How I Look at Economic News: Beyond the Talking Heads

As I’ve mentioned many times before, I’m not afraid of the current economic conditions. I simply don’t buy into the fear that is constantly being touted during most news reports about the economy.

Several readers have followed up with me extensively on this. How can I possibly feel positive about the economy when, over the last year, several banks and investment firms have completely failed, the federal government has tossed at least a trillion dollars to bail out many other companies, unemployment has skyrocketed, and the stock market has fallen on its face?

Here’s the truth: I don’t listen to CNBC or other mainstream sources for my economic and personal finance news. Almost always, those sources try to take the actual facts and try to spin it into a larger story, making it sound as though a bad piece of economic news is “proof” of something disastrous and good pieces are often put up as exceptions to the rule.

Instead, I look at the following:

How are the people around me doing? I know a couple of people who have lost jobs – a number that’s completely in line with the rise in unemployment. Quite a few more are cutting back on their spending, mostly as a way to protect themselves against a potential job loss that they fear.

Most of the people I know, though, aren’t changing a single thing. I know people who are buying cars, shopping for homes, buying consumer goods, and so on.

How does that compare to real numbers? Is this just my own experience, or is it in line with the real numbers out there? Well, the actual unemployment rate changed from 4.9% to 7.2% from December 2006 to December 2007 – a difference of 2.3%. In other words, out of every 100 people I know, two more should be unemployed right now than a year ago – and that’s pretty accurate.

What about consumer spending? Most accounts have consumer spending dropping about 4% during 2008, which makes it appear to be a truly terrible year. However, what’s being left out of that picture is that 2008 had virtually no inflation – almost every other year has at least 3% inflation, which artificially boosts that consumer spending number. In a year with normal inflation, the consumer spending would have appeared unchanged and thus there would be little or no panic about it.

What about stocks? The last eighteen months saw a very rapid drop in stock values – about 40%, depending on what index you use.

However, if you go back and look at the last recession, from mid-2000 to late 2002, we saw almost the same exact percentage drop in the stock market – about 40%.

The big difference between the two was the speed of the drop – but the speed of the poor economic news was much more rapid this time around, too. The typical signs of recession – a popping bubble in an economic sector, rising unemployment numbers, and so on – all lined up very tightly this time around – but the numbers themselves weren’t that unusual.

Even more noteworthy is that since November, the stock market has basically leveled off, with behavior that mirrors what happened in late 2002 and early 2003 at the end of the last recession. In fact, the stock market from 2003 through 2008 looks almost exactly like the stock market from 1996 to 2003. The only differences are the speed of the rise (faster in the earlier one) and the speed of the fall (faster this time around).

Things I’m not seeing I’m a student of the Great Depression. I’ve talked to many people who lived through those years about their experiences and read countless books on the subject.

We are not living through anything that even compares to the Great Depression, and to even imply that we are is simultaneously deeply insulting to those who did live through it as well as woefully ignorant as to what it was like.

There are no block-long lines for soup kitchens. More than 90% of the nation is fully employed – not the 60% or so employment of the 1930s. There is no “dust bowl” – soil and water conservation practices have made such a huge loss of our nation’s bread basket impossible. People aren’t going to lose their money to bank failures – the FDIC has them insured.

What do I read to get my information? I read most of the same media sources that everyone else does. The only difference is I don’t care about much of the commentary. I just ignore it and look at the numbers. What do they really mean? How do they compare to what I see in my own life?

The rest of those articles – the pieces that attempt to paint a frightening picture – are mostly spin. Don’t worry yourself about them.

So, my take is… As far as I can tell, this is a pretty typical recession – perhaps a little stronger than a typical one, but nothing comparable to what happened in the 1930s.

Yes, there are a lot of ominous economic signs out there. But there are very ominous economic signs during every recession – virtually every down turn has bubbles that pop and situations that seem apocalyptic.

What I see, though, is that almost everyone I know is still fully employed. The local food pantry doesn’t have a line out the door. No one is seeing their life savings disappear in bank failures.

That’s the state of the economy as I see it – a strong recession, but nothing we won’t survive.

If you enjoyed reading this, sign up for free updates!

Loading Disqus Comments ...
Loading Facebook Comments ...
  1. Mary says:

    Thank you for a breath of sanity. I appreciate your ability to sift through the spin and put the essentials into perspective.

  2. Oskar says:

    I totally agree with your logic, someone at my place of work told me that the economy (in Sweden where I live) was back at 2004 levels…don’t know exactly how he calculated that (I think he was actually talking about the stockmarket) however what he said got me thinking….was 2004 really that bad…I don’t remember any ‘great depression’….:-)))

  3. Frugal Dad says:

    Amen! I can’t help but think much of this negative news drum was beaten in the name of a creating an “October surprise.” Unfortunately, members of both parties bought into it, and their knee-jerk reactions of giving out billions in bailouts is probably what put a cap on inflation (in fact, I’m surprised we didn’t see some deflation after such unprecedented obligations to spend money).

  4. Judy says:

    Thanks Trent. We needed that. Our family has stopped watching the TV related to what you have just described.
    By the way, you might like to know your book was displayed on a small table, by itself, right at the front door of a large Barnes and Noble here in Santa Ana California. We bought a copy of course.

  5. What is happening now is merely the economy trimming the fat and attempting to build some muscle. The reason for the current recession is, ultimately, bad debt given out to irresponsible borrowers by greedy lenders, under some coercion from the fools running the government. The bottom line is that we all need to be very careful about the debt we incur (I’ve personally sworn off all debt except a mortgage within certain limitations) and to be very responsible with how we handle it. Maybe the next cycle will be even stronger if Americans will realize that buying things you can’t afford is what caused this mess in the first place.

    But yes, this economy isn’t all that bad right now. I’ve managed to find a new job that pays better in the midst of the problems and it was a good time to roll my little 401(k) into an IRA as it cut back on the fees.

  6. evi says:

    Thank you Trent, for your logical and thoughtful words on that subject. It’s good to get a break for freaking-out media and people. If we keep living and working, things will get back on track (are they off track? I am not too sure about that… After all, money is an illusion and is just what we want it to be…) Keep writing – I will keep reading. ;-)

  7. Curt says:

    It’s always more fun to play the optimist…

    But then you don’t believe the President … who has studied all the data and talked to all the economists and concluded that this is the worst economic crisis since the Great Depression and perhaps worse.

    Be careful not to be over optimistic, like President Bush, and get blindsided when you do one day lose your job.

    The Great Depression started in 1929 but didn’t get bad for several years later. If 2008 was like 1929, then now is the time to prepare for the bad years to come.

  8. Rob says:

    To some extent recessions are very selective. If you, say, worked for Lehman Brothers, this is your personal depression. :-) You have technical skills that were at one point valuable, but are now neither valuable nor in demand. Without some sort of major lifestyle change in terms of career, employment prospects really are bleak for a very long time.

    No amount of reinforcing the economic ideas of supply and demand will make you feel better, either. :-D

    Likewise… in a recession, it’s important to think in terms of the margins. One of the questions I think about now is whether we’ve shifted (or begun to shift) from a consumption-based economy, to a sustainable one. For simplicity sake, let’s say that reduces demand 10% across the board, indefinitely.

    Again simplifying, it means 9 of 10 people will still have a job, but 10% of the working population will have to find their own way. I’m most definitely not an economist, but with a steadily climbing unemployment rate, it’s fair to ask – what are all these people actually going to end up doing?

  9. kristine says:

    I think the drop in consumer spending took into account inflation, which negates your comment.

    On LI, New York, there may not be block-long lines for the soup kitchens, but charity pantries are running out fo food due to increased demand. And the soup kitchen my aunt volunteers has doubled its clientele.

    In looking primarily at the people around you, you are wearing blinders that almost exclusively take into account your specific soicio-economic and demographic group. Not every group will feel the effects equally. I am an upper middle class teacher, and the only effect I have felt is my dismal retirement account statements. And my friends are fine too. But I realize my range of vision is limited to community, not the whole country.

    Unemployment figures no longer take into account (thanks to Reagan) those whose benefits have run out, or who gave up looking for full time and now work at sporadic little part time gigs with no benefits, to survive. They may not be technically unemployed, but I’ll bet they would like full time employment, health care, and sick days, and resent not “counting”.

    I do not presume that we in a great depression. But to say this is the same as the last recession seems inaccurate. Not because of the panic and fear factor, but because of the global ripple and negative feedback loops that have developed, that still have further inpacts in the making.
    To say things are not that bad is insensitive to the millions losing their homes, even if it has not happened to anyone you know. You left foreclosure figures out.

  10. Anastasia says:

    What really worries me is not the current state of things, but how we got into them. I can’t help wondering if the system is broken. How much of our prosperity in the past few years was brought on by people actually being able to afford the things they bought, verses people buying things on credit?

    Credit is, in a way, a fantasy. It’s having the spending power of a lot of money, without actually having that money. At some point reality strikes and people have to pay the money back, or default on their loans. Too many people default, and we get the situation that mortgage companies and banks have been in this year.

    I’m certainly not suggesting judicious use of credit is a terrible thing. Many people buy houses, cars, and even HDTVs with credit and pay off their loans just fine. What I honestly don’t know is if the economy can flourish with just those people using credit, or if we’re in a situation where we need more consumerism than the general population can afford. If so, we have a problem.

  11. Michael says:

    You’re not the only one who relies on primary sources. Many people who also tune out the daily news draw different conclusions.

  12. ct47pa says:

    I must take exception with the statement that we had virtually no inflation this past year. Inflation in 2008 averaged 3.85%, the highest number since 1991, when it was 4.25%. Gas and food were the primary factors.

  13. AB says:

    But you live in rural Iowa!!!! You need a much more representative sample before you can draw sweeping conclusions about the rest of the country. Your view would be much different from the suburbs of Las Vegas or Riverside, California.

  14. Troy says:

    We do not share the same opinion.

    Sorry for the long post, but it is important for your readers.

    My concern is the “media” isn’t reporting enough of the real issues.

    The second wave is coming. You can measure those around you, which is a decent measure, adn your own situation, and many other points. You must also look at all the incoming information.

    You said that is what you do. Great. Lets talk about the coming “second wave” information

    I highly highly recommend you study and then post/discuss what I am speaking of. It will control virtually everyones lives for the next three years. Financially, it is THE topic.

    The second wave. The “prime” debacle. Wave one was the subprime mess, as pop culture defines it. That was an appetizer. Subprime mortgages originated for those with poor credit from 2003-2007. Those loans typically have a 2-3 year fixed rate period followed by an adjustment.

    So, from 2006-2008 those loans started to adjust. Boom, you have what we just witnessed. The subprime collapse. Nearly brought down everything it touched, set off a global meltdown, you know the rest.

    The Subprime meltdown is essentially over as ov the end of 2008.

    BUT…here comes the next wave. It is guaranteed to come. We know it is coming. OH…and it is much bigger. The second wave.

    Alt-A/Option ARM/ARM wave. These are loans originated between 2003-2007 for generally 5 year fixed periods to people with good credit, unlike subprime. However, these loans had something missing. They either required little or zero down, required zero prrof of income, and the kicker, OPTION ARMS, required LESS than the interest due on the payment. these loans had payment choices each month. (Full, Interest Only or Minimum…which was less than interest due) That means that most, over 80% of those loans the borrowers have paid less than the interst due, so their balance has RISEN over the past 3-5 years. RISEN.

    Since most of these loans were 5-year fixed rates, followed by adjustmens after, the beginning of the loans adjustment periods start in 2009, peak in 2010 and last through 2011.

    THIS WAVE IS MUCH LARGER THAN THE FIRST WAVE-SUBPRIME.

    Google “ARM Reset” and look at that data.

    Then remember this second wave will crumble many of the already weak institutions that barely survived the first round.

    Why were these originated. High priced areas. Most of California, Florida, etc…the “HOT” markets had such enormous appreciation the homes became unaffordable for the average person.

    Back in 2005-2007Here in the Midwest, the average household income wass 50-70K and the average home price was 150K-200. roughly 3-1 ratio. In the high priced markets the income was 70-100, but the home price average sometimes got into the 500-700K range, or 7-1. More than double what is normal.

    Peopel couln’t qualify, so teaser rates with tiny minimum payments were invented to keep the party going.

    The party is over now, and it is time to pay for our “indulgences” The hangover hasn’t even hit us yet. It will HURT. ALOT.

    Be prepared for this. It is coming, without a doubt. Don’t buy into the media hype for sure, but pay attentiion to this.

  15. jeff says:

    You are so right, Trent. This is a very helpful analysis to talk some people down from their ledge. Thanks.

  16. John says:

    I think some people take comfort in absorbing over-hyped news about the economy. Their thinking is, “If sometimes happens to my job, or if I can’t afford to pay my bills, then it’s not my fault. It’s the economy.”

    These days, we need to be more prepared and responsible. Some people will feel like that’s too much to expect from them, and those are the people who will suffer the most.

    If people spent more time taking steps to improve and protect their finances and less time looking for reasons to worry about money, I’m pretty sure the economy would improve.

  17. Stephanie says:

    I couldn’t agree with you more, Trent. We’re in the process of building a new bigger home we can afford and looking at a fixed 3.5% interest rate on a 30yr mortgage. Paying 20% down on our house with a super healthy emergency fund of at least a year of living expenses left over.

    It is amazing how being responsible with money gives us such freedom. I don’t buy the news drama at all.

  18. George says:

    It definitely isn’t the same as the last recession. Oregon, in the spring, reflected the national average in unemployment. By November, unemployment was 8% and now, for December, it is 9%. This is an unprecedented acceleration of unemployment in my state and we have not experienced this level of unemployment since 1985.

    Now hopefully things are leveling off, but that rate of unemployment increase is major symptom suggesting that my state’s economy has more bad news on tap.

  19. You have vastly underestimated the current state of the economy. Ignorance may indeed be bliss.

  20. Thanks a lot Trent. Now what am I going to do with all this gold I just bought?

    I thought those people on TV were looking out for my best interests!

  21. Katie says:

    I disagree with the statement that 90% of the country is fully employed.

    The way the government calculates employment numbers has changed since the Great Depression. For instance, The 7.2 number does not include people who have been out of work for more than a year (a number that is likely to rise during a recession) or people who are underemployed, such as those who would like a full-time job but can only find part-time work.

    At it’s highest unemployment reached 25% during the Great Depression. If the number was calculated the same way it was then, the current U.S.’ unemployment numbers would be closer to 16 or 17%.

  22. CPA Kevin says:

    I agree somewhat, but my biggest fears are:

    1) What Troy said at 9:54am – that the mortgage/real estate market gets worse. We are hoping to move this summer and fear there won’t be anyone to buy our home.

    2) That once things start improving, people will forget quickly and start spending lavishly again. Basically, that this neo-frugality will go away so fast it won’t make a difference.

    3) Our country will get into some REAL trouble and need to borrow money and won’t be able to since we’ve already borrowed to the hilt to finance day-to-day operations. What if there’s another big war, terrorist attack, health scare?

    Basically, I hope people and the government learn a new habit of saving something for a rainy day.

  23. The Personal Finance Playbook says:

    I agree with the comments re: the way unemployment is calculated.

    It’s impossible to predict the future, or know how this will all pan out. You should prepare for the worst and hope for the best. I actually feel pretty confident that we’re somewhat on the road to recovery…the government is taking extreme action using tools that weren’t necessarily available leading up to the Great Depression. However, there are so many variables as to where we could go from here. Deficit spending can be dangerous, anyone in touch with their finances can attest to that. We’ve almost exhausted any possible stimulus from monetary policy. We could become involved in another war…or worse, we could be attacked. That’s a hypothetical, but I think it’s reasonable enough that we should be digging in and preparing as though this is going to stretch out for some time. Don’t stop saving, don’t stop investing, and live well within your means.

  24. Matt says:

    @Troy

    Yes, but … with short-term interest rates in the U.S. so low (and with 1-year LIBOR down from 2006/2007 levels), won’t this “reset crisis” be softer than previously expected?

    I’ve even read that some folks’ ARMs will adjust DOWN! The adjustment is generally tied to a baseline interest rate plus a margin (read: profit) for the lending institution. When the baseline interest rate falls, so does the amount of the adjustment.

  25. Ian says:

    I really like your analysis. I too really view the economy more from “what’s happening here”. For example 3 homes on my street are in foreclosure, many people I knwo are struggling, and as many are doing ok. I think looking at the local impact first hand is always better that reading the news.

  26. Matt Sage says:

    The magnitude of the economic recession that you see around you really depends on where you live. I live in the Inland Empire in Southern California, epicenter to the housing boom and bust. In my social circle (the church I attend) roughly half of the people are employed by the housing industry in some manner. Or were employed. Our pastor just ran some numbers and found unemployment at about 16% for our congregation, which is high. That doesn’t count those that are working, but working for a lot less than the past few years.
    I work in commercial industrial construction, and I haven’t seen a slowdown like this since 1991-93. Our company is just sitting around dead in the water right now.

  27. K says:

    I agree with Trent’s point that we are not headed toward a Great Depression. People made some poor decisions and now are living with the consequences. And affecting the economy as well. But no one I know who made smart decisions (stayed out of debt, got a fixed rate mortgage on a house they could easily afford, planned for their future) is in financial trouble. Both sets of our parents are still retiring this year despite the drop in the markets because they have been planning carefully and have their assets allocated properly. Sure, there will always be people who need to use public assistance, soup kitchens, etc. But even the people I know who have lost their jobs are doing ok because they had enough funds to tide them over, and are willing to adapt and work in other jobs. Even with lower pay, their lifestyles aren’t too extravagant to put them in trouble. There are even a few at my company who volunteered to be laid off because they were so secure. So in my opinion, capitalism is working exactly the way it is supposed to. Punishing people who don’t “play by the rules.” The Great Depression, however, was so ubiquitous it affected nearly everyone, who were forced to adopt extreme cost saving measures, measures that no one, no matter how destitute, would need to do today.

  28. tightwadfan says:

    the only thing I agree with you Trent is that this recession isn’t anywhere near as bad as the Depression and the comparisons are insulting to those who lived through the Depression.

    Due to the safety net put in place after the Depression, ordinary people are not being horrifically wiped out as they were back then. And as you note there is no dust bowl to compound the problem.

    However… I think you are being premature and naive. This recession is going to be much worse than any in recent history. At the moment the full effects of the banking crisis haven’t finished spreading through the economy. And worse is to come in the housing market as Troy noted.

    Most of the recent economic recoveries were fueled by debt-based consumption… so much of it was home related (furnishing/renovation) … that road is now closed.

    As kristine pointed out the unemployment rates are higher than you think, nowhere near as bad as the Depression, but not as rosy as you believe.

  29. Sally says:

    Thank you. The sky isn’t falling……and let’s hope things do improve.

  30. !wanda says:

    One things that has been… nice.. about the current crisis is the cutback in conspicuous spending among the people who can afford it. It really sets the tone when people read how the rich are “doing without,” even when they’re just cutting expensive yearly vacations and the 10-year old’s cell phone. I

  31. Sunshine says:

    Extremely off-topic, but can I just say “Holy crap” to the staggering number of comments on the “First Time” post! Very inspirational to read why people continue to read TSD.

  32. Jade says:

    Well, I dunno what the local impact looks like everywhere else, but here in CA I drove down the street to visit my mom and saw 10+ for sale signs in half a mile, several of them indicating foreclosures, short sale, or bank owned, and even one big ugly yellow sign for an auction that was on someone’s garage.

    I hope Matt is right and that these Option ARMs may adjust down, but I already helped one friend with a loan modification when his Option ARM adjusted up. Fortunately, he’ll be able to keep his house.

    And just from what I’ve seen around me, the mortgage broker I worked for briefly in late 2005/early 2006 was still selling Option ARMs like there was no tomorrow all the way through 2006. So I’m sure his clients will all be seeing their payments adjust through 2011. I quit working for this guy because I knew these were bad loans, and I wouldn’t be able to sleep at night if I sold one. And it drove me nuts that I’d call the office for a rate quote on a 30 year fixed and all I’d get was “Why aren’t you selling them an Option ARM?” My response was, “Because they can actually afford their house and they don’t want to lose it when the market tanks in a year or so.” And my boss’s response was always the same, “Housing prices will never fall!” But the market was already showing signs of cooling off at this point…

    I think that the last recession we had wasn’t as painful as it needed to be to pay for our excesses during the dot com boom, because people switched to speculating on houses soon after their portfolios tanked. So this is like a double recession, and the only thing that’s going to drive us into a depression is fear and panic. Or we’ll find something else to speculate on and use that to continue living beyond our means, and then that will bust and we’ll be in a depression. Either we all learn (including the government) to live within our means now, or we end up like the Romans.

  33. Jan says:

    The future is unknowable, nobody knows what’s ahead.

    If this is going to be a new Great Depression, then huge misery will be obviously present a couple of years from here, not in the immediate future.

  34. Rob says:

    Re: Option ARMs

    I read the terms of those mailers that subprime lenders send in 2006-2007… I’m relatively sure that they read something like this:

    Initial: 1.75%
    1 year: Prime + 3%
    2 years: Prime + 5%, or sometimes crazier numbers, like 16%

    etc., etc.

    We weren’t smart enough to avoid a completely subprime mortgage, but there was equally no way we would’ve gone for something that sounded too good to be true, and a lot of people seem to be figuring that out the hard way.

  35. Strick says:

    Yeah, I’m not really sure why folks ever fear or actual base household decisions on macroeconomic factors instead of their individual economic situation. I’m not saying its bad that folks are being more cautious now because of it, just wondering why no one worried about losing their job when employment was 5% instead of 7% and wondering why no one worried about their debt back when they were allowed to go further and further into it.

  36. momof4 says:

    You know Trent last year when someone asked you if you thought we were in a recession you said no and posted an explanation about why we were not in a recession. Unfortunately you were wrong. As other people have commented, 90% of the people are not fully employed. I know that I live in one if the harder hit areas, so my view is probably skewed toward the negative, but the unemployment rate does not reflect the under employed, those who have timed out on benefits, the stay at home moms who are trying unsuccessfully to reenter, heck, even the high school kids on our block who are looking for low wage jobs. Our local food bank and heat and warmth fund have seen a 30% increase over last year. I don’t think the sky is falling, but to say this is just another strong recession sounds ridiculous. Unfortunatley many of the jobs lost in manufacturing, both white and blue collar are not coming back and these workers need to do a big shift to find work. When I heard President Obama’s speech and he talked about a seismic shift in the country, I think that phrase really applies to employers and employees and the future of the American worker.

  37. Sandy E. says:

    @Matt — it is my understanding that when the interest only loans reset, the principal will now be added in, (something that a lot of people aren’t realizing). Consequently, even though the interest will be lower, w/the now added principal, it will result in a higher monthly mortgage payment.

  38. Cathy says:

    I also tune out the mainstream media. However, my analysis is much different. Almost all of my friends have either been laid off, taken a pay cut, had hours reduced, or lost benefits. That’s my immediate circle. I live in Seattle and Microsoft has announced layoffs for 5,000 people – 1,400 will be laid off today. That’s going to have a nasty ripple effect in my community. Microsoft employs many people directly, but even more indirectly. Partners are going to follow what Microsoft does.

    I lost my job during the tech bust and it was nasty then. This is going to be worse because this is based in the foundation of our economy – the financial system. The tech sector was an isolated segment in 2000-2004. This is an earthquake that cracked the foundation.

    We will recover, slowly. But it’s going to be more painful than during the tech bust – and I don’t have fond memories of that period. That’s about as optimistic as I can get.

  39. Sandy E. says:

    @Matt: When the interest only loans reset, it is my understanding that the principal payment will then be added. Consequently, even though the interest rate will be less, the actual monthly mortgage payment will be higher. That is the worry.

  40. Sandy E. says:

    @Matt — it is my understanding that when the OPTION loans reset, the principal payment will then be added. Consequently, even though the interest is less, the actual monthly mortgage payment will be higher. That is the worry.

  41. maggie says:

    I agree with Kristine. I do not think that the inventive numbers you choose to look at – ignoring the commentary associated with them – allows you to view clearly the economy as a totality.

    You say that you only have 2 friends who are laid off. Using my own experience as a recent graduate, I have 5 friends who have recently been laid off. I have 20 more who have been unable to find a job in their feild and have either given up, (8 people), chosen to be dramtically underemployed (8) or have chosen to remove themselves from the job market by putting themselves further in debt and returning to school (4). Using my collection of friends, the unemployment and underemployment of the general population should be at about 25%, which is closer to the actual rate of those underemployed, unemployed, and who have removed themslevs from the job market. Due to the socioeconomic status of my friends, that does not take into losses associated with having lesser economic or social privilege.

    Further, though there may not be a dust bowl now, food prices have dramtically risen due to a perfect storm of greater demand (ethanol), higher input costs (transportation, fertilizer, etc). These things, which apparently have little effect on you, have dramatically affected the nation’s poor – and even relatively well off. There may not be scores of soup kitchen lines, but there is certainly beyond-capacity demand for food banks. Combined with having no house, or having a sharp increase in cost for a house, or having to pay rent for a sub-standard apartment, and the world is not as rosy as you paint it.

    Though you and many of your friends have been able to avoid the brunt of the recession, not everyone is equally situated. Ask ANY recent graduate about finding a job; ask a random sampling of inner city families; ask those in the financial or banking industries. Your area of the country may not have been particularly hard hit, but that does not mean that all have not. Although that doens’t mean that we will *never* recover, I do think that your analysis is overly blithe.

  42. Mister E says:

    I strongly agree with some of this post – the part about ignoring the talking heads and trying to just form opinions based on the facts. And I also think that things are not QUITE as bad as some of the real doomsayers are uhm, saying.

    But I would definitely catagorize this, and most other columns you’ve written on the current crisis as somewhat optimistic.

    In paticular I think it’s flawed to use your own circle of friends as a barometer of how things are for the general population. I don’t think anyone has a large enough circle of friends to accurately represent the general population and the many, many different situations that will arise as fallout from this.

    Personally I know a handfull of people that are freshly unemployed and MANY that are concerned about their jobs. Some people I know though would tell you in no uncertain terms that “everyone [they] know is out of a job” and it wouldn’t be that far from the truth.

  43. Fred says:

    .
    Telling people what they want to hear works always better than telling the truth… Especially when wealth is measured by the frequency of return of the readers.
    Banks are dead or zombies (walking dead) – you, serf, taxpayer, consumer (…we had to wait for Obama’s speech yesterday to hear CITIZEN again) are paying for the resuscitation through the dilution of the dollar.
    Rape and plunder – nothing has changed since the beginning of times – the current crisis is simply the result of careful planning to transfer wealth from your pocket to the few in powerz (Obama’s, Bushy’s etc… masters).
    The devaluation of the dollar through inflation (dilution) will hurt the whole world, not only economically, but also by loss of liberties and freedom.
    America (and Europe) will only suffer by what they lose, while the rest of the world will, once again, suffer from what they don’t have.

  44. Great post! I think I’m going to take the general idea of your post and put the same thing on my blog.

  45. Kabukimono says:

    Lots of stuff about mortgages and housing. Lots about stocks. Nothing about bonds; and yet we are told that a portion of our investments should be in fixed income. Depending on what you read or listen to, the bond portion should be your age as a percentage of 100. At age 35 you would be 35% in bonds. I argue therefore that they are important, but you see no analysis, no guidelines.

  46. IRG says:

    Optimism tempered with reality is a good thing. Optimism for the sake of optimism…not so much.
    In general, I like your balanced approach to things, but I think this article was overly optimistic.

    Along with others, I debate the accuracy of the statement “More than 90% of the nation is fully employed.” I don’t know where you got those figures, but that hasn’t been the case for many areas of the country for years.

    And as we all know the unemployment rates are a joke as they in no way take into account the seriously under-employed and many who are no longer getting benefits but still don’t have jobs.
    (My brother was laid off in October. He now works 2 days a week, if it’s available. He’s not considered as part of the unemployed but he sure isn’t able to cover his bills for his family with two days of work some weeks!)

    IMHO it’s irrelevant to compare what is happening economically today to what happened in 1929. The world is a vastly different place (although greed continues to fuel so much of the problems) and you can’t discount the times one lives in along with the unrealistic expectations. There was a shaky foundation for a long time and now, even the more prudent suffer along with the greedy.

    As for you not seeing people change habits, well, I can tell you that my fellow New Yorkers have had to change plenty. For the obvious reasons.

    Sure, some people are still spending as if nothing has changed. But I suspect that is the exception and not the rule. And certainly not “real” people.

    Frankly, I listen to a variety of media, and then make my own decisions as to what to do. In the end, you can’t blame the media (they are the messenger only) for unwise actions and financial decisions we make. More people have to do more due diligence and NOT rely on the media for decision-making information. And as for the experts interviewed on the media, well, if you look at any too closely, you see the flaws. You have to make your own decisions, with as much information as you can get and vet.

    As our new president says, we all have to work together to create positive change. Again, this concept that WE have to create change is tough for some to take (Hey, it’s Washington’s problem. Let them fix it.) But that’s the reality. The difficult part is that people with commonsense don’t run companies. Just greedy fools who pander to greedy stockholders who want $$$ at any cost.

  47. AnnJo says:

    This was a really good post, and you make some very important points. This is certainly no Great Depression, or even, yet, as bad as the Carter stagflation (stagnant growth, high unemployment, huge inflation).

    Our economy has been absorbing huge numbers of new workers for decades, with the greater participation of women and with millions of new immigrants.

    Our civilian labor force has grown 120% since 1960, and our civilian employment even more – 122%. To grasp how huge those numbers are, compare them to countries like Japan (50% and 46% respectively), France (49% and 38%), Sweden (31% and 26%) and the UK (28% and 23%) (Germany’s data is hard to compare because of the folding in of East Germany in the 1990s, but it’s not any better.)

    A lot of people have the general impression that the economy during the GW Bush presidency has been stagnant or declining, but we added over 10 million new civilian jobs in that period, even taking last year into account. That’s less than the 15 million under Reagan and also under Clinton, but considering we were in recession in 2001 and took the economic hits of 9/11 and Katrina, it’s actually pretty remarkable.

    What concerns me is that the current “crisis and panic” mode in which Wash. DC is operating will result in structural changes to our economy along the lines of some Western European countries. Notably this has included an intractably high level of unemployment, a large underclass of government-dependent permanently unemployed people, and the discouragement of much sense of personal initiative and responsibility.

    I’m also concerned that the way we have usually recovered from recession – unleashing the productive sector by lowering taxes and lessening government burdens – is likely off the agenda for a long while, and instead, the policies that prolonged the Great Depression are now once again viewed with favor.

    Trent, as a student of the Great Depression, I wonder how you see that? I’m mindful of the lament of Henry Morgenthau, Jr., FDR’s Secretary of Treasury, who, after eight years of aggressive government takeovers of the economy, lamented that nothing they had done had alleviated unemployment and simply ballooned the public debt.

    I can’t see how adding huge sections of the middle class to the welfare rolls, as we’re doing wwith the SCHIP expansion and will likely do with various home foreclosure rescue schemes, can possibly bring us out of a recession.

  48. J.O. says:

    I work in the media and I have to tell you, all the current “fear” over the economy is totally media driven. As long as they can scare the um…feces…out of people they’ve got an audience. It’s a business, people. They’re selling information. Nobody watches when there isn’t some drama involved.

    “If you tell a lie big enough and keep repeating it, people will eventually come to believe it.” That’s what’s happening here to some extent.

    I don’t believe it is a total fabrication but I know how the news works and I can guarantee you the current state of the economy is grossly exaggerated. I know people are hurting but SOME people are hurting when there is 4.9% employment and the cameras aren’t always pointed at those people, are they?

    The best analogy I can make is: The over-reporting and exaggeration of these reports are like a train. Once the train pulls out of the station, you can’t stop it easily. If you get out in front of it (trying to be rational, etc.), you get run over.

    That, and the news will ALWAYS look for the negative headline in every story.

    We have these news cycles all the time. Remember the bird flu from a couple of years back that was supposed to come and kill everyone and people were scared to eat chicken? What they didn’t tell you was that a worst-case mutation would be required for that virus to become pandemic and that kind of mutation is exceedingly rare. You’d have a better chance of going outside, jumping up and touching the moon than for that to happen. And, despite all the attention focused there, any virus can undergo a mutation it doesn’t have to be just that one.

    Anyway, the point of all this is, I’d never accept anything I hear from the media OR POLITICIANS as 100% fact. Things have never been better in my life, financially speaking, and I think I had more to do with that than anyone else did.

  49. Sharon says:

    Congratulations on not being scared.

    I have to say, though, it seems people weren’t scared when they bought houses they technically couldn’t afford, or bought too many disposable goods with credit, or rolled one car loan into the next car loan, or skipped on saving for retirement, so forgive me if I don’t find a lack of fear persuasive evidence that things are a-ok.

  50. The Other Michael says:

    Trent-
    Everyone keeps talking about the Great Depression because it’s the only depression they know about. The comparisons are entirely unwarranted, and show a real ignorance of history.

    The current situation much more closely parallels the financial disaster of 07/08, which was caused by leverage and ridiculous speculation.

    Fortunately we have a much better system in place today to ride it out :-)

  51. The Other Michael says:

    I meant 1907 & 1908, of course.

  52. Mr. Nickle says:

    Trent,

    Obviously, the impact of what has happened to the world’s financial system hasn’t hit the majority of Americans nearly as hard as the Great Depression, yet. I don’t think anyone could make that case, and I don’t believe hardly anyone has.

    The concern is that what has happened, unless somehow corrected, is going to impact us in a similar way as the Great Depression in the next few years.

    The congressional budget office has predicted that the U.S. economy will be contracting until 2015. If that is correct, some people may be looking at multiple years of unemployment.

    While I’m continuing to invest the same amount as I was before this crisis (betting my money on the eventual recovery), I’ve also drastically reduced my discretionary spending to help with extending my safety net for myself and my family (already sufficient to survive off of for more than 1 year) by socking away more cash than usual. There’s absolutely no harm in this, and I think anyone who is not doing something similar is foolish.

  53. BigB says:

    The sky is falling…. look out the sky is falling……

  54. Chad @ Sentient Money says:

    This is all fine, but it’s the exact same puff piece you complain CNBC does.

    The numbers you use for unemployment and inflation, though “correct”, can’t be compared to historical numbers as the formula for calculating them is way different than it was even 15 years ago. Just remember the current formulas are designed to make whoever is currently in power look better, not provide accurate information.

    On top of that unemployment is a trailing indicator. This means it tells us what happened after the fact, thus we can’t use it as a predictor.

    Will we survive? Yes, but we shouldn’t fool ourselves into thinking that we have seen the bottom of this recession yet. The numbers are all still going negative…numbers that are never mentioned on here or other personal finance blogs because they are too deep and complicated for most people to figure out (example: Baltic Dry Index).

  55. beth says:

    No shortage of replies today, but I had to throw in my two cents’.

    Whether or not the impact of the recession is visible is *definitely* affected by where you are– physically & professionally.

    I’m Las Vegas. Housing here has been crushed as everyone knows. On my block of about 16 houses, I can think of at least 7 that have been short-sold or foreclosed in the last year. And we’re pretty lucky, because at least we live in a neighborhood that was built 10 years ago, so I have neighbors, as opposed to the communities that went bankrupt halfway thru the building process.

    All state employees here, including teachers, are facing a potential 6% pay cut next year along with municipal layoffs and early retirements, and they are proposing cutting higher ed funding by over a third… meaning that if you are one of the thousands of casino, tech, city, or county employees losing your job, you also won’t be able to afford to go back to school to train for a new career.

    On the flip side, none of my family members back in Kansas can tell anything is wrong with the economy, other than food prices are still going up. They know it from the news and from their 401-k balances, but not at all in their day-to-day lives. It’s just a matter of where you look.

  56. Jeff says:

    I respectfully feel this post is insensitive to the many struggling families out there right now.

    Today there was news of ~11,000 layoffs ahead for employees at Intel and Microsoft.

    Just because your sky isn’t falling doesn’t mean times are good.

  57. Jackie says:

    I agree with the attitude of not being afraid of the current economic conditions. Fear is something that is contagious and dangerous. While it is important to realize that bad things can happen to you, I think that the better thing to do is to consider the current economic condition in your future planning.
    That being said, some people are being greatly affected by our current econ conditions. My best friends grandparents should be retiring but instead they cannot even make their mortgage payments. Her grandfather works in the construction business and in the area they live in, there is just no demand at this time. So, while some are not directly affected, there are many who are and I think it is the ethical responsibility of people who are doing well to at least consider those in times like these.

  58. Ms. Clear says:

    Fear mongering and panic talk are not good things. Being in denial and ignoring the serious situation we are in is also not helpful.

    Your comment on the unemployment rate is beyond uneducated and really undermines the entire argument.

    Do you have any idea what the latest estimates are for people who have just given up? Or the number of people involuntarily working part time? Our employment rate is not 90%. That number doesn’t even make sense, because 90% of the US population is not working age anyway.

  59. PC says:

    Not all ARMs will have the principal portion added back in at reset, Sandy E.

    My ARM (not an option ARM) resets in 2010, but the payment will remain interest-only until 2015, just based on the new rate.

  60. s says:

    I’m seconding comment #8 about socioeconomic standing and relying on one’s own experiences to interpret what’s going on in the world.

  61. steve says:

    “Mu”

  62. DONNA says:

    I agree wholeheartedly that things are not as bad as the media is making it out to be. What I am seeing is some companies/employers using this ‘recession’ to downsize /lay off less productive staff. Overall, I don’t know of anyone who is changing their lifestyle because of this recession.

  63. steve says:

    We have between 5 and 10 people coming into my place of business every week inquiring after work positions, where previously only maybe one would come in every 3 weeks.

  64. My local food pantry has a line out the door.

  65. Bernz says:

    I agree with you 100%. Like the old saying history always repeat itself and that’s exactly is what is happening now. Nice article and very encouraging.

  66. doug says:

    Historical notes: After the stock market crash in 1929, unemployment spiked. Then, by the summer, it was back down to “normal” levels (around 5.5-6%). It wasn’t until the Smoot-Hawley Tariff Act passed in June that things started getting bad.

    The stock market crash of ’29 had its roots in speculative behavior: People could earn more money by borrowing money and buying stocks, then selling the stocks to pay back their loan. Simplified, but the attitude was “The stock market will never retract.” The same beliefs held sway throughout the real estate boom in our own time.

    The danger comes after the “crisis.” FDR used the crisis to his advantage to start meddling in the economy, and government control of the economy and punishing the high-achievers (i.e. the rich) led to loss in productivity as “the rich” took their baseballs and went home. Again, simplified.

    The same danger exists today. There is a president and a Congress that want very much to meddle in the economy. The result will be the same as 1929, because the Laws of the Free Market are like the Law of Gravity: you can bend the rule to allow things to fly, but eventually gravity will win.

    That being said, I’m not worried. My house is paid for, so no bank can take it from me. I don’t carry debt, so no one can call my loans. I’ve got a year’s supply of emergency fund (although that money is slated to buy a house later this year).

    F.E.A.R. – False Evidence Appearing Real

  67. Another Elizabeth says:

    Thank you, Trent.
    I was encouraged by your earlier post about not being afraid, but I am even more pleased by this post, because of the explanations you provide for why you believe this isn’t “the end of the world”.

  68. Kris in JP says:

    Actually, one of the reasons why I donated to the American Red Cross is that I saw a line out and around the block in Roxbury, MA (Boston) for their food pantry on a cold, sleet-filled day.

  69. Brian says:

    “The people around you”? You live in Iowa, right? How representative do you suppose is that economy?

  70. Kevin says:

    Trent,

    I hereby challenge you to the first ever Inter-Blog Economic Forecastpalooza.

    The loser buys the winner a Global chef’s knife or something similar in terms of value.

    We both predict 2009 GDP growth, unemployment rate at the end of the year, Housing Starts for the year, where the Dow will be on 12/31/09, and where the Consumer Confidence Index will stand at the end of the year.

    Are you game?

  71. ooohhitskaren says:

    Wow..is all I can say. I too feel that Trent is being too optimistic. I’m still waiting for the other shoe to drop. I’m greatful that when I bought my house..I had to prove I could afford it. I was self-employed then..and I had so many hoops to jump thru..I wondered if it was worth it. I’m now greatful I had to jump thru those hoops..it was the builder/loan company almost watching out for me. My interest rate is 5% fixed for the entire life of my loan. My problem is property taxes…lol…and that is another story.
    I live in Indiana..our unemployment has grown..I don’t know how much…but I have a friend who is an employment head hunter..he works for many companies…and they are telling him they don’t need his services because they (the companies) are NOT hiring..they are downsizing. My friend lets me know how bad he sees it..it is NOT a pretty site out there.

  72. Phil says:

    Trent, this is not your garden variety recession. This is the result of almost 30 years of “easy money” policy and people taking on too much debt. We reached “peak credit” in 2007 and now we’re on the way down from that peak; we’ll eventually reach a much lower level of credit.

    I also agree with Troy’s assessment of the coming Option ARM wave (wave 2 he calls it) – even if rates are much lower now some 70% of option arm holders have been paying the minimum, non-amortizing payment meaning they owe more on the house every month. After these loans reset, the debtor must pay the fully amortizing payment on a shorter timescale (so if they had a loan that reset after 5 years, now they’ll have 25 years to pay down the original principle + 5 years of accumulated interest) – many will see a 20 to 30% rise in their payment. Many of these folks took out an option ARM thinking that home prices always rise and that this type of loan would allow them to buy more house and thus have higher appreciation (so they thought).

    The other shoe yet to drop is bad credit card debt – and the recession and rising unemployment is going to make that worse as well. Banks will lose even more $Billions when they can least afford to.

    I live in Oregon – our unemployment rate went from about 5.5% last Spring to 9% in December – very rapid acceleration. This week many more layoffs have been announced in our area. It’s likely that we’ll have over 10% unemployment in a couple of months. 12% to 13% by the end of the year is not out of the question. And of course, we know that the way unemployment is measured now is understating the actual rate. 1099 workers don’t get counted (this would be many of your construction workers), business owners who are experiencing terrible business conditions aren’t counted, people who fail to find a job within 6 months aren’t counted either. The widest measure of unemployment in the US, U6 is well over 12% right now.

    All this to say: be prepared for things to get much worse. Be as frugal as possible and if you still have a job consider yourself lucky and save as much money as you possibly can.

  73. Carmen says:

    Your view sounds logical and I appreciate where you are coming from, relying on the facts and not opinion. But I think your optimism is because this is supposedly just the beginning. So you are right that so far, even though we all notice changes, there has been nothing to worry about (comparatively).

    The UK has only officially gone into recession TODAY, due to the latest economy contraction figures being released. So today is just the start! Which makes me worry that it is going to be worse than anyone expects, because why all the fuss to date when that was nothing?

    Another good comment by Troy too.

  74. Kevin says:

    Recessions are officially called after the fact.

    The NBER called the current U.S. recession nearly a year after its start; using the conventional definition (2 quarters of negative GDP growth) – means a recession won’t be declared until it’s 6 months in progress.

    They might have announced a recession in the UK today – all that means is that your economy has BEEN in recession for a period of time. Think about it.

  75. Sandy says:

    I understand that the only reason that we do not have people waiting at soup kitchens (worse than they are now…our pantry in our town is all used up) is the fact that there is a Food Stamp program for those who are in need. Otherwise, you would likely see those long lines again.
    So the next time the person in front of you or behind you in line whips out her card for food….know that you are standing in a soup line of your own that is more or less invisable.

  76. J.O. says:

    Why did you censor my comment about the media? I don’t think I said anything THAT out of the way. I enjoy the blog, by the way.

  77. constance says:

    Do not confuse optimism and myopia.

    Although I understand the desire to avoid hyperbolic commentary, you won’t know what’s hyperbolic if you don’t listen to it. No need to swallow it whole, but sometimes commentary and news we don’t agree with can still teach lessons.

    I suggest reading up on confirmation bias for interesting perspectives on how to filter information.

  78. CPA Kevin says:

    Obviously things are much different on the coasts than they are here in the Midwest. I wonder about some people though…if you can’t find a job where you live, why not move somewhere more stable?

    I live in the St Louis area and while things are certainly tightening up, I still see full parking lots at Applebee’s, Olive Garden, Chevy’s, etc. Target still has a full parking lot on the weekends. The malls are still packed. I’m sure there are some people hurting around here, but not at the levels where I would even call it a serious recession.

    The problem is people have been so accustomed to living it up and spending above their means, they think any little cutback in their lifestyle means we’re going to hell in a handbasket. Our family is using this as a learning experience and hopefully this summer a great opportunity to buy our next home that we’ll live in 20-30 years.

  79. luvleftovers says:

    “IRG @ 1:21 pm January 22nd, 2009 (comment #40)”

    Sorry Trent, but I have to agree with IRG. I work in NYC and live in a borough. My company is laying off 300 people next week. Houses aren’t selling. Stores are closing, car dealerships are closing, heck, even delis are closing. Friends and co-workers are afraid of losing their houses. Those who still have jobs have seen cuts in salary, paid time off, hours, and/or medical benefits.

    Fortunately, I started getting frugal about 18 months ago, so I at least have enough of an emergency fund that, with UI insurance, a severance and hopefully some temp work, I can get through at least a year of unemployment

    I don’t believe we will hit a ‘Great Depression’, but it’s going to get worse before it gets better.

  80. kristine says:

    There are many reasons people don’t just up and move. Given that 50% of marriages end in divorce, one parent moving could deprive them of the other parent. Unless of course, you can simultaneously uproot 2 families at the same time, find employment for all the working adults, and affordable housing for both familes, in the same new area. Not impossible, but most exes are not up for it. I am where I am so my kids can see their dad. He will not move. Otherwise- I would have left years ago. And I am not even taking into account the complex machinations should an ex have a new family of his own, or blended familes, with extended family priorities. It is just not that simple!

  81. luvleftovers says:

    “if you can’t find a job where you live, why not move somewhere more stable?”

    To where? Who’s going to pay for the move if you don’t have the financial resources? (no, comapnies generally don’t pay relocation fees unless you are at the very top) What if you can’t sell your house? Do we all move to Trent’s neighborhood? That would be interesting.

    “I live in the St Louis area and while things are certainly tightening up, I still see full parking lots at Applebee’s, Olive Garden, Chevy’s, etc. Target still has a full parking lot on the weekends. The malls are still packed. I’m sure there are some people hurting around here, but not at the levels where I would even call it a serious recession.”

    Well, how do you know these people can really afford it? Over-consumption is one of the reasons we are in this mess. Are the people in the malls actually buying anything? 75% of the time I walk into a store, I leave empty handed. How do you know these people aren’t hurting? have you seen their charge card or banking statements? Many people are still in very deep denial – the “That won’t happen to me” syndrome.

  82. Fred says:

    .
    One more resource to see through the lies:
    http://www.shadowstats.com – If you ever wondered why you could not re-conciliate what you experience daily with what the government is telling you (no inflation, no unemployment, etc…) this is the place to go.

  83. Cathy says:

    @luvleftovers: That was my thought as well. Some people are in denial. For many young people, they haven’t lived through a prolonged recession before, and haven’t changed any of their habits yet. I live in Seattle and know quite a few kids that work for Microsoft that have a mortgage, an Audi, have never cooked anything at home before, and have zero money in savings. They are in for a rough ride.

  84. Scaly Salamander says:

    IBM employees all over the country were on edge yesterday as layoffs were handed out. There are no official numbers, but the union thinks it’s around 3,000. By the way, a “layoff” at IBM is a dismissal; they don’t call you back later.

  85. Carmen says:

    @Kevin: I know recession is called after the event. I understand what you are trying to say. But it takes 2+ quarters of contraction. So the UK actually went into recession at the beginning of the month (Jan), instead of today. I am well aware that things were not great to get to this point, but the start of a recession is just that, a beginning. And so we (in the UK at least) are at the beginning of the recession. I don’t think anyone can argue with that. And if it’s short lived, as in the end is already in sight from the beginning (ha!), then great.

  86. Ryan says:

    I can’t stand the negative. It’s not going to help at all. Plus, the macro situation doesn’t always affect us on a micro level.

    Best thing to do in my mind, that so many forget, is just to know your situation. Using a tool like BudgetPuluse (http://budgetpulse.com) will help so much in understanding where you sit financially and how to react to the “huge” news stories.

  87. CPA Kevin says:

    @luvleftovers – re: moving, I realize it’s early in the recession, but at some point don’t you have to cut your losses (house included) and try to get a job somewhere? I would think after a year or so of no job, maybe less, I would start looking everywhere. Obviously I’m not talking about doing anything drastic the day after you’re laid off.

    Re: the restaurants, malls, etc. I agree some may be in denial or overspending, but I’m not sure whole restaurants full of people count. It may be different where you live, I’m just reporting what I see.

  88. steve says:

    @Matt and ARM/Alt A rate reset:

    Yes, those rates can be refinanced at a lower rate, but only if you now qualify based upon income and the amount of the loan. Probably 80% of alt-A loans were based upon fraudulent income figures and that kind of underwriting doesn’t exist now in this market (thankfully). And, leaving the income verification aside, if your home is valued at betwen 10-30% less than it was when you bought it, you may not qualify in this market because you might not have any equity. So the idea that the interest rate drop is a solution to this has to take that into account.

  89. Mr. Nickle says:

    I don’t think you can refinance a mortgage if your house is now worth less than you owe (unless you can fork over more cash to make up the difference).

    Can someone correct me, if I am mistaken?

  90. Beth says:

    Well I’ve read from New York and Seattle, Midwest and a few states scattered in between. I’m from Michigan, and yep obviously it’s hit us hard! Just yesterday I had to say goodbye to 9 of my co-workers on my floor alone. (I work for Ford if you were wondering)I’ve survived 2 reductions, and am preparing to not survive the next. To the comment about moving….My husband and I bought a house in Aug of 2007 where we were certain we hit close to the bottom of the real estate market (boy were we wrong!) and put so much money down on the house, I couldn’t imagine walking away even if I were next in line to be cut from my job. And since I am married, what about my husband’s job? Just because I may be in jeopardy of losing my job, does that mean we both uproot and leave his job and both hope for jobs where we end up? I think the comment of just move, was a knee jerk reaction and maybe should have been more thought out instead of a solution for everyone. For us and many ppl I know we cut where we can, we use up some of the emergency fund for necessities and hope for better times. I know plenty of people that have been out of work for much longer than UI will allow. I just hope people learn from everyone’s mistakes and holds onto their money. I will agree that I am one of those cars in the mall parking lot, but like luvleftovers, I’m just looking for somewhere to walk around b/c I’ve cut so much of my entertainment budget we look forward to window shopping. I’m sure that I might not be the norm, and there are many young and old alike that haven’t cut their spending, but maybe they should! I don’t agree with Trent, but my side of things are just as skewed as his since I do live in the #1 state for unemployment right now!

  91. mike says:

    As many others have said, we are at the beginning of something that I think will get worse. What happens when gas prices return to $4 or higher (and they will only get higher in the next 5 years)? That will be devastating for a lot of companies and individuals.

    As for a dust bowl? Our agricultural practices are totally unsustainable and coupled with climate change could result in a pretty fierce dust bowl.

    I do agree that we shouldn’t panic and worry (Matthew 6:25-34) about the doom and gloom. Personally I’ve been trying to simplify my life and spending not for a recession or depression, but because it’s a better lifestyle regardless of the economic climate.

    Really enjoy the blog.

  92. jana says:

    this also depends on where you live. i am an european. until recently only automotive firms and certain money institutions encountered problems. since christmas, however, there has been a ton of layoffs in my field and people are seriously struggling

  93. Kevin says:

    @Carmen:

    The last two quarters in the UK featured negative GDP growth. (-.6% in Q3 of 2008 and -1.5% in Q4 of 2008.) If you look at the headlines, they’ll say something like “UK Officially IN Recession,” not something like “Recession Officially Begins in UK.” The recession in the UK started sometime in mid 2008. Not January.

  94. littlepitcher says:

    The comment that true unemployment rates are closer to 17% is on target. Remember: when Southern blacks are unemployed by ag mechanization and Southern whites are out of work from factories closing, the media does not give a d**n. When middle-aged and unpretty women get laid off after forty, find no work whatever, and end up in the projects, media doesn’t care. When stockbrokers, aerospace engineers and munitions makers, and now IT specialists are laid off temporarily or permanently, media starts squalling because these industries own lobbyists and PR firms.

    In many rural areas of America, unemployment rates have long been in the 30% range, with workers on welfare who can’t get the bucks together to relocate where the work is (or, now, was). Far more of this country is rural than urban, and many of these workers have been counting on the rise in telecommuting to eventually find work. Now that customer service jobs are being outsourced to India and other homework-eligible jobs are going out of the country, rural area will become even more depressed. These regions have become hotbeds of methamphetamine cooking and greenshine-growing, and Mexican competition for these illegal businesses, as well as minimum-wage harvesting jobs, has put far more of America out of business than urban dwellers ever could imagine.

    The recession has been here for ten years or more. Clinton started it with NAFTA, and concealed it by a minimum-wage increase and currency manipulation.
    Bush accelerated it, and we are truly on the highway to another Great Depression unless corporate America puts its citizens back to work and its money into capital improvements instead of into golden parachutes and other boardroom frippery.

  95. Fred says:

    .
    There is no stopping the unfolding of this cycle – it is like declaring winter illegal… you can do it but don’t have the tools to enforce it! (isn’t it what we are doing with climate change BTW?)

    Roosevelt, when visiting the grand Canyon said “leave it alone, you cannot improve it!” – Obama reported it in his speech – I say leave this economy alone, it is drowning in fiat paper, pouring more won’t help.

    Leave the economy alone, let the cycle unfold, unsustainable activities will end, soon replaced by regenerated ones.

    And while you are at it, leave the constitution alone, you cannot improve it.

  96. Fred says:

    .
    A year or so ago, we were told that a few billions would suffice to shore up the banks balance sheets – The SHOCK took the markets down – that was great news, because, we were told, that all the bad news was in the market, and things could only improve!
    We are now at 300B injected in Citi, Bank of America needs another 131B to digest Merryl, 100s of thousand bank & finance jobs have been lost…

    Don’t you worry your goodselves, the US economy is strong and resilient & we have a STRONG DOLLAR policy – said ex King Henry when Bear Sterns hedge funds were failing in July of 2007 (just 18 months ago)…

    AHEM! the talking stick is now in the hands of BigLiar Geithner that recently managed to piss off the US main creditor, labelling the Chinese “currency manipulators” in order to extort the votes needed for his nomination as the Empire master taxman.

    Are you going to believe that things are ready to improve? Who is going to lend to a lying through its teeth America? The Chinese?
    Do we really think they are THAT dumb? I would rather hope not!

    We’d better think again! The Chinese might very well understand that the US is THE currency manipulator, printing fiat IOUnothings Federal Reserve Notes in a pathetic attempt to inflate its way out of debt; they would then not only stop financing the outrageous US deficits, but also likely send back their treasury bonds and demand payment.

    Do you understand what the consequences would be for your financial future?
    Are you prepared?
    Would you bet your future on the remote chance that the American Character that Obama appealed to still exists?

  97. Trent

    Such straight talk is simply refreshing.

    I love how you cut through all the crap and tell it like it is.

    Life is not what happens to you, but, HOW you REACT to it.

    This recession, as you say isn’t even close to the great depression.

    We ll get through it , because we CHOOSE to get through it.

    Stay positive. Ignore the negative and the spin.
    excellent article!
    Spot on, my friend.

  98. steve says:

    @”There is no stopping the unfolding of this cycle – it is like declaring winter illegal… you can do it but don’t have the tools to enforce it! (isn’t it what we are doing with climate change BTW?)”

    lol

  99. Sarah says:

    I work at a small daily paper (circ. 10,000), and we’re being told we lost a half million dollars last year and the company is running on reserves. The newspaper industry, as we know it, may not survive this recession, and that has me scared professionally because I love what I do, and worried about our country where the press plays a vital roll in our democratic process. Layoff announcements from newspaper all over the country are announced every week … I’m very worried.

  100. jreply says:

    The negative news isn’t spin. In fact, it doesn’t go far enough in examining the deepness of the problems and the recklessness of the solutions being pursued. Do you think the FDIC has an endless supply of money? Take a look at the numbers. Do you think the Fed can remain solvent
    forever?

    The stimulus package cannot spend us out of the recession; it will just put us deeper into debt.
    You can’t keep zombie banks alive; Japan tried that in the 1990′s. We need to purge the misinvestments and let deflation bring housing prices back to sane levels instead of trying to inflate our way out of the crisis.

    Bubbles are caused by central banks printing too much money – the true meaning of inflation.
    The Fed engineered 1% interest rates and you wonder why we had a bubble with enormous misinvestment? The only solution for an artificial boom is deflation. Only then will prices fall to market-clearing levels.

    The Fed has injected so much money that if the banks start lending again, we will be whipsawed by runaway inflation. Right now, banks are just trying to boost their reserves. For some, it is too late.

  101. Gert says:

    Well…

    Lets see. Given my POV, a native Michigander who finally got hit by a layoff too and who’s fiance was laid off last December…

    We didn’t have a mortgage. I wasn’t spending beyond my means nor he his, in fact, I’d cut back my spending and expenses drastically over the months to account for my hours and pay rate being cut and his layoff. I was not lazy nor dead wood, nor was he, we were both praised in our exit interviews and given references. Those of you assuming victims of layoffs are so obviously have never been let go in this way.

    As my fortune has it, I have an oppertunity to go to school and improve myself so that hopefully I can get a better paying job in the future.

    But to do this, I, like many, will have to get my ‘soup kitchen card’ for food stamps to survive. Because if I don’t, I can’t pay my rent or insurance, both of which are needs, not wants. I have a used car and need internet to job search so that’s also a need not a want that I must pay for, as too is electricity. We really don’t have much left over after we pay for these things.

    Optimisim is all well and good and in spite of everything I know I can return to work making more in a couple years. Hiking is free and so is using up art supplies I’d bought but never had time to use.

    Optimisim is good, but I sort of doubt Trent has ever cried because someone bought his family dinner becuse they knew had they not, he and his family would have gone without that night because they had no liquid income to do so.

    I have.

  102. Mark says:

    I normally do the exact opposite of what the talking heads say. When fear is rampant and the end of the world is coming, I invest. When everything is rosy and a sector is extremely hot, I cut back on my investing.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>