450SEL6.9

I wanted to start this thread immediately after the rate cut, but I wanted to see if the stock market held the gains the next day. It did.

Now, what do you think? Greenspan predicts between 33% and 50% chance of recession. I think the chance is greater than 50% because there are just so many things wrong with the world economies. They seem to be culminating all at once.

Is the Federal Reserve move going to avert a recession or worse? Comments?

P.S. I think the biggest problem is the unrestrained optimism in the capital markets. The market tanked in August, got bailed out by the Fed and immediate shot back up in next to no time at all. For an economy that is swimming in its own debt and has a 33% chance of plunging into recession, I think the U.S. stock markets are at very high levels.

notic

there is too much money in the us economy imo. intuition is probably high inflation in the next few years along with interest rates that would suffocate growth. countries all around the world are distancing their currency from the u.s. dollar fearing some sort of contagion effect like in asia a few years ago. the future looks murky, especially with us/iran conflict.

i doubt the move will reduce chances of recession in the us. investors might shy away from the american bond markets. if that prolongs, the americans will have no one to fund their massive debt.

its pretty late and i'm tired, so i'm not sure if that made any sense...

SDNR

A lot of people are very happy today ......but how will this ease the debt situation?

I certainly don't want to see a recession Ray, I guess we'll have to wait and see what happens.

The Artist

yep we will have to wait and see..
but the situation seems more infected ..and i belive that these cuts wont help it much in the long term

450SEL6.9

Notic, our loonie reached parity with the U.S. dollar again. First time since 1976. Honestly, do our fellow Canadians understand the implications of this? All I hear about on TV are brain-dead newscasters saying it is cheaper to buy things in Buffalo and our currency goes a long way in the U.S. these days. I wonder how many more manufacturing jobs Canada will lose, but economists don't seem to care because the energy/commodity sector is lifting the entire country.

Rob, I do want to see a recession because a massive amount of bankruptcies is the only way to shake out the problems. There are many irresponsible people who bought way more house than they could afford. I don't think a rate cut helps their debt. It lowers the cost of their payments, but the fact remains that debts need to be repaid and these people bought more they want they could pay. Realistically, many people need their home values to rise substantially just to cover the amount they owe on the mortgage. The property market in U.S. bubbled because of the few years of low interest rates after 2000. Now that the bubble exploded, I think a few interest rate cuts will not save the real estate market.

Household debt in America is still higher today (as a % of GDP) than before the great depression. I don't see how much more the Fed can cut rates to help these debtors. Some are predicting the Fed funds rate will fall to 3.00% - 3.75%. I think that could produce a vicious and catastrophic cycle.

I think Canada has a similar problem (mortgages eating up 40-60% of a family's monthly income), but people are ignoring it, like Americans ignored their housing problem/bubble for years.

notic

yea i agree. i'm hoping that the energy and mining/exploration companies will use this strong cdn dollar to buy up smaller companies and properties in other countries to enhance their growth.

i recently read that saudi arabia has taken their currency peg off of the us dollar, if the rest of the middle east follows, this could mean more problems for the us dollar and economy in the long term ahead.

btw, here is Bush's response to what he thinks of a possible recession:

QUESTION: Do you think there’s a risk of a recession? How do you rate that?

BUSH: You know, you need to talk to economists. I think I got a B in Econ 101. I got an A, however, in keeping taxes low and being fiscally responsible with the people’s money.

watch the video here: - ONLY REGISTERED AND ACTIVATED USERS CAN SEE ALL LINKS - CLICK HERE TO REGISTER

Centurion

The situation is at the moment worrisome and all the over paid analysts are making matters better with their over pessimistic force casts.

On the other hand the dollar is in a big trouble and in the case of a collapse the result would be a disaster world wide.

notic

i just wanted to add to my previous post. if the high canadian dollar costs manufacturing jobs, it may be theoretically good for fighting inflation. lower inflation can be achieved through increased unemployment and slow downs in growth. i'm not sure what the output gap in canada is right now, but if it is in the positive, the economic slow down may help stifle some of that inflation brought on by the crazy housing market and increased materials costs. who knows, maybe this will work in our favour.