Here's a Hugh "Oh shit" fact.

[dixiegrrrrl]

We have been standing at the edge of the cliff far longer than is generally known.

Look at this:
( from yesterday's OpEd News)
http://tinyurl.com/cl8qav

"The major factor behind the current business cycle was and is a worldwide housing bubble
and bust ~ based on loose and devious credit and driven by the speculative surge in mortgages and equity loans."

"What you may not know is that, according to former Fed Chairman Alan Greenspan,
that bubble accounted for 50% to 70% of GDP growth in recent years. "

The housing bubble masked the fact we were in a recession for years.

I have no idea how many "recent years" that Greenspan refers to,
but we know we hit a recession 1999-2000.
and apparently only a housing bubble masked reality of little GDP since then.

[Taverner]

1. Well if you look at employment figures, it looks like 1999 was when we hit it

Once the tech bubble burst, the housing bubble and consumer spending bubbles took over, masking the recession

The difference between these bubbles was that the tech bubble was based on something tangible, rather than inflation.

But look at the bright side - we already survived the first 8 years of the recession

[marketcrazy1]

4. I think this is the dirty little secret

most Economists know but dont talk about and is the reason GDP contraction will be greater than estimated. trillions of dollars in phantom GDP has vanished!.

[uppityperson]

13. Does that mean it is the Clenis's fault? That was semi-joking, but I wonder

how much of a recession it would have been if mrasshole hadn't been put into power. Looking at the bright side, we survived 8 yrs in a recession which has gotten worse every yr until it reached depression proportions and at least mrbush is now not in power to make it worse? I need more coffee. Sorry.

[Taverner]

14. I'm surprised this isn't a GOP talking point

All the while through W's term, any time we had a recession, they could have played this card and blamed Clinton

Not that it was his fault - - completely (making it easier for manufacturers to leave the country didn't help)

[Dover]

31. Egads....so Clinton DIDN'T reduce the national debt?

:sarcasm:

A surplus in the fed budget perhaps, but it's really all voodoo.


Why the Bush debt-recession will topple Clinton's equity-recession

Jan 18th 2008 10:22AM by Peter Cohan


If you can't pay back the bank, the bank takes your house or your car. If a stock you own loses its value, there's no collateral you can go after to cushion your loss. This is why Bush's debt recession will be far far worse than Clinton's equity one.

The stock market in the last year of George Bush's term is following a pattern that reminds me of the last year of Bill Clinton's. The Clinton market tumble -- where the NASDAQ fell in March 2000, rose through September 2000, and then began a straight down plunge through January 2001 -- preceded a brief recession in 2001. But I think that the Bush recession -- following Dow and broader market quakes in March 2007, August 2007, and the 14% decline since the October peak -- will be much much worse.

The reason? Clinton's recession was driven largely by a collapse in equity prices, while Bush's will be driven by an implosion in the value of debt. Before focusing on what Bush's recession might look like, it's worth remembering that Clinton's was driven by the collapse of the NASDAQ as the dot-com bubble burst. It also involved debt -- $1 trillion worth of borrowing by fiber optic network builders like Global Crossing that went bankrupt when they couldn't pay their debts as their customers, the dot-coms, went belly up.

For all those individual investors who got burned by the dot-com bust, after the dust had settled they had lost lots of money in their stock market accounts, but most people still had jobs, houses, and cars. And Clinton left the Federal budget in surplus with the national debt declining to $5 trillion. Bush used that recession to sell $1.3 trillion in tax cuts and to lower interest rates to 1%. With the $2.4 trillion worth of wars in Afghanistan and Iraq, the Federal budget went into deficit and the national debt ballooned to $9.2 trillion.

One effect of Bush's lower interest rates was to temporarily revive the economy by making it cheap for consumers to buy houses. Thanks to securitization, mortgages could be originated, packaged and sold as securities such as Collateralized Debt Obligations (CDOs) to investors around the world...cont'd

http://www.bloggingstocks.com/2008/01/18/why-the-bush-debt-recession-will-topple-clintons-equity-recessi/

[sendero]

38. In so much as he appointed Alan Greenspan..

... yes it is his fault because Greenspan is in the top 3 of folks responsible for this mess.

[dalaigh lllama]

23. I completely agree, from my personal experience in retail

My husband and I owned a furniture store that did well beyond our wildest dreams for decades. In the spring of 2000, it was like someone turned off the spigot. It seemed no one was buying furniture anymore, and according to the sales reps we talked to, it was the same all over. We'd go to the furniture market in Highpoint, North Carolina every year, and it used to be you could hardly squeeze through the crowds of buyers. After 2000, it became more and more like a ghost town. The factories in North Carolina began to close, moving all their operations overseas. If the factories didn't do so, it wasn't long before they went belly up, no longer able to compete.

Then we began to notice something odd -- when we did deliver furniture to these big new houses, they were empty of furniture except for the items we were bringing. Before this, people were buying replacement furniture or, if the house was new, complete furnishings for every room. Now we'd deliver a bed for the child's room and walk by an empty living room. It was strange.

On top of this, we had a good health insurance plan for our employees, but in the 2000's some actually needed to use it and no one was getting any younger, so our costs skyrocketed.

I can imagine this same scenario playing out all across the country. We were lucky -- we sold our business in 2005 and our rural home in 2007 and relocated to a condo here in Illinois. Just in time, it seems. We had one small piece of property left in our old hometown: we just recently sold it (just to get rid of it) for about 1/5 of what we had paid for it back in the 90's.

[Dover]

30. Surely we've got one more bubble in us. Perhaps a 'green' bubble?..n/t

[Renew Deal]

2. This was intentional

That's why they kept dropping interest rates. They wanted the appearance that things were booming. Bush would even brag that the housing market is doing great. Add in the home equity loans on money that never really existed and you understand how inflated the market was. There was tons of non-existant cash. It's amazing we're not paying $1 million for a loaf of bread.

[Phoebe Loosinhouse]

3. There were lots of people who knew that was happening at the time

The stock market tanked in the late nineties with the tech bust. Every indicator of everything was in the crapper or headed that way except for Ta-dah! Housing! The one sector kept upright on artificial legs and propping up the entire failing system due to one thing and one thing only - artifically low rates put in place by Mr. Alan Greenspan. When housing overheated, as it was obvious it was overheating to even a moron, Mr. Greenspan kept lowering interest rates. There was a point when he ENCOURAGED people to go for ARMs even when the fixed was a the lowest rate ever! He WORRIED that people had too much capital tied up in equity!

It's the house that Alan built.

Alan provided the low rates that raised the price on the house on that provided the mortgage that provided the security that provided the credit swap.

He doesn't get the entire blame, but he was in position at the first chokepoint when some of the damage could have been restrained earlier.

[AndyA]

5. Meanwhile, Mr. Greenspan's wife, Andrea Mitchell of MSNBC, continues to report

on the economy like she has no connection whatsoever to anyone involved. No disclaimer, no disclosure.

And people think we don't need regulations put in place to control the media today. :eyes:

[upi402]

18. propaganda, pure and uncut

to me, these folks are traitors.

[Veritas_et_Aequitas]

6. Recent years = since 2000.

And, yes, odds are that Greenspan and his ilk foresaw the current problem and failed to act accordingly.

[ixion]

7. This particular grift was called a "jobless recovery" and followed up with

the "Ownership Society".

The truth was that we've been screwed since the tech bubble burst, and the groundwork was laid before that.

[kirby]

8. It wasnt a secret to me...

After the dot com bubble burst, all the people who made money had to invest it somewhere. The next target was housing. In parallel with that was huge sums expended for 'Homeland Security' and the Iraq war. Last summer, people who had made a killing on housing moved to the next target, oil. Speculation on oil is what got us to $4 a gallon gas.

[predfan]

9. Great point. Where's that money going next?

[Wednesdays]

15. What money?

:shrug:

[Joanne98]

10. WOW

[dixiegrrrrl]

11. Well, you will love this next and largely unknown bubble, then.

Crosspost from Joanne98...

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x57383

am I reading this right? we have a crdeit card debt bond default looming?

[Warpy]

12. More like "well, duh!"

What this article isn't telling you is that during the same period, the wealth was exported to other countries while the profit, based on nothing but debt, stayed here.

Corporations basically sold this country off, piece by piece, just to gain a few higher numbers for the rich.

The GDP has represented nothing but empty profit based on debt for the last decade, at least.

Every factory that has closed, every bit of machinery exported or sold for scrap, was this country's real wealth being sold off.

They didn't just kill the goose that laid the golden eggs, they ate it.

[The Brethren]

25. I'm not surprised at all at what has been going on.

Am just surprised at how many people in general didn't see it coming.

Our country has been sold off in countless ways...including foreign ownership of U.S. properties and business rights. And if you add trade issues, exports vs. imports, political favors, it's a wonder we have anything left to call our own, with little leverage to work with.

Then we have our national deficit - most of which is owed to China; the same country last I read, we were borrowing approx. 2 billion dollars each day (last year's figures, could be more by now) to sustain our economy. And they're also the leading the importer to our country. In other words, aside from all of our other losses, a good portion of our money-flow is cycling from The U.S. to China and back again routinely. However, the money flowing back to us is in the form of debts not profits. A very bad boomerang act.




Know what you're paying for. The Stimulus Plan ("American Recovery and Reinvestment Act of 2009"): Orig. House version -- http://appropriations.house.gov/pdf/RecoveryBill01-15-09.pdf , House spreadsheet -- http://spreadsheets.google.com/ccc?key=pV-c6t5fOVmNorqMpHvnCMw ; Senate version -- http://appropriations.senate.gov/News/2009_02_02_The_American_Recovery_and_Reinvestment_Act_of_2009.pdf ; and Senate compromise -- http://www.govtrack.us/congress/billtext.xpd?bill=h111-1 , Text and $$$ details of Senate compromise -- http://appropriations.senate.gov/News/2009_02_08_UPDATED_Appropriations_Provisions_of_American_Recovery_and_Reinvestment_Act.pdf?CFID=4043629&CFTOKEN=40573040 . In addition to -- http://readthestimulus.org/amdth1.pdf , along with -- http://www.readthestimulus.org/ . Final version, Feb. 13th, 1500 pgs. worth -- http://www.whitehouse.gov/the_press_office/arra_public_review/ , more details on the final version -- http://www.taxpayer.net/resources.php?category=&type=Project&proj_id=1913&action=Headlines%20By%20TCS , including spending -- http://cbs4denver.com/national/Web.government.accountability.2.937188.html

[notesdev]

16. SGS shows negative GDP for about 5 years now

And I'd take their numbers over the government's, any day.

[upi402]

17. the country that makes stuff and sells to others...

wins.


we stopped that nonsense long ago.

[progressoid]

19. Sure. Right after the Dot Com bubble burst,

the housing bubble was always threatened to go next, it just took longer to pop than expected.

[wuvuj]

20. The second shoe is about to drop?

[rosesaylavee]

21. I know on this homefront

finding a decent job has been difficult since 9/11. I had a 'temporary' stupid job in 1999 that I kept until 2005 because every time I looked into an industry or was invited to an interview, that particular industry would suffer a major hit either the week before or after the interview. I did have a job from 2005 to 2007 that was dependent on the home construction industry which started to publically tank in 2006.

Yeah, the Bush Years were swell.

[pug66]

26. Best economy in 50 years!

Best economy in 50 years! That's what I have been saying between the years 2001 and 2008. Of course I am being sarcastic. I agree finding a good job (or any job) has been difficult since 2001. Really it has been difficult since 1984 when supposed "U.S. corporations" started to close their manufacturing plants and begin the big happy exodus overseas. Go Go Wall Street!

But hey, being a good American "consumer" (not citizen mind you) I retrained myself for the Dot.com bubble, alas I worked my last real computer job in 2001.

Now what do I do? I can't sell houses. I can't sell cheap Chinese crap on eBay (no one has money to buy "stuff"). I can't find a good paying manufacturing job (the last manufacturing plant in my local area is going to close within the next few months -- another 2000 people will be out of work).

Hmmmm...government job?

That's it! An Obama Job! That's my only hope. Seriously.

Yeah...it's hopeless.


http://iguessineedajob.wordpress.com/

[rosesaylavee]

28. Ha - I am right there with you

I remember when Lucent laid off thousands early on in this mess. Many of those workers had 6 figure salaries. A friend who had worked there at the time and was one of the many laid off, found work as a math tutor and one of his friends was folding underwear at Sears. It's been nuts since that initial downturn. I am hopeful that the stimulus package does spur a green energy boom... I think it is very likely it will. I found my current job on Craigslist - it's not paying what I made at my last job but it's keeping me employed until this turns around.

I liked your blog btw - it made me laugh. And at this time of the morning, that's saying something. Welcome to DU! :hi:

[pug66]

32. Can't talk about *that*

Hey rosesaylavee, you can't talk about masses of people being laid off the past 8-9 years. That's hearsay. ;-) In the media's mind -- it never happened. Hasn't the government told us that the mass lay offs didn't start until December 2007? -- the official kick off of the latest and greatest recession/depression.

One is not really unemployed if one can sell crap on eBay; or charge their expenses (like a mortgage) to a credit card; or get equity out of their house via inflated house prices. It's all good. Oh wait, the inflated housing bubble burst, the banks are not lending, the credit card companies are raising credit rates to usury levels, and the only people buying crap on eBay are Europeans and Asians who still have a bit of money to squander.

Time for a government job! I don't have much faith that the whole green jobs boom will ever happen. Wouldn't surprise me if most of those "jobs" go to current government employees, relatives of politicians, or H-1Bs (not enough qualified technical people in the country doncha know - sarcasm alert).

I've been looking on Craigslist for jobs. I have applied to a few. Nothing. Nada. I always have this itch, when I apply for a job on Craigslist, to state in my email: "Here's my fake resume for your fake job." Seemingly lots of jobs on Craigslist are fake jobs - recruiters making up jobs with inflated pay scales in order to mine resumes, hoping someday those jobs will exist and they can make a commission off of them. But it worked out for you so maybe there is some hope.

Thanks for the encouraging comment about my blog. Yeah, it's funny in a "thank God I'm not her" sort of way. :-) I've been reading DU for a year now, I figured it was time to chime in, especially when I read posts about unemployment. A sore spot with me -- unfortunately.

http://iguessineedajob.wordpress.com/

[rosesaylavee]

35. Funny - I thought I just knew a bit more about computer work

I would find something better on Craigslist. Check out their contract work and part time stuff too. Lots of stuff available if you don't want to get on someones bankroll. What kind of computer work do you do? You would probably be ok working from your home computer? Try the Chicago Craigslist - it does seem to have a lot on there for computer work. And tho it made me laugh again, there was no "thank God I'm not her" in reading your blog. It made me laugh as I certainly saw myself in your writing. I do try to stay positive and keep the faith and all that... but my cynical side is quite active.

And I am sure there is a forum on here that is for employment. tho I never go there, there may be networking function there for you too.

Best of luck to you -

[FieldsBlank]

22. not so tiny bubbles

There is a blogger that seems to understand the system fairly well
http://hypertiger.blogspot.com/

Although a bit of a doomer I suppose
and overuses the 'implosion' word
much of what he/she says seems quite logical

that due to the inherent flaws in the fractional banking system
each successive bubble must be larger than the previous one
or the system will implode

the site is worth a look

[knitter4democracy]

24. No surprise here in Michigan. We've been there for years.

And we knew it. I haven't been able to understand why people kept saying the economy was doing fine when it obviously wasn't.

[wuvuj]

27. Expected result of the stimulus?

Sure hope things work out this way....I think....

[bhikkhu]

29. shadowstats.com's graphic on that:

[SlowDownFast]

33. Next Up: Commercial Real Estate Collapse.

As big or bigger than the Housing Crisis.

Put that in your pipes and smoke it.

[dixiegrrrrl]

34. Neck and neck with credit card bond defaults

apparently credit cards ...in fact, car and collage loans, all debt...
also was packaged and sold off as tiers of bonds, just like mortgages.

and are now being defaulted on.

The economy is like a bowling ball going down a very very very long flight of stairs.

[davekriss]

36. The article is wrong

We did not "hit a recession 1999-2000", the recession started in March 2001, a couple of months into Bush's term, and probably brought on with his stumping of how bad the economy was when running for the Presidency in 2000. THe collapse of the internet bubble probably would've brought on a mild recession anyway, but Bush did a damn good job of talking us into a deeper recession than it otherwise had to be.

[Art_from_Ark]

40. bu$h and Cheney both

They went on a little tour of spouting economic gloom-and-doom in early 2001 as part of their "make Clinton look bad" campaign.

[JohnWxy]

37. I couldn't quantify it (as % of GDP) but I had been noticing that the only sector in the economy

that was looking good for several years was housing.

Another reason Greenspan kept interest rates low was to keep our export prices down. Lower interest rates made the dollar cheaper in relation to other currencies whose countries had higher interest rates. This had the effect of lowering our export prices and boosting our exports. The Cheney - (okay -- Bush) administration liked boosting the housing market and exports so Greenspan knew what to do. Keep the money supply growing and the interest rates DOWN.

Unfortunately, this also started driving commodity prices higher which, combined with moribund prospects in the stock market (other than luxury home builders and energy stocks) started many people moving out of equities about 2 to 3 yrs ago. If equities don't look good and the rates are low (making investing in bonds not so attractive) the only place left to go is commodities. As this movement continued the speculators seeing the trend started piling on. The piling-on became very apparent about Aug-Sept of 2007. This is when commodities prices really started to take off (but this was just an acceleration of a multiple year trend).

I should point out that CDSs enter the picture again in that commodity speculators could use Wall Street banks to hedge commodities bets for them they could avoid any regulatory scrutiny. They had the banks buy the futures contracts for them and also bought CDSs from the bank to cover aagainst significant loss on the futures contracts. One more gift from unregulated CDSs - they helped magnify the speculation in commodities and thus helped drive up the price of all commodities (including farm commodities - i.e. FOOD) to stratospheric heights by the summer of 2008.


See - Testimony of Michael W. Masters, Managing Member - Portfolio Manager - Masters Capital Management, LLC, before the Committee on Homeland Security and Governmental Affairs

The CFTC has granted Wall Street banks an exemption from speculative position limits when these banks hedge over-the-counter swaps transactions.21 This has effectively opened a loophole for unlimited speculation. When Index Speculators enter into commodity index swaps, which 85-90% of them do, they face no speculative position limits.22

The really shocking thing about the Swaps Loophole is that Speculators of all stripes can use it to access the futures markets. So if a hedge fund wants a $500 million position in Wheat, which is way beyond position limits, they can enter into swap with a Wall Street bank and then the bank buys $500 million worth of Wheat futures.23 In the CFTC’s classification scheme all Speculators accessing the futures markets through the Swaps Loophole are categorized as “Commercial” rather than “Non- Commercial.” The result is a gross distortion in data that effectively hides the full impact of Index Speculation.

[EmeraldCityGrl]

39. The Military Industrial Complex has had it's own bubble for

the last decade. What would the last decade have looked like without the billions that were funneled into "the war."

[Kip Humphrey]

41. Remember the Bush "jobless" recovery? Busharro World's changes in how economic

statistics were compiled and reported never changed reality. The revised rules only covered up realty. If you paid attention to DU, you would know that the real unemployment rate continued to increase for all but about 9 months of the 8 years of Terror. Most often, each month the "reported" unemployment rate stayed steady or dropped without the economy generating enough jobs to cover even the minimum job market expansion rate (~150,000 per month). Just as with the unemployment rate, the inflation rate and GDP reported numbers were comparably cooked.

[GoesTo11]

42. What's 1999?

Isn't this 1997? I just checked the markets.

[Art_from_Ark]

44. Well if it's 1997

I'm going to load up on gold. I hear it's going to triple by 2008.

[Liberal_Christian]

43. WTF? I'm as gullible as the next guy but OpEdnews? Allan L Rolland? Come on now.

Why are you people taking economic opinion from a psychotherapist???????????? The rescue package Obama proposed was what? Barely a week ago and they're calling bullshit because it "hasn't stimulated anything". Open a history book. It took longer than a week for FDR's New Deal to do anything. Jobs have to be created, people have to start working, money has to be invested. Also, why are we listening to Greenspan?????? The financial messiah for Conservatives. Even he admitted his past policies were wrong. Even Bush's Bailout, as fucked up as it was, did a little good by preventing the banks from caving in and causing more of a negative economic chain reaction.

[wuvuj]

45. Here is some bad news for you.....

http://articles.mercola.com/sites/articles/archive/2009/03/03/Could-This-Be-Worst-Economic-Crisis-Ever.aspx