The Recession is Over?

Last week the National Bureau of Economic Research (NBER) said the recession ended in June 2009.

The NBER can say that the Recession ended over a year ago all they want but in the court of public opinion, the Recession isn't over.

Thankfully, Warren Buffet agreed and had this to say about the Recession.

What does Warren Buffet mean by all this GDP talk?

GDP represents the total dollar value of all goods and services produced over a specific time period. Some people look at GDP as output, others as measuring the size of the economy. It is compared year-to-year or quarter-to-quarter. If some economist somewhere (i.e.-Brad) says GDP is up 7%, it can be interpreted that the economy has grown by 7% over the last year (or past quarter).

What Warren is saying is that our GDP (our output, our income (income approach), our spending (expenditure approach)) needs to get back to pre-recession levels.

We're not there yet.

I like Warren's approach; combining it with unemployment and underemployment can make a strong case that we're still in a recession.

Debate on...

The Giant Pool of Money

The Giant Pool of Money | NPR

"A special program about the housing crisis produced in a special collaboration with NPR News. We explain it all to you. What does the housing crisis have to do with the turmoil on Wall Street? Why did banks make half-million dollar loans to people without jobs or income? And why is everyone talking so much about the 1930s?"

Student Loans, Gateway Drug To Debt Slavery

Student Loans, Gateway Drug To Debt Slavery | The Consumerist

"One of the most important lessons students learn in college is how to get into debt and stay there. It's crucial to the success of the Republic. An indebted population is easier to control; needing to pay off crushing debt - a debt that if defaulted on has been stripped of many normal consumer protections and rights - graduates more willingly shuttle into cubicles, becoming the square pegs demanded by the square holes. After a few futile years of floundering idealism, their souls have been successfully jackbooted into powder and they're ready to keep the thumb on the next generation of would-be drones so as to protect their empire of matchsticks. But how did we get here? This chunky infographic examines the origins and (d)evolution of the student loan leviathan"

I have been talking about this for years. The student loan situation is out of control. Tuition costs are higher (even when America experienced one of the worst financial crises in history) and interest rates rose ON A GUARANTEED, RISK-FREE LOAN!!!

In addition, my friend found this GREAT Frontline story...

An Explanation in Video Form

!!! DISCLAIMER - I posted an article regarding Credit Default Swaps by Paddy Hirsch at Marketplace.org. I received great feedback regarding his explanation(s) and have decided to include his wonderful videos in this post...enjoy!

When I found Paddy Hirsch's video regarding Credit Default Swaps, I thought it was downright amazing. My colleague, Brad, had some solid feedback in his comment.

So I will attempt to tie-in Brad's comment and Paddy Hirsch's video(s)...

"CDOs (collateralized debt obligations) and repos (repurchase agreements) make up what economists call the "Shadow Banking System"...

CDO's


Repurchase Agreements


Shadow Banking



...this system allowed banks to become over-leveraged and overly-interconnected...


Leverage


Banks Interconnected


Thus, when the collateral in the CDOs -- in 2008, these were typically based in real-estate -- began to devalue, nearly every bank and financial institution imploded."



Numerous thoughts come to mind about this whole scenario. But the thought that sticks out the most is Hyman Minsky's Financial Instability Hypothesis which I have written about before (you can read it here).

I hope viewing Paddy Hirsch's videos coupled with Brad's comment (mixed with a shot of Hyman Minsky) explains this scenario well and doesn't leave you, badly, needing a drink.

;-)

How The Risk of a Double Dip Recession is Being Overblown

How The Risk of a Double Dip Recession is Being Overblown | F Wall Street

An excellent article from F Wall Street commentator (and value investor), Cale Smith. Written at the end of July, he has skepticism about a double-dip recession. Great read.

Quantitative Easing

Another GREAT explanation from Paddy Hirsch at Marketplace. This time he explains Quantitative Easing.



NPR's Planet Money had a podcast that discussed this type of process recently. Though they don't mention it [quantitative easing] by name, if you listen closely, it's there.