Long recession in U.S. is inevitable TheStar.com - Columnist - Long recession in U.S. is inevitable
September 19, 2008
Richard Gwyn
The fall of the Berlin Wall, and so the end of the Cold War. The 9/11 attacks by Islamic terrorists on the World Trade Center Towers in New York.
And now the financial crisis on Wall Street: it's of the same transformational, things-will-never-be-the same again, historic order.
About the nature of the coming new order, it's of course impossible to make any pronouncements with any confidence.
But about what the future may hold – my own guesstimates about it follow below – there is one defining aspect that can be stated with complete confidence.
This is that almost no one has yet got it right, or even come close. As is even more relevant, all the guesstimates by all the experts have erred, massively, in the same way. They've all been far too conservative, far too optimistic, and too anxious to avoid making things worse by sounding too gloomy.
In fact, at least one shining exception to the near-universal analytical timidity does exist: back in 2003, billionaire investor Warren Buffett described the new financial gimmicks then being peddled by Wall Street as "financial weapons of mass destruction." He went on to describe those peddling these gimmicks as "madmen."
Today it's time to err on the side of pessimism. That's my own mood anyway. Here are my guesses:
A recession is inevitable. And it will be a long one, say of three or four years, quite possibly longer.
Canada is in incomparably better shape than the U.S. Our banks and insurance companies are far better regulated, and by nature are conservative and responsible.
Our government finances are similarly in incomparably better shape than those south of the border.
Luck also is on our side. We have lots of resources. The next-door market for our oil, minerals, potash and the rest will contract. But many major markets, from China to India to Brazil, will continue to grow.
The U.S., though, matters the most to us by far. As it goes down, so will we, if less dramatically and painfully.
The U.S. recession will not just be long and painful, but brutal. The collapse of its giant automobile corporations – GM, Ford and Chrysler, which are all now trying to get $25 billion in subsidies out of Washington – is a distinct possibility, with potentially harsh consequences for Ontario.
The reason for the scale of the pain ordinary Americans will have to endure is because of the scale of the gains, largely artificial, that they have granted themselves in recent years.
South of the border, everyone's been living on credit. The nation is in debt, with huge unfunded liabilities such as social security and medical care still to be factored in. Individuals have maxed out their credit cards. Corporations are deep in debt, often, as shown by the collapse of giants like Lehman Brothers and AIG, far deeper than either their own executives or their regulators knew.
Just one remedy exists: deep cuts in government spending matched by tax increases to bring in additional revenues. Out on America's Main Street, though, the consequence will be job losses and income losses, and therefore a longer and deeper recession.
The U.S. is about to go through an agonizing rethink about its place and role in the world. It can no longer afford the war on terrorism. The annual cost of the war in Iraq – at some $300 billion – is the equivalent of all the corporate bailouts that have just been executed. The military can't escape the general cuts in spending.
Watch, therefore, for the U.S. to turn inward, although not necessarily isolationist. Watch for an early withdrawal from Iraq and an early acceptance that the war in Afghanistan is unwinnable.
Watch for the Middle East to become a very unstable and unpleasant place. Watch, therefore, for oil prices to soar.
No one would be happier than me if all these predictions turn out to be alarmist and exaggerated. But we'd all be a lot happier today if the chair of the Federal Reserve Bank or the U.S. treasury secretary or, as the least likely possibility, the president had been as alarmist as Warren Buffett.
http://www.thestar.com/World/Columnist/article/501937
Final nail in the coffin for the Bush legacy and his stooges in the house and senate who let buisness run wild with no controls unlike wise old Canada.....hear that Harper, no deregulation.
This mess even has the deregulator McCain changing his tune.:roll:
America, home of the greedy.:angryfire:
September 19, 2008
Richard Gwyn
The fall of the Berlin Wall, and so the end of the Cold War. The 9/11 attacks by Islamic terrorists on the World Trade Center Towers in New York.
And now the financial crisis on Wall Street: it's of the same transformational, things-will-never-be-the same again, historic order.
About the nature of the coming new order, it's of course impossible to make any pronouncements with any confidence.
But about what the future may hold – my own guesstimates about it follow below – there is one defining aspect that can be stated with complete confidence.
This is that almost no one has yet got it right, or even come close. As is even more relevant, all the guesstimates by all the experts have erred, massively, in the same way. They've all been far too conservative, far too optimistic, and too anxious to avoid making things worse by sounding too gloomy.
In fact, at least one shining exception to the near-universal analytical timidity does exist: back in 2003, billionaire investor Warren Buffett described the new financial gimmicks then being peddled by Wall Street as "financial weapons of mass destruction." He went on to describe those peddling these gimmicks as "madmen."
Today it's time to err on the side of pessimism. That's my own mood anyway. Here are my guesses:
A recession is inevitable. And it will be a long one, say of three or four years, quite possibly longer.
Canada is in incomparably better shape than the U.S. Our banks and insurance companies are far better regulated, and by nature are conservative and responsible.
Our government finances are similarly in incomparably better shape than those south of the border.
Luck also is on our side. We have lots of resources. The next-door market for our oil, minerals, potash and the rest will contract. But many major markets, from China to India to Brazil, will continue to grow.
The U.S., though, matters the most to us by far. As it goes down, so will we, if less dramatically and painfully.
The U.S. recession will not just be long and painful, but brutal. The collapse of its giant automobile corporations – GM, Ford and Chrysler, which are all now trying to get $25 billion in subsidies out of Washington – is a distinct possibility, with potentially harsh consequences for Ontario.
The reason for the scale of the pain ordinary Americans will have to endure is because of the scale of the gains, largely artificial, that they have granted themselves in recent years.
South of the border, everyone's been living on credit. The nation is in debt, with huge unfunded liabilities such as social security and medical care still to be factored in. Individuals have maxed out their credit cards. Corporations are deep in debt, often, as shown by the collapse of giants like Lehman Brothers and AIG, far deeper than either their own executives or their regulators knew.
Just one remedy exists: deep cuts in government spending matched by tax increases to bring in additional revenues. Out on America's Main Street, though, the consequence will be job losses and income losses, and therefore a longer and deeper recession.
The U.S. is about to go through an agonizing rethink about its place and role in the world. It can no longer afford the war on terrorism. The annual cost of the war in Iraq – at some $300 billion – is the equivalent of all the corporate bailouts that have just been executed. The military can't escape the general cuts in spending.
Watch, therefore, for the U.S. to turn inward, although not necessarily isolationist. Watch for an early withdrawal from Iraq and an early acceptance that the war in Afghanistan is unwinnable.
Watch for the Middle East to become a very unstable and unpleasant place. Watch, therefore, for oil prices to soar.
No one would be happier than me if all these predictions turn out to be alarmist and exaggerated. But we'd all be a lot happier today if the chair of the Federal Reserve Bank or the U.S. treasury secretary or, as the least likely possibility, the president had been as alarmist as Warren Buffett.
http://www.thestar.com/World/Columnist/article/501937
Final nail in the coffin for the Bush legacy and his stooges in the house and senate who let buisness run wild with no controls unlike wise old Canada.....hear that Harper, no deregulation.
This mess even has the deregulator McCain changing his tune.:roll:
America, home of the greedy.:angryfire: