How much longer is this recession going to last?...

[msj]

An article in the Globe and Mail about 3 scenarios for this recession.

You will have to read the link to get a feel for them.

I'm going to offer up my opinion on why this recession is still looking bad for another 6 or 9 months.

To be as simple as possible here is my logic:

- usually the stock markets hit bottom 3-6 months prior to the recession trough.

- the current markets are still stubbornly high given the terrible earnings being reported (and/or expected to be reported)

- even if the S&P 500 were to fall to 440 (or 500 like I want it to if only for the magic of the numbers "500") by the end of March then we are likely looking at the end of the year/beginning of 2010 for the trough to hit.

Granted, just because the sun came up today doesn't mean it is going to come up tomorrow.

Let's hope my scenario above, or, better still, growth within the next 6 months, comes to pass rather than "Dr. Doom's" 30% chance of an "L" shaped near-depression as mentioned in the article above.

Anyway, that's my guess and logic - so what is yours?

--------------

Edited to add - I'm focusing on GDP and stock prices above. I should have made it clear that I think unemployment will still trend lower into 2010 and probably have a sluggish recovery through 2011 and 2012.

Edited February 17, 2009 by msj

[Oleg Bach]

Mine started about 10 years ago resulting from actually filing a tax form - They assumed that all of the pennyless years did not exist and I always made what I made that year - so 100% guarnshee...They can do that on the last check (on termination)---seeing the feds were to dumb to figure out that if you worked for one day for a producer you could be terminated that day and re-hired the next -The feds did not have a clue how the enterainment buisness worked - so I got check like this $0.00 No kidding I still have them..They said I could work of the debt in 7 years - great I will just walk to work for nothing and get nothing and eat nothing and be nothing --- so I said "no income-no income tax" Now I am a non-entity and they don't want to go near me for fear of embarrassment.

I have become conditioned to the reccession - been practicing for 10 years now ----Yours will end when my recession ends - and that is never ....you are in for the long haul buddy --- I was the canary in the gold mine - and I am still breathing like bench mark for all those who now suffer---sorry for being the test case..

[August1991]

For baby-boomers with RRSPs, you have asked the $64,000 question msj. This recession will not be about unemployment. It will be about house prices and equity indices.

From one of your favourite web sites, here's a good graph.

I reckon that stock market prices can fall lower not because the p/e of Canadian banks are too high but because many people are afraid.

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With that said, the G&M link misquotes Carney. The BoC's forecasts were about Canada - not North America. We have seen the dollar fall from parity to 80 cents. Our banking system, like Canadians outside Montreal, is conservative. Unlike Iceland or the US, no one worries about bank deposits.

The BoC has been generous, and it has fixed in advance any potential credit friction. Our federal government has been expansionary, but its policy is dependant on need. It is a "conditional" fiscal policy.

Our dollar is 25% cheaper. What we sell (oil) is cheaper. We may possibly be poorer for a while but we'll all have jobs.

When the G7/8 meet this summer, Stephen Harper will be one of the few with a relieved ironic grin on his face.

- even if the S&P 500 were to fall to 440 (or 500 like I want it to if only for the magic of the numbers "500") by the end of March then we are likely looking at the end of the year/beginning of 2010 for the trough to hit.

I got finally out of the SP500 on the rally just before Geithner's announcement (and I put it into Canadian).

I'm with you that the S&P is destined for worse. Time will tell.

Edited February 14, 2009 by August1991

[bush_cheney2004]

Anyway, that's my guess and logic - so what is yours?

Nobody knows.....why guess? It will be over when it's over.

[Muddy]

It will be over when I sell the empty house I have had on the market since last August.

[msj]

----

With that said, the G&M link misquotes Carney. The BoC's forecasts were about Canada - not North America.

I would recommend that you go to the Bank of Canada website and read the press releases and the monetary policy reports before making such claims.

When the article states "Mr. Carney expects the U.S. economy to shrink 1.7 per cent this year, rebounding nicely in 2010, growing 2.6 per cent" it is referring to the January 2009 monetary policy update.

So, yes, Carney has, as the top representative of the Bank of Canada, spoken about Canada, the US and the global economy over the past month or so and it is quite fitting for the G&M article to use all of those sources.

Last time I checked, Canada and the US constituted most of North America - or at least the part that a Canadian audience would find most important (nothing against Mexico though).

[msj]

It will be over when I sell the empty house I have had on the market since last August.

The modern recession/depression quandary: when my neighbours house is unsold it's a recession, when my house is unsold then it's a depression.

[Oleg Bach]

The modern recession/depression quandary: when my neighbours house is unsold it's a recession, when my house is unsold then it's a depression.

It will be over in about 5 minutes -- all forget that the fiat monitary system is a religion - it's a belief system. So believe in yourself and the goodness of those around you and it will be over in the blink of an eye...if you do not take this instruction you will fade. If you have a clean bed - a roof and food and water - you are rich...so shut up and stop whinning - once you bottom out materially - only one way to go UP!

[bush_cheney2004]

....If you have a clean bed - a roof and food and water - you are rich...so shut up and stop whinning - once you bottom out materially - only one way to go UP!

Word !! Just keep the cat happy.

[Oleg Bach]

Word !! Just keep the cat happy.

The curse of the unhappy cat can be deadly - I say kill the cat. BUT I would never do that - you get 10 years for catracide in Canada - and a hug and some nice medication if you kill a human.

[eyeball]

I think the idea that we need to recover the economy is the wrong approach. We need to remake it if we expect it to 'grow'. As much as anything our concept of what growth is needs to change because a good deal of growth has simply been a liquidation of natural capital, a liquidation that has not been subtracted in any meaningful way. Liquidate a forest, GDP goes up, burn a forest to the ground and lose hundreds of millions worth of homes and kill a bunch of people in the process, GDP still goes up. Its crazy.

Economic recovery should mean a recovery of our senses and the realization that our economy is based in the real world around us. Growth as we've come to know it these last number of years has been based on a financial fantasy world of make believe products. If we simply try to recover our economy by restablishing the ability to suspend our disbelief in the financial alchemy and wizardry that got us here, we might as well subscribe to a Law of Attraction than a Law of Supply and Demand.

Remaking our economy has to involve things like replacing the false snapshot the GDP provides for a Genuine Progress Indicator that carefully subtracts ecological and social deficits in the real world before any gains in the economy are calculated. In the same spirit of transparency and accountability recovering or remaking our economy has to involve basing its regulatory oversight on the certain knowledge and fact that power and wealth corrupts people - far too many to trust anyone that possess too much of it.

The only way to sustain the remaking of our economy is to give people a far greater number of democratic options than currently exist. This would certainly have to involve a transfer of greater authority to the local level and local management boards, especially in the case of decisions that impact our natural ecosystems and the adjacent human communities that depend on them because these are the real indicators of our economy.

[August1991]

I would recommend that you go to the Bank of Canada website and read the press releases and the monetary policy reports before making such claims.

When the article states "Mr. Carney expects the U.S. economy to shrink 1.7 per cent this year, rebounding nicely in 2010, growing 2.6 per cent" it is referring to the January 2009 monetary policy update.

I based my post on news reports of Carney's speech in Halifax but out of curiousity, I wen to your BoC link and found this:

The Canadian economy is expected to recover in the second half of 2009 and to grow above potential in 2010, as policy actions begin to take hold, both in Canada and globally. Support will also be provided from the past depreciation of the Canadian dollar. On an average annual basis, real GDP is projected to decline by 1.2 per cent in 2009 and to rebound by 3.8 per cent in 2010.

...

Global economic growth is projected to slow to 1.1 per cent in 2009—a rate consistent with a deep global recession—and to pick up in 2010, but remain below the rate of potential output growth (Table 2). Economic activity in all regions is expected to be much weaker over the next couple of years...

U.S. economic growth is expected to decline through the first three quarters of 2009, as consumption and business investment continue to contract and exports weaken. Annual U.S. GDP growth is projected to average -1.7 per cent in 2009 and 2.6 per cent in 2010.

What the G&M glossed over is how much rosier Carney forecasts Canada's future compared to the US or elsewhere. I think his justification is the fall in the Canadian dollar and the confidence of our financial system. In addition, Canadians did not get involved in a housing bubble nearly as much as Americans/British/Spaniards did.

We'll see how this episode plays out but it's very much in the frame of US and Canadian banking history stretching back over 200 years. The US has had a series of financial panics (about every 20 years or so) since its inception. Canadians have stood by, watched, feeling thankful, and wondering what all the confusion was about.

----

As an aside, it's "reassuring" to know that if Ignatieff becomes PM, he'll have a good grasp of how financial markets work:

However, a brief, bubbly appearance on CBC's Go this morning from the Liberal leadership front-runner left me stunned:

Casually and, almost, with pride, Michael Ignatieff declared he owned no stocks. He never owned a single stock in his entire life. No mutual funds, nothing.

That's right, the future would-be king has no personal experience of making a single decision around investing in companies. Not even with his banker to decide whether to put RRSP contributions into a dividend fund or index fund. He wouldn't know the difference. Or, if at best, he understood the notional difference, he had no experience of the difference.

I have a nightmare: a money making machine lustily dropping dollops of corporate subsidies as a "strategic partner to business" under the command of Iggy the Impervious. If he screws up? What does he care! It won't even bruise his mountain of GICs.

Some blog

It would be harder to find a better definition of government: supposed experts giving other people's money to still other people.

I think the idea that we need to recover the economy is the wrong approach. We need to remake it if we expect it to 'grow'. As much as anything our concept of what growth is needs to change because a good deal of growth has simply been a liquidation of natural capital, a liquidation that has not been subtracted in any meaningful way. Liquidate a forest, GDP goes up, burn a forest to the ground and lose hundreds of millions worth of homes and kill a bunch of people in the process, GDP still goes up. Its crazy.

I don't disagree with your sentiment but the GDP statistic matters less than you imagine. It is the real world that matters and to the extent that resources are owned privately (or managed wisely), then all of these costs are incorporated into any decision.

Even something like local air pollution will lower property values.

Edited February 15, 2009 by August1991

[Oleg Bach]

There is no black magical spell cast on the world ---- that plunges us in to recession, depression and a general state of hopelessness..It's up to the individual to rally in these times...firstly none of this is real and all of fiat currency is but a mist in the air...People are the wealth and the money. If step by step person by person believes that all is well all will be well. You will always have a roof over your head - this is Canada - you will always eat and the sun will shine - relax....There is big retired RCMP officer who "lost his shirt" in the market...even he is adjusting to the fact that those that invest and want something for nothing get nothing in the end - It was all a case of natural physics...wealth is health and prosperity is love and good will --- try taking a walk and spread some cheer.

[msj]

I based my post on news reports of Carney's speech in Halifax but out of curiousity, I wen to your BoC link and found this:

What the G&M glossed over is how much rosier Carney forecasts Canada's future compared to the US or elsewhere.

Let's see, in the G&M article we see that Carney's scenario is under the "rosy" category.

Furthermore, we see the columnist, McKenna, call Carney's "hopeful forecast" an "improbable dream vacation" since all the tools to fix the problem are expected to "work exactly as they are intended."

Then we have this bit from the article:

The recovery starts where it all began — in the United States. Mr. Carney expects the U.S. economy to shrink 1.7 per cent this year, rebounding nicely in 2010, growing 2.6 per cent.

And yet Mr. Carney's GDP forecasts are a full percentage point more optimistic than most private sector forecasts. Morgan Stanley, for example, is calling for gross domestic product to shrink 2.7 per cent this year, and grow a modest 1.8 per cent in 2010.

All things considered, Canada gets off pretty lightly, the way Mr. Carney sees it. The economy shrinks 1.2 per cent in 2009, before roaring back to life in 2010.

Far from being the worst crisis since the Great Depression, Mr. Carney sees Canada bouncing back much faster than it did from previous recessions — in 1981-82 and 1990-92.

The only one glossing over anything here is you glossing over the G&M article.

[msj]

We'll see how this episode plays out but it's very much in the frame of US and Canadian banking history stretching back over 200 years. The US has had a series of financial panics (about every 20 years or so) since its inception. Canadians have stood by, watched, feeling thankful, and wondering what all the confusion was about.

Found this graph which helps put things in perspective.

From this I don't see where you get every 20 years or so.

But this is where we differentiate between opinion/memory and objective evidence.

That graph is in current dollars, too, so it is not a matter of inflation washing away the previous years.

For those who may not know - FDIC stands for Federal Deposit Insurance Corporation which is the US provider of deposit insurance.

Edited February 17, 2009 by msj

[msj]

Looks like the NY Times has asked the question too: When Will the Recession Be Over?

[Oleg Bach]

Looks like the NY Times has asked the question too: When Will the Recession Be Over?

It will be over about the middle of April this year. Humans are like bugs...in the dead of the wintery reccession they lay static ...but when the beautiful spring sun comes out and everyone's mood and spirit are elevated - it will be over - besides the whole thing was an illusion - and no illusion is stronger than the miracle and fact of spring --- cheer up...the best is yet to come!

[August1991]

Found this graph which helps put things in perspective.

From this I don't see where you get every 20 years or so.

But this is where we differentiate between opinion/memory and objective evidence.

That graph is in current dollars, too, so it is not a matter of inflation washing away the previous years.

And that's the problem. In 1933, about 5500 banks failed in the US but the graph barely shows that. (BTW, the money supply in 1933 was about 40% lower than in 1929. So the current dollars of the graph were even smaller in number.)

But look, I'm not trying to argue that Washington Mutual's effective bankruptcy was somehow a good thing.

----

The 20 year thing is haphazard and stretches back at least to 1873. Indeed, some have compared the currect crisis to the Panic of 1873. I happen to think the FDIC (and the Fed) have changed the nature of US financial bubbles/panics. In recent memory, the US had a stock market crash in 1987, the tech bubble collapse in 2000 and now the collapse of a housing bubble in 2008 (or about every 10 years).

Greenspan finessed the first two but wasn't around for the third. One could argue that Greenspan's earlier finessing encouraged moral hazard since the players took on greater risks, feeling that the Fed would bail them out. (I think this is called Greenspan's put.)

----

Returning to the OP, how long will this last? God knows. Bernanke & Summers are responding in textbook fashion so if texctbooks are to be believed, teh US should see positive growth sometime in 2010. (With a bigger US federal government, and larger public debt. There's a risk of overshooting so we may have inflation problems.)

I am surprised about how severely and quickly this has affected the real economy. US GDP in the 4th quarter 2008 was down by over 6% on an annual basis. People are now forecasting unemployment will rise to double digits.

Real estate is a seductive but dangerous market. It has been the undoing of many entrepreneurs. (Think the Reichmanns or even Robert Campeau.)

I also reckon that there are some major intergenerational transfers going on. Boomers with stocks and a house just saw their wealth fall dramatically.

Finally, computers have really changed the banking business over the past few decades.

Edited March 2, 2009 by August1991

[msj]

August, spare me your faux history lesson, please.

Either put up some information with things like evidence and, gasp, facts, or shut up.

[August1991]

August, spare me your faux history lesson, please.

Either put up some information with things like evidence and, gasp, facts, or shut up.

I usually supply long quotes and links when I want to support my case but hey, this is called a discussion forum after all.

Here's a generic link:

The stock market crashed. Wall Street panicked. People stashed silver and gold under mattresses while businesses shut doors across America.

We're talking, of course, about the Great Depression ... of 1873.

That's the event that Scott Reynolds Nelson cites when asked to give an historical perspective on today's sputtering economy. The historian says the economic panic of 1873 started with the same toxic mix as today's crisis: risky mortgages, a stock market dive and the use of complex financial instruments that few understood.

"Until 1929, when people used the word Great Depression they referred to 1873," says Nelson, a professor of history at the College of William and Mary in Williamsburg, Virginia.

"That was a worldwide international depression that started with the banks. That's what we're seeing now. This looks like 1873."

CNN

IOW, speculative bubbles collapse.

----

Christina Romer can wax on about the stimulus package but I suppose things won't really start to work until the US financial sector starts to work again.

[Topaz]

I've heard some people say that it could last as long as five years or until the people who have to money to invest like the multi-millionaires and billionaires decides that the rest of us have had enough and go back to investing. In the US, taking 550 BIL out of the money markets sure didn't help and really started the ball rolling. I wonder if Rush was part of that, with his 20 mil +yrly income and now that Bush is gone, time to give the Dems so problems and keep their minds off of impeachment of Cheney and Bush!! The global downturn is in the hands of very rich and probably the same group that want to change the world and control it.

[eyeball]

I've heard some people say that it could last as long as five years or until the people who have to money to invest like the multi-millionaires and billionaires decides that the rest of us have had enough and go back to investing. In the US, taking 550 BIL out of the money markets sure didn't help and really started the ball rolling. I wonder if Rush was part of that, with his 20 mil +yrly income and now that Bush is gone, time to give the Dems so problems and keep their minds off of impeachment of Cheney and Bush!! The global downturn is in the hands of very rich and probably the same group that want to change the world and control it.

No Topaz, these people don't have a clue either, they're at as much of a loss for a solution as anyone.

[bush_cheney2004]

I've heard some people say....

Classic!

that it could last as long as five years or until the people who have to money to invest like the multi-millionaires and billionaires decides that the rest of us have had enough and go back to investing.

Probably not that long, but the "filthy rich" don't owe anybody anything....but they like to do it for themselves.

In the US, taking 550 BIL out of the money markets sure didn't help and really started the ball rolling. I wonder if Rush was part of that, with his 20 mil +yrly income and now that Bush is gone, time to give the Dems so problems and keep their minds off of impeachment of Cheney and Bush!!

I took mine out of mutual funds to....does that help to hurt the Democrats? Bush and Cheney can't be impeached....that's not how it works.

The global downturn is in the hands of very rich and probably the same group that want to change the world and control it.

Not really....if the average American consumer decides to stop buying crap from the "globe" on credit, that will change the world more than any fat cats could do.

[gradkiss]

Classic!

Probably not that long, but the "filthy rich" don't owe anybody anything....but they like to do it for themselves.

I took mine out of mutual funds to....does that help to hurt the Democrats? Bush and Cheney can't be impeached....that's not how it works.

Not really....if the average American consumer decides to stop buying crap from the "globe" on credit, that will change the world more than any fat cats could do.

We here in Long Beach California, expect the recession to last untill someone in the US Government begins using the historical record to realize the system of economics they use is one that is not even considered legal. The Dollar is not backed...the cost of printing each denomination is only 8 cents...so what is the penney worth? Fact is...the US government schemed in the 70's to somehow loose the silver that once backed the dollar. Today it is obvious...they are inslaving the population. Plus, as history proves...the solution to an ever changing economy that always follows suppy and demand is to get rid of money...and use the invoice...vote. gradkiss

[M.Dancer]

I'll go on record by saying I think we will start to see the economy rebound in earnest by US Thanksgiving...novemberish....the signs are starting right now...

WASHINGTON — U.S. housing construction posted a surprisingly large increase in February, bolstered by strength in all parts of the country except the West.

The U.S. Commerce Department reported Tuesday that construction of new homes and apartments jumped 22.2 per cent in February compared with January, pushing total activity to a seasonally adjusted annual rate of 583,000 units.

http://business.theglobeandmail.com/servle...y/Business/home