An alternative theory to the credit crisis

[chrispinto]

So, a friend and i were discussing core economics, and some quite interesting points were raised.

Basically, outwith current global economic crisis, the UK should have entered this current recession long ago or, possibly even just only coming out of the late 80's early 90's recession by this year, that was only "healed" by the dot com boom

I know many will disagree, but please remember this is simply a theory based on extensive economic research and the standard 20 year model of boom/bust

So.. please discuss.

[+John Teacake MVC]

There is no "Credit Crunch/Crisis" Its scare mongoring by the media that EVERYONE jumps on the bandwagon to use as an excuse. Think of it this way. You cant MAKE money its simply moved around, Someones buying so Someone out there (Very Talented/Lucky/Whatever you want to call it) is making a **** load of money.

I know for a FACT Im no worse off than I was before the media hype (Infact Im probably better off with all the promotions,special offers and what not on the things I would buy anyway). One person says they are affected by the credit crunch then people think its the "Cool" Thing to say so everyone acts like it. It creates panic, Nothing else.

[chrispinto]

There is no "Credit Crunch/Crisis" Its scare mongoring by the media that EVERYONE jumps on the bandwagon to use as an excuse. Think of it this way. You cant MAKE money its simply moved around, Someones buying so Someone out there (Very Talented/Lucky/Whatever you want to call it) is making a **** load of money.

I know for a FACT Im no worse off than I was before the media hype (Infact Im probably better off with all the promotions,special offers and what not on the things I would buy anyway). One person says they are affected by the credit crunch then people think its the "Cool" Thing to say so everyone acts like it. It creates panic, Nothing else.

You raise some valid points there Sawyer12. For a start, modern monetary systems are entirely fictional and "man made" - given value by the very people that use it, us.

I also agree, i'm no worse off and for the most part better off

[Fish]

Tell that to somebody who's just lost their job and been repossessed...

So, you're implying that for the last 15 or so years the economy has been artificially supported by the rise of the popularity of the internet?

[+John Teacake MVC]

Not just the internet. I knew someone would mention loss of jobs and reposessions. I was going to put something in there. Does anyone know anyone whos had their house repossessed because I dont think its as common as you think . . . or have been lead to beleive. People have ALWAYS lost their jobs and had their houses repossessed just the media make you beleive that its everyone in your street thats going to loose their house. Like I said somones got to buy them . . . so again someones making a LOT of money at the moment.

[gnuman]

There is somewhat of a point on that. Think of it though. The US was in a recession then the whole .com boom happened then what happened it created high paying jobs the market shot up. Then when it bust the market dropped into a recession then 9/11 happened and the market tanked. A few months after 9/11 the market was making huge gains. Some tech stocks tripled then the next scheme the subprime mortgage.

That scheme went bust when the feds decided to raise interest rates to cool the economy off. But not knowing how many ppl really couldn't afford their houses that is where the domino effect happened. Plenty of Americans were using their credit cards to support their lifestyle and didn't know how to SAVE. Guess what happens when you have 15 credit cards and need money, you default and then more pieces of the puzzles come in place.

What is going to get the market up again we're not sure. Subprime was the main trigger caused by the feds. When money dries up no one will loan it to you. This is the worst recession in history. The only ones making money are the ones that short the market and will make when it goes down. Look at stocks like HOD, HNU and HFD on the TSX. Oil was $140s the HOD stock was in $6.30 range now oil is in the $40s the stock is up almost 8x.

[thealexweb]

...this current recession...

The UK is not is a recession (yet) so please don't call it one, your not helping by making people scared and making things worse.

[Fish]

Does anyone know anyone whos had their house repossessed because I dont think its as common as you think . . . or have been lead to beleive. People have ALWAYS lost their jobs and had their houses repossessed just the media make you beleive that its everyone in your street thats going to loose their house. Like I said somones got to buy them . . . so again someones making a LOT of money at the moment.

True enough. Those with capital will benefit from the misfortune of others, but the numbers speak for themselves.... http://news.bbc.co.uk/1/hi/business/7762627.stm

[+John Teacake MVC]

The UK is not is a recession (yet) so please don't call it one, your not helping by making people scared and making things worse.

Exactly. Thank you. If people hear these buzz words banded around too often it becomes believable. And as for those "Figures". They are ESTIMATED. How are we to know whats going to happen next month never mind make a prediction for a full year.

[Fish]

Yes, there is some guesswork and estimation. But I quote from the same article -

The number of repossessions jumped by 12% in the third quarter of the year, according to figures from the Council of Mortgage lenders (CML), with 11,300 homes taken back in that period.

That brought the total this year to 30,200, higher than the 26,200 for the whole of 2007, and much higher than the figure of just 8,200 in 2004.

Repossessions are increasing. I will concede, however, that some of the gloom associated with the current climate is indeed attributed to media sensationalism, but unfortunately that's just how things are these days. "Flavour of the month", if you will. The Bank of England and the Government have officially stated that we are in a recession. I don't see how you can disagree with them?

[username();]

There is no "Credit Crunch/Crisis" Its scare mongoring by the media that EVERYONE jumps on the bandwagon to use as an excuse. Think of it this way. You cant MAKE money its simply moved around, Someones buying so Someone out there (Very Talented/Lucky/Whatever you want to call it) is making a **** load of money.

I know for a FACT Im no worse off than I was before the media hype (Infact Im probably better off with all the promotions,special offers and what not on the things I would buy anyway). One person says they are affected by the credit crunch then people think its the "Cool" Thing to say so everyone acts like it. It creates panic, Nothing else.

I do not think you grasp how the economy works. Money does get created. http://en.wikipedia.org/wiki/Money_supply

[chrispinto]

The UK is not is a recession (yet) so please don't call it one, your not helping by making people scared and making things worse.

Aside from anything else, i did say it was a "theory" - And seriously, how can one man (me) make things any worse (or for that matter, better)

Exactly. Thank you. If people hear these buzz words banded around too often it becomes believable. And as for those "Figures". They are ESTIMATED. How are we to know whats going to happen next month never mind make a prediction for a full year.

Not true. Anyone who uses financial systems will tell you differently. Argueably we entered recession a year ago with the collapse of northern rock and oil rises. Though again i stress the word "argueably". Remember, terms like "slump" and "slowdown" are simply terms that define early recession.

I do not think you grasp how the economy works. Money does get created. http://en.wikipedia.org/wiki/Money_supply

Thankyou for that point, it's a hard one to put across to people at times. Sawyer did indeed raise a couple of valid points though.

The Bank of England and the Government have officially stated that we are in a recession. I don't see how you can disagree with them?

Thankyou for clarifying that. And whilst this may be of no consolation at all and may even be considered patronising (it's not, i assure you) i entirely empathise with those that have lost jobs and had reposessions. Why am i empathising? in 1989 my family went bankrupt for a rather large sum of money as a result of the 1989 recession (they didn't go banrupt until 1991, it took 2 full years for the effects to filter through to my families businesses) which resulted in...reposession.

Edited December 6, 2008 by chrispinto

[chrispinto]

I should add that the term recession is very misunderstood by the general masses :o)