are we heading for a depression?

[markio26]

several newsletters i have been receiving are predicting a depression..... i know things are ruff right now and families are barely getting by... one statement said that over 500,000 ppl. on social security are also on social security supplemental???????? i don't know how true this is... any thoughts?????

[PRICEPLUS]

I hope it does not happen but I have been hearing that rumor for years!

[poundwise]

Here are a couple of online news clippings:


05/05/2006

"The workforce saw yet another month with virtually unchanged unemployment rate in April, yet the employment number is slightly up.

Nonfarm employment increased by 138,000 in April, and the unemployment rate was unchanged at 4.7 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reports.

Average hourly earnings rose by 9 cents in April.

'The report shows our economy continues to grow and steadily produce new jobs,' says U.S. Secretary of Labor Elaine L. Chao. 'For the first four months of 2006, 692,000 net new jobs were created for a total of 5.3 million net new jobs since August 2003. The unemployment rate remains low at 4.7 percent, which is below the 5.7 percent average of the 1990s. And average hourly earnings in April were better than consensus forecasts, which is good news for America's workers.'"


NEW YORK, May 5 (Reuters)

"Are we there yet?

That's the question that will dominate Wall Street's thinking next week as investors look for the Federal Reserve to shed light on when it intends to stop raising interest rates.

The Fed's policy-setting Federal Open Market Committee meets on Wednesday and is expected to nudge interest rates up another quarter percentage point to 5 percent, which would be its 16th hike since June 2004.

But paramount to Wall Street is whether the statement that follows the Fed meeting will give any hints of when interest rates may stop rising. U.S. interest-rate futures on Friday signaled about a 30 percent chance of a June rate hike that could follow the widely expected increase next week.

Any language that suggests the Fed is done raising interest rates is poised to propel U.S. stocks higher next week, putting the Dow Jones industrial average <.DJI> in sight of a break above its Jan. 14, 2000, intraday record high at 11,750.28, according to analysts."


I think it takes real doom and gloom to forecast a depression in the light of the fact that economic indicators, such as these referred to above, show that the economy is strong and getting stronger.

[JBinKC]

I have no clue what will happen next because I continued to be baffled by the US markets. There is little value in the market IMO. It seems the traditional indicators for tougher times ahead like an inverted/flat yield curve was totally ignored by Wall Street this last go around. One thing I do know is the second the fed stops raising interest rates the dollar will collapse against most other currencies. I continue to believe in buying foreign based companies whose earnings are derived from strong commodity prices or holding the commodities themselves.

[mrvirgo]

In a word, NO! Rumor mongers and false analysists are usless. One might as well look into a crystal ball or into a tea cup bottom for that sort of prediction. Markets and economies are unpredictable. If they were not erratic, we'd all be rich.

[Haku]

Well, I don't think we'll end up in a depression akin to the '30s, but I will say this much: Our baby boomer generation has started to retired. Government programs such as Social Security and Medicare won't last long. Compound this with a costly national debt that our current administration has incurred and... well, I'm worried to tell you the truth.

Worried in the sense that we can no longer rely on our own government to help us the way it did for our previous generations. Personal retirement planning, for example, is now a necessity just to make sure that we don't end up retiring into poverty.

Sound grim? Perhaps, but it is the truth as I see it. Even if I turn out to be wrong, there's nothing wrong with being fiscally responsible so... I'd rather err on the side of caution.

[sweeps]

How about a return to the Cold War, thanks to our old friend Dick Cheney.

[VJW]

Originally Posted by markio26

several newsletters i have been receiving are predicting a depression..... i know things are ruff right now and families are barely getting by... one statement said that over 500,000 ppl. on social security are also on social security supplemental???????? i don't know how true this is... any thoughts?????

Well, there are more than 48 million Americans receiving monthly Social Security benefits, and about 2 million above the age of 65 are also receiving SSI, but I’m not sure what that has do with anything, as SSI is only managed by the Social Security Trustees, but no SSI funds are derived from the Social Security system.

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[VJW]

Originally Posted by Haku

Well, I don't think we'll end up in a depression akin to the '30s, but I will say this much: Our baby boomer generation has started to retired. Government programs such as Social Security and Medicare won't last long.

Actually, Social Security is much more financially sound today than it has been throughout most of its 70-year history. The assessment of the Congressional Budget Office (under the control of the Republican Majority since 1995) is that Social Security can pay all promised benefits through the year 2054 with no changes whatsoever, then pay 81% of promised benefits until the Baby Boomers finish exiting the system, then resume 100% of promised benefits. And that is the pessimistic forecast.

Compound this with a costly national debt that our current administration has incurred and... well, I'm worried to tell you the truth.

Yes, the current federal debt is most certainly oppressive. If you look at the U.S. government outside of Social Security, current income tax revenues (which have plummeted to 1959 levels), only cover about sixty-eight percent of total government spending. Contrast this with what the current administration considers a “crisis”, that on the day the Social Security Trust Fund is exhausted, by one pessimistic forecast almost a half a century from now, Social Security will be in better financial shape than the rest of the U.S. government is today, as it could still cover eighty-one percent of the cost of future benefits.

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[VJW]

As to a “Depression”, the following chart is useful:

CHART


While a recession is generally negative GDP economic growth and the opposite of positive GDP economic growth, a depression is generally a declining Standard of Living and the opposite of Prosperity which is a rising Standard of Living.

Many people wrongly believe that a “Depression” is merely a very bad “Recession”, but as the chart plainly reveals, an economy can go in and out of recession yet still remain in depression. Here, the national economy was out of recession for about four years, but remained in depression.

Another interesting aspect of the chart is that it contravenes the myth that the ‘Hawley-Smoot’ trade legislation caused the stock market decline and hence the Great Depression, as the stock market downturn clearly pre-dated the legislation. Not to mention that the tariff applied to such a tiny fraction of the overall national economy.

We’re unlikely to see the same type of ramifications of a depression as we did in the 1930s, as because of the reaction to which were enacted certain societal floors. That said, we’ve seen the Standard of Living of the vast overwhelming majority of Americans go backwards each of the last five years, and there are millions fewer workers in the national economy, as a percentage, than there were in 2000.

Do these contractions mean we’re in a depression ? Dunno yet. Stay tuned.

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[NoWayNovember]

We're already in a depression! Ask anyone who has to fill their car up with gas!

I wouldn't worry about it too much. Just make sure to take care of your fiscal responsibilities and don't depend on Uncle Sam to help you with your retirement.