Talk:Financial Crisis of 2008
Thank you for all of your hard work. I would have to question though the starting premise that it is the worst financial disaster since the Great Depression. I realize that commentators are saying such, but they have a tendency to interject hyperbole to make things sound more grandoise than they should. Do we really feel, at this point, that the current crisis is worse than the downturn in the early/mid 70's or the hard hit in the early part of Reagan's first term after the Carter Presidency? Inflation is not 18%, unemployment is not 10%, and the GDP last quarter contracted at -0.3%, which I somehow doubt ranks as high in the list of calamities, especially when you consider that it was induced mostly by fear and a drop in consumer spending. If consumer spending had stayed the same quarter to quarter than the GDP would have grown 1.9% last quarter instead of the -0.3 that we recorded. And that certainly would not be a 'sky is falling' scenario. Learn together 22:53, 14 November 2008 (EST)
- well we've just plunged into this mess and nobody knows where it will bottom out. Yes, I think that so far it it worse than the others mentioned in several ways: 1) this is worldwide 2) there have been spectacular bankruptcies and collapses of huge companies--something we never saw before; that includes some of the biggest banks in the world, the #1 insurance company (AIG) and--on the verge--General Motors and Chrysler and maybe Ford too (in Reagan's day it was the much smaller Chrysler that was in trouble); add in the housing crisis and the fall in retirement funds that hit most people with retirement accounts and stock market investments....RJJensen 23:27, 14 November 2008 (EST)
- I do have some more thoughts. Most US recessions are world-wide to some degree because we're the big kid on the block. When we fall everyone feels it. The Arab Oil Embargo after the Yom Kippur War grounded the economies of all of the West (if I remember correctly -- it certainly did here). When the stock market first broke 1000 it went back under that level the next day -- and wouldn't come back for 10 years. After the 2000 election the Nasdaq was at 3500, after Gore's run to take the Presidency it had dropped to 2700 and after 9/11 it was 1300 -- so we've had worse financial hits market wise as well. Personally I don't like this downturn as I am invested in the market, but I don't think it does justice to the downturns that we have weathered in this nation. And as for the big companies going out of business, is that because the economic situation was so untenable or because they just weren't that smart? Look at the contract GM has with its union. The workers get paid whether they're laid off or not. Wasn't that a recipe for disaster during any downturn? Did anyone twist the arms of the financial institutions to lend money like they did? Was that an extremely unfortunate series of economic events that caused institutions to fold or circumstances that were half self-made and didn't require a deep recession to occur? Learn together 03:58, 15 November 2008 (EST)
- how smart was it of the banks and hedge funds etc to play the games they played? very dumb and they lost $$$$$. But the collapse of multiple very big firms in US and Europe is something the world has never seen before, so I'm pretty pessimistic myself. I see a 50-50 chance that both GM and Chrysler will close down in the next 6 months, along with many of their suppliers and dealers; the article has some scary estimates of how much that will cost the econony, on top of the trillions that have already been lost.RJJensen 14:25, 15 November 2008 (EST)
- I'm not sure the numbers are as dire as predicted. The auto sector makes up less of a percentage of the U.S. workforce than it did during the Chrysler bailout, and that only cost 1.2 billion. Many of the jobs would 'shift'. For instance Americans would still buy cars, so car salesmen wouldn't go out of business, they would merely be selling Toyota or Honda or some other non-US model instead. Many of the car plants that would close down enmasse would be bought by competitors who would be itching to make the sales that the American car manufacturers previously made in the world's largest economy. There would be some hard times during the transition, but the overall volume of product and how it is delivered wouldn't change much. Foreign car companies already have plants in the U.S. They would just turn up with a lot more of them. Learn together 02:15, 22 November 2008 (EST)
- I am very pessimistic. I predict if GM goes down the transplants will not make up the gap for several years; instead they will cut back production because they can't get parts (many parts companies will go under and the transplants depend on them). (It takes years and billions of dillars to build one new auto plant--we will need 20+ new plants and where is the money coming from?) US auto sales will plunge, prices will soar --like the Prius. People will pay $40k for a car that now costs $25k, and will have to wait 6 to 12 months (like in 1945-47). Americans will be very unhappy. Most GM dealers will close--they are major factories in every Main Street in the USA and are in trouble right now. The closing costs will be hundreds of billions, and a million or two well paid people (like salesmen) will be badly hurt. RJJensen 07:33, 22 November 2008 (EST)
- I'm not sure the numbers are as dire as predicted. The auto sector makes up less of a percentage of the U.S. workforce than it did during the Chrysler bailout, and that only cost 1.2 billion. Many of the jobs would 'shift'. For instance Americans would still buy cars, so car salesmen wouldn't go out of business, they would merely be selling Toyota or Honda or some other non-US model instead. Many of the car plants that would close down enmasse would be bought by competitors who would be itching to make the sales that the American car manufacturers previously made in the world's largest economy. There would be some hard times during the transition, but the overall volume of product and how it is delivered wouldn't change much. Foreign car companies already have plants in the U.S. They would just turn up with a lot more of them. Learn together 02:15, 22 November 2008 (EST)
- I definitely see a period of adjustment, but it's not like there are no other car companies in the world, and they are still very competitive among themselves and would try hard to get the open market of the largest car buying nation in the world. I do agree the waves could last for years as it takes time to adjust plants to other manufacturers as well. The biggest problem with the bailout right now is will it work? Unions have contracts that workers have to be paid even if they are laid off, and their pensions and medical plans are untouchable. The car companies are bleeding heavily and putting more blood into open wounds won't solve the problem. Costs are so high that the first slowdown would kill the industry -- and the upcoming slowdown looks to be as bad or worse than what they are going through presently. With the way books are kept its hard to tell how much money they really lost, but on paper it was almost 20 billion dollars in the last quarter among the three. With losses like that, apart from helping them to live a bit longer, how is any economic stimulus package going to help them? Chrysler had a plan when they needed help 30 years ago, and they implemented it to turn themselves around. Where it the plan among the automakers now other than a call for help? Learn together 11:10, 22 November 2008 (EST)
- I fear too much attention is given to 100,000 overpaid UAW workers -- there are 1 million OTHER workers who will lose their jobs--at 3600 local dealerships for Chevy, Buick, Pontiac etc. If GM shuts down car sales (including US-made and imports) will fall in half for several years, you will wait 6- 12 months to buy an imported new car, and it will cost 50% more than today. (It will take years for Japan to build new factories to service the USA, and they will charge us 50% more.) Americans will not tolerate that. (and indeed it happened in 1945-47). Furthermore the adjustment costs will be far higher than the bailout costs. The government will have to pay all the pensions of retured GM workers, for example (that's a law signed by Jerry Ford in 1976).RJJensen 18:40, 22 November 2008 (EST)
Recent Edit
I think part of Geo's concern is the lack of a source and the veracity of the claim. The Bush administration can not stop funding to General Motors except through a veto -- something which has not come up. Congress has the authority to grant whatever money it sees fit. I seem to recall the Democratic Congress asked for more information before going forward. General Motors themselves has claimed that bankruptcy is not an option, so saying that they are on the verge of bankruptcy may not be accurate either. I haven't made any alterations to your work, but I also hope you take the information given here in helping you to frame the scope and overall presentation of the article. Learn together 21:20, 1 December 2008 (EST)
- It takes 60 votes to pass major legislation through the Senate--the Democrats have 51 votes now, (and will have 58 or so starting in Jabuary). The Bush administration said it would oppose a bailout, meaning a veto, and the GOP in the Senate has been strongly opposed. That's how things are blocked. Geo's insults (calling a very well researchedarticle "garbage") ruin his credibility in the matter. GM itself says it is on the verge of bankruptcy, and its board is now evaluating different bankruptcy strategies. for some evidence see "GM's troubles stir question of bankruptcy protection vs. a bailout". "Democrats propose taking $25bn (£17bn) from the $700bn Wall Street bailout to fund carmakers. Barack Obama made the case for government aid in an interview... Republicans largely oppose any bailout, with Richard Shelby, the ranking member of the Senate banking committee, saying that the government would be throwing good money after bad. "It would only be postponing the inevitable," Shelby said." quoted And this from Fox News: "Treasury Secretary Henry Paulson told Congress on Tuesday [Nov 18] that the administration remains firmly opposed to dipping into the government's $700 billion financial bailout fund for a $25 billion rescue package for Detroit's Big Three automakers, no matter how badly they need the help." Fox news report RJJensen 21:51, 1 December 2008 (EST)
- The President, and previous Presidents, have been known to say they oppose something without going to a veto. It's a way of making their position known and the wording of it is usually very important. My understanding is that the Democrats chose to not proceed immediately because of their own reservations. No one wants to be caught supporting a bill that simply requires a neverending series of bailouts for an industry that is not viable. I'm not saying that's the case, only that the Big-3 automakers had not shown Congress how they intended to make this money resolve their difficulties to the satisfaction of Congress. So far most of the proposal has been showing how they're burning money and need new money quickly, but not showing how they intend to stop burning money. Congress, both Republican and Democrat, will want some form of specifics. Learn together 12:29, 2 December 2008 (EST)
Overblown
This is a recession, to be sure. Why call it a "crisis"? And who says it's the worst since 1932? All that happened is that a couple of bubbles have burst: the dot-com bubble
the housing downturn, which started in 2006, is a primary cause of the broader economic malaise. --Ed Poor Talk 22:05, 1 December 2008 (EST)
- I think most analysts say the crisis is the worst since 1932. It's a crisis because the financial system has nearly collapsed with many of the biggest financial companies either collapsed (Lehman) or taken over (AIG, Fanny Mae, Freddy Mac, Bear Stearns, Wachovia, Washington Mutual) or given vast bailouts (Citigroup) to survive. That never happened before. A recent quote from Paulson: "We are going through a financial crisis more severe and unpredictable than any in our lifetimes.....our financial system seized up and severely damaged the economy." quoted Nov 17 2008 RJJensen 22:16, 1 December 2008 (EST)
Probably better to leave it as crisis. Technically a recession is declared based on growth, which has and/or is happening now, but in addition to that you have the credit crunch which saw the virtual drying up of inter-bank lending which in turn created massive cash-flow and liquidity problems and the collapse of banks and financial institutions. The crunch is different to the recession, although involved with it when seen from the point of view of cause and effect, so both together counts as a crisis.--Ieuan 22:58, 1 December 2008 (EST)
Separate article needed on recession
This Financial crisis article is primarily about the financial crisis--involving banks and related institutions around the world. It only briefly mentions the recession in the USA, which will require a sseparate article that covers issues like unemployment, income levels, growth trends, and word trade issues. RJJensen 22:58, 1 December 2008 (EST)
- Proceed as you see fit. Obviously you are the one who has written the bulk of the article and you should be able to break it up into subsections. Learn together 12:31, 2 December 2008 (EST)
- I've dug a little into previous recessions and "panics". The common theme is greed and speculation. That is, people invest in land or companies, not because they see a potential for steady growth, but simply because they think they'll be able to sell after a short period time to someone else; who in turn has the same greedy idea - like a chain letter. The balloon is filling with the hot air of speculation; it has no substance; so it always bursts, taking with it all the profits of the last echelon of speculators.
- Ours goes even a little deeper Ed. Because an economy needs spending to grow and to continue, cutting back on spending leads to negative growth and a recession. Since about 2/3rds of spending is at the consumer level, the economic condition is very much dependent upon perception -- and therefore to press manipulation. So if the press keeps telling people we are in a recession, and people start to believe it and cut back their spending, then we will go into a recession. It's a self-fulfilling prophecy. If you see my first comment at the top of the page, the slightly negative economic growth that we sustained in the last quarter would have actually been almost 2% growth if consumer spending had just stayed constant. But people were spooked and therefore took what would have been slow positive growth and turned it into a negative. Learn together 12:58, 2 December 2008 (EST)
- Consumer confidence it at the lowest level in many years. That's reality: people are NOT buying cars even when there are great deals. They are NOT buying houses (which means they also buy less furniture, rugs, appliances etc). The stimulus last spring failed because people did not spend when they were told to spend. The banks are worse. they are hoarding their money and it is fairly hard to get a loan or credit card these days.RJJensen 13:13, 2 December 2008 (EST)
- Ours goes even a little deeper Ed. Because an economy needs spending to grow and to continue, cutting back on spending leads to negative growth and a recession. Since about 2/3rds of spending is at the consumer level, the economic condition is very much dependent upon perception -- and therefore to press manipulation. So if the press keeps telling people we are in a recession, and people start to believe it and cut back their spending, then we will go into a recession. It's a self-fulfilling prophecy. If you see my first comment at the top of the page, the slightly negative economic growth that we sustained in the last quarter would have actually been almost 2% growth if consumer spending had just stayed constant. But people were spooked and therefore took what would have been slow positive growth and turned it into a negative. Learn together 12:58, 2 December 2008 (EST)
