Recession Deniers?

[themusicteacher]

My father-in-law, who is a very intelligent, well-read lawyer with a degree in economics (though from the 70's), success in the market and owns and operates his own practice quite well. He does not believe we are in a recession at all or at least believes that the economic gloom-and-doom so oft reported is highly exaggerated. He laughs when the prez or anyone else claims that the economy is as bad as it's ever been since the Great Depression. Not surprisingly, he is a real Repub (not one of those social conservative whack-jobs but a dyed-in-the-wool big-R Republican) even leaning towards libertarian (though he would never admit that).

My questions are:

1. In light of the cold, hard numbers on job losses, collapsing banks, etc, how can someone so smart and usually economically savvy deny that we are in a recession?

2. Could he be right? If so, how?

I, personally don't know much about economics but I am worried that when I finish my master's degree this spring and go job-hunting, I will not be greeted by my FIL's version of reality. We do live in a state (New Mexico) that hasn't been hit particularly hard (yet) so that sould have a buffering effect. My FIL is notorious for smugly relegating what is happening in the wider world "irrelevant" to his life and writing it off as much ado about nothing, liberal nonsense, east-coast bias and whatnot.

Any thoughts about this would be helpful as would any additional conjecture about when you believe the economy may right itself (latest projections have been revised to early 2010). Thanks

 

[The Don]

I think it's all a matter of perspective. If there is a 3% fall in GDP, some people will experience a significant fall in income, some negligible, some significant.

In my case, the rate I can charge for my services has fallen by around 15% but the result of this is that instead of making a very comfortable surplus, my business is making a surplus. The impact on the Don household could be nil (though in fact we've chosen to take less money from the business, save more of what we take out and reduce consumption) so the recession doesn't exist for us - or most (if not all) of our friends who are all in paid employment.

There is a tendency towards exaggeration of the issue in the media and by politicians they need a story after all. Then again we could all be going to hell in a handcart and this is just the start

 

[Francesca R]

Either you think the national statistics are falsified or you need a definition of "not in recession" that would apply all the time.

In 2008 Q4 the annualised rates of contraction in overall economic output were -3.8% (US), -5.9% (UK), [dunno yet but bad] (Euro and Japan), and industrial production in December was down on the previous December by -7.8% (US), -6.9% (UK, Nov), -7.7% (Euro, Nov), -20.6% (Japan). Unemployment is sharply up in all these areas. And equity markets are between -35% and -50% lower than the end of 2007 (in local currency)

That doesn't mean everybody is doing badly. But then some businesses go broke in a boom too.

 

[drkitten]

I think it's all a matter of perspective. If there is a 3% fall in GDP, some people will experience a significant fall in income, some negligible, some significant.

I also think that a lot of people think "recession" means they suffer, for whatever reason.

There is a technical definition for recession (two successive quarters of negative GNP growth) which the USA has clearly met. Of course, this technical definition can only be identified in hindsight, and we may already be out of the recession right now (although I doubt that, but we will need to wait for the numbers for the next quarter to know).

And a lot of the economic "pain" for the general public continues after the recession has technically ended. Unemployment, for example, is a lagging indicator -- most companies are slow to fire and equally slow to fire, -- even if business picked up last month, you may not want to restaff yet just in case it turns out to be a dead-cat bounce -- so people will still be out of work and out of money for quite some time after the recession ends.

And some people actually do better in recessions. Recession is harvest time for the bankruptcy lawyers, payday lenders, and pawnbrokers.


But I think the following statement kind of misses the point:

The impact on the Don household could be nil (though in fact we've chosen to take less money from the business, save more of what we take out and reduce consumption) so the recession doesn't exist for us

Is there not an epidemic if you're not sick?

Is there not an unseasonable cold snap if you personally happen to like cold weather?

 

[themusicteacher]

Yeah, I think too many people, my FIL included, tend to have that Homer Simpson attitude of "It's funny 'cause it's not happening to me!" Overpersonalizing seems to be a hallmark of conservative thought.

 

[Free Thinkr]

I've been saying this recession is coming since summer of '07. At every stage along the way, there have been deniers. Back in August of '07, the DOW dropped something like 400 points in a day; I remember well the thread on another forum regarding that drop, and all the people who said what a great time it was to buy stocks due to the drop (the DOW as at 12,845 at the time). All through '08, as the evidence mounted, the deniers pointed to the fact that there hadn't yet been two consecutive quarters of contraction, as if it wasn't obvious that there would be, in retrospect.

As time has progressed, the ranks of the recession deniers have thinned considerably, but there's still a little room to pretend that it's all media hype, and this will just be a minor bump in the road. By fall of this year, the evidence should be clear to all, I think.

 

[theprestige]

Why not ask your father-in-law what his reasoning is? I mean, he's intelligent, successful, and has some education on the subject matter.

 

[Free Thinkr]

Why not ask your father-in-law what his reasoning is? I mean, he's intelligent, successful, and has some education on the subject matter.

I got $10 on "the liberal media" being mentioned.

 

[The Central Scrutinizer]

I've been saying this recession is coming since summer of '07.

Wow, if only we had listened to you.

At every stage along the way, there have been deniers. Back in August of '07, the DOW dropped something like 400 points in a day;

The DOW <> The Economy

I remember well the thread on another forum regarding that drop, and all the people who said what a great time it was to buy stocks due to the drop (the DOW as at 12,845 at the time).

It's always a great time to buy stocks. The DOW has nothing to do with it.

 

[themusicteacher]

I got $10 on "the liberal media" being mentioned.

I can't take that bet since the odds are very much in your favor.

I don't really like talking to him about it because he can be very condescending. He assumes that everyone knows what he knows and if you don't you're a moron. He usually follows up his ideological statements with a snort and a laugh that says, "Wow, you're an idiot if you believe anything other than what I purport to be fact." I love the guy in general but he is NEVER wrong about stuff like this.

Don't get me wrong, he's lost about $100K (likely about 5-10% of his portfolio) in this mess but he just doesn't see it being as big a problem as it's being made out to be.

 

[Free Thinkr]

Wow, if only we had listened to you.

Yep. People who listened to me sold when the DOW was in the high 13's. Those who didn't took a beating.

The DOW <> The Economy

Never said it does. The point was that the DOW dropped because, by that time, it was evident a crisis was on the horizon. But fools denied this fact, saying that the DOW was set to rally. Oh, and self-interested people who peddle stocks.

It's always a great time to buy stocks. The DOW has nothing to do with it.

No, it's a bad time to buy stocks when they're losing value.

 

[dudalb]

There is an old joke that it is a recession when your neighbor loses his job, but a depression when you lose yours.

 

[macdoc]

Oh it's been a recession since the last quarter of 2007 - not sure what planet the OP relative is dwelling on.

Run this by him

http://articles.moneycentral.msn.com/Investing/SuperModels/too-late-to-avoid-a-depression.aspx

The real question is technical depression.....

Do recall that a technical depression as Japan went through in the 90s is far different than the Great Depression of the 30s.

I'm firmly of the opinion that more value for less money is an inherent part of modern economies and anyone thinking otherwise is in for a major surprise as we have seen.

Dropping back to a mid 90s GDP is a huge contraction by classical economic standards but I maintain the post 2000 growth was never real in the first place. All shadow nonsense.

If the metrics are artificial so was the boom and the bust.

I suspect real economic activity tracked wages all through the last 8 years - basically no growth at all in real terms while the fake economy tracked the M3 money supply.

Contraction is very real but how much is the bubble ( perhaps $5-10 Trillion ) and how much the real economy is tough to sort out.

 

[ServiceSoon]

I think everybody who compares today’s unemployment environment to that of the great depression is out of touch with reality. Now we have unemployment benefits in place which should negate a lot of the negatives surrounding a depression.

 

[drkitten]

I've been saying this recession is coming since summer of '07.

Yes, yes, we're all very impressed.

Yet more proof that even a stopped clock can be right twice a day.

 

[The Central Scrutinizer]

Attack the arguement, not the arguer.

Replying to this modbox in thread will be off topic  Posted By: Tricky

 

[drkitten]

No, it's a bad time to buy stocks when they're losing value.

If you can't distinguish between buying "stocks" and buying a specific stock, then you shouldn't be investing.

And if you think the Dow measures anything other than how well thirty specific stocks are doing, you shouldn't be following the Dow.

 

[macdoc]

Also a very different demographic - many in the 1930s were young withfew built up resources.

Now it's very different. Small families and there is enough housing to go around for a few years forward.

Not a lot of material wealth has destructed - just ephemeral dreams of fools.

 

[Free Thinkr]

Yes, yes, we're all very impressed.

I didn't say that to impress; the point is, there's a lot of people who simply deny the economy will ever go into recession. I know it, because I've been of the opinion it would for a long time, and dealt with such people.

Yet more proof that even a stopped clock can be right twice a day.

Rule 12 violation.

If you can't distinguish between buying "stocks" and buying a specific stock, then you shouldn't be investing.

Sigh.

And if you think the Dow measures anything other than how well thirty specific stocks are doing, you shouldn't be following the Dow.

Much like a survey only measures the opinions of 5,000 random people.

Seriously, don't be daft. Anyone can look at the DOW chart and see how it's a loose indicator of the state of the economy through history.

 

[Free Thinkr]

Could you change your name to Clueless Clarence?

Could you come up with a more retarded thing to say? Out of all the forums I've ever posted on, you are the most shameless post-count whore I've come across. You know, if you don't have anything worthwhile to say, you don't actually have to post.