When will it end?!

[○∙◄☻¥tπ[╪AV┼cVê└]

Some of these, like 4 and 5, aren't mutually exclusive. I think that the current situation is terrible, but if Obama gets enough Keynesian stimulus through, we could end up with first situation #4 and then situation #5.

[Nixon in '80]

Option 4, but it won't be as bad as the numbers suggest.

[Sam Spade]

The last four options given are simply not realistic in my book (less than 0.0001%, maybe).

Right now, the most likely of the options to me is "Severe Recession", which would be more like Great Depression 2, and would bottom out at more like 3600 in the DOW, with 20% unemployment.  I give this option about 40% chance or so.

AS always, I would hope for the "Bad Recession" option, except this means more like 4500 on the DOW, with 15% unemployment.  It should probably be termed a depression, and would be.  I would give this option about 25% chance of occurring.

Btw, the "Very Bad Depression" is clearly a depression worse than the Great Depression and would bottom out around 1987 crash levels (i.e. 2000 in the DOW), 25-30% unemployment - a whole host of S&P 500 companies go bye-bye (which will also happen in the "Severe Recession" scenario - just not the same amount).  You need to include the fact that this type of depression has, I figure, about a 1 in 3 chance of taking out our form of government permanently (the others are, of course, much lower).  The odds of this one occurring have risen a lot of late to me - I put it at about 30% (note - higher than the good scenario).

The Worst Depression ever scenario more likely than not results in our form of government changing permanently.  It cannot be discounted, given present actions - even though I would have, in the past, put it at the level of kookdom.  I must give it a 5% chance now.

Spade, should this 'doomsday' scenario occur, what form will this new government take?

whoa, I have no clue...

Actually, if I were to make a reasonable guess, given the history of this country and the makeup of the people likely to be the most "wanting blood", I would place my money on a low-level military dictatorship.

I should just note on the side that it is interesting to see the love for Keynesian government pump-priming (even though that's really not what is going on, but whatever) and the belief in its effectiveness.

We're living right now in the middle of a paradigm shift in thinking with the ends being unknown, of course. 

However, some ideas will be so discredited that people will not rely on them for at least a generation. 

One of them may be the classical/neo-classical idea (i.e. the Republican model at present - I see no reason to see that determine they have changed for now) that private individuals and companies can borrow and spend into infinity without negative consequences and that government should be encouraging such actions.  This will bring certain growth to the populace.

Well, the introduction of government encouragement to the equation (to such a large extent) is somewhat a new phenomenon, but the rest of this is the same old game we've seen played time and time again in the past - see 1837, 1873 and 1929 for example (if not 1715 or so).  It has been discredited before and it will be discredited again.  It will probably be played again at some point in the future - at points unknown.

The second idea is a good bit more pervasive in the US (considering its origins are older - 1933 compared to mid-1980s AND, more importantly, belief in its healing effects are strong, due to misplacement of its success) and its discrediting will probably consummate the paradigm shift referred to above.  It is the concept that government can borrow and spend into infinity without negative consequences.  Its origins are Keynesian in principle.  Note the connection to the other model.

This, too, is actually not a new phenomenon (whether hyper-inflationary or deflationary in effect), but its collapse will be new to the United States (we've come close before).  Depending on the scale of the collapse, this is the type of collapse that often leads to governmental collapse.  I am not predicting such - but I really don't know.  It will probably be played again at some point in the future. 

I will note that if it is discredited less than the private capital spending model (noted above) - another one of its collapses will occur again before the private model does.  That type of scenario will almost certainly lead to dramatically lessened living standards for the US over the long-term, unless one of a few very unlikely scenarios occurs in my mind.

[Gustaf]

I'm going to be cautious when it comes to predicting the economic development. I will say, however, that it's going to be pretty damn bad over the next couple of years. If you look at how some of the interest rates are behaving right now, the implications are pretty scary...like Sam I believe there is a definite possibility of "blood in the streets" This is clearly going to be the worse global crisis since the Great Depression (and it is concievable that it might equal or surpass even that) and we all know what that led to. Hopefully, we have learned something since then but I'm not going to bet money on it.

Then again, I'm not quite as pessimistic as Sam. I do believe there is more competence to deal with this stuff today than there used to be. On the fundamental level I'm an optimist who believe that society gets progressively better at dealing with this stuff. So I'm not giving up on the idea that we can manage our way through "only" a deep economic crisis.

When it comes to the political side, it will be a spin-game. FDR managed to spin things in his own favour pretty efficiently and it remained a Democratic weapon for decades. The Swedish conservatives have failed spectuarly in the past, but are doing better now. It depends on whether Obama can achieve anything in resisting the down-turn and get people to believe it.

[Sam Spade]

Then again, I'm not quite as pessimistic as Sam. I do believe there is more competence to deal with this stuff today than there used to be.

I understand.  However, you're wrong here.  There's less competence in dealing with this stuff than in the past.  Much less.  Let me count the ways.

[CARLHAYDEN]

I'm going to be cautious when it comes to predicting the economic development. I will say, however, that it's going to be pretty damn bad over the next couple of years. If you look at how some of the interest rates are behaving right now, the implications are pretty scary...like Sam I believe there is a definite possibility of "blood in the streets" This is clearly going to be the worse global crisis since the Great Depression (and it is concievable that it might equal or surpass even that) and we all know what that led to. Hopefully, we have learned something since then but I'm not going to bet money on it.

Then again, I'm not quite as pessimistic as Sam. I do believe there is more competence to deal with this stuff today than there used to be. On the fundamental level I'm an optimist who believe that society gets progressively better at dealing with this stuff. So I'm not giving up on the idea that we can manage our way through "only" a deep economic crisis.

When it comes to the political side, it will be a spin-game. FDR managed to spin things in his own favour pretty efficiently and it remained a Democratic weapon for decades. The Swedish conservatives have failed spectuarly in the past, but are doing better now. It depends on whether Obama can achieve anything in resisting the down-turn and get people to believe it.

Sorry Gustaf, but Sam is essentially correct.

While the Obamanations will tell you that they have a solution to all problems (more government), they simply do not have any understanding of reality.

They simply have faith that government will solve all problems.

The aborigines in New Guinea had more reason to adhere to the 'cargo cults.'

[TeePee4Prez]

Option 5.  I think the downturn is overblown, but still bad nonetheless.  DOW will drop to 6000, but recovery to 8500 by New Years 2010 is likely.  Unemployment will top at 11-12%, but will normalize to 6% by 2011.  A Dow increase me thinks will lower unemployment sooner than past recoveries for this reason- Baby Boomers will be ever more comfortable with hanging it up leaving the workforce and more positions will open for Gen X and Yers.  A lot of the economic malaise in my opinion is Baby Boomer stagnation and greed.  Generalization- They don't want to train the younger generations, they're arrogant and think younger employees are idiots.  Because of the market being down, most are hanging around.  Look at the unemployment by age bracket.  The Under 30 crowd is getting hit brutally while the Boomers are well under 5% STILL. 

I think Obama is doing the right things generally, but more focus should be on education to meet the needs of upcoming talent shortages.

[TeePee4Prez]

Question now is do I tell some of the youngins in here to go for education and health care and bolt from finance/accounting, construction, real estate and other industries?  Nah, I probably shouldn't because one thing I've noticed is every other woman under 25 I know is a nursing major and about half the rest are in some medical related field.  Think about the eventual supply and demand on that one for a moment.

[opebo]

...There's less competence in dealing with this stuff than in the past.  Much less.  Let me count the ways.

You forgot, again, to actually count the ways, or in fact to give a single example, you lazy ass.

Let us remember here fellows that all of this is just political/psychological.  Nothing has actually happened.  The productive capacity of the country is roughly the same as it was 5 years ago.

Remember the Weimar Republic?  Hitler had all that fixed in no time.  Its all just about leadership and effective state action, and its never 'too late'.

[A18]

Your options skip the most likely scenario:

I expect the unemployment rate to top ou at approximately 10.8% and the DOW to bottom around 6,000 (Industrial).

Obama is toast unless the Republicans blow it (again).

Why would that mean he's toast? In November of 2012, the public isn't going to care about the state of the economy as of 2009. As disastrous as Obama's agenda is, it would be incredible if his policies managed to prevent a recovery by late 2012.

[opebo]

...As disastrous as Obama's agenda is, it would be incredible if his policies managed to prevent a recovery by late 2012.

'Recoveries' only happen because of government policy, Philiip.

[A18]

'Recoveries' (World War II, for example) only happen because of government policy. Recoveries, on the other hand, are a product of the efforts of free people.

[TeePee4Prez]

'Recoveries' (World War II, for example) only happen because of government policy. Recoveries, on the other hand, are a product of the efforts of free people.

What does GDP equal.  Consumption+Investment+Government Spending+(Exports-Imports).  You're both right!  What needs to be stimulated right now?  C.  It's that simple.  Will G help with C?  Absolutely.  Do we have to worry about inflation eventually?  Sure, but not now.  Simple microeconomics doesn't solve everything.

[CARLHAYDEN]

Your options skip the most likely scenario:

I expect the unemployment rate to top ou at approximately 10.8% and the DOW to bottom around 6,000 (Industrial).

Obama is toast unless the Republicans blow it (again).

Why would that mean he's toast? In November of 2012, the public isn't going to care about the state of the economy as of 2009. As disastrous as Obama's agenda is, it would be incredible if his policies managed to prevent a recovery by late 2012.

Three things Phil,

First, nice to see you posting again.

Second, it takes time for a recovery to be fully underway.

Third, the current recession is longer and more severe than most, and may well turn into a depression.

[12th Doctor]

It's amazing how the doom and gloom liberals have changed their tone in just a couple months.  not even a year ago, every tiny issue was the next major crisis.

[12th Doctor]

I vote Severe Recession, BTW.  Obama plastic fantastic, instant WOW, economics aren't going to be of much help in the long run.

[TeePee4Prez]

It's amazing how the doom and gloom liberals have changed their tone in just a couple months.  not even a year ago, every tiny issue was the next major crisis.

Prophesizing gloom and doom ALWAYS benefits the party not in power.  Politics 101.

[Tender Branson]

Option 5. Things will get better soon (by the end of the year, with modest growth next summer).

[opebo]

'Recoveries' (World War II, for example) only happen because of government policy. Recoveries, on the other hand, are a product of the efforts of free people.

Well, firstly, you are obviously wrong about economics because the efforts of the people in any society are controlled by the State, and secondly I'd like to point out that your concept of 'freedom' is assinine.  We live in a society based on power relationships, and to talk about humans as 'free' like some beast wandering a wilderness is absurd.   Workers are 'free' to either starve or do what they're told. 

The closest thing in reality to your fantasy of a 'free man' is an owner, but in our society he is less 'free' than in an empowered position over others in the heirarchy.