A month ago I wrote "In a word, screwed." The GDP (the amount of stuff the country produces) fell by a lot in the final in final quarter of last year. I said at the time that the numbers were bad but the real story was much worse - due to the way it was counted it actually made things look better than reality.
Well, the reality number was released today: The economy contracted by 6.2% in the fourth quarter of 2008... Which is worse than predicted. You'll read that this is the worse decline since 1982.
So is the economy only as bad as the early 1980's?
No, it's much worse. In 1982 oil was at $34/barrel and over the next four years dropped to $13 (a huge savings for us). In 1982 the prime rate on loans was over 15% and would be cut in half over the next four years. By 1982 the housing market had been decimated. Bottom had been hit and housing prices moved up as interest rates came down.
Where are we now? Oil has already dropped by 2/3. There's not much more it can drop. The Fed is giving money away... and holding a gun to the heads of bankers and saying, "You will take this." Interest rates are at record lows. And housing prices still have not hit bottom.
In other words, none of the positives that brought us out of the 1980's recession will help us now.
Cheers!
*****
Dad, please plant extra sweet corn this spring. One, I'm going through withdrawal and will eat more this summer than ever. Two, whatever excess can go to a soup kitchen nearby. I'm sure it will be appreciated.
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