Recession?

They're practically glorified hiccups nowadays. I don't get what the big deal is.

I also have much suspicion that a recession is in the offing.

In a word, no. Unless you're talking houses here in the Bay Area, but the "recession" is more like a return to a normal, vanilla market. All the economic signs I see look good. Krugman's cat must be hurting.

The housing market is hurting all over the place. Oversupply and high prices. Potential home owners are sticking with rentals until housing costs come down. Which means a lot of real estate speculators are now stuck with properties that can't unload. While housing prices are dropping at around 2 or 3%, the rate could increase substantially.

And keep in mind that with housing sales falling, thet means other segments of the economy will suffer as well. Sales and services, manufacturing, imports and exports. Loss of income along with a demand for lower costs. Recession nothing, we might be talking full blown depression.

An increase in foreclosures. Restrictions on credit. Now add in the growing outcry regarding China's outlaw industries, many of whom apparently enjoy government support and protection. (Just recently at least 100 children in Panama died as a result of being given medicines "sweetened" with an ingredient used in anti-freeze.) China depends a lot on her exports to support her industrial expansion. She loses her outside markets she may well face economic and possibly even governmental and societal collapse.

The 19th century really came to an end when German troops crossed the Belgian border on August 1st 1914. The 20th may truly end when American forces occupy the city of Vladivostok Russia to defend it from advancing Chinese troops.

There was a big housing crash in Arizona recently, and housing crashes can have a devastating impact on the wider economy. Construction jobs are lost, people feel less wealthy and thus spend less, all falls apart in one malign spiral.

Housing crashes from around the world (Falls in House Prices:

Netherlands, 1978-85 -50%
Finland, 1989-95 -46%
Japan, 1991-present -43%
Norway, 1987-93 -39%
Switzerland, 1990-2000 -39%
New Zealand, 1980-85 -37%
Denmark, 1978-82 -36%
Sweden, 1979-85 -35%

In Finland unemployment rose to 20%, the banking system disintegrated as mortgages went unpaid and banks were unwilling to lend to potential buyers. Same happened in the Soviet Union. Housing crashes invariably lead to a recession in the wider economy.

The major question for America is - how high are RENTS vis-a-vis house prices? Because if it costs much less to rent than to buy a house, then high house prices are all bubble, and have nothing to do with rising income.

Alan - Russia has a lot of nukes.

The economy has been generally good, unemployment has been relatively low throughout. And so no, I don't see the looming failure ecomomically.

Omar,

Russia is a rotting corpse kept together with tape and twitching with intermittent jolts of electricity. It comes to an American occupation of the Russian Far East there will be no Russia to protest.

I doubt it. People often react to one aspect of the economy without looking at the larger picture. Yes, there was an overextension of sub prime lending, but those are only a fraction of mortgages.

Other fundamentals are still very strong, and the yield on equities (earnings divided by price) is often less than the after tax cost of money (about two thirds the long term interest rate to borrow). I think a recession is extremely unlikely when stocks are so cheap compared to money and smart companies are using their cash to buy back in their own shares and acquire other companies.

Alan, how much do you want to bet that Chinese and/or Russian forces will occupy the far east of Russia? I highly doubt either will happen within our lifetimes.

As of right now Wikipedia's list of recessions does not go past the early 2000s.

Alan

Western media myths. The western media gives out a lot of disinformation on the Russian economy, mainly because they don't like Putin. It is growing very well and, contrary to popular beliefs, is diversifying away from natural resources, Putin's flat income tax has had astonishing results.

Its demographics don't look good, but to be honest - neither do China's. As the Chinese economy grows and grows we may even see some Siberian migration to China, although East Asian ethnocentrism makes that highly unlikely. And how would Japan respond to all this?

Don't believe everything you read, for a proper look at the Russia economy look Andrei Shleifer and Daniel Treisman's 'A Normal Country: Russia After Communism' http://post.economics.harvard.edu/faculty/shleifer/papers/normal_jep.pdf

Main point:
"although Russia's transition has been painful in many ways, and its economic and political systems remain far from perfect, the country has made remarkable economic and social progress. Russia's remaining defects are typical of countries at its level of economic development."

According to wiki IQ and the Wealth of Nations put Russia's avg at 96, high for such an enormous, drunken and ethnically diverse nation. I'd imagine that hides huge variance, and they are losing their Ashkenazi smart fraction to Israel and the US, but 96 is enough.

Before WW1 Russia was set to become the largest economy in Europe - Russia's rate of economic growth was one of Germany's biggest fears. The top German military strategists concluded that they would be unable to defeat Russia in a war after 1916.

Razib,
I don't get the impression of any looming recession, though I have read people predicting one over a year.

Zetji,
I have to agree with you. I think in the US at least that the Equity Market and Real Estate Market act like a giant see-saw, when one is up the other is down.

Here in New York the Real Estate market is known to have a 12-year cycle on average. Currently this market has peaked about a year ago, so now I think that Equity markets will do well for a few years... so my money is on equities!

Razib, this article from Donald Luskin should put your mind at ease. "Growth This Spring Is Strong, and Looks to Continue."

http://www.smartmoney.com/aheadofthecurve/index.cfm?story=20070504

"They've been saying the same thing for a year now, as housing has fallen off a cliff. But it just never comes true. There's simply no evidence of infection of 95% of the economy by the 5% represented by housing.

"Income is strong. Spending is strong. Jobs are strong. Corporate earnings are strong. Everything is strong but housing."

Omar,

Travelers in Russia have noted the deterioration, how the infrastructure has degraded over the years. Roads falling apart, train stations literally rotting away. Russians have written about it. Apathy, inertia, and oil sales are about the only thing keeping the place together right now.

Most telling, the population is falling. In the 67 years since 1940 a (possible) population of 200 million has dropped to 130 million. By mid-century it is projected to fall below 100 million. That is not a healthy country by any measure. Think about it, a country could in a century's time lose half her population due to death and emigration. That's a prospering nation?

But I shan't convince you, since you believe that western media engage consistently in myths.

The U.S. Equity markets have been hitting all time highs, and valuations aren't egregiously out of whack like they were back in 1999/2000. U.S. Corporations have posted double digit quarterly profit increases for at least 12 straight quarters, and are now sitting on boatloads of cash. Unemployment is at a reasonable level. I think at worst we're going to see a *correction*, but not a depression. In addition, Alan's doomsday prophesying aside, China has been posting nearly double digit *GDP* growth for the past 25 years (see here). Think about it: it's unheard of for corporations to accomplish this, let alone an entire country. China may suffer the slings and arrows that come with grander economic cycles, but predicting its collapse is, I think, a bit misguided. And, as for Russia, Alan's population numbers are 1) incorrect and 2) not taking into account the loss of population due to the breakup of the Soviet Union. Also, population loss does not equate with a deteriorating economy. That's just Malthusian wrongheadedness.

"In a word, no. Unless you're talking houses here in the Bay Area, but the "recession" is more like a return to a normal, vanilla market. All the economic signs I see look good. Krugman's cat must be hurting."

I like Krugman, but indications are very mixed, even in the housing market (according to my economist wife). Even in the Bay Area, the outer bay is flat or declining, but near the coast things are still hot, thank you. My impression is that we'll see some slower growth (maybe 2%), but nothing close to a recession.

What's your commute like? Getting longer or shorter? That's probably the best indicator of the economic health in your immediate area.

Razib, this article from Donald Luskin should put your mind at ease. "Growth This Spring Is Strong, and Looks to Continue."

Luskin? Why should Razib pay any attention to a college dropout with zip, zero, nada training in economics, whose claim to fame is being in Wall Street is becoming a fund manager through family contacts in the boom time of the mid-1980s.