

Ask HN:  Are we in trouble? - keltecp11

Honestly... does anyone have any idea.  I have been hearing people like Donny Deutch coming out and saying 'ignore the noise, it's all hype' and I turn on Bill Maher who says 'it's all gonna hit the fan.'<p>Has anyone seen any economic case studies, predictions, or articles, that can shed some light on what is REALLY going on here.
======
tokenadult
We might experience something like Japan's "lost decade" of the 1990s. I
expect that, actually. But we'd live through it. My all-time favorite pair of
HN comments was the question and answer I saw I think before I signed up here,
when I was lurking for interesting discussions.

 _Q: Anyone here lived through the Japan depression care to share their
experiences with us?

A: It was terrible. People were forced to eat raw fish for sustenance. They
couldn't get full-sized electronics, so they were forced to make tiny ones.
Unable to afford proper entertainment, folks would make do by taking turns to
get up and sing songs._

<http://news.ycombinator.com/item?id=328685>

~~~
martey
Link to actual comment: <http://news.ycombinator.com/item?id=329218>

That comment is funny, but not actually useful. Sushi, consumer electronics,
and karaoke were all a part of Japan become their economic turmoil. Since this
is HN (as opposed to say, Reddit), I would like to see actual facts suggesting
that the situation in Japan in the 1990s was not that bad, as opposed to
snarky comments.

~~~
tokenadult
Perhaps the useful comment would take the form that even though Japan suffered
a lack of forward progress that was remarkable after its several postwar
decades of rapid economic growth, it was still a country with a traditional
culture, advanced technology, and consumer-driven popular entertainment. In
other words, things weren't so bad. And that is what I think the quoted
comment said, in memorably humorous form that made the point very well for
people like me who are familiar with Japan.

The fact that might appeal to other ways of looking at the issue would be a
fact about immigration to Japan from other areas of Asia.

"The growing status of Japan as a major global and regional economic player
was the background for the arrival of newcomers. The rise in the value of the
yen, labor shortages, and the development of transnational networks (including
the activities of migrant brokers) all contributed to a marked increase in
foreign migrant workers in the late 1980s.

"The number of visa overstayers, who comprised the bulk of immigrant workers,
grew from 100,000 in 1990 to 300,000 in 1993, and stood at around 207,000 as
of January 2005. They have come mostly from other Asian countries, such as
Korea, China, the Philippines, Thailand, Malaysia, and Indonesia."

[http://www.migrationinformation.org/Profiles/display.cfm?ID=...](http://www.migrationinformation.org/Profiles/display.cfm?ID=487)

"However, two channels were available for de facto 'unskilled' labor
migration. One was the trainee system, which subsequently expanded with the
launching in 1993 of the Technical Internship Trainee Program. As of 2004,
there were over 75,000 foreign workers in Japan under this program, marking
the largest number ever. They found opportunities in agriculture, fishery,
construction, food manufacturing, textile, machinery and metal, and other
industries.

"The other channel was the recruitment of Nikkeijin (descendants of Japanese
emigrants), who were given access to residential status with no restriction on
employment. The most important visible impact of the legal reform was the
influx of Japanese Brazillians.

"Whereas the aggregate number of visa overstayers began to decrease in 1993,
according to Immigration Bureau statistics, the Brazilian population more than
tripled from 56,000 in 1990 to over 176,000 in 1995, and to over 286,000 in
2004."

------
melito
I'm not worried. I've been saving adequately for a while now and I have a good
job. Even if the job goes away I'll be alright, because I'm not afraid to wait
tables (or perform any other type of manual labor).

I didn't buy a house I couldn't afford and I went without when I could (even
went so far as to live in a small room rented from a friend, where I slept on
a $150 futon from Ikea for over a year and a half [this was during 'good
times']).

All this talk about bailouts is very upsetting to me. I never asked for
anything when I didn't have anything.

A very small bitter part of me wants the country to fall apart. If it does
maybe people, will stand to the challenge, by standing with one another and
overcoming. If not then maybe at least the glow of their reality tv will keep
them warm.

There is no rational in going into a panic. This is a financial problem. It's
not like people are dying en masse as a direct result from this.

~~~
Tichy
"Even if the job goes away I'll be alright, because I'm not afraid to wait
tables (or perform any other type of manual labor)."

I think the unskilled labor jobs would be even more scarce than other jobs in
a depression. It would work if you own a farm, so that you could turn manual
labor into food directly, I suppose.

------
tom_rath
Yeah, probably. But while you're slogging through it remember this: It will
get better.

"The Greatest Generation" emerged from the Depression, the dot.com boom
followed the Gen-X "McJob" years and the "something-something" will follow
whatever we end up calling this mess.

Ask any unlucky sod who finished school just in time for the last nasty
recession and they may tell you how unbelievably bleak and hopeless things
felt while they took any odd job they could find just to pay rent and eat (my
own situation, fwiw). Still, they were able to enjoy the magical tech boom
just a few years later and, during that boom, it was hard to believe there was
ever a time of job and capital scarcity.

The economy is cyclical, fortunes rise and fall, and you have to work with the
hand you've been dealt. Times will be tough (for some, even worse than you're
picturing) but things will get better and the good times will return.

Then, when they do, remember that it'll crater again some day and prepare
accordingly, because almost everyone else will have forgotten.

~~~
helveticaman
_Yeah, probably. But while you're slogging through it remember this: It will
get better.

"The Greatest Generation" emerged from the Depression, the dot.com boom
followed the Gen-X "McJob" years and the "something-something" will follow
whatever we end up calling this mess._

That's like saying the day follows the night. It's true though.

------
aristus
No one knows, and unless you have mountains of cash to invest, there's no
reward for being right either way. The only thing you can do is think through
the absolute worst that can happen (to 1% or whatever your level of paranoia)
and plan to deal with that. ie, your income is X, can you live on 0.5X? Better
to find out now and not when your personal trapdoor opens. But take it calmly,
like a game. If you spend all of your energy in Holy Shit Mode you stop moving
forward.

Some friends of mine today got two messages from their employers: their pay
was cut 18% and their insurance premiums went up 23%. It's going to hurt but
the worst thing they can do is let the fear sap their energy.

I personally think it's going to be bad for 12-18 months then a slow recovery.
The financial assumptions for many businesses and people will fall away. If
you are in some business that depends on consumer discretionary funds, I would
look for alternatives (not jump like a spooked cat, _look for_ for
alternatives ahead of time).

If it's any consolation my Brasilian, Venezuelan and Argentinian friends think
we're all a bunch of pussies for worrying so much and not preparing
rationally.

------
antpicnic
How can we help but go through a slow period while households and banks repair
their balance sheets? Just increasing the savings rate from the current 5% in
January to a more sustainable 10-14% means people will need to forgo a of
consumption. I doubt the wheels will fall off completely.

You younger folks on HN have a great opportunity to save your money now and
make a killing in 25 years. The stock market could lose another 30% and then
move laterally for several years. But over a few decades, you might average 8%
returns annually. Just remember to sell out before the great crash of 2049.

------
Eliezer
Anyone who could predict whether the market would be up, down, or in the same
place in six months time - or one month's time for that matter - could become
very rich in a very short time.

~~~
NyxWulf
Unfortunately there are many people making predictions about where the market
will be. The real question is can someone make a prediction, commit capital,
and realize a gain based on those predictions. Only time will tell, and for
those of use watching from the sidelines, it's virtually impossible to tell
who will be right, and if they are right that it's because they deeply
understand the fundamentals of the problem versus just randomly having the
right prediction for the wrong reasons.

------
131072
The unusually huge volatility (large price movements) in many financial
markets essentially means that nobody is certain of the future (providing you
believe in 'the wisdom of markets', which despite Gladwellian overtones, is
not necessarily a bad idea).

To my knowledge, nobody out there has anything approaching a realistic model
of the current economy, either. It has countless variables that interact in
countless ways, and producing results that have never been seen before.

Talking heads/pundits are for entertainment value only (depending on your
definition of entertainment).

The only way to have confidence in a prediction for the future, at the moment,
is by failing to understand the uncertainty of the situation.

------
cpr
One depressing take: Jim Kunstler's The Long Emergency (a book, summarized
here:
[http://www.rollingstone.com/news/story/7203633/the_long_emer...](http://www.rollingstone.com/news/story/7203633/the_long_emergency)).

I'm afraid I think he's right (even if he's indulging in a lot of
schadenfreude)--it's just a matter of timing. Our society isn't going to
survive the peak oil crash intact.

The bright side is that we'd have to become hyper-local in our economy, give
up the hyperconsumerist dreamland of suburbia, big box stores and electronic
entertainments, and deal with the real world.

~~~
ibsulon
What you call a bright side of hyper-locality and the "real world," I call a
civil war in which religious and sexual minorities will be left without a side
and mercilessly slaughtered.

------
mechanical_fish
_Has anyone seen any economic case studies, predictions, or articles...?_

Calculated Risk: <http://www.calculatedriskblog.com/>

The sidebar should have all the analysis you could possibly want. Try not to
overdose on it while drinking; alcohol is a depressant.

------
sgoraya
_Has anyone seen any economic case studies, predictions, or articles, that can
shed some light on what is REALLY going on here._

I do not think that studies or predictions are what you/we really need.

What are the odds that a prediction, based on past/future assumptions, modeled
by some economist is really going to help anyone out? I'll answer my own
question - the odds are VERY VERY low.

Hunker down - work hard and put a band aid on what ails you and stop relying
on Donny Deutch or Bill Maher to _shed light_ on what is REALLY going on.

If my company is struggling and I cant make it work out, I'll have to figure
something out and so will everyone else who is in a tough spot. Whatever your
worst case scenario is, you'll be able to deal with it and it will not be as
bad as you imagined it (God/Buddha/Spaghetti Monster willing)

------
Tangurena
_Has anyone seen any economic case studies, predictions, or articles, that can
shed some light on what is REALLY going on here._

Look, this is all wrapped up in politics. You're not going to get any light
shed on this because it is against the interests of the parties involved for
that to happen. And watching the news, you can see that one party wants the
other one to fail so much that they'd let the country crash and burn.

Some people are going to do fine. Some people are going to end up living under
a bridge, or having to make the decision to sell their gun or eat it (weasel
words: when I got to that point, I sold mine). 2001 and 2003 were good for
some people, and horrible for some (like me).

Read Calculated Risk if you want case studies (look for the Ubernerd series)
on why this happened.

------
mistermann
Many days of reading here:

<http://market-ticker.denninger.net>
<http://globaleconomicanalysis.blogspot.com>

Most of what you see in the msm (CNBC, Cramer, newspapers) is either
uninformed opinion at best, or deliberate lies.

By the way, Japan's lost decade is now two decades, note the current stock
market level and recent 12% drop in GDP. Although to visit there, you would
never know, it is an awesome country and everything seems perfectly fine on
the surface.

------
tocomment
This is an excellent question. I think the truth is that no one knows. However
the fact that many people are asking this question (not just crazy reddit
folk) implies to me something bad could be afoot. Thoughts, HN?

------
mkuhn
It's funny that you ask for case studies, because many people argue that what
is happening right now has never happened before.

I'm studying business with a healthy dose of economics, and when we ask
Professors, they even don't know what is going on, and everyone who says so is
just guessing. IMHO no one knows what's really going on!

We have to just let it play out. If you want to be somewhat prepared be
flexible and adapt quickly to new situations as you see them developing. Not
very useful and very generic but the only thing you and I can do.

------
danbmil99
hmm... you've been listening to Donny Deutch and Bill Maher, and you still
don't know what's going on? Obviously, the problem is you didn't pay enough
attention to Suzy Orman.

~~~
alaskamiller
I, for one, find a dosage of both Glenn Beck and Nancy Grace really gets me a
better grounding to how to live my life.

~~~
brunnock
Shout out to Larry Winget. The economy went down the tubes after they canceled
Big Spender.

[http://video.google.com/videosearch?hl=en&q=larry-
winget...](http://video.google.com/videosearch?hl=en&q=larry-winget+big-
spender#)

------
Kaizyn
Peter Schiff has an interesting take on things. As does Ron Paul. Both seem to
understand what is really going on.

The problem isn't really all that complicated to explain. However, no simple
solutions have been presented yet. Instead, the US government and others are
opting to push for much more of the same stuff that got us into this mess to
begin with.

~~~
jfornear
FYI Peter Schiff is the economic advisor behind the politician, Ron Paul.
[EDIT: for the 2008 Presidential Campaign]

Much of what Schiff predicts are dependent on the rest of the world 'cutting
us off' by depegging their currencies from the dollar and turning away from
treasury bonds -- both of which are not happening, and to the contrary, much
of the world is turning _toward_ our treasury bonds in this crisis. Oil being
down and perceived weakness in the euro are definitely helping us right now,
too.

~~~
SwellJoe
I've never heard of Peter Schiff being related to Ron Paul in any particular
way (not saying he isn't, but "behind the politician" seems extremely
implausible). I'll point out that Ron Paul's basic premises are what he's been
espousing since the 1970s, when Peter Schiff was about ten years old.

Wikipedia says "Schiff was an economic adviser to Ron Paul's 2008 presidential
campaign." Sounds like he was one of multiple economic advisers, and it sounds
like they aren't associated in any official capacity today.

~~~
jfornear
You're right, I overreacted. I just don't like seeing a politician trained in
medicine given the same credibility on economic analysis as someone with a
technical background in finance. Not to downplay Ron Paul's solutions to our
economic problems, but I've never seen him make an in depth case for why we
are where we are today like Schiff has -- his job doesn't call for it.

~~~
jhancock
and I don't like to see people well trained in finance completely screw up the
economy...as they have.

Most "experts" have no more credibility now than the masses who can barely
calculate simple interest. They are a bunch of paid-for shills. Just because
you understand the math behind derivatives does not mean they should have ever
been allow to exist.

------
wwsculley
The economy lost an enormous chunk of itself. It will need to correct for this
change - whether now or later. The world will have to call USA's debt some
time.

My big question: will the rest of the world continue to use USA's economy and
currency as the global economic focal point and medium? -or will it abandon
them for alternatives?

~~~
chiffonade
> My big question: will the rest of the world continue to use USA's economy
> and currency as the global economic focal point and medium? -or will it
> abandon them for alternatives?

Here's the crux of the matter: there are no alternatives. The US is a meta-
country that drives the rest of the world. It's a proxy for the world.

~~~
tallanvor
Exactly.

Countries such as India and China have done very well in large part due to
investments by Americans and American companies. Even during Japan's
recession, the US economy helped keep Japan going. People and countries all
over the world invest in the US dollar - Even today, when interest rates are
at an all time low, T-Bills are still considered safe investments.

Will the economy continue to change and evolve? Of course. But America's place
in the world economy is not likely to change in the near future.

------
finoleo
<http://www.davidicke.com/content/view/20744> do not riot

------
nickfox
I think the better question is to look in the mirror and ask myself "Am I in
trouble?"

~~~
ryanmahoski
It is an especially good time to be a pragmatist. Communities can help us
interpret the wake-up call but at some point the individual must do his own
research, think hard and execute on a solid vision.

------
bianco
What the future will bring us: nobody knows, there has never been anything
really similar in history...

The causes are very simple to describe: our (temporary) so successful economic
system didn't follow many moral rules. And now we are _all_ (the responsible
and non) forced to pay for that (silly) mistake.

You may not agree with me, but I'm convinced that this will be the summary of
our current situation, reviewed in about 50 years.

~~~
bwd
I'm not sure how morality plays into the mistake. A lot of people deluded
themselves into believing that housing prices would never go down. Some people
did that because they worked for investment banks and wanted to earn large
profits on bonds and some people did that because they wanted to live in
California or Florida or Nevada. The only immorality that I have seen is
people who lied about their finances on their mortgage applications and
brokers who originated mortgages that were clearly unsuitable for the
borrowers. There were plenty of people who did neither of these things who are
just as much at fault in what happened because they made an honest mistake
while trying to make a better life for themselves. What sort of moral rules
should our economy follow to prevent this sort of thing from happening in the
future?

~~~
johnyzee
The repackaging and reselling of worthless loans, creating money out of thin
air, seems pretty immoral to me, and was arguably one of the triggers of the
crisis.

~~~
anamax
> The repackaging and reselling of worthless loans, creating money out of thin
> air, seems pretty immoral to me, and was arguably one of the triggers of the
> crisis.

The loans aren't worthless now and weren't worthless then. They're just worth
less.

Combining loans into a fund doesn't "create money". It merely allows folks to
spread their risk over more loans, to diversify.

What happened was that the collective risk was misunderstood. When folks
figured that out, they stopped buying those packages. Since US regs require
mark-to-market, 0 buyers means 0 "value". Since US regs also require that
banks have sufficient assets, marking huge portions of their portfolios to 0
made them technically insolvent.

Note that most of these loans are still performing and the funds are still
producing cash, so they're clearly not worth 0.

The other thing that happened is that a lot of folks decided to insure that
risk. These folks thought that being paid to cover losses beyond some
threshold was free money. Since they didn't get paid enough to compensate them
for their actual risk, they're losing gobs of money.

Which is as it should be. If you're willing to take the profit, you should
take the loss.

