Your recollections before the economic crash, other crashes.

Discussion in 'Politics, Religion, Social Issues' started by 63dot, Jan 21, 2009.

  1. 63dot macrumors 603

    63dot

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    #1
    In about mid-2006, I remember when California real estate market around me started falling down. Just prior to that, I saw houses gaining value from high to higher, on a monthly basis. The highest per capita city/region in the US was not Beverly Hills or the Hamptons, but Los Alamos, NM where defense contractors were making, on average, more than anybody in the country and Livermore, CA was not far behind on "Iraq" war money/kickbacks/bonuses. People were driving huge SUVs for show more than anything else and regardless of gas price, they had jobs that could sustain any amount of cost to run such a vehicle. But we all know what happened since then.

    Every recession/depression often sees a high time right before the crash.

    I am old enough to remember 1989. People bragging about lighting their BBQs with 100 dollar bills in Orange County where daddy's little girl could call up on Madonna or Elton John mid tour for a private concert, people wearing $35 dollar polo and OP beachwear (which was a ton lot of money then), people pimping out their cars easily spending more than the car itself, parents giving kids $20-$30 dollars daily for the mall every day after school for snacks and video games, etc. That whole excessive '80s lifestyle, and flaunting it became so out of style after many lost a lot of money in the '89 stock market crash and a few savings and loans mishaps that followed shortly after.

    What are your pre-crash recollections from where you lived?
     
  2. Desertrat macrumors newbie

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    #2
    Born in 1934, I was raised on "what it was like" during the Depression. Basically, about half the country did without much beyond bare basics. Luckily, almost half the workforce still lived on-farm, so many people had a place to run to and some ability to raise their own food. Excess credit and easy money in the 1920s brought it about, same as with today's mess. "The Roaring Twenties" and, I guess, "The Awful Aughts".

    We had the same thing in the 1970s, culminating with the bad advice Bert Lance gave Carter about monetary policy. The appointment of Volcker as Fed Head led to his raising the Fed rate to around 14% or so, which brought everything to a screeching halt. Credit dried up and we had the serious recession of 1980-1982. (I sold a house in 1980, carrying the paper at 11%.) Inflation stopped and then the ensuing tax cuts helped get us restarted. At the time of that recession, non-mortgage debt was relatively low and more people had some amount of cash reserves as savings.

    That recession led to strong emotions against "hard landings" from economic excesses and the ends of boom times. We had the same lead-in to the 1990 recession, but the Fed lowered interest rates to ease the pain to a "soft landing". We then had the dot-com boom, which again would have ended painfully but for another easing of interest rates such that the recession which Bush inherited was relatively mild. Following that we had the housing boom and bust of current discussion.

    The trouble with soft landings is that they do not allow the marketplace to fully correct. The bad investments don't all fail, as they should, and inefficiencies in production continue. So, a sequence of soft landings merely defers the serious hard landing to a later date.

    And here we are. The above is a bare bones view. There are other contributory factors to include, such as people's reactions to technological advances (electronics toys, e.g., and the ease of Internet shopping among other things) and government interventions into the workings of the marketplace.

    We're worse off in many ways than in the past, due to a lack of savings and an excess of debt--both personal and governmental. We've spent ourselves into a helluva hole.

    The 1930s saw the same sort of efforts that are being tried today. Then, it was "pump priming" and the WPA. Now, it's "fiscal stimulus" and "provide jobs". Infrastructure construction then; infrastructure construction now.

    The Great Depression lasted ten years.

    Best luck...

    'Rat

    "I was always taught to respect my elders, but it keeps getting harder to find one." -- Olde Phart
     
  3. 63dot thread starter macrumors 603

    63dot

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    #3
    The most sunny forecasts still call for the depression/recession/downturn to end in mid-2009 at earliest, but most forecasts see this into 2011 with a starting point somewhere in 2006 so it can be a massive, yet compact five year depression which in terms of real dollars may not be as bad as 1929-1938, but will be worse in some sectors such as "our" technology sector vs. the 1930s technology sector, and "our" housing sector vs. the 1930s housing sector.

    But we will likely not have a dust bowl crisis in the midwest, or continued trading fraud (as was still the case through the 30s) as we have more knowledge about rotating crops and more laws outlawing shenaigans which were actually legal back then.

    Whether this downturn is called a recession or a depression will be up to the historians long after it is over, but if current wisdom is to be believed we at least had a small depression in the early 1980s, and one in the mid-1970s. I do remember the gas crisis back in the 1970s and it made this one seem mild by comparison. Most people on this site won't remember it or were even born then. People with big cars, even in relatively good condition, were abandoning them in poor neighborhoods or selling for close to nothing. It was the big rush to trade in Caddies for small Japanese cars. This is what gave Japan such a huge foothold on the US market. I had a Datsun 610, slow, no power, but great gas mileage. ;)
     
  4. Desertrat macrumors newbie

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    #4
    Moneywise, the 1970s were a great time for me. I was a "vest-pocket dealer" in collectibles, mostly coins and guns. Prices were zooming upward at a great rate. I'd buy a collection, sort through and appraise everything and then by the time I'd get to a show, prices were up another 20% or more. Easy pickings! But I voted for my mother's fixed-income billfold, voting for Reagan, and I had to go back to work for a living.

    AS I've said elsewhere, my monetary views derive in large part from the folks at Agora Publishing. They believe--and, from history, I agee--that anybody who thinks this will pass in a mere two or three years is delusional.

    The only way I see that a nation can have a truly healthy economy is to export more in $$$ value of goods than it imports. To do that, you have to make things that folks in other countries want or need to buy--and you have to exercise restraint in what you buy from them. We haven't behaved that way for thirty years or more, and I don't think we can really turn that around in a mere two or three years.

    'Rat
     
  5. 63dot thread starter macrumors 603

    63dot

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    #5
    As of mid-2006, we were a full two years into it with securities volatility and out of control real estate drops where I lived in California. In a few months, we will be at three years.

    Some parts of the country, Ohio and Detroit for instance, has seen close to four years of economic hardship.

    Even if this turnaround takes one year from today, that's nearly a four year downturn. I think it will take at least 18 months from now and maybe two years, so we are talking nearly five years from stem to stern. This is certainly no 3 year downturn, but more like 5 years, or six when it's completely erased.

    But a downturn from 2006-2016 seems unlikely since we don't have the same conditions and lack of regulation that led to the nearly 10 year bust of the 1930s.

    In the 1800s, there was a 23 year downturn and slow economy when virtually no regulation was in place.
     
  6. Desertrat macrumors newbie

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    #6
    Housing prices peaked in 2005, and the historical average until the bottom has been four years, or mid-2009. Okay, if and only if the economy starts picking up can that hold true. (But all predictions from those with any credibility are that the housing bottom is still a good way off.) There's another fly in the real estate ointment: The commercial real estate implosion is just now getting underway, and is nowhere near a bottom. That's an unending loss of jobs in that sector--until the economy starts picking up.

    A further problem is that this kerfuffle is worldwide, and other countries are imploding even worse than we are--and thus cannot buy our exports.

    Our present jobless rate is now equal to 1982, and is still climbing. We're essentially broke, and the stimuli are merely printed paper and federal deficits--which won't do anything to help exports except as the dollar falls in value. People have little or no savings, on average, and on average have way too much consumer debt. For now, consumers are ceasing to consume, and are beginning to stash cash. That's Doomsville for an economy which has depended on some 2/3 of its action to come from consumeritis.

    IOW, I don't see anything in particular that's going to re-start the economy until the asset-value implosion has run its course, and until debts are paid or are all written off. IMO, that's several more years.
     
  7. 63dot thread starter macrumors 603

    63dot

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    #7
    Of all the sectors to return to normal, the real estate economy will come last where I live. I can actually see the economy out of a recession, technically, but out in overpriced housing area where I am (northern california), prices will still fall as they got out of hand from way back. Some San Jose plots in key locations for single dwellings were bringing in a million+ during dot.com and the steady downturn in prices will have to go a long way before that gets normalized.

    We here are hitting busts from the housing/mortgage crisis from '06-'07 and still the after effects of the dot.bomb crisis several years before that. Now I hear that Bill Gates is shooting for more H1B Visas for high tech workers so more Americans can lose work while Microsoft lowers their cost of operation dramatically.
     
  8. Desertrat macrumors newbie

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    #8
    That old Chinese curse is sure here, 'cause it's indeed "interesting times".

    G'night...

    'Rat
     
  9. 63dot thread starter macrumors 603

    63dot

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    #9
    China is handing us our own asses.

    I remember back in my MBA student days in the mid-'90s when the "business theory of the day" was outsourcing to increase profits of US companies, mainly porting work off to India and China from the simple tasks to high end engineering jobs. It was called, "being competitive".

    I was the lone liberal in the class who was opposed to just padding the bottom line of US companies via outsourcing. I was tagged an "isolationist" being pro-America as Clinton, and Bush Sr. before him were all gung-ho about "outsourcing" and giving China favored nation status. I only had allies in the far left and the Libertarians of left/right/center leanings, being sectors of the American political landscape who had no pull in Washington, D.C.

    I never thought we would sell off all the jobs while at the same time ranking dead last in K-12 education among large nations in math and science education. We are to blame for all this mess. Now people who thought like me, America first, are considered the wise ones, so go figure.
     
  10. Queso macrumors G4

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    #10
    Before the crash there was this obsession with bling, even amongst those who couldn't afford any of it. People had been manipulated into behaving like consumers rather than people. They borrowed money on the magical supposed value of their homes, to the point where had they thought about it they actually didn't even own that anymore. Their entire lives became an extremely expensive and stylish house of cards, every penny in their pockets going towards buying ever more objects that lost most of their value before the packaging was even discarded.

    And now it's coming crashing down people are trying to spend absolutely nothing to recover from their previous addiction to spending, desperately hoping they won't be next on the redundancy list. Sadly this lesson will only be temporary. In 20 years time a new generation of consumers will suddenly discover that money isn't so easy to come by as they'd thought. Some of us are lucky this time round. We watched the world come falling down before and didn't get fooled on this occasion.
     
  11. Desertrat macrumors newbie

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    #11
    63dot, for many companies, it was "Outsource or die." Simple as that. The public voted with its billfold, and US companies couldn't compete. When folks could buy 70% of the quality for 25% of the price, guess what? If you guessed "Wal*Mart", we have a Bingo!.

    Queso, in the Carter era, there were "Suvivalists". Disorganized and often irrational, but trying to prepare for an uncertain future. Nowadays, it's "Preppers" and they're far more aware, literate, rational and self-organized--and exist in far larger numbers.

    'Rat
     
  12. 63dot thread starter macrumors 603

    63dot

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    #12
    Even in my hobby, musical instruments, the granddaddy of them all for American guitars, Martin Guitar Company from the late-18th century, made some high profile models in Mexico.

    Of course, electric guitar makers from the US like Fender had been making Taiwan, Japan, and Mexico Fenders for years, and US company Gibson made offshore guitars under the Epiphone moniker. The last US-only holdout among major US guitar/bass guitar makers was Peavey, and then they resorted to offshoring some of their gear.

    When Peavey, a super traditional "America first" type of guitar/bass company went offshore, then I knew it was over. Minor US makers like Pensa Suhr and Rickenbacker, who have very small production numbers, are still made entirely in the US. But the giants, hundreds or thousands of times bigger, are ones who have resorted to off-shore production.

    Actually, it's really sad to see "American" car companies using many components made in Europe and in Asia to make thier Big Three products out of Detroit.

    The short term gains from off-shoring are tremendous, but the long-term effects are devastating.

    I would much rather, if I can, have just one American car, one American guitar, far fewer American clothes and other goods, and avoid the Targets, Wal-Marts, and Macy's just to have more foreign goods.

    In no way in this day do I think foreign goods are in any way inferior, but I would rather go with less, and get good, union-made American goods to help our struggling workers in this ignored country.

    I would even go for lesser-quality goods, if they were made in the US, than a better quality foreign good.

    Right now, I have an incredibly reliant Japanese car and Swedish car, but I would like to help my country by buying American for the next car. My next guitar will be an American guitar, even if it has, as has been the case, fewer features.

    But for computers, I am happy with an American computer, Apple, and an American PC like the ASUS, Acer, or Dell, though they are outsourced like all computers, to foreign countries. The day of an all US made computer from all American made components, is long gone. But better to buy Apple and Dell than Sony and Toshiba. I am willing to pay 10-15% percent more just to help my fellow countrymen/women.
     
  13. Desertrat macrumors newbie

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    #13
    63dot, nobody in all the previous discussions here has ever answered the basic question about "sending jobs overseas" and "importing cheap products": What is the alternative? IOW, how can the lower economic strata have the material possessions that they now have, such as computers, internet access, cell phones, etc.? (The list is endless...)

    If you protect jobs by imposing tariffs, you maintain or raise product costs beyond the buying power of the lower echelons. And then come trade wars and it all goes to Hell, just as in the 1930s.

    Hell's bells, it's almost forty years ago that it was announced, "The smokestack era is over. We (the US) are now in the information age." It's not Generous Motors' fault that nobody listened. And nobody listened when Pres. Clinton essentially repeated that message in the mid-1990s with, "The future work force must be better educated." If you can't compete in a given market, find a different market--or admit to general incompetence.

    Side note: I'm uninterested in "liberal" or "conservative" when I talk about money issues. I may comment about such views, but that has to do with the accuracy of the view, not the source. I go by history and my own experiences in the cold-cash marketplaces in which I've "played".

    'Rat
     
  14. iAthena macrumors regular

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    #14
    The one thing that stands out in my memory about every economic downturn is how many people told me for years how stupid I was for paying off my house, paying off my credit cards every month and investing in conventional savings accounts rather than flipping houses or some other whacky trend.

    Then when everything hit the fan, these same people groused about how "lucky" I was not to be affected by the economic downturn.
     
  15. Desertrat macrumors newbie

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  16. 63dot thread starter macrumors 603

    63dot

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    #16
    It's true in the short run that China and India made products make more products available for the American poor and working class. But what happens when too many of the US jobs go over there? Then not only do we have the poor over here, but a much bigger class of poor because their jobs went overseas. The long term trend is a massive long term recession and high unemployment.

    We already have a 1/4 of the population with at least Bachelor's degree and 1/4 of those graduates with advanced degrees. That's a ton of people. It's not more education we need. We need sound fiscal policy.

    Sure, let's keep an open market, free market, and free trade, but within a realm of reasonable trading. To just pad rich people's portfolios by porting working class and middle class jobs abroad only helps a small fraction of our population. Most of us were not lucky enough to be on the ground floor of a Lenovo or Wal-Mart with the initial capital needed to make us financially independent. And who knew?
     
  17. jecapaga macrumors 601

    jecapaga

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    #17
    I remember "back in the day" of the housing boom literally sitting at my desk thinking how strange it was that I made well above the median income in my area and yet based on what housing was selling for I'd need to make at least 3, 4 times what I was making to get into a house.

    It was obvious to me that if the average to above average earner cannot afford the average (at the time) $700,000 house in a terrible area with bars on the windows and hoodlums standing on the corner...something ain't right. If you need to be a doctor or lawyer to afford to buy a house in Compton, something is wacky...and look where we are now. The real estate market needs a serious correction.
     
  18. 63dot thread starter macrumors 603

    63dot

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    #18
    So I go to ABC News on the boob tube, and the United States Commerce Department puts out some interesting California housing numbers.

    Average California house before the bust, around $490K.

    Average California house now? ... about $280K!

    Before this real estate popped-bubble is corrected, we will have seen a true 50% percent drop in the median housing value in our state.

    Real estate has climbed far faster than wages and salaries in the country, and especially California, since 1946. Now that's a lot of hot air being blown into a bubble ready to be popped. Talk about a freakin' blowjob.
     
  19. Desertrat macrumors newbie

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    #19
    Some analysts say that the housing crunch won't end until we get back near the historical average: When the cost of an average house is just under three times the average* annual wage. (Define "average". :))

    'Rat

    * Maybe median instead of average; I disremember.
     
  20. 63dot thread starter macrumors 603

    63dot

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    #20
    US annual median wage, $24,000 dollars per year per person (slightly lower for women, slightly higher for men). This balances out to a dual household income averaging $48,000 dollars a year. Compare that to far more than a third of the world who make less than $2 dollars a day.

    My good friend moved from a $500,000 dollar small one bedroom house, at the height of the California boom, to a much larger house on the Canadian border near Maine for $35,000 dollars. So that was going from the highest market in the nation to one of the lowest. Remember, these are boom price housing costs, so the boom average nationally was between $100K and $200K. Now in the housing crunch, it's anybody's guess what the average American house is worth.

    And BTW, those income figures are during the absolute height of the boom, long before demotions and layoffs hit.

    My house lost about 55% percent in value last time I checked and it may be closer to 60% percent. The California average went down, nationally, approaching 45% percent, more in expensive markets like certain areas in Silicon Valley, and less in the states, ironically or not, who voted for McCain. People voted for change in party when they saw their houses getting devalued and not for change when their housing value remained relatively steady, with only a small downturn.

    If I was a homeowner in a different area of the country, I too may have voted differently. When California and New York lose a share of their domestic market to other areas of the country, the Midwest and South take up a lot of the slack and the transplanted West coast and Northeastern companies. Much in California high tech has moved to Texas, who some call the "new" Silicon Valley, or the "real" Silicon Valley.
     
  21. zachplaysguitar macrumors 6502

    zachplaysguitar

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    #21
    I've moved a few times, and in 2000 and 2005, and both those times our house sold in 2 weeks, and it actually increased in value. I can't imagine selling our house no, and if we did, it would be at a huge loss.

    I also remember when gas was under a dollar (at least in Toledo, OH) in the mid 90's and everyone freaked out when the local gas station's sign changed form 0.99 to a little over a dollar.
     
  22. DarthTreydor macrumors 6502

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  23. 63dot thread starter macrumors 603

    63dot

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    #23
    Indirectly, it contributed towards this one.

    Some say, there is a connection between 9/11 and Saddam Hussein, others say there wasn't. Either way, it was a big selling point in getting the US into an expensive war. Counting the costs of civilian workers and contractors besides the regular military, national guard, and reserves, this war has averaged out to about $2 billion a day and it has sapped our nation's resources.

    On an interview I heard on ABC News radio, the supplementary costs make the average bullet fired, and what huge organizational management to make our troops supplied halfway around the world, to about $1,000 per bullet fired. Doctors, nurses, dentists, supply corps, and others have to be there too to keep the fighting front lines to get in there, stay there, and occupy for a long period of time. Compare this to the estimated $1,000 dollar cost per air to air missile during the Vietnam War. The cost of the Iraq War, v.2, has been astounding.
     
  24. Desertrat macrumors newbie

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    #24
    No doubt we'd be better off, moneywise, had we not gone into Iraq. But the direct cost, annually, over and above our other military costs, was roughly one-third of the average annual federal deficit during these last five years. By and large, the other two-thirds was social transfer, whether retirement, Medicare/SS, or the generic "welfare". And pork, of course.

    Anytime there is an expanding economy that gets into a boom time, you invariably have a period of optimism, loose money, easy credit and malinvestment. These periods are always followed by downturns of varying severity. If you don't allow the marketplace to wipe out malinvestment, and do the "soft landing" thing, malinvestments continue. Eventually, after enough soft landings, you wind up with today's type of problem--a seriously hard landing.
     
  25. mactastic macrumors 68040

    mactastic

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    #25
    Yeah, the largest transfer of wealth from the middle class to the rich we've seen in quite some time.

    You can't seriously be arguing that Bush increased spending on retirement, medicare/SS, or the generic "welfare", are you? Certainly not by enough to account for the other two-thirds of the federal deficit, right? And pork? Come on, McCain tried to run on that, but it was pointed out that the Iraq war costs were many many times larger than all the pork in the budget. If you think the money spent on the Iraq war was not that worrisome, as you have repeatedly pointed out that "hey, it's only 1/3 of the problem", you really shouldn't gripe too much about the much smaller pork numbers.

    His tax cuts cost a huge chunk of that remaining two-thirds. And the vast majority of that was a massive wealth transfer to the top 1% of income earners.
     

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