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Thread: Recession predictions - economic history lessons

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    Cyburbian Signature's avatar
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    Recession predictions - economic history lessons

    0nce the new president is in place, I believe recession will be a hot topic.

    1) What sectors of the American economy will continue to do well?

    2) How does recession effect community development, land use, and regulations?

    3) What patterns can we expect to repeat that we saw post-Vietnam or post-Gulf War ?


    Can't wait to hear your thoughts!!

    D

  2. #2
    Cyburbian Emeritus Chet's avatar
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    Quote Originally posted by Signature View post
    0nce the new president is in place, I believe recession will be a hot topic.

    1) What sectors of the American economy will continue to do well?
    All of them remember, "it's the economy, stupid"

    Quote Originally posted by Signature View post
    2) How does recession effect community development, land use, and regulations?
    depends on where you live.

    Quote Originally posted by Signature View post
    3) What patterns can we expect to repeat that we saw post-Vietnam or post-Gulf War ?
    Are you serious?

  3. #3
         
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    Here is my 2 cents!

    I think the economy will be an issue long before the election. We should know before the end of next summer how the current downturn in the housing and mortage markets will impact the larger economy.

    1. The energy, alternative energy and agriculture sectors will continue to do well. They are all inter-related now. All three are having a good year in Colorado.

    2. Here in Colorado, municipalities will become even bigger retail sales tax whores as housing starts continue to lag.

    3. Whether the war ends or not, the small town rural farm economies in the US will see the largest growth since post WWI & post WWII. Higher grain prices due to ethanol demand, growing demand from Asia and crop failure elsewhere will put record amounts of cash into this long suffering sector. Expect higher food inflation as a result.

    Soil conservation will become a major issue once every marginal farm field falls under the plow. The 2010s could bring a new dust bowl to the U.S. and other parts of the world if not carefully controlled by proper Ag policies.

  4. #4
    Cyburbian Cardinal's avatar
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    In the last couple of days I have read that mortgage applications and home sales have both declined by about four percent. If you want a mortgage, we have gone back to a day when you needed good credit and a down payment. Housing, which has fueled the economy for several years, is in a slump. Many of the communities I work with have seen that trend, with a sharp drop in permits for new housing. It is very hard to look forward and not see that we are on teh verge of a recession. Barring any surprise, I think that is where we are headed.

    Of course the economy is going to be a central question in teh next presidential election. Right now the focus in the primaries is the war in Iraq. After the primaries are through, though, the candidates are not going to focus on that issue.

    The silver lining in this is that a weak US economy means the US dollar will be weak versus other currency. Hey, even the Canadian dollar is worth $0.95 again. That makes US-made products more cost-competitive both at home and abroad. If the next president can match that with trade policies that put the USA on an equal footing (i.e., human rights, environmental protection, etc.) with competitors like China, then we could come out of it much stronger.
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  5. #5
    Unfrozen Caveman Planner mendelman's avatar
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    As long has the housing segment of the economy keeps dropping, I'm a happy camper. Have yet to buy a house.

    Really, I think the housing market was overblown anyways and is just correcting to a realistic level.
    I'm sorry. Is my bias showing?

    Let's not be didactic in this profession, because that is a path to disillusion and irrelevancy.

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  6. #6
    Cyburbian DetroitPlanner's avatar
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    Quote Originally posted by mendelman View post
    As long has the housing segment of the economy keeps dropping, I'm a happy camper. Have yet to buy a house.

    Really, I think the housing market was overblown anyways and is just correcting to a realistic level.
    I'd have to agree though my neighborhood is skidding fast due to this (last month my zip code was second highest in the nation for foreclosures) and I'd like to get out. I can't really sell now. All I can do is watch some of the properties around me go from once nice homes to crap where junkies have smashed in the doors to steall the copper plumbing and have stripped the aluminum trim. Me bitter?? Nah, I stayed to be close to my grandparents... I have to put it in persepective. I was able to make their last years quality. Grandma just passed on a few months ago. I would rather take a bath on my property than allow them to live a life they woud not want.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

  7. #7
    Cyburbian boilerplater's avatar
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    Nah, I stayed to be close to my grandparents... I have to put it in persepective. I was able to make their last years quality. Grandma just passed on a few months ago. I would rather take a bath on my property than allow them to live a life they woud not want.
    That's so noble. Not a lot of people would do that. When I was growing up, it seemed like I knew a lot of people who had grandparents left behind in deteriorating inner city neighborhoods. Now it seems like my Mom's older inner-ring suburb is deteriorating, and I'd like to buy her a place closer to me.

    As for the economy, I'm going to look for a bank-owned property!
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  8. #8
    Cyburbian Plan-it's avatar
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    Not to be contrarian, but there are sectors of the economy (non residential construction) that are doing gang busters. My other half is an architect that does convenction center, hotels, and large condominium projects throughout the US. They cannot get enough people into the office to assist them with the work they have coming in. The same can be said for other people that work in the non-residential market.
    I mention this because architects tend to get busy prior to a major construction boom in the economy. As businesses prepare for expansion they need architects to assist with preparing them for the structural growth of their operations. If there are that many businesses looking to expand operations in these fields, I cannot think that we will go into a major economic downturn.

    Where I am employed residential housing permits are way down from their yearly norm. The have been for the last year and a half. Commercial, industrial, and housing renovation (additions, infill, etc.) construction are doing better than usual. What does that say about the economic situation?

    The media in this country is assisting to pour fuel on this fire of this entire residential housing market mess. It is clear that people (mostly in the lower and lower middle rungs of the economic system) made poor decisions decisions on investments. The entire economic system will not come to a crashing halt because Wal-Mart will not meet its profit target for the year. A major part of the US ecoomic outcome and gross GDP of the American economy comes from other sources of revenue. I am sorry this sounds kind of harsh, but I am so sick all of this end of the world crap I am hearing out there.
    Satellite City Enabler

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    Cyburbian donk's avatar
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    Due to the bursting of the US housing bubble, GM and Ford have announced that they are laying people off in Oshawa as the market for pickups is down. This will spin out to parts suppliers and so on.....not good for the economy in Ontario.
    Too lazy to beat myself up for being to lazy to beat myself up for being too lazy to... well you get the point....

  10. #10
    Cyburbian Mud Princess's avatar
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    Is the reduced demand for pickups really due to the "bursting of the housing bubble"? I find that hard to believe. I suspect that the demand for pickups and SUVs is down because of transportation costs and a shift in consumer preferences. GM and Ford are just trying to put a pretty face on it for their shareholders.

    I agree with Plan-It about the media influence. All this talk about the housing market... it really depends what market you are in. Locally, median housing prices are stable or increasing. Our economy is dominated by education and government, so things are much more stable.

  11. #11
    Cyburbian Coragus's avatar
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    Quote Originally posted by Signature View post
    1) What sectors of the American economy will continue to do well?

    2) How does recession effect community development, land use, and regulations?

    3) What patterns can we expect to repeat that we saw post-Vietnam or post-Gulf War ?
    1. Health care. The number of elderly will continue to increase and they will have to be taken care of.

    2. Around here, recession has meant that developments have almost ceased. Developers are running around and getting rezoning and site plan approvals in place and keeping property in hand in case the economy turns around in the next couple years.

    3. I can't really answer that. I was a child for post-Vietnam and I was in college for post-Gulf War.
    Back home just in time for hockey season!

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    1. Health care, anything that can be tied to "green" efforts and alternative energy sources, manufacturing, specialized agriculture and anything related to raw materials extraction. Reasons: Weak dollar helping exporters, cheap labor in Asia getting more expensive, voracious appetite for raw materials worldwide, baby boomers with cash to burn looking to latch onto anything that sounds "green".

    2. Recession would have the greatest impact on community development efforts in areas that saw the greatest % increase in home prices during the housing bubble. Areas whose demographic make-up remained relatively constant throughout the bubble should be unaffected, wealthy or poor. I'm not yet convinced we'll have a technical recession. Probably just a bit of stagnation.

    3. A Clinton in the White House.

  13. #13
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    Quote Originally posted by DetroitPlanner View post
    I'd have to agree though my neighborhood is skidding fast due to this (last month my zip code was second highest in the nation for foreclosures) and I'd like to get out. I can't really sell now. All I can do is watch some of the properties around me go from once nice homes to crap where junkies have smashed in the doors to steall the copper plumbing and have stripped the aluminum trim. Me bitter?? Nah, I stayed to be close to my grandparents... I have to put it in persepective. I was able to make their last years quality. Grandma just passed on a few months ago. I would rather take a bath on my property than allow them to live a life they woud not want.
    DP, I admire your devotion to your family. That is truly one of the hardest things to consider when going out into the world: should I stay or should I go? And when one has a family already in place, it's so hard to leave it there.

  14. #14
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    Recession + Inflation

    1) What sectors of the American economy will continue to do well?

    I agree with those who say exporters ... in the short run. In the long run a devaluation of the currency makes the dollar a less viable investment for foreign countries. When they dump their dollar holdings our money will be devalued to the point that foreign goods will become tough to purchase.

    Not to mention that a flood of currency, like we have now, is a sure sign of inflation to come. A recession combined with inflation? That's what we saw when Nixon took us off the gold standard (see question #3). My prediction, in part based on the recent widening of the gap between the 10 yr and 2 yr T-notes, is for some serious inflation and a recession.


    2) How does recession effect community development, land use, and regulations?

    I'm sure this will affect each community differently but I know that a lot of nonprofits were created following stock market booms as foundations with large investments had more money to hand out. A recession would likely be a slowdown in grants and inflation would be tightening of the pursestrings by everyone.

    On the plus side, short term loans look like a pretty good deal right now and for far into the future.

  15. #15
    Cyburbian Brocktoon's avatar
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    Quote Originally posted by centralpark View post
    1) What sectors of the American economy will continue to do well?

    I agree with those who say exporters ... in the short run. In the long run a devaluation of the currency makes the dollar a less viable investment for foreign countries. When they dump their dollar holdings our money will be devalued to the point that foreign goods will become tough to purchase.

    Not to mention that a flood of currency, like we have now, is a sure sign of inflation to come. A recession combined with inflation? That's what we saw when Nixon took us off the gold standard (see question #3). My prediction, in part based on the recent widening of the gap between the 10 yr and 2 yr T-notes, is for some serious inflation and a recession.


    2) How does recession effect community development, land use, and regulations?

    I'm sure this will affect each community differently but I know that a lot of nonprofits were created following stock market booms as foundations with large investments had more money to hand out. A recession would likely be a slowdown in grants and inflation would be tightening of the pursestrings by everyone.

    On the plus side, short term loans look like a pretty good deal right now and for far into the future.

    Your assessment of devalued currency holds true for almost every currency but the dollar. All the world s commodities are denominated in dollars and the US Treasury bonds are still considered a riskless investment, one of the only such instruments in the world. With the decline of the dollar relative to other currencies you will likely see a reduced demand as foreign investors can get a higher premium in other world debt markets. There are still plenty of investors that want the high quality paper of the US even at a lower interest rate. As for foreign good most large exporters to the US purchase dollar hedges to mitigate the risk. These exporters will see a decline in profits or they may have to raise their prices but since most of the goods are made overseas there are few alternatives. This could create inflationary pressures albeit a very small amount of pressure.

    A recession is possible but not likely. Unemployment is low (although underemployment is rather high), businesses have large cash stores, productivity is still at record levels (but slipping), inflation is under control (low CPI numbers and a fed rate cute) and incomes are growing (but slowly). The economy will slow but a recession is unlikely unless the US economy sustains a shock, which is possible. The most likely shocks will be a crash of the mortgage backed securities market which could topple several hedge funds or a huge decline in the housing market.

    Although the US is awash in capital, credit is difficult to obtain, limiting the money multiplier effect, which creates another limit to inflation.


    As I was told my economic professors, "Economists have predicted 11 out of the past 6 recessions."
    "If you don't like change, you're going to like irrelevance even less" General Eric Shinseki

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    I hope you're right

    I don't mind being wrong, getting paid in a respected currency means a lot to me. Enough so that I have concern for its continued decline in value. The real problem is when countries with large dollar holdings, like China and Saudi Arabia, begin making rumblings about dumping their dollars. China has already made moves in that direction -- almost seemingly in response to U.S. reaction to the consumer products problems a few months ago. When Saudi Arabia didn't have a reaction to the recent interest rate that concerned me as well ...

    The economic numbers you're quoting are probably the most agreed-upon measures of strength for the economy and confidence in the markets. No argument at all there. It concerns me, though, when I see questions that don't appear to have immediate answers. Such as:

    * How does the rising price of oil and material goods not translate into greater inflation?

    * When does investment in the Euro or the Pound begin to make more sense than the dollar?

    I've got some others but those are really the big ticket items. I don't disagree that things look fine now -- amazing, really, when durable goods orders are going strong in the face of the collapsing housing and automobile markets. Maybe this just points to the need for reliance on new indicators.

  17. #17
    Cyburbian Cardinal's avatar
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    Quote Originally posted by centralpark View post
    ...How does recession effect community development, land use, and regulations?...
    It is a good time to be a planner with expertise in economic development.
    Anyone want to adopt a dog?

  18. #18
    Cyburbian Brocktoon's avatar
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    Quote Originally posted by centralpark View post
    The real problem is when countries with large dollar holdings, like China and Saudi Arabia, begin making rumblings about dumping their dollars. China has already made moves in that direction -- almost seemingly in response to U.S. reaction to the consumer products problems a few months ago. When Saudi Arabia didn't have a reaction to the recent interest rate that concerned me as well ...
    China has made veiled threats but few truly believe its little more than posturing. These threats usually come when someone in Congress mentions trade sanctions. China does hold a substantial amount of US dollars in the form of treasuries. They do this for several reasons. Here are two reasons why they won't take any serious action. First their currency is pegged to the dollar. If they sell off treasuries they will either have to readjust their peg (causing an appreciation of the Yuan.) Second they can reduce the number of Yuan’s in the float resulting in a slow down to their economy and growth. Neither appeals to them. What China has started to do (as well as South Korea and other industrialized economies) is they start buying other hard currencies. If enough countries start doing this it could cause higher interest rates and slow grow in the US. This is a real threat to the US economy in the future. As more people become more comfortable with the Euro we could see a switch from the dollar to the Euro as the currency of choice for international commerce.

    * How does the rising price of oil and material goods not translate into greater inflation?
    As the US economy switches to a service based economy oil and materials prices matter less. Also there are many more deflationary pressures in our economy than their were even 20 years ago. Look at the prices of computers, TV and other types of consumables. They have all gone down. Oil, while important, has diminished in importance. The number of oil fired power plants has declined. The individual consumer's ability to handle higher gas prices has also increased. If you remember 3 years ago everyone predicted $3 gas prices will cripple the economy but that has not happened. In fact they are the norm in most parts of the country.


    * When does investment in the Euro or the Pound begin to make more sense than the dollar?
    I doubt the Pound Sterling will ever become a dominate currencies like it was 100+ years ago. It will remain a hard currency but will be on the second tier as FOREX is concerned. Since the Euro is new people still want to see the track record but if it continues it will become a more important currency in international transactions.

    I've got some others but those are really the big ticket items. I don't disagree that things look fine now -- amazing, really, when durable goods orders are going strong in the face of the collapsing housing and automobile markets. Maybe this just points to the need for reliance on new indicators.
    New indicators are absolutely necessary for inflation, employment and the overall health of the economy. The politics of those changes will be what prevents them from happening.
    "If you don't like change, you're going to like irrelevance even less" General Eric Shinseki

  19. #19
    Cyburbian Signature's avatar
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    PlanningMadly:
    "1. Health care, anything that can be tied to "green" efforts and alternative energy sources, manufacturing, specialized agriculture and anything related to raw materials extraction. Reasons: Weak dollar helping exporters, cheap labor in Asia getting more expensive, voracious appetite for raw materials worldwide, baby boomers with cash to burn looking to latch onto anything that sounds "green".

    2. Recession would have the greatest impact on community development efforts in areas that saw the greatest % increase in home prices during the housing bubble. Areas whose demographic make-up remained relatively constant throughout the bubble should be unaffected, wealthy or poor. I'm not yet convinced we'll have a technical recession. Probably just a bit of stagnation.

    3. A Clinton in the White House."

    Definitely gave a favorite answer! Spot on!

    Quote Originally posted by centralpark View post
    1) What sectors of the American economy will continue to do well?

    I agree with those who say exporters ... in the short run. In the long run a devaluation of the currency makes the dollar a less viable investment for foreign countries. When they dump their dollar holdings our money will be devalued to the point that foreign goods will become tough to purchase.

    Not to mention that a flood of currency, like we have now, is a sure sign of inflation to come. A recession combined with inflation? That's what we saw when Nixon took us off the gold standard (see question #3). My prediction, in part based on the recent widening of the gap between the 10 yr and 2 yr T-notes, is for some serious inflation and a recession.


    2) How does recession effect community development, land use, and regulations?

    I'm sure this will affect each community differently but I know that a lot of nonprofits were created following stock market booms as foundations with large investments had more money to hand out. A recession would likely be a slowdown in grants and inflation would be tightening of the pursestrings by everyone.

    On the plus side, short term loans look like a pretty good deal right now and for far into the future.
    Awesome answer! What kind of econ classes did you take? Is this something I would learn to predict by taking a basic Macro course? (Just a biologist, here....) Or is this something you just picked up?
    Last edited by Gedunker; 14 Mar 2008 at 2:31 PM. Reason: sequential replies

  20. #20
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    Just picked this up as the result of wanting to invest and exploring my options. I read a lot of editorials from commodities experts, they rely heavily on market forces to predict future markets.

    I will add that I am a lot more concerned about the economy *now* then I was when I first wrote that. My concern comes from how the Fed is handling the monetary crisis, printing more money and making credit more easily available is NOT the answer. That only drives the value of the dollar even lower and increases the risk of spiraling inflation.

    On the bright side, the uber-wealthy appear to be doing just fine and that means that charitable donations to nonprofits should continue at a brisk pace. For those of you employed by local governments I don't know what to say except that if municipalities are fighting back over their bond ratings then there has to be a search for new income sources ... and that *might* signal some issues with revenue generation.

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