Uh Oh! II

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El and Bill

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Almost a year ago, we began a discussion that became lively and informative. This is what we said in our first post:

"Strong evidence is emerging that consumer spending, a bulwark against recession over the last year even as energy prices surged and the housing market sputtered, has begun to slow sharply at every level of the American economy, from the working class to the wealthy.

The abrupt pullback raises the possibility that the country may be experiencing a rare decline in personal consumption, not just a slower rate of growth. Such a decline would be the first since 1991, and it would almost certainly push the entire economy into a recession in the middle of an election year."

http://www.nytimes.com/2008/01/14/busin ... yt&emc=rss

The above tale from the NYTimes might herald a significant change in the boating world in the next few years. If indeed the economy slips into recession, and the price of fuel remains high, what will be the impact for us boaters? What do you think?

To read the posts in the Uh Oh! - 2008 you can click on this link from C-Brats:

http://www.c-brats.com/viewtopic.php?t= ... &start=240
 
Here are some thoughts to start off 2009. Yes, the NYTimes was right that the perceived reduction in consumer spending would push us into recession by the mid-year.

But much more has happened:

This is not just the ordinary recession many of us have lived through many times. This time it is a recession brought on by a financial crisis, a far more serious event. For most of us (unless you lived through the beginning of the Great Depression), this is a Black Swan. To read about Black Swans, click on:
http://www.geocities.com/bill_fiero/black.htm

Professors Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard, in a recent paper entitled "The Aftermath of Financial Crises," observed the following average characteristics of a financial crisis recession (as observed in developed countries):

1.Housing losses continued for 6 years and averaged 35% down and stock markets lost 55% over a three and a half year period of decline.

2. Unemployment rises 7% above the rate at the start of the downturn, so if this holds true with the 2008-09 decline would see unemployment about 10-12% for an average of four years. Output drops 9% over two years.

3. Government debt rises an average (in the crises since WWII) of 86%. The rise is mostly the result of failure of tax revenue.

If you wish to read the entire paper (and, for an economic paper, it's quite readable): http://ws1.ad.economics.harvard.edu/fac ... ermath.pdf.

Now, predictions are intrinsically unpredictable - so of course, this study is only a suggestion of what could be - and, for those who like to prepare themselves (or their investments and/or retirement or employment decisions) for a possible future - interesting to consider.

One good thing: crude oil, natural gas, and gasoline prices are down due to the drop in global demand. This, however, is also thought to be a temporary drop that could change dramatically as foreign events that might effect oil supply could change prices quickly.

So, like I brought up a year ago at the beginning of this slide, what effect might a prolonged economic hard time have on our boating? Like this past year, El and I will probably reduce our travel miles on the boat and perhaps reduce our overseas travel in order to preserve our investments (and they will continue to be invested in conservative ways).
 
If oil prices and the Canadian exchange rate holds near current levels this coming summer would be a great time to make a towing trip north to Alaska or even the Yukon area. Jo-lee and I have an ongoing debate on doing just that or holding and enjoying Yellowstone and other local areas. It would be no debate just making plans for another trip north this summer if our retirement wasn't only one more summer away.

This seems a great time for those that have the time and resources to make a northern cruise or for that matter a extended cruise most anywhere.

Jay
 
Certainly some excellent thoughts to ponder. Another consideration which I feel is very important is the degree of inflation which will occur. This will not be immediate. But any time a government "creates" vast amounts of money supply, inflation will follow. This will hurt those who have already retired the most.

Perhaps we need to consider the basics which the generation of the "Great depression" learned the hard way; save and avoid the temptations of "easy money".

I found Bill's article about Black Swans interesting. In the medical profession we are trained to expect the unexpected, so perhaps we are more attuned to probabilities occuring outside the bell curve.

Hippocrates is reported to have written:
"Life is short, the art long, opportunity fleeting, experiment treacherous, judgment difficult"

I have always felt that one needs to make the most of opportunities in life. This recession has opportunities, as well as pain and loss.
 
Look at the bright side. If the economy continues to tank, we won't have to wonder why our kids never call . . . they'll be living with us again. :sad
 
Yes, well, ahem. All gloomy. Still have a job. May work a year or two longer than originally planned, if they will let me. Still, we rode the appreciation on our house up more than 4x, if it slips back to 3x or even 2x, I guess that is the way it is. Know where we are going when we retire, that is a comforting thought. Plus all the free beer I can drink...
 
Sneaks":1zqef347 said:
Look at the bright side. If the economy continues to tank, we won't have to wonder why our kids never call . . . they'll be living with us again. :sad
Click to expand...

I told my kid that we are going to move in with her! After all, they have jobs! :mrgreen:

Now, kidding aside... there are certainly going to be some big changes in our way of life over the next few years. Perhaps not so much with us personally (since we started our downsizing about 3 years ago) as with society. We are already seeing less flagrant displays of wealth... those who still have it aren't flaunting it. As I see it, unemployment (and the resultant loss of our tax base) is going to be the next major problem facing our economy.

Like most, our retirement investments have taken a beating. But, we have no debt and no major expenditures planned. We will do some traveling this year; as long as fuel prices remain stable, the state of the economy won't affect those travel plans (since fuel is our major expenditure when we are out on the boat). We have been enjoying poking along at 6 knots, and the boat is plenty comfortable doing that. Once the weather in the other 90% of the country warms up, we will divide our time between the boat and the RV - both lifestyles we enjoy and neither needs to be extravagant.

One thing we have noticed with RVing recently... there are more people out there in RVs who have given up homes (not always by choice). Living more simply is going to become a way of life for many who have not had to (or chosen to) do that previously.

It's going to be an interesting year.

Best wishes,
Jim[/i]
 
The following is not meant to derail this thread or provoke controversy, but just to lace this discussion into a larger context and as an expression of my opinion and perspective.

**********

This recession or depression (dare we call it that, yet?), will be, on the larger world history scale, relatively short lived, and symptomatic of a much greater shift in the world distribution of power and wealth.

The America we grew up with in the 20th Century is losing it's preeminence on the world stage as the dominant economic and military player, and will have to accept a somewhat diminished role in world affairs as we find our way into the 21st.

We can no longer afford to be the policeman to the world, nor write the history of the other nations of the world with our military and economic might for our own gain. We still have a relative abundance of military power and a few dollars in the bank, but it's time to rein in the forces and decide what's really important and what we can afford.

America must solve it's energy crisis, deal effectively and decisively with terrorism, find jobs for many of its citizens displaced by the shift of manufacturing overseas, invent a way to make the benefits of medical science more affordable to a larger segment of her people, discipline and control the greed motivation that now permeates our society, define and set limits within our immigration policies, police and control our gang and underworld elements while we find and create worthwhile opportunities for our disadvantaged, negotiate and implement realistic environmental policies and practices, define new agendas for our political parties that have increasingly obsolete and self-centered platforms for their proponents, refocus on and redefine our family and individual values and societal goals, and the list goes on...

What were dealing with, of course, is more than the change in our pockets or the bucks in our billfolds, but instead the course of American History as we invent and see it written.

Isn't it intriguing to think about what we'd discover if we could take a magical look into an American History book written 100 years from now about the first half of the 21st Century?

Fun (and difficult, in some ways) to think about!

Joe. :teeth :thup
 
Joe -

This book might be an interesting read for you (and others) interested in following up on your post about the larger [shall we say, historic?] changes we might be witnessing as a result of our cultural materialism, resultant economic meltdown and recent foreign policy.

Strauss, William, The Fourth Turning; An American Prophecy
 
Sea Wolf":2lvpfa30 said:
This recession or depression (dare we call it that, yet?), will be, on the larger world history scale, relatively short lived, and symptomatic of a much greater shift in the world distribution of power and wealth.

Joe. :teeth :thup
Click to expand...

Relatively short lived?...

I suggest you read the following excerpts from a post found on a financial Website....

***************************************

The Greater Depression is coming as surely as an out-of-control freight train and it's unstoppable.

But, that's not the bad part.

What's coming is the end of the era of the US Dollar dominating the world and all the abuses that resulted, allowing the US to live well above its means at the expense of all the other countries obliged to use the US Dollar for their commodities transactions.

What's coming is the destruction of the 'American Way of Life' and the return to harsh reality, where consumption will be forcibly cut down by at least 30 to 35%, in line with what the US can actually afford.

What's coming is the complete loss of Faith in FIAT currencies, starting with the US Dollar, but extending eventually to all paper currencies as well and heralding the return of precious metals as the TRUE store of VALUE: my initial target for Gold is $2,750.00, but $5000.00 is also a real possibility.

What's coming is the destruction of a 'smoke & mirrors' economy, where all the statistics are fraudulently manipulated: CPI/Inflation is 13% - NOT 3%; GDP Growth is -2.5%, NOT +1.5%; unemployment is 14%, NOT 5%, and M3 runs at 18%, etc...

http://www.shadowstats.com/alternate_data

What's coming is the end of the current style of capitalism with all its excesses and the concentration of money and power in the hands of a few, while most of the citizens are kept in virtual financial slavery where their income in REAL terms has been stagnant for the last 15 to 20 years.

What's coming, in a nutshell, is the collapse of the Dollar and the US economy, heralding a Greater Depression that will last far longer than that which began in 1929 and ended in 1939, as the US no longer has the means it used to have back then to pull itself out of the hole.

+ In the 30's, the US had oil aplenty to use and export. Now it imports 70% of its needs at huge cost, as US oil production peaked in 1970.

+ In the 30's, the US had a strong manufacturing base and its people were lean and driven. Now, most of the manufacturing base has gone to Asia and some 60% of Americans are overweight or obese, lack drive or have become apathetic, while their Asian counterparts are lean, motivated and mean.

+ In the 30's, the US population was one of the better educated. Now it's lagging most modern countries an the high technology sector has to rely on foreigners for over 50% of its employees.

+ In the 30's, the US was competitive in terms of labor costs. Now, Asia is at least 10 times cheaper and making huge stride in productivity because it started from a much lower level.

+ In the 30's, the US was not anywhere as indebted as it now is. As the largest world debtor, the US now needs to borrow some $3 BILLION a day just to keep afloat on which it cannot even pay the interests and its debt and future liabilities - as per GAAP accounting - now exceed $65 TRILLION, or some $510,000 for every household.

Here is the bad part:

In short, the US will soon enter the Mother of all Depressions, BUT no longer has the means it once had: it took 10 years and the advent of WWII to pull out of the last Depression, but the US balance of assets/liabilities is far worse now, except for its army.

However it no longer is in the best of shape or all dominant with the advent of Russian and Chinese nuclear weapons developments and their MAD (mutual assured destruction) capability, so this is another option that has become obsolete.

***********************************

It is a fact that some $15 trillion of US wealth have been destroyed in the last couple years in bad loans, stocks and real estate losses and there is no way the Fed and Treasury can make up for it with their various bailouts. However, the mad rush to print money - some $8.5 trillion of it, so far, is bound to have a very negative long term effect on the US Dollar...

Anyone who is watching marine or RV related stocks has seen Brunswick (Mercury, Bayliners, etc...) come down from a yearly high of $19.00 to $2.00; Marinemax from $16.00 to $1.25; Winnebago from $24.00 to $4.25, etc... When RV's sales are tanking 60%, car sales have gone down 35 to 40%, manufacturing is at a 60 year low, one can only expects sales of discretionary goods, such as boats and related items to continue tanking further...

Brunswick is not as essential to the economy as GM, so while I anticipate the Fed to continue bailing out GM, then GE and Boeing, the marine industry will be left out in the cold. As a result, I expect at least half of the marine related manufacturers and dealers to be bankrupt by the end of 2009...

Not a pretty picture, sorry...
 
Bill and El:

Thanks for the book recommendation! I'll check it out and read it thoughtfully.

Seagem:

I know of the type projections you refer too, and we have to wait and see just how far down and for how long the trend continues. My "relatively short" may have been a poor choice of words if the more dire predictions come true, but I was trying to put the economic aspects in into a perspective that sees the entire scope of the problems we face, and not focus on hitting the alarm button with a distressing message. As usual, the economic forces may eventually determine the outcome of many of the other issues. Thanks for your comments!

Joe. :teeth :thup
 
We as a nation have squandered much of our national wealth and in the doing have still contributed much more to the world at large then we have taken from it. At the present there is still no nation on the globe that has near the combination of transportation system and national resources that we still posses. Though many don't want to hear about it or continue its use we also have energy reserves in the form of coal plus oil shale that I believe could be extracted and used in a environmentally sound way that would still allow us to be more then competitive with any nation on earth especially when combined with other alternative energy resources. Add to that the few restraints on individuals who have the desire to improve themselves compared to most nations and I personally think we may well do better then expected by many in the future. Of course the excesses we see in abundance are having a detrimental effect (the best example of this to me is the size of the homes so many choose to live in and there environmental and actual cost to maintain) on our system, but one should also consider the other persons view of excess is an other's viewed need. I know our traveling in whatever form is a need to us and viewed by many others as an excess. So in our individualistic society change most always comes after a battle or other dire need and I personally would have it no other way.

Joe your points of what we need to accomplish as a nation are well thought and written out however I think the "discipline and control the greed motivation that now permeates our society" if not controlled is what will be the main culprit in the lowering of our nations ability to maintain its present status. In many ways the saying "we have met the enemy and it is us" rings true today as it has in the past to many other nations that were on the top of the heap and their society slowly depended more and more on the few and fewer with less and less earned for their efforts.

And I sure hope Joe's view of the outcome of this mess we're in is the more accurate of his and Seagem's though I think it could go either way or hopefully at the worst somewhere in between.

Jay
 
Jay-


Far be it from me to think that I have the ability to predict the eventual outcomes of the economic forces that are shaping our changing world, though I know they are far more powerful than many of us appreciate and will undoubtably reshape America vastly in our no so distant future, though the degree to which this will happen is the real unknown. Yes, it is scary to think about!

I was and still am trying to point out how much the immediae economic issues interrelate with the rest of the fabric of American social, political, and moral problems. Sometimes it's hard for some to look beyond their own pocketbooks.

Joe. :teeth :thup
 
When I was a young man, I would go down to the docks and watch the ships load up finished goods made in America. Now the ships leave with raw materials to be made into finished products elsewhere. Turn that around and things will be better economically. My canary will be a baseball cap. When I get one 'Made in America' I'll know the corner's been turned.
 
dotnmarty":1tmsald3 said:
My canary will be a baseball cap. When I get one 'Made in America' I'll know the corner's been turned.
Click to expand...

C-Dory cap: Bangladesh
Ranger Tug cap: China
John Deere Owner's Edition cap: China
Clatsop Power (dealer) John Deere cap: Monroe, WA, USA

Score one for the little guy selling the Japanese stuff with the all-American name!

John Williams' Shadow Government Statistics":1tmsald3 said:
What's coming is the end of the current style of capitalism...
Click to expand...

But not if they can help it. They want $175 for a year's subscription to their newsletter.
 
Such pessimism! Lets look at some actual facts. America is not dead or even moribund. The rest of the world is catching up--and in some ways surpassing the United States.

America: Largest Economy in the World
America: most used currency in the World
America; Largest Exporter in the World
America: Largest Importer in the World
America: Largest Military
America: Most foreign aid given
America: First and largest responder in time of international crisis

Investors are flocking to the US Treasury bills, driving interest down to near Zero; despite recession, the US is still felt to be the safest investment.

Last year foreign investors put 233 Billion dollars into US business ventures--far surpassing China and Hong Kong combined.

Us Economy is 14 Trillion dollars a year-dwarfing second place Japan by almost 3 times--and way over China (3rd) and Germany (4th)--each of which are about 3.5 trillion dollars a year.

US manufacturing output is over $1.7 trillion last year: Japan $950 Billion and China $780 Trillion. Where do we lead? Health Care, Communications, pharmaceuticals, aerospace, oil and gas equipment and industrial machinery.

America has a greater output and increase of output per worker than any other country--averaging 2% a year for the last 13 years. Amoung the G8 only UK has outpaced the US since 2000. An increase of 1.5 to 2% is predicted over the next few years.

Our infrastructure ranks 9th--but some of the comparisions are with city states, such as Hong Kong and Singapore--and under 5 European countries which had a number of years of greater government spending on infrastructure.

Despite some foreign dependance, the US is still the world's greatest producer of energy (and user)...This includes Coal, solar, wind, nuculear, oil, natural gas etc.

The US remains the worlds' greatest producer of services--$6 trillion dollars worth--and 14% of the world's services.

The quality of research is still #1-but there are many close behind. Two Thirds of this research is privately funded--and with the public funding is equal to 30% of all research in the World.

Yes, we have many changes to make--and maybe this is a wake up call. I don't know if we have the will to tighten the belts and keep the edge or not. But the private sector has made America what it is--and I hope it will in the future.

Certainly education--and the family structure are number one in our priorities.
Health care availability ranks up there in needs (the quality is tops), along with infrastructure.

We have to recognize the gobalization of the economy--do what we do best, and farm out what others can do best.

One last fact--is that only 62% of voters voted in this last national election.

Source Kiplinger's Letter, which I have found to be reliable.
 
thataway":2ih34lm2 said:
Such pessimism! Lets look at some actual facts. America is not dead or even moribund. The rest of the world is catching up--and in some ways surpassing the United States.

America: Largest Economy in the World
America: most used currency in the World
America; Largest Exporter in the World
America: Largest Importer in the World
America: Largest Military
America: Most foreign aid given
America: First and largest responder in time of international crisis

Investors are flocking to the US Treasury bills, driving interest down to near Zero; despite recession, the US is still felt to be the safest investment.

Last year foreign investors put 233 Billion dollars into US business ventures--far surpassing China and Hong Kong combined.

Us Economy is 14 Trillion dollars a year-dwarfing second place Japan by almost 3 times--and way over China (3rd) and Germany (4th)--each of which are about 3.5 trillion dollars a year.

US manufacturing output is over $1.7 trillion last year: Japan $950 Billion and China $780 Trillion. Where do we lead? Health Care, Communications, pharmaceuticals, aerospace, oil and gas equipment and industrial machinery.

America has a greater output and increase of output per worker than any other country--averaging 2% a year for the last 13 years. Amoung the G8 only UK has outpaced the US since 2000. An increase of 1.5 to 2% is predicted over the next few years.

Our infrastructure ranks 9th--but some of the comparisions are with city states, such as Hong Kong and Singapore--and under 5 European countries which had a number of years of greater government spending on infrastructure.

Despite some foreign dependance, the US is still the world's greatest producer of energy (and user)...This includes Coal, solar, wind, nuculear, oil, natural gas etc.

The US remains the worlds' greatest producer of services--$6 trillion dollars worth--and 14% of the world's services.

The quality of research is still #1-but there are many close behind. Two Thirds of this research is privately funded--and with the public funding is equal to 30% of all research in the World.

Yes, we have many changes to make--and maybe this is a wake up call. I don't know if we have the will to tighten the belts and keep the edge or not. But the private sector has made America what it is--and I hope it will in the future.

Certainly education--and the family structure are number one in our priorities.
Health care availability ranks up there in needs (the quality is tops), along with infrastructure.

We have to recognize the gobalization of the economy--do what we do best, and farm out what others can do best.

One last fact--is that only 62% of voters voted in this last national election.

Source Kiplinger's Letter, which I have found to be reliable.
Click to expand...

You forgot to mention that the US is by far the largest Debtor in the world - in fact, if it was a normal business, it would have been bankrupt long ago - as it needs to borrow $3 billion per day to remain afloat, on which it cannot repay the interest, without more borrowings, let alone the principal...

The current debt of the US, in accordance with GAAP accounting principles, now exceeds $65 trillion, or some $510,000.00 per household and that has just increased in the last year by another $8.5 trillion to bailout bankrupt banks...

http://www.worldnetdaily.com/index.php?pageId=37167

- You or your source seem to make things up to suit your argument: the largest exporter is Germany and the US is 3rd after China...

http://en.wikipedia.org/wiki/List_of_co ... by_exports

- The largest economy in terms of GDP is the EU....

http://en.wikipedia.org/wiki/List_of_co ... P_(nominal)

- China to Supplant U.S. as World’s Largest Manufacturer by Next Year...

http://www.moneymorning.com/2008/08/11/ ... facturing/

- China's military is ranked #1, at least in terms of number of active soldiers...

http://en.wikipedia.org/wiki/List_of_co ... med_forces

... and what has the latest US military venture achieved in Iraq?...

It killed over 1 million innocent Iraqi civilians, got over 30,000 Americans casualties between killed and wounded, will spend over $2 trillion by the time all the veterans disability claims are taken into account and it's being kicked out of the country by the end of 2011...

No benefit whatsoever has been gained: a complete waste of lives, time and money, unless you happen to be one of the military contractors, of course...

Finally, the US health system is ranked #37 in the world, after Morocco, Chile and Dominica...

http://www.photius.com/rankings/healthranks.html

...but it's nearly twice as expensive as the next country on the list, Switzerland...

http://www.voanews.com/english/archive/ ... N=19564538

One statement I agree with completely is that the US is by far the biggest importer, which leads to the largest trade deficit in the world of some $750 billion a year. Americans need to cut excess consumption by some 35% to make this deficit disappear, but, since consumption represents over 70% of GDP, the contraction is going to be very painful...

The point I was making earlier and which ties in with the C-Dory story is that many boat builders and dealers will be bankrupt by the end of 2009: I hope that the makers of the C-Dory won't be one of them....
 
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