[Shaved Monkey]

Im think correction, big correction possible crash as no one has really recovered from the last one and all the tricks have been used up.
Last time Australia made it virtually unscratched,we had lots of coal and iron ore to sell to China and the centre left government handed out $1000 to everyone and said go shopping and started a massive school/community infrastructure building program in virtually every town and suburb.
This time the current government is into austerity and China isnt as hungry for coal and iron ore.
House prices are going mad in the major capitals(no where else),but consumers have closed their wallets and retail is dead.
Unemployments on the rise,fear of job security creates fear of shopping and borrowing.
and we are supposedly some of the richest people on earth.
http://www.smh.com.au/business/the-econ ... 163ip.html

Only 6 per cent of Australians have wealth below $US10,000, compared with 29 per cent in the United States and 70 per cent for the world as a whole.

[Plantagenet]

To clarify, we'll use this definition for purposes of the poll:

re·ces·sion
rəˈseSH(ə)n/
noun
1.
a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

That definition doesn't match up very well with what the world economy has actually been going through since 2008. What we're going through is lot more severe than that. Try this definition instead---it matches up really well with what is actually happening:

In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession...

Considered by some economists to be a rare and extreme form of recession, a depression is characterized by its length; by abnormally large increases in unemployment; falls in the availability of credit, often due to some kind of banking or financial crisis; shrinking output as buyers dry up and suppliers cut back on production and investment; large number of bankruptcies including sovereign debt defaults; significantly reduced amounts of trade and commerce, especially international; as well as highly volatile relative currency value fluctuations, most often due to devaluations. Price deflation, financial crises and bank failures are also common elements of a depression that are not normally a part of a recession.

Depressions typically go on long enough that there can be multi-year periods within the Depression when economic activity picks and a little growth occurs. In the Great Depression of the 1930s, things gradually picked up after the 1929 crash, until a second major collapse in 1937. I think when the world reached peak oil (for conventional light oil) in 2008, the world began another depression. In the US we've had weak growth, with occasional negative GDP in one quarter (the most recent negative quarter in the US was the first quarter of 2014, and in the EU they are on their third recession. 6 years of crappy economic growth ain't your garden-gariety recession. The 2009 collapse and subsequent weak global economic picture fits much better with the definition of a depression (see above). The current depression is hitting harder in the EU then it is the US, while the 1930s depression hit harder in the US and mostly weaker in Europe. But make no mistake about it---we are in year 6 of global economic weakness.

[Loki]

The current depression is hitting harder in the EU then it is the US, while the 1930s depression hit harder in the US and mostly weaker in Europe. But make no mistake about it---we are in year 6 of global economic weakness.

Agreed. The current period could certainly be considered a depression. Not at the level of the 1930s (unless you live in Greece, Spain, Egypt, et al.), but pretty close to the 1890s (in the US).

But maybe another way to think about the question is if we in the US are about to see another 1937 in the near term.

My answer is: Maybe. LOL

I voted 3. I had hoped we might be able to limp along into the 2020s, Europe and Japan stagnant, but the US "recovered" to our new normal of Dollar Store America. But we never really dealt with the private debt problem in the US. Deleveraging has stopped and we're now building new debt. This cannot last. Good opinion piece on the subject by the Australian economist Steve Keen.

Here's his private debt to GDP chart. It paints the portrait:


What role oil will play is harder to tell. I don't think peak oil caused the Great Recession, but there were certainly some feedback loops. What role the decline of tight oil will play is still to be determined. A lot depends on how fast it declines, which in turns depends on price.

Which is a long-winded way of saying TEOTWAWKI on Thursday, December 4, 2014. No one expects doom on a Thursday.

[Loki]

Not sure what response I should indicate but what I think will happen is the economy will muddle along until Obama is out of office. The falling energy prices might stave off a more broad based economic decline but I wouldn't rule that out in 2015. Starting in 2017 there will be an explosion of economic activity. Government spending will go up as will corporate investment. Monetary policy will tighten at that point. That is all.

I never had you pegged for a corny.

I disagree that President Gingrich will increase government spending once he takes office in 2017. After all, "grinch" is right there in his name LOL

But surely you don't mean Hillary I think the zombie apocalypse might be preferable....

[Loki]

"I don't think peak oil caused the Great Recession" Loki, if not peak oil, then what?

Certainly not debt; you chart tells us debt has risen steadily and regularly since 1940, yet the slope seems disconnected to all the subsequent recessions.

Yes, debt. The line goes up, then it goes down. Just like it has before. Only the magnitude is far greater this time around. And we've only just begun to fall.

The oil price spike came on the heels of the housing crash. It did not precede it. If you're going to argue causation, you need to explain the timeline.

Notice my mention of "feedback loops." Financial crisis playing a role in the rapid rise in oil price, itself a cause of what we call 'peak oil' for shorthand, leading to exacerbation of financial crisis, leading to demand destruction, leading to leveling off of oil price at a higher level, leading to development of tight oil, which is playing a role in our slight (probably temporary) economic recovery in the US but setting us up for more debt defaults and oil shocks, etc. Very brief outline of a highly complex topic.

It's misleadingly simplistic to just say "peak oil caused the recession."

[Loki]

But there have been half a dozen serious recessions during the debt-climb. Yet none of those recessions, nor the expansions in between seem correlated with debt change. Why this previous recession?

Private debt doesn't explain all recessions, therefore this last recession has nothing to do with private debt? I smell a logical fallacy.

Did ya notice that little uptick and downtick around the 1930s? Come to think of it, I think there might have been a small recession some time around then.

The oil price spike came on the heels of the housing crash. It did not precede it. If you're going to argue causation, you need to explain the timeline.

How do you figure that?

Beginning of housing bust = 2006
Beginning of oil price spike = 2008

Notice the difference?

You are twisting financial 'theory' to cloud a simple explanation. Peak oil is here and causes all sorts of hell.

So peak oil is the one and only cause of everything since 2008. Yep, nothing simplistic about that LOL

[dinopello]

Not sure what response I should indicate but what I think will happen is the economy will muddle along until Obama is out of office. The falling energy prices might stave off a more broad based economic decline but I wouldn't rule that out in 2015. Starting in 2017 there will be an explosion of economic activity. Government spending will go up as will corporate investment. Monetary policy will tighten at that point. That is all.

I never had you pegged for a corny.

I disagree that President Gingrich will increase government spending once he takes office in 2017. After all, "grinch" is right there in his name LOL

But surely you don't mean Hillary I think the zombie apocalypse might be preferable....

It's just my guess and I don't really view it as a corny position. When the spending starts back up, commodity prices will rise fast. And, it doesn't really matter who the president is in this regard. Although, someone like a Jeb Bush election would lead to the biggest spending increase over other probable next presidents.

[Quinny]

I'm with Pete on this one. I think PO did cause the crash maybe not directly, but after US peaked last century the financiers had to come up with some kind of ponzi schemes to fleece us with. These are all based on debt and so of course the repercussions are financial when they fail.

I suppose a lot of opinion depends on which kind of wealth you believe ultimately trumps the other. Real wealth or money?

[Shaved Monkey]

It is strange times when blue chips aren't safe so money moved to houses but now that is over inflated.
Banks aren't as safe as they once were and interest doesn't usually cover inflation, so your losing money in real terms and they may crash.
Safer stocks paying good dividends are over priced and traditionally don't grow fast.
If you put it under your bed you attract Zombies or rats and inflation will eat it.
Jobs aren't as safe or available as they once were
All these problems are caused by uncertainty and that's caused in part by the price/supply of the stuff that fuels economic growth.
Its not going to just magic itself better,it will need to reset at a lower level and try and get people willing to take a risk at the lower prices,but PO will always be there so it will reset again and again.

[Pops]

I'm not sure if the current period is just the old fashion teetering of expansion vs contraction or a whole new era altogether. Are we just in another bubble blown by TARP & QE leverage that's created zombies out of wall street (just like the zombie banks of Japan) and perhaps a Ponzi scheme in LTO fracking? Is it just a phase of clearing?

Or are there structural changes that constitute a new normal? High energy prices of course but also Boomers opting out / forced out of the economy, Millennials who aren't interested in reflating the markets the boomers built, the optimizing of the production of Stuff never touched by humans and the advent of the ephemeral economy: data charges, apps, streams, clouds and EZ Pass that is fundamentally restructuring how things work - and presenting a buttload of attractive pinch points in the process?

I disagree with Loki that oil prices had nothing to do with the lesser depression. I rough figured last year in the Price of Collapse thread that perhaps a trillion dollars had been re-allocated by increasing fuel costs in the run up to the credit freeze - there is no way you can make a bunch of loans to folks without the actual ability to repay, let alone any cushion, then force them to pay double, triple, quadruple for energy just to get to work and not expect them to default. Once the paper had been sliced and diced and given the blessing of the priests at Price Waterhouse (in return for an alter offering) the final owners of the mortgages didn't have any cushion either - they convinced themselves the paper was golden.

The root of course was the over exuberance of everyone involved lying to each other about risk that set up the crash - I mean everyone just suspended any skepticism. Crazy time. But I give some credit to the run up in energy prices starting in '04 and '05. Fer sure the crash was well underway way before the oil price spike in '08 but that was just the cherry on top.

So I'm wondering if this is coming up on a correction or is it actually a changing of direction?

[Loki]

I disagree with Loki that oil prices had nothing to do with the lesser depression.

Where exactly did I say that?

The primary cause was over-indebtedness caused by the housing bubble. This is obvious as the day is long.

Oil price played a secondary role, but it still played a role.

[Loki]

Loki, how does private debt cause a recession? You are twisting history and common-sense economics with that explanation. If anything, debt is an economic multiplier.

Your explanation sounds like something out of a Ron Paul's playbook. "Ooooooo debt is evil. We should pay for everything with gold. Or our children's labor. Send them to the tannery, post haste!"

Try googling "debt deflation" and learn something for once.

And stop trying to confuse private debt with public. Two different animals.

[Loki]

Loki, how does private debt cause a recession? You are twisting history and common-sense economics with that explanation. If anything, debt is an economic multiplier.

Your explanation sounds like something out of a Ron Paul's playbook. "Ooooooo debt is evil. We should pay for everything with gold. Or our children's labor. Send them to the tannery, post haste!"

Try googling "debt deflation" and learn something for once.

I have, and does say this, "Debt deflation is a theory of economic cycles, which holds that recessions and depressions are due to the overall level of debt shrinking (deflating):" Did you get that? Not too much debt, but too little debt causes recession. You have it bass-akwards.

Your 30 second glance didn't sink in, obviously. Try again. I could spoon feed you, but you're so adamantly against any idea but "peak oil as the cause of everything" that it'd be a waste of time.

[dolanbaker]

Looking at the poll results, I am the only one to expect a minor correction.

But things look different from here, it appears that the 2008 US recession (and recovery was better) was much less severe than the one we experienced here in Ireland, recovery here has been much weaker.

So for us a slight downturn will quickly get us back to the bottom (2010 level), we're not very much above it now!

Ireland's recovery looks much better than it really is due to the fact that so many emigrated during the collapse (mainly of the construction industry) and many EU migrants went home.