2008 Recession

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Charts, graphs, and commentary around key economic indicators and how they relate the recession.

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  • Thanks to Dr. Stephen Buser for insights http://fisher.osu.edu/fin/faculty/buser.htm Fred Graphs are available from the Federal Reserve Bank of St. Louis - http://research.stlouisfed.com/fred2/ What dates are used for the US recession bars in FRED® graphs? The NBER recession data is available at http:// www.nber.org/cycles.html . The monthly dates for the peaks and troughs are represented as daily dates in the charts as: Peak, Trough 1857-06-01, 1858-12-01 1860-10-01, 1861-06-01 1865-04-01, 1867-12-01 1869-06-01, 1870-12-01 1873-10-01, 1879-03-01 1882-03-01, 1885-05-01 1887-03-01, 1888-04-01 1890-07-01, 1891-05-01 1893-01-01, 1894-06-01 1895-12-01, 1897-06-01 1899-06-01, 1900-12-01 1902-09-01, 1904-08-01 1907-05-01, 1908-06-01 1910-01-01, 1912-01-01 1913-01-01, 1914-12-01 1918-08-01, 1919-03-01 1920-01-01, 1921-07-01 1923-05-01, 1924-07-01 1926-10-01, 1927-11-01 1929-08-01, 1933-03-01 1937-05-01, 1938-06-01 1945-02-01, 1945-10-01 1948-11-01, 1949-10-01 1953-07-01, 1954-05-01 1957-08-01, 1958-04-01 1960-04-01, 1961-02-01 1969-12-01, 1970-11-01 1973-11-01, 1975-03-01 1980-01-01, 1980-07-01 1981-07-01, 1982-11-01 1990-07-01, 1991-03-01 2001-03-01, 2001-11-01
  • 2008 Recession

    1. The 2008 Recession Tom Haney October, 2008 [email_address] The grey bars on the following charts represent periods of recession.
    2. Gross Domestic Product Recession is defined as several months of declining economic activity. We’re probably in a recession now, but next quarter’s GDP number hasn’t been released yet. A recession isn’t “declared” until we’re several months into it. 70% of the GDP now comes from household consumption expenditures, not including housing.
    3. Personal Savings Rate The average household saves nothing. It will be difficult to drive growth with no savings and reduced domestic manufacturing capacity.
    4. Consumer Credit Outstanding People don’t stop spending when they run out of money. They stop when they run out of credit. With the credit crisis, home values decreasing, home equity tapped out, and credit cards at their limit, people may finally be out of credit.
    5. Interest Rates Cutting interest rates in 2001 helped the economy by unleashing pent up demand to borrow for housing, etc. There is no pent up demand left. Lower interest rates no longer drive this activity.
    6. Net Exports Improvement in net exports could help. If the dollar de-values vs. the Chinese Yuan, domestic consumption could increase. This situation could be accompanied by notable inflation.
    7. Federal Consumption Government spending is already at an all time high, limiting the ability for the government to drive consumption. The high spending is driven in part by the war in Iraq. The bailout will raise spending even further.
    8. Foreign Debt The war in Iraq and bailout are being funded in part by foreigners, especially China, who has been bidding up the price of Treasury offerings to keep the value of the dollar high. 66% of foreign debt held by the public is held by the central banks of Japan and China. We do not “owe it to ourselves”.
    9. China / US Exchange Rate China is spending to keep the value of the dollar up to maintain Chinese exports. If the value of the dollar falls it could lead to fewer US imports from China, improving net exports, stimulating the U.S. economy.
    10. Federal Deficit The bailout will contribute to the already negative deficit.
    11. State Taxes State and local governments will lack resources to stimulate the economy as taxes will fall as a result of the recession. There are no rainy day funds.
    12. Unemployment Unemployment will increase with the recession. It won’t recover until well after the recession ends as business want to be sure before taking on the expense of new hires.
    13. Domestic Investment Investments in plant and equipment will be reduced until inventories are used and business owners have high confidence in recovery.
    14. Inflation Inflation could escalate if the dollar de-values and demand for treasuries dries up. Many treasuries have maturity lengths under 3 years.
    15. Oil Prices The price of oil is likely to decline with decreased global output.
    16. Banks: Commercial Charge-Offs Bank charge-offs will increase sharply. Q3 yet to be reported.
    17. Non-Current Loans Next quarter’s numbers could be extreme.

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