How Long will the 2008 Recession Last?

June 04, 2008

Posted by dotell

5 stars ( 1 rating )

The election will determine a lot based on how long the US plans to stay at war in IRAQ. But now, commodities are really what is killing the economy. Gas prices are just getting started. From what I've read, we are headed to $6 dollar oil in the US in the next year. With gas prices like that the entire country will need to change, people will relocate, changing their lives to curb gas costs, all the while spending less as gas is taking a big cut out of their disposal income and the house cash cow is no the house liability.

The only good news is whoever we end up putting in the white house will be better than Bush, although John McCain will keep spending. And my last point is that commodities move in cycles, meaning that while gas is up and may keep going up, history shows us that gas prices will go down. Also, the government is looking into these high gas prices for fraud/manipulation, which is without question going on, we just don't know to what extent.

2011

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June 10, 2008

Posted by stevelup

4 stars ( 1 rating )

IMHO there are two issues that will determine the length and depth of the recession. One is cyclical and the other is more secular or long-term.

The short term friction is the credit/real estate damage. While deep and far reaching, it will abate eventually - perhaps 12-18 months is my guess. People sometimes underestimate the power of credit and liquidity issues, but easy credit was the underpinning for much of the growth in the economy, through real estate development, debt-financed M&A activity and the corporate/consumer spending that was debt fueled. We're riding the other half of the bell-curve toward the mean.

The longer term issue is the balance of payments (trade deficit) problem. Many commentators (most notably Warren Buffet) have said that as a country, we can't keep importing more than we export and paying for it by borrowing in the form of the National debt. The current manifestation of this long-term trend is the weakness in the Dollar and the related price of oil. A short-term help could come if the Fed raises interest rates (or the EU lowers theirs - the opposite of what they propose), but longer term, an economy that consumes and doesn't create is not healthy. As someone important said, "We can't keep our economy going by just serving each other hamburgers..."

So I believe the current recession will be relatively short-lived, but our recovery will be stunted unless we address the trade deficit on a long-term basis.

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