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bob - nobody can be sure, but why do you think that the U.S. can avoid a
recession if Asia drags the rest of the world down with it? By the way,
I do not think that will be the undoing of the economy unless it is Asia
via Y2K. I think the Europe plus Australia, Japan, Canada etc are
prepared, but where will Asia get the money to fix their Y2K probs? What
happens on Jan.1. when a barely breathing Asian economy cannot deposit
its checks or pay its bills?
The other point is that recessions and market crashes are caused by
human behavior and that has not changed, new paradigm or not. What it
means is that instead of a 70-90% drop in stock valuations, maybe it
will only be 30-70% and maybe it will be two years instead of 10 (or one
day like 1987).
Steve
> How can you be so sure? What is your economic evidence? It surprises me
> that so many people on this list making posts under the CRASH heading are so
> sure that things are no different today than in the past. I'd like to give
> you all just two pieces of concrete evidence (among dozens) that WE ARE
> living under a new paradigm, and the result COULD be that economic cycles
> (recessions) are dead. Again, I'm not saying these things are absolutely
> true, I'm just trying to get the persistent pessimists on this list to think
> "outside the box" and open their minds to the possibilities of a "new
> economic order."
>
> The first piece of evidence is the evolution of Fed policy to the point of
> "almost" perfection. I explained in an older post that the primary cause of
> the stock market crash in 1929 was that the market was built on leveraged
> money. Investors in those days (if you can call them that) only had to put
> up 10% of the face value of stock to buy it. This led to grossly inflated
> stock prices, which in turn led to panic selling. That situation simply
> doesn't exist today. More importantly, however, is the fact that the Great
> Depression following the crash actually had very little to with the stock
> market, and everything to do with a misguided Fed policy.
>
> To make a long story as short as possible, the Federal Reserve (as they had
> in previous economic downturns) felt people weren't saving and investing
> enough, so they therefore contracted the money supply. We now know with the
> benefit of hindsight that this only added kerosene to the fire. The real
> problem was that people weren't SPENDING enough, and the money supply should
> have been expanded. The contraction in the money supply also caused the
> banking system to collapse because banks didn't have enough money on hand to
> pay the panicked customers who wanted to withdraw their money.
>
> It's taken about 60 years to get it right, but the Fed has just about
> perfected their job. Is it just a coincidence that virtually every
> recession the US has had since 1929 was shorter than the last one? I don't
> think so. Everybody was sure the 87 "crash" was going to cause a recession,
> but guess what was the first thing the Fed did after that event? They
> dramatically increased the money supply, and the economy just kept going.
> It took a failed real estate tax policy and a huge tax increase to cause our
> last recession in the early 90's, and that one was so brief that we didn't
> even know we had it until it was over!
>
> The second reason is because of a change in the private sector. Any
> economist worth his or her salt will tell you one of the primary factors
> involved in the length and the severity of a recession is the amount of
> excess in the nation's inventory system. Companies used to go from boom to
> bust because judging the true demand for their goods or services
> consistently during the year was almost pure guesswork, and they had to make
> those decisions months in advance. Since they usually erred to the upside,
> when a slowdown in the economy came, inventories became so large that
> companies didn't just slow down the production growth, the production
> actually contracted. This caused a recession.
>
> Thanks to information technology, companies can now carry very little or no
> inventory, and have become very good at judging future demand. A good
> example of this is the airline industry. I have a friend who flies from LA
> to Las Vegas almost on a weekly basis. He used to almost count on getting
> bumped (and getting a free ticket out of the airline) at certain times of
> the year because the flight was overbooked.
>
> Today, even though the average flight is much more full than even just a
> couple of years ago, he almost never gets bumped (and no free tickets). The
> reason is every major airline now uses sophisticated software called yield
> management that lets them predict with almost frightening accuracy the
> demand for seats on any given flight at any given time of the year, and what
> price they can charge for each and every seat at each and every moment
> without overbooking. On a flight of 300 people, it's not uncommon for there
> to have been 250 different prices charged for seats!
>
> These two examples are just the tip of the iceberg. I can't guarantee you
> that there won't be another recession, but something is definitely different
> out there folks...
>
> Bruce
>
> > - someone is always talking about a crash; someone is therefore
> > bound to be
> > right at some point,
> >
> > - commentators/ economists have successfully forecast five of the
> > last three
> > recessions,
> >
> > - see the "Albert Einstein" joke on RT a week or so ago- quite perceptive!
> >
> > Regards
> >
> >
> > Bob Jones
> >
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