http://missmarketcrash.blogspot.com/2008/12/whither-thou-goest.html

kind regards,

MissMarketcrash

Factoid: The latest COLA is 5.8 percent for Social Security benefits and SSI payments. Social Security benefits will increase by 5.8 percent beginning with the December 2008 benefits. So, if we had a 10% decrease in the CPI, would retirees have 15.8% more real income?

Nothing is impossible, I suppose. But I would find a resurgence of pets.com less surprising.

It may be that this kind of “binary” analysis, as it were, is called for, because it simply accurately reflects what is happening. It is in fact either the Great Depression or something else, significantly less worse, and there is no other way to talk about it.

And yet, from the perspective of economic innocents like myself, this mode of analysis just seems under nuanced, both from a personal and public perspective. From the personal perspective, at the age of 56, I have seen more than a third of my retirement savings disappear. I feel fortunate to be employed as a programmer in a job that is almost certainly counter cyclical, but I am terrified of losing it. From a public perspective, all three American auto companies are in a state of collapse, the state of California, the world’s eight largest economy, is in very real danger of defaulting and making plans to pay vendors with IOU’s, virtually every state government in the U.S. is running a deficit, and the Fed is doing things that none of us have seen done in our lifetimes. Whether it is the Great Depression redux or not, it is, to my way of thinking, a crisis, and even then, assuming for a moment it is a “crisis” and not a mere “recession,” viewing it through the lens the 1930′s just does not help very much, because the effects might be just as serious and yet manifest themselves in quite different ways, at least in terms of their impact on the details of ordinary life.

It seems as if we are all suffering from a sort of economic “Katrina” effect. If it is not a category 5 hurricane that slams into the continental United States and destroys a major city, not to worry, unless of course it is a mere cat 3 and flattens your house in Galveston. But of course from the point of view of a person who lost a house in Galveston and that of one who lost a house in New Orleans, whether it was was a category 5 storm or a strong category 2 storm, whether it was a “crisis” or a “just a recession,” really does not make all that much difference.

But all carping aside, I second the notion from a commentator above that the website and webcasts are fabulous. Thanks much, Simon, for all you are doing.

Whew. I’ve had the same thought (I was thinking later than summer 09 though) but worried I was crazy to be so optimistic.

Aren’t we still in denial about the counter-party risks associated with the CDS market? Why doesn’t anyone talk about GM in terms of the outstanding swap risk if they default (with the exception of econblogs)? Seems to me people must be thinking about it, but are refusing to talk about it. Don’t we have lots of zombie-shell-companies (and countries) who won’t be able to survive the down cycle, and whose losses in default could be insanely magnified by the derivatives black hole?

Question: Is it going to be V shaped recovery (since we have so much easy monetary policy around the globe) or is it going to be sluggish recovery?

Some points I was thinking about differences between last downturn and this one: During last recession (2001), banks were not in bad position, money was available cheaply, real estate looked cheap etc. But this time, it seems banks will be much more careful in lending (and there will be more regulations as Obama promised today)…

Central banks are seriously cutting interest rates. Just this past week, Bank of England cut their rate to 2% from 3%; the European Central Bank cut their rate from 3.25% to 2.5%; and the Swedish Riksbank cut their 3.75% rate to 2.0%. This month the Fed will likely cut their rate to 0.5%. Perhaps more dramatic is the fact that the Fed is now expanding the money supply through the use of “quantitative easing” measures.

The effects of such measures will clearly lag by a few months. But eventually the actions of the central banks will have a dramatic effect.

On top of this there are very large stimulus programs being proposed and implemented in a number of countries. China has said it will pour over half a trillion dollars into its economy as a stimulus. It is possible the Obama stimulus will be over $700 billion.

The response of governments around the world to this crisis is unprecedented. The strong fiscal and monetary responses will absolutely have a dramatic effect in the next 6 to 12 months. It would not surprise me if the recession ends in this country by the middle of next summer.

If this financial and economic crisis has demonstrated anything, it is that governments around the world are capable of working together and taking strong measures to support the global economy.