[TreeFarmer]

Hey guys;

I've done some looking but I'm turning to you guys for some help. I've very interested in seeing how the current recession and the one of 1982 are alike and how they are different.



If you know of an analysis that you think is top notch, please post the link here.

Thanks;

TF

[copious.abundance]

>>> The early 1980s recession was much worse than today <<<

[timmac]

2 things i find wrong with that chart there Oilfinder, 1st the jobless rate is now higher than chart states, might even be much higher if you factor in the 3 times more homless now than in 82 that are not counted, also the core inflation I find not correct [1.5 for 09 ?? ].

One other note is that we all know we owe much more than we did in 82 on both the personal debt, business debt and Federal debt, so from my perpective we are a lot worse off than in 82.

Also in 82 we had a much better Prez to lead this country out of that mess than we do today.

[AirlinePilot]

In 1982 the top 15 banks in the US were not insolvent.

In 1982 we were not foreclosing on mortgages at record rates.

In 1982 the Commercial real estate sector was not failing.

In 1982 we were not COLLAPSING personal credit like we are today.

In 1982 average debt was not 128% of disposable income.

in 1982 the Government had not (and did not) embark on a massive monetization of its own debt.

in 1982 the prime lending rate was not at zero percent. It has been for nearly a YEAR.

In 1982 the US Government DID not issue massive stimulus programs anywhere near what we have seen so far.

In 1982 the US Government had not become almost the sole buyer of massive losses in mortgage backed securities.

In 1982 the Euro Zone financials were not leveraged like they are now.

In 1982 M1 did not look ANYTHING like it does now.

I could go on, but there are a HOST of reasons why this time it is completely diffferent to anything we have witnessed in modern times.

Choose to see or not, it's right in front of your face.

[AirlinePilot]

Credit




M1

[copious.abundance]

In 2009 the prime rate was not at 20.5%

In 2009 core inflation was not at 13.9%

In 2009 the jobless rate was not 10.8%. It is possible it might get there next year, but time will tell.

In 2008 the 30-year mortgage rate was not at 18.9%

In 2009 a 48-month car-loan rate was not at 17.4%

In 2009 the Misery Index did not get up to the high teens as it did in the early 1980's. Currently it is less than 9.

[AirlinePilot]

Out of context my good man. You cannot compare a CREDIT Collapse with an Inventory based recession. Two completely different animals caused by non related economic and political events. You keep making the same ignorant mistake.

More.....

[copious.abundance]

Out of context my good man. You cannot compare a CREDIT Collapse with an Inventory based recession. Two completely different animals caused by non related economic and political events. You keep making the same ignorant mistake.

More.....

No, it is you who are making an ignorant mistake. The 1982 recession was not an inventory based recession. It was a recession brought on by the Fed jacking up interest rates sky-high to fight off inflation. And with interest rates jacked up sky-high, you can be sure credit collapsed back then, too. Who would want to borrow money at 17% interest, unless you absolutely had to?

[Tyler_JC]

Nominal interest rates don't tell the whole story.

What was the REAL interest rate?

According to your data:

In 1982, a car loan was 17.4% but the core inflation rate was 13.6%, the effective interest rate on a car loan was only 3.8%.

Today that same car loan is 6.8% and the core inflation rate is 1.5%, the effective interest rate on a car loan is 5.3%.

So a car loan is actually significantly more expensive today than it was back in 1982.

To make matters worse, the Fed is currently buying mortgages, car loans, consumer loans, and other debt in order to keep interest rates down and stimulate the economy. If you remove the effect of government intervention, interest rates for consumer loans would be higher by at least a few percentage points.

Moreover, your dataset is cherry picked. It uses a different year for each comparison. Core inflation is taken from 1980 while unemployment is taken from 1982 and prime interest rates from 1981.

[copious.abundance]

Speaking of cherry-picking data, as I've been pointing out frequently here, the fall in consumer credit is not necessarily a bad thing. According to AP's bizarre reasoning, it would be better if consumers were taking on more debt (otherwise he wouldn't be crowing about it declining). But while he crows about consumer debt falling, he also tells us:

"In 1982 average debt was not 128% of disposable income."

If having average debt 128% of disposable income was bad, then it would be GOOD that this debt was falling. But, in classic doomer fashion, AP needs to spin the news bad no matter what. If it goes up, that's bad. If it goes down, that's bad.

[like_the_dinosaurs]

http://curiouscapitalist.blogs.time.com/2009/03/06/employment-decline-now-worse-than-in-1981-82-recession/

[Dr. Ofellati]

In 1982 every third economic headline did not begin with the phrase, "not since the Great Depression . . . ."

[TreeFarmer]

Speaking of cherry-picking data, as I've been pointing out frequently here, the fall in consumer credit is not necessarily a bad thing. According to AP's bizarre reasoning, it would be better if consumers were taking on more debt (otherwise he wouldn't be crowing about it declining). But while he crows about consumer debt falling, he also tells us:

"In 1982 average debt was not 128% of disposable income."

If having average debt 128% of disposable income was bad, then it would be GOOD that this debt was falling. But, in classic doomer fashion, AP needs to spin the news bad no matter what. If it goes up, that's bad. If it goes down, that's bad.

OF I agree with you that consumer debt falling is a good thing. However, this is the problem/question that I have: how much further does debt need to fall to get to a reasonable number? About how long will that take at current rates?

My logic is that if it needs to fall a lot further then there will be a lot more pain becase "the consumer has stopped spending" will have to continue for a good while longer.

Othewise, thank you all for this discussion, its what I'm looking for.

TF

[mcgowanjm]

Paying off debt germany britain france gold

which led to Depression and then WWII:

For much of history, failing to repay debt was regarded as not merely a breach of contract, but a crime. People who failed to repay their debts in timely fashion were thought to have stolen from their lenders; they were put in prison. In the Middle Ages even a dead debtor's children could be sent to prison.

Now, bankruptcy laws allow individuals and businesses to go to rehab. Then, they can stiff creditors again. Neither sin nor crime, debt is now just a cost of doing business.

But few creditors are as forgiving - or perhaps as forgetful - as those who lend to governments. That is the conclusion of a new book by Carmen Reinhart and Kenneth Rogoff, This Time It's Different. The two professors document the history of eight centuries of "financial folly." What we learn from it is what we already knew - that borrowers are often perfidious, crises are usually insidious, and bankers are morons.

From Bill Bonner, Daily Reckoning.

When paying off debt, which my wife and I were doing in 1982,
you must live a peasant's life. the pay off is a gradual rise in your
Standard of Living from that "worst point".

And that's what most folks, like addicts doing withdrawal in the first
days, don't want to or can't go thru.

[mcgowanjm]

Out of context my good man. You cannot compare a CREDIT Collapse with an Inventory based recession. Two completely different animals caused by non related economic and political events. You keep making the same ignorant mistake.

More.....

No, it is you who are making an ignorant mistake. The 1982 recession was not an inventory based recession. It was a recession brought on by the Fed jacking up interest rates sky-high to fight off inflation. And with interest rates jacked up sky-high, you can be sure credit collapsed back then, too. Who would want to borrow money at 17% interest, unless you absolutely had to?

I remember 1982 almost exactly because my life was being turned inside out.

And I was just coming out of the beginning of my Depression. My Depression
lasted until Saddam was Greenlighted into Kuwait, weirdly enough.

I remember the day when profits from production were accelerated into
finance which has proceeded from that Summer 1982 Day til now.

See the US Stock Market and declining interest rates/fekete for details.

The 'inflation' OF2 talks of was the direct result of the US oil peak of 1971,
and Nixon then refusing to pay $ for gold. That led to the Great Grain Robbery,
and the Yom Kippur 'War", OPEC oil Embargo and then Brzezinski luring
Russia into Afghanistan and the Carter Grain Embargo/Iran Revolution.

OIL and GRAIN. And 1982 money markets paying 10%. Greenspan(for which
he was amply rewarded) took 20/25% of the avg Workers check (FICA) to begin the redistribution of wealth upwards. With Productivity Gains giving the
workers debts instead of wage increases to keep their life styles up.

With PO May 2005 (Deffeyes re iterates same in PO News/Leanan) and
1/2 the US Midwest declared disaster areas(Nov, 2009), workers will have to be crushed again. Will they put up with it.

[Dreamtwister]

In 1982, the United States government wasn't disguising gold as "gold scrap" and smuggling it out of the country at a rate that is 24 TIMES higher than annual production.

[AirlinePilot]

The reduction in consumer credit would be a great thing, albeit for the fact that our entire consumer based economy over the last 10 years has been based on exactly the opposite. I've shown on here before, as others, how this time its not a good thing that consumer credit is collapsing. It's collapsing due to default, foreclosure, UE,and the giant sucking sound that is private and commercial real estate. That coupled with the almost near ZERO velocity of money is not conducive to recovery nor is it in any way shape or form comparable to 1982's downturn.

I'm sure 1982 was bad, but the destruction in asset wealth both tangible and intangible this time FAR outweighs anything since GD1 and we are nowhere near out of the woods yet. Unless of course you are OF2, AntiDoomer, or SOS.

[shortonsense]

I'm sure 1982 was bad, but the destruction in asset wealth both tangible and intangible this time FAR outweighs anything since GD1 and we are nowhere near out of the woods yet. Unless of course you are OF2, AntiDoomer, or SOS.

I don't know Airline, if someone buys into the "gee haven't Americans been stupid with their credit fueled spree" over the past decade, I'm not sure I assign any connotation to your lack of credit expansion other than YEE HAH!!

Seriously, we had an asset bubble. A good one. Its been punctured, and I have a tough time buying into the concept that this is a BAD thing, and then trying to use this assumption to claim it makes the current recession ( or not ) worse than the one in 1982. Its about time people got a decent smack in the face for being ignorant enough to think that market cycles only go up, or that real estate investing is a surefire hit.

Certainly I've been watching the credit available to the average consumer ( defining myself as an average consumer ) over the past 18 months now, and certainly rates have gone up, and certainly the lending practices I have been familiar with over the past decade have changed from the larger entities ( GMAC and such ) to smaller and local ones, like a decent local bank or credit union.

But it hasn't been a BAD thing, its just been a change, rates are slightly higher for the same types of products ( cars mostly ) and a credit card or two has tried to zap me with those "gee lets raise his rates for fun!" routines which you see on the nightly news. But I don't know...I don't think any of this is BAD, its just more similar to the old days, and people are perhaps unhappy with the lack of low interest, high octane fuel being pumped into the economy at the consumer level drying up...I say its a good thing and maybe we should listen better to our parents and grandparents who learned their lessons during the REAL depression.

[Homesteader]

In 2009 the prime rate was not at 20.5%.

In 1982 the economy could withstand the prime rate being at 20.5%.

What would happen to todays economy if the FED announced a target rate of 20.5% in 12-18 months?

[mcgowanjm]

And here SoS is right, except on this:

I've been watching the credit available to the average consumer ( defining myself as an average consumer ) over the past 18 months now

while I've been watching credit extended in lieu of wage increases since
1982. when All Production profits were systematically moved into
the FIRE economy. The only way the Empire could maintain after Oil
Peaked in 1971. But now, even leveraging profits from Production
to Finance has come to an end.

Everything has been monetized out to forever. And like SoS said:

Its about time people got a decent smack in the face for being ignorant enough to think that market cycles only go up, or that real estate investing is a surefire hit.

Except that the 'people' who should be getting this smack are instead getting
bailed out:

By Chris McGreal in Los Angeles

UN special rapporteur says wealthy US ignoring deepening homeless crisis while pumping billions (Trillions) into bank rescues.

How I Stopped Hating Thanksgiving and Learned to Be Afraid

by Robert Jensen / November 13th, 2009 (14)