Economy - Recession or small setback?

[:1]Given the recent pattern of the economy, there are plenty of divided opinions on whether a recession/depression will occur or if this is just a small setback after the US credit rating downgrade and the economy is still stable. What are your thoughts and why? Any investors?|||I have no opinions anymore. I couldn't possibly tell if hard times are here to stay, or if the U.S. is going to pull itself out of its own butt somehow. All I know is, I used to have extra money and now I'm spending more than I make just trying to stay afloat. Yummy.|||I've heard that Wall Street was making record profits.

I don't really know if it's true.

Of course, anyone under 250k a year suffers (not that higher brackets don't. Or do they?).|||It is bigger set back then you think and more can be done about it.It is not going to take few month to year to fix.It will take quite a few years to fix.|||Honestly, I don't know if all those economy problems are real or just fear-based ways to manipulate people further. Not to sound paranoid, but let's face it... it's the US that owes money, most of it is owed to Americans.

So in theory, the gov could cut spending and spend more wisely, and create some jobs in the process, and balance their budget.

Come next republican in the house, he'll be all like "pfft what economic crisis" and go on a spending spree involving some war with some fictitious overseas threat.|||Quote:








Honestly, I don't know if all those economy problems are real or just fear-based ways to manipulate people further.




They're real enough. In case you haven't noticed, groceries have gone way up over the last year or two, a serious number of people have lost homes and retirement funds, real estate and new housing has gone down the tubes, and it is definitely a lot more difficult to find a job than it was 5 years ago. Fear based, manipulation or not, the bottom line speaks for itself for the average citizen.|||Groceries are freaking ridiculous. It's absurd how much we have to pay for food, especially down here. There's almost no chance that I'll be getting Social Security when I retire, even though I have been paying into it for almost 15 years at this point.

I think I am going to stop here before I start repeating myself (again) about political corruption and how it is ruining everything. Oops, too late.

I hope it is just temporary. We've been struggling to get back to where we were since 9/11, but we HAVE been making progress. There have been lots of setbacks, but progress, nonetheless.|||I agree that we feel the repercussions. What I meant was that I wonder how much of it is fear & speculation, and how much was driven by actual valid factors. And of those factors, how many are corruption and mismanagement at the top tiers, and how much is from other factors outside our control.|||Quote:








All I know is, I used to have extra money and now I'm spending more than I make just trying to stay afloat. Yummy.




Seriously this.

************************************************** *************


Quote:








I've heard that Wall Street was making record profits.

I don't really know if it's true.




It's true. Yay for barbell economies.|||Orthodox economics, which is a hybrid of Keynesian macro-economics and Neoclassical microeconomics, would define a recession as two successive quarters of receding GDP growth. The problem with orthodox measures is their inability to properly consider labor markets in their analyses. So it would be fair to say we may not be entirely out of the woods to begin with.

In my opinion, we are going through a market correction. A painful and necessary part of economic recovery. I subscribe to the Austrian model but I can best explain this in Keynesian terms.

Since the New Deal era the government has been under the illusion that their spending alone can prime the pump. Keynes was right, but his interpretations are where things go awry. The New Deal and most centre-left stimuli revolve around infrastructure, which while important will not restart an economy. The centre-right stimuli target business, or used to, to boost manufacturing or production of new goods.

When you follow the IS-LM-FE model (macroeconomic model), the increase in government spending results in lowering the native currency and increase in exports coupled with a rise in prices (how this is measured is an entirely discussion) and a boosting of GDP.

Where orthodox falls short is they assume rational behavior on all players in the market. I believe this rationality is more bounded but still existent. We look at the stock market. It's a gambling game of uncertainty. What we need more than ever is for the government to take a neutral role, let the zombie institutions die off and stimulate viable businesses if they must.

In the classical liberal model, government defines property rights, investment conditions and can be a force of good.

Ok, macroeconomic rant done. In short, we are not heading for a depression. We are still solvent, more so than Europe (prime example at the failure of social democratic policies) and most of the world.