NY Times: Trying to Guess What Happens Next (How Bad Could the Economy Get?)

[marmar]

Trying to Guess What Happens Next

By PETER S. GOODMAN
Published: November 25, 2007

YOU need not be a Wall Street chieftain to feel the anxiety that has wrapped its arms around the American economy. The stock market seems locked in a downward spiral as one bank after another suffers its day of reckoning with bad mortgages. Companies are sharply cutting profit forecasts as the sense takes hold that American consumers are finally too loaded with debt to buy the next flat-screen television. The dollar has fallen to inglorious depths, turning Manhattan department stores into something like a Tijuana street market for Germans. One unpleasant word hovers large: recession.

How bad could things get? Pretty bad, say many economists. Not so bad that your grandfather’s prescriptions for enduring the Great Depression need dusting off, but nasty enough to force many Americans to get reacquainted with living within their means. That could make life uncomfortable. It may also be an unavoidable step toward purging the United States and the global economy of a major source of instability — an unhealthy dependence on the willingness of American consumers to keep buying even as debt mounts. Concerns that Americans must eventually grow thrifty, leaving factories from Guangzhou to Guatemala City scrambling for buyers, now sows unease around the world.

It is worth bearing in mind that the American economy has a history of unexpected resilience in the face of supposedly grim prospects. Moreover, some parts of the economy are enjoying good times, notably farmers able to cash in on the making of ethanol. That said, most economists think the American economy is headed for a significant slowdown, as housing prices keep falling, consumers grow tight, and businesses cut investments.

The Federal Reserve last week said it expected the economy to grow 1.6 percent to 2.6 percent next year, a stark contrast from the 3.9 percent rate registered in the most recent quarter. Some see signs of a worst-case scenario — a severe recession that would feature a plummeting stock market, a lower dollar and the loss of many jobs. That would make for an unpleasant year or two for Americans from most walks of life. It would probably drag down the world economy, as Americans put off purchases of everything from computers made in China to Italian-produced sports cars.

The most bearish indulge frighteningly gloomy tones. “The evidence is now building that an ugly recession is inevitable,” declared Nouriel Roubini, an economist who was among the first to warn of the dangers of a real estate downturn, writing last week on his blog, the Global EconoMonitor. “When the United States sneezes the rest of the world gets the cold. And since the United States will not just sneeze, but is risking a serious case of protracted and severe pneumonia, the rest of the world should start to worry about a serious viral contagion.” .......(more)

The complete piece is at: http://www.nytimes.com/2007/11/25/weekinreview/25goodman.html

[Demeter]

1. Actually, It WILL Be Worse Than 1929!

And Grandpa's stories of the Great Depression (which will in the future be labelled the Lesser Depression) are in my mind regularly since BushCo coup. Grandpa was also a witness to the Bolshevil Revolution--those stories also pop up regularly.

[OHdem10]

2. You cannot fire your customers and continue to expect

growth in your business. The US has been the consumer base
for the world. We make more and more trade deals--outsource
American jobs, thus Americans' making lower and lower salaries.
Lower Salaries means one cannot buy as much (even cheap imported
goods). Americans not being able to buy up all these goods
means other countries will get into economic doldurms.

Lee Iacoco taught us way back when---He outsourced. His Workers
had been the buyers of his cars. By Relocating jobs out of country
"I fired all my customers".

Slowly, the chickens are coming home to roost.

Energy Prices, Crooked Banking and Mortage Practices and Companies
firing their customers--Convergence==a perfect storm.

[flashl]

3. Thank you.

Since "right-sizing" and other payroll purging antics, I have been wondering how far firing the consumer would go.