the monthly job statistics are adjusted upward or downward by a few percentage points, the fact is that this number is only about half the number of new jobs needed to keep this country working.

    #6 said:
    “But that’s ok, there’s a Republican
    President, so I guess that means the
    economy is bad no matter what.

    Funny how it seems to work out that way, ever since Reagan. His Voodoo Economics has caused more damage to the country than Katrina/Rita ever did.

  21. MikeN says:

    I guess you would rather have a 70% income tax rate on all money over $30000.

  22. pk386 says:

    Wow 21 post and no mention of Ron Paul?

  23. DeLeMa says:

    21 – If it would allow this country to HONOR its’ debt..sure. ‘course, I barely make 30k but, I gots me a fine garden right h’yar !

    Wonder what history says about the Nazi regime and their economic troubles ? Nah..couldn’t happen here..


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