We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
It is a truism that MSM economic news is always spun to be dire, or on its way to becoming dire, as long as Repubs are in power in DC.
The entirely predictable burst of the housing bubble in many parts of the country will hurt for a while (but I think it will ding markets more than people with jobs outside of construction), and of course the markets are in a tizzy due to the credit markets, but the US economy is still chugging along. Job growth remains strong, and note Surber today on manufacturing orders, and Rattner in the WSJ: Let's get real about the economy.
I will grant that recessions are usually only seen in the rear-view mirror, but the Maggie's Farm Chief Economist predicts slower GDP growth, but no meaningful recession, in 2008. He also predicts a bull market in election-year economic fear-mongering.
Out of the box let me admit to not having read the articles ..yet..however this is a HUGE part of the unknown and by the way, unregulated world economic challenge.
2007 MID-YEAR MARKET SURVEY - DERIVATIVES
Notional amount outstanding of interest rate derivatives grew by 21 percent to 347.09 trillion (dollars) from $285.73 trillion. This compares with 14 percent growth during the second half of 2006. The annual growth rate for interest rate derivatives to mid-2007 is 38 percent from $250.83 trillion in mid-2006. In this survey, 88 firms provided data. All major dealers responded.
Notional amount outstanding of credit derivatives grew by 32% in the first six months of the year to $45.46 trillion from $34.42 trillion. The annual growth rate for credit derivatives is 75% from $26.0 trillion at mid-year 2006.
Notional amount outstanding of equity derivatives, which consist of equity swaps, options, and forwards, grew by 39 percent from $7.18 trillion to $10.01 trillion. This compares with 13 percent growth during the second half of 2006. The annual growth rate for equity derivatives to mid-2007 is 57 percent from $6.38 trillion at mid-year 2006.
To give you a comparison the estimates of the entire US GDP, which dwarfs all other nation is ONLY 13.86 trillion
Derivatives are not investments, they are gambles, and there exists few if any financial gurus who fully understand them.
In my world that's a whole bunch of exposed money waiting in our current environment to simply vanish,as we have seen in part from the securitized and then formulated derivatives in the housing market.
It's on helluva big exposure that NO country or countries could cover. The derivatives market needs regulations and oversight.
Seems like house prices have doubled and more in the last three to four years. A 20% correction is due and is not the end of the market, imo. Those who bought high might lose, except for everyone needs a place to live and GOOD quality residential real estate is always useful to somebody. A nice thing to have. Friend who worked at the bank told me that the old widows who had a few rentals and understood how to choose good tenants had nice steady incomes and good equity value too. I never have been a landlord but in the residential construction biz have seen a number of ordinary folks do very well especially if they can buy and hold onto good residential real estate for at least 10 years.
Has anybody noticed the fact that the economy has experienced two 'bubbles' in 8 years? Very unusual. First, the Keynesians wanted easy credit now they want more gov't spending at a time of slowing growth while the feds already eat up 18% of GDP. This has been going on for a while now and the old pump priming may no longer work. If tax revenues are to be maintained in such an environment, easy money bubbles may be the only way to go since spending ain't going down. It'll hit the fan one of these days. Keynesianism was a great short term solution for politicians in an environment where the central government consumed 5 or 6% of GDP and could increase it to 8 or 9% during a slowdown. Can't take a larger slice of an arithmetically growing pie by a geometrically growing central state. Eventually, you run out of pie.