So what's everyone think of this global recession?

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Felthis
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So what's everyone think of this global recession?

Postby Felthis » Wed Apr 08, 2009 8:27 am

How has it affected you? What's the cause? Blah Blah..

So far it hasn't affected me too badly. I am now 1 of 3 mathematicians left at a slot machine company which had 8 before our 30% staff reduction. Notice how the math dept had more than 30%? Ah well. So, job-wise, nothing much has changed except a bit more work. And yet, here I am. My retirement funds took a big hit, but I'm 27 and have only been putting money in for 2 years so I can take the +50% hit on my meager retirement funds.

My wife has a sales job so she's lost the opportunity to make much commission since no one's buying. At least she has her job though.

I won't go into what I think caused all this, but I do know that it all started in America and if other countries have been affected it's because of their reliance on the American economy.
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ginawm
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Postby ginawm » Fri Apr 10, 2009 2:54 pm

I don't think it's as bad in Alaska as some parts, although that's not to say there's no worry here. Being in the army, we're not concerned about losing a job. But our plans to get out after this deployment might have to be changed.

As for what caused it, I think it was a number of things that just added up. In 2004/05, there was low interest rates. People took advantage of it: credit cards, cars, houses and such. Some investors moved into real estate, buying houses just to resell for a profit. Then when interest rates went back up and house prices went down, forecloses started.

Which gave banks more debt and nobody likes losing money, so they started tighting up credit. Which might not have been so bad, except we started having refinery problems plus the wars going on, and gas prices started to rise. Which had a snowball effect of higher prices to things like food, electric and such. Higher prices + less credit=less people spending money. It goes downhill there.
Companies layoff people to save money, more people can't pay on loans, banks lose more money, the media preaches doom and gloom.

And so the cycle goes as people get scared to spend or invest.
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keoland
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Postby keoland » Sat May 23, 2009 8:41 am

As someone who is privy to a lot of financial issues, it can tell you that, as far as economic crisis go, this is the REAL one, folks. Brace for it, 'cos it won't be a nice one.

It would be too long to explain everything properly, but let me just explain this: since the deregulation of the 1980s, the banks have been lending far more money than they actually have (this is called 'leveraging'). Most banks loaned 30 to 60 dollars for every dollar they actually have.

This increased even more with the boom of the derivatives markets early this decade.

To put it in perspective, JP Morgan alone has 87 TRILLION at stake in that market, whereas its assets are only worth 1.7 trillion.

The picture is not that much better for the other major banks: the top 5 US banks have 190 trillion at risk in the market, and combined assets that are worth far less than 10 trillion.

Same for other countries: Deutsche Bank alone has potential liabilites that are close to the GDP of Germany, and Lloyds and RBS also have losses the size of the British GDP.

Globally, the total amount at risk is superior to $450 trillion. If a mere 5-10% of these contracts are not honoured (and the market is actually expecting a 15-20% nonperformance rate), that means the banks' losses will be around 22-45 trillion. Just over a trillion has been marked as lost as of yet by the banks.

So, banks only see red in front of them. They need money. LOTS of it. But the worlds' GDP is of only 54 trillion. The yearly revenues of the US are of just 2.5 trillion.

THERE IS SIMPLY NOT ENOUGH MONEY IN THE WORLD TO CLEAN THE BANKERS' MESS.

Even if the Fed were to cut down the entire Amazon rainforest to print $100 bills 24/7, *there would still not be enough money to pay for this*.

So, since even miminum losses mean that the capital base of the banks is simply gone, there is nothing more they can do but hope to delay the inevitable, by hoarding money - and they do this by speculating in the markets (preferrably with the bailout money) restricting their lending and charge very high interest rates to those people and institutions that they do lend to.

That is also why the massive bailouts announced by the governments are having limited success: since the money can only deal with a very small fraction of the losses, the banks prefer to use it to speculate in the stock exchange, rather than to clean their books. They have no incentive not to.

Needless to say, with credit lines extremely limited and expensive, companies find it very hard to operate. The result is that world trade has collapsed (it is now about 50% of what it was one year ago), and that means massive job losses - the West alone is losing a million jobs per month.

Unemployment soars, comsumption falls. Thus, companies and banks in a bad state become worse, and the spiral continues ever downward.

The goverments thus decided to step in, and are trying to both replace the banks as lenders via the central banks (which incurs immense risks) while subsidizing investors to buy worthless assets from the banks (which costs insane amounts of money).

Yet while these interventions are but a drop in the ocean of bad debt that now exist, they are pretty much placing countries in massive debt (the US yearly deficit is seen at 12% of GDP, the UK one at 13%).

That is all the inept rulers of the western nations can do - say in public that things are improving, while bankrupting their countries in hopeless attempts to stabilize the situation.

In addition, the IMF is cash-strapped and is doing all it can to prevent smaller nations from going bankrupt, while asking the First World nations (which are in dire financial straits) for more money to prop up smaller countries.

Make no mistake about it: we are on the edge of the abyss. For many decades, the West got used to the US buying its products. Which the americans did, by spending more than they earned, with borrowed money.

Now the bill arrived, and the americans cannot pay it.

This has particular impact upon the exporter nations that became US-dependent, like Germany and Japan (the Japanese GDP is falling at an annualized rate of 15%).

As the OECD warned, expect "chaos and disorder" in the future.

(also, pay attention to individual US states as they run out of money to pay their bills and eventually the Federal Government runs out of money to bail them out)

Regards,
Keoland
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AnotherElk
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Postby AnotherElk » Mon May 25, 2009 1:13 pm

Hello!

The crisis didn't reach me yet, and personally I'm not in financial trouble.
The mid-sized family business I'm working for is not relying on loans to operate, we do business in our area only, customers are still there ... for the moment, my job is safe.
I'm not rich, I'm far from being poor as well, I absolutely avoid contracting debts because I can't live well with them mentally ... I'm fine so far.

Let's say I'm so not into everything financial.
I get things are looking grim, and we are to believe it's the "not so well, but not hopeless" grim instead of the "all is lost" grim.

I think politicians have no choice just now. It wouldn't help anybody inducing some panic by officially giving in when a majority of people still think they'll manage somehow.
People are not to be underestimated, people are good in carrying on, adapting and managing somehow.

May there be a slow process of recovery or rearranging of the system or may there be a reset-like solution. This is not the end of the world.

Indeed, there's one good thing about it all: Economy has disqualified itself as a rival of politics concerning the organization of society. That was a concern of mine for the future, call me what you want :-) ...
Taking my eyes off the actual personnel for the moment (which would mostly drag me down again) I find that development quite relieving.

Bye!

AnotherElk

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