Poll: Which is Most Likely for the Economy?

Please vote in this poll using the sidebar.

Which is Most Likely for the Economy?

  • The whole mess is worked out by December. (1%, 4 Votes)
  • Short recession (<1 year), then business as usual. (9%, 29 Votes)
  • Long recession (1-3 years), then business as usual. (46%, 143 Votes)
  • Japan-style long bust. (18%, 56 Votes)
  • 70s-style stagnation. (9%, 27 Votes)
  • Depression. (17%, 53 Votes)

Total Voters: 312


This poll will be active and displayed on the sidebar through 10.18.2008.

0.00 avg. rating (0% score) - 0 votes

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

33 comments:

  1. 1
    Lamont says:

    70s style stagflation simply will not happen in the next year or two.

    wage inflation is flat. what we are seeing now is asset prices falling back in line with salaries and destruction of the debt that fuelled the pre-2007 boom. no matter how inflationary the policies of the government are wages are going to be stuck at their current levels due to a collapse in the job market and rising unemployment.

    unless we see double-digit year over year inflation in wages this is definitely not the 70s. if it had been the 70s, then for the past 8 years we would have seen aggressive negotiating on the part of strong unions for wage hikes to keep up with the rising cost of gas and food. the prescription would also be to hike rates to 20% like Volker did — and he was allowed to do that because of the relatively low amount of debt that consumers were carrying (due to the debt devaluing due to the inflationary forces). what we find ourselves in now is a situation where we are leveraged to the gills and no way of seeing asset inflation not unwind in asset deflation instead of wage inflation.

    maybe in 10 years the 70s will be back, but its not happening today…

    (and as much as everyone talks smack about the $USD and the chinese dumping it, what we’re seeing is a flight to the $USD which is taking down commodities and foreign currencies and a massive strengthening wave in the $USD. and as long as the world believes that US treasuries are the only safe harbor in the storm that will make it so).

  2. 2
    casey1167 says:

    I think the funny thing is there are a good number of people on this site that know what a Japan style bust is. But then again, I would bet most on this site have all the same web sites bookmarked…….

  3. 3
    Scotsman says:

    Too early to really tell, but we should know more by the middle of next year. Even the Great Depression took a couple of years to really sink in. The Oct. 29th drop was only a prelude to the long downward trend.

    The unusually high levels of personal and .gov debt and how they will resolve are the great unknowns in the current situation. We’ll just have to sit back and see what the .gov comes up with as a strategy. My best guess is we wobble along on the tracks for a year or so before the next phase hits, and it may well be a more widespread collapse. None of the attempts to stabilize put forth so far are really curative- they delay, but don’t resolve the underlying issues.

  4. 4
    Eleua says:

    Depression, and a nasty one at that. 100% certainty.

  5. 5
    uncle john says:

    Lamont Stagflation is when wages are flat or negitive and prices of goods increase.

  6. 6
    mikal says:

    Eleu, the only certainty is that you are to depressing to not be manhandling yourself to happiness. You are a lonely man.

  7. 7
    mukoh says:

    LOL Mikal.

  8. 8
    jonness says:

    I suspect Bernanke/Paulson will end up throwing in between $3 and $5 trillion in an attempt to avert a depression. I’ll leave the math up to others as to what this means for the future of our country.

  9. 9
    david losh says:

    My bets have been on inflation.
    It’s the only thing that covers the value of the assets.
    Promising good paying jobs, inflating the value of assets, making a strong economic showing, those are the things that would bring peace and prosperity to the world.
    If we follow the Scotsman’s idea of “we have lost our manufacturing base economy” it seems a simple leap to reopen factories.
    Any politician could run a campaign to put America back to work.
    We only need to care about us, the United States, and the rest will follow. The entire global economy can rebuild together.

  10. 10
    The Tim says:

    Note that the poll says “70s-style stagnation” not “stagflation.”

    Just thought I’d point it out. I intentionally didn’t say “stagflation.”

  11. 11
    Lamont says:

    “Lamont Stagflation is when wages are flat or negitive and prices of goods increase.”

    No it isn’t, 70s style stagflation requires a wage-price spiral. Nominally wages increase, although on a real basis they may not be increasing. In the 70s, unions were negotiation double-digit cost of living increases in salary to keep up with price inflation. That is something that we don’t see now. We are not even seeing nominal wage increases that can keep up with the core CPI measurement.

    The “stag” part of “stagflation” is not wages, but GDP and productivity growth.

    And I don’t think we’re going to see stagnation, either, other than on a decadal scale. I think we’re going to get rollercoasters up and down with stagnation as average.

  12. 12
    Matthew says:

    No way in hell this thing is over in less than 3 years. It’s either going to be a full fledged depression, or a decade long deflationary spiral ala Japan.

    The current actions that our politically elected “leaders” have taken almost guarantee its going to be a depression.

  13. 13
    buyStocks says:

    I vote 1 day…
    Things are shaping up to be a nice sucker rally tomorrow…

  14. 14
    Robert Wojciechowski says:

    The issue is that in Japan actually the Federal bank curtailed supply of money and that contributed to the bust.

    The govt can print as much money as it wants. And it looks like all banks will print money as necessary to make sure there is lots of money going around and markets stay liquid. If banks start lending money to each other there will be exchange of goods and services.

    The only issue is whether foreign people will be so willing to hold USD. This helped in the past for the US to keep interest rates low and deficit high. So foreign people and govts might no longer be willing to bail out the US. So consumption might go down a notch and the economy could stabilize at a slightly lower level. And the US might be loosing its importance to China and the rest of the world but the US will likely stay strong.

    Plus it can still corrupt many 3rd world govts and drain resources out of them. So this can still go on for a long time. I am surprised that Iraqi govt is not sending oil in exchange for some consulting services on democracy or something like that. I am sure if the US decides to go for Iran’s resources then it will put in a govt that will serve US interests. Or maybe the existing govt seeing what happened to Iraq will agree to give the US natural resources for very cheap and allow US corporations to profit there?

    On top of that the US does not regulate private enterprises like Europe does and as a result I think the innovation will exist more in the US than say in Europe. I doubt that the French would agree to have a competitive economic model.

    So maybe a recession that will provide some clensing after the debt spiral and then business as usual. That’s my bet!

  15. 15
    LUC says:

    Sucker Rally is going on this morning (DOW Up 389).

  16. 16
    softwarengineer says:

    WHAT IS DIFFERENT FROM 1929, 1970 OR EVEN 1990’s RECESSION FROM NOW?

    How about a global economy with wage depression/competitions on most American workers, 100-200 million more American citizens [most paying in very little income tax] and hoards of bad loans to the greedy poor from the greedy rich from 1998 on.

    How do we fix it like we did in 1970 and 1990? Hard question, we’re in uncharted debt territory and I don’t want to sound hopeless, but if we don’t control uncontrolled growth in America, I see no light at the end of the tunnel. It will just get worse as growth gets worse.

    Without a decent low growth worker tax base with higher Middle Class pay we can’t fund our crowded schools or rebuild our bridges and roads. Why do you think our public schools are failing in math and science? I clearly believe its too much growth and subsequently not enough decent wage revenues with too much in-sourcing and outsourcing deterioration of the Middle Class tax bases.

    King County’s solution, raise our property assessments as home values collapse. Sounds good if you’re renting, don’t smirk, the landlords pass on the illegal increases. Appeal your property assessments, its slam dunk, you’ll win in this corrupt and desparate political environment.

    You won’t hear almost all the Dem/Rep politicians or media talk clear thinking like me, you will hear Dr. Nader talk like me though.

  17. 17
    Pegasus says:

    Sign Of The Times….Payback For Sonic Fans

    The main player in buying the Sonics gets butt kicked financially.

    AP
    Chesapeake Energy CEO forced to sell company stock
    Friday October 10, 8:14 pm ET
    Chesapeake Energy CEO Aubrey McClendon sells bulk of his stock to meet margin calls

    OKLAHOMA CITY (AP) — Aubrey K. McClendon, the billionaire chief executive of Chesapeake Energy Corp., has sold “substantially all” of his stock in the company over the past three days in order to meet margin loan calls, the company said Friday.

    Last month, Forbes showed McClendon at No. 134 on its list of the nation’s 400 richest people, with a net worth of $3 billion, an increase from $2.1 billion the previous year.

    A margin loan is a loan made by a brokerage house to a client that allows the customer to buy stocks on credit using securities. When a stock dips below a certain point, brokers who lent investors money through margin agreements demand that the investors sell part of the stock or pony up cash to cover losses.

    McClendon said he looked forward to rebuilding his ownership position in the company. He and Tom Ward co-founded Chesapeake Energy, the county’s largest producer of natural gas, in 1989.

    Both men are members of an ownership group that recently purchased the NBA’s Seattle SuperSonics and the Seattle Storm of the WNBA for $350 million. A group of Seattle businesswomen purchased the Storm from the group, but the Sonics franchise was moved to Oklahoma earlier this year after much legal wrangling.

    Chesapeake’s stock closed Friday on the New York Stock Exchange at its lowest price of the year, $16.52, down $1.19, and well off the $74 top of its 52-week range.

    http://biz.yahoo.com/ap/081010/chesapeake_energy_ceo_stock.html?.v=2

  18. 18
    Flotown says:

    Tough time to be forced to sell – the company is way oversold IMHO

  19. 19
    Sniglet says:

    The issue is that in Japan actually the Federal bank curtailed supply of money and that contributed to the bust.

    Huh? This is not the case at all. The Japanese central bank FLOODED the market with easy credit, even offering negative interest rates (i.e. PAYING banks to borrow from it). Unfortunately, this didn’t help.

    Actually, the loose monetary policy in Japan is one of the main culprits behind the credit bubble. It encouraged the massive Yen carry trade (i.e. with people borrowing cheeply in Japan to invest elsewhere).

  20. 20
    Eleua says:

    What Sniglet said.

    The currency moves in this crack-up are going to surprise a lot of people.

  21. 21
    Slumlord says:

    My vote goes for depression. Declining assets – real estate and equities – are creating a situation of monetary deflation that will eventually lead to deflation in most consumer prices. The major exception is energy, where prices will resume their upward trend as depletion reduces oil production in the best fields and the replacements are all smaller and more expensive to produce.

    This is going to be a difficult process to reverse. I see massive investments efficiency, rail, and alternative energy as keys to the solution, but sadly, our politicians do not have the same sense of urgency.

  22. 22
    david losh says:

    What happened this week end injected literally trillions of dollars into the global economy. You’re right money flowed out of Japan.
    Money has flowed everywhere.
    Protectionism is going to be hard to sell when we all depend on each other in today’s global markets.
    Now that the financial markets are open to global trading it’s time to return to the basics of producing goods for consumption. It’s a long list. Global markets need everything.
    The United States should be first in making workers a part of the expanded global wealth. It may sound stupid, but we need manufactured goods. We have factories. There are factories that are idled while the financial markets trade paper.
    It’s done, over, finished, the global market place is established. The paper has traded hands until it’s now worthless. Now we need somethings tangible.
    So in my opinion our economy, the economy of the United States, will need a couple of years to retool. It will take another couple of years to establish a work force capable of keeping up with demand.
    After all we all want to be rich doing nothing.

  23. 23
    Slumlord says:

    I forgot to add that Seattle would avoid the second great depression because it is special; we have Tim and company to protect us. (This is giving a compliment to the entire Seattle Bubble community because knowledge will eventually lead us out of what is to come.)

  24. 24
    Jillayne says:

    I voted for a depression, but maybe it’s because I’m depressed. Hot water heater died while at my daughter’s soccer game on Saturday; water everywhere in the basement.

    Need help: Rheem or Bradford White?

    Any advice appreciated. Gas hot water. Thanks!

  25. 25
    Slumlord says:

    The installation price is not as important as the operation costs over time. It pays to spend a little more and get an efficient unit with good insulation.

  26. 26
    DaveyDave says:

    Just a brief comment regarding the likelihood of inflation or deflation. Granted, it’s an equation with many, many variables. The one weighted most heavily in my mind is the extraordinary amount of dollars recently injected into the system. This is of course, currently open ended as we’ve promised Europe ‘unlimited’ dollars to increase their own liquidity. Combine this then with a certain recession that will be severe and prolonged at a minimum. It seems apparent we’ll have a situation with too many dollars chasing too few goods in the near and intermediate term. I would like to hear the supporting arguments for a deflationary environment.

  27. 27
    Jillayne says:

    Operating costs over time… energy efficiency and good insulation….thank you, Slumlord.

    Tim we forgot to add one choice. Hays Barnard is now calling our economy “nutty.”

  28. 28
    Slumlord says:

    I was looking at some foreclosure auction information in Snohomish County this morning. For several of the properties on the block the defaulting party was the developer Barclays North. (These were in various LLCs and the founder’s name, Pat McCourt). In several cases, the total amount owed was more than 10 times the assessed value. For one group of parcels, the assessed value was a little over $900,000 and there were unpaid mortgages and taxes for over $10,000,000. Amazing!

  29. 29
    LUC says:

    CNBC Headline: Dow Jones Industrial Average Surges 11%—Biggest One-Day Percentage Gain Since 1933

    I think the irony is lost on them.

  30. 30
    mukoh says:

    Slum,
    The projects that they have usually have assessed value in the raw form. if he has 100 lots on it, then his loan is high, and assessor has not caught up yet.

    Were you looking on this week list or 4 months ahead list?

  31. 31
    jonness says:

    “I would like to hear the supporting arguments for a deflationary environment.”

    Lot’s of money in circulation = inflation. Little money in circulation = deflation.

    In the Japan bust, the govt. threw massive money at the problem and lowered the lending rate to nothing in hopes of getting the money flowing into the system. But instead of taking the money and lending it out, the banks put the money in safer ventures such as T-bills. Thus, inflation never took root.

    The U.S. is looking at the same problem. Let’s say we throw mass money at banks in an effort to get them to lend. What is going to get them to lend that money to a guy coming in for a loan on a house that loses value before he gets the paper’s signed? There are much safer ways to invest the money.

    The first idea I’ve heard yet that I’ve actually thought could work is the govt. buying into the top banks. It’s a lot easier for one bank to trust loaning to another bank when they know the govt. has a heavy stake in the co.

    Personally, I’m against the idea, but if we are going to spend the money anyways, I’d rather see it go this way than some of the other stupid B.S. Paulson had planned.

    Thoughts?

  32. 32
    Robert Wojciechowski says:

    “The U.S. is looking at the same problem. Let’s say we throw mass money at banks in an effort to get them to lend. What is going to get them to lend that money to a guy coming in for a loan on a house that loses value before he gets the paper’s signed? There are much safer ways to invest the money.”

    Yes – so the prices of real estate can drop quite a bit. Once that situation stabilizes the prices will not keep going down. Banks will start issuing loans for mortgage again.

    So long term this will play itself out I think!

  33. 33
    Jillayne says:

    A couple things.

    This morning, Volker (link from CR) says we’re in for a “considerable U.S. recession.”

    http://calculatedrisk.blogspot.com/2008/10/volcker-considerable-us-recession.html

    Also, we’ve talked about Barclays North on the blog and in the forums. It will be interesting to see how the local state-chartered banks fare once they have to take the Barclay’s write-downs.

    Last, I’m with Robert Wojciechowski (comment just above this one.) banks have to make loans to surive, but this time around they need to make good quality loans. Especially during a recession.

    We should expect underwriting guidelines to tighten and interest rates to go up on higher risk loans, both of which will contribute to fewer home buyers, rising inventory and shadow inventory of REOs coming from the higher foreclosures.

    FHA keeps accepting the marginal buyers with a 3.5% downpayment.

    As prices continue their march downward, soon, FHA will need a bailout.

    NOW where will the first, second, and third time homebuyers go who don’t have 20% down?

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