Paul Krugman:

We are now, I fear, in the early stages of a third depression.

It will probably look more like the Long Depression than the much more severe Great Depression.

But the cost -- to the world economy and, above all, to the millions of lives blighted by the absence of jobs -- will nonetheless be immense.

The Economist's Washington correspondent:

I thought I was unlucky graduating into the tech bust.

I had no idea.

Barry Ritholtz:

This current generation is pretty much fucked.

Simon Johnson:

The conventional wisdom among the elite is still that the current slump "cannot be as bad as the Great Depression."

This view is wrong.

Neil Howe:

If you think that things couldn't get any worse, wait till the 2020s.

Anatole Kaletsky:

The battle over bailouts in Europe is only a sideshow compared with the great social conflict that lies ahead all over the world in the next 20 years.

Decius:

Man, what a great time to be alive!

Dan Kildee:

Much of the land will be given back to nature.

People will enjoy living near a forest or meadow.

Decius:

Cutting production means layoffs which will reduce consumption which will reduce orders which means that production will need to be cut which will require more layoffs which will reduce consumption which will reduce orders which means that production will need to be cut which will require more layoffs which will reduce consumption which will reduce orders which means that production will need to be cut which will require more layoffs ...

John Lanchester:

It's becoming traditional at this point to argue that perhaps the financial crisis will be good for us, because it will cause people to rediscover other sources of value. I suspect this is wishful thinking, or thinking about something which is quite a long way away, because it doesn't consider just how angry people are going to get when they realize the extent of the costs we are going to carry for the next few decades.

Judith Warner:

We're all losers now. There's no pleasure to it.

The Onion:

After nearly four months of frank, honest, and open dialogue about the failing economy, a weary US populace announced this week that it is once again ready to be lied to about the current state of the financial system.

The Third Depression

Ginia Bellafante:

There used to be a time if you didn't have money to buy something, you just didn't buy it.

Pascal Bruckner:

A revolution comes when what was taboo becomes mainstream.

Ruth Simon And James R. Hagerty:

23% of all mortgage borrowers in the US are underwater.

David Foster Wallace:

There are these two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, "Morning, boys, how's the water?" And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes, "What the hell is water?"

Steven Pinker:

In every age, taboo questions raise our blood pressure and threaten moral panic. But we cannot be afraid to answer them.

Simon And Hagerty:

Mortgage troubles are not limited to the unemployed. About 588,000 borrowers defaulted on mortgages last year even though they could afford to pay -- more than double the number in 2007, according to a study by Experian and consulting firm Oliver Wyman. "The American consumer has had a long-held taboo against walking away from the home, and this crisis seems to be eroding that," the study said.

John Bird and John Fortune:

They thought that if they had a bigger mortgage they could get a bigger house. They thought if they had a bigger house, they would be happy. It's pathetic. I've got four houses and I'm not happy.

Decius:

I've gotten old enough that I now understand why adults seek to escape reality. Paradoxically, I think I was better at escaping reality when I was younger.

Richard Brody:

On the island where he encounters the Wild Things, Max talks of his desire to do away with the "sadness and loneliness" -- something that has less to do with their needs and desires than with his own -- or, rather, with the screenwriters' notion that so much of experience can be summed up under those two signifiers, and that there's some implicit happiness awaiting those who can suppress them.

John Lanchester:

It's becoming traditional at this point to argue that perhaps the financial crisis will be good for us, because it will cause people to rediscover other sources of value. I suspect this is wishful thinking, or thinking about something which is quite a long way away, because it doesn't consider just how angry people are going to get when they realize the extent of the costs we are going to carry for the next few decades.

The Economist's Washington correspondent:

By some measures, America already has a lost decade in its rearview mirror. A couple more would mean a lost generation. Worst of all, it would mean my generation. I thought I was unlucky graduating into the tech bust. I had no idea.

1 in 4 Borrowers Are Underwater

The Onion:

After nearly four months of frank, honest, and open dialogue about the failing economy, a weary U.S. populace announced this week that it is once again ready to be lied to about the current state of the financial system.

Paul Graham:

Adults lie constantly to kids. I'm not saying we should stop, but I think we should at least examine which lies we tell and why.

Two kids on a school bus:

Lisa: Can't you see the difference between earning something honestly and getting it by fraud?

Bart: Hmm, I suppose, maybe, if, uh ... no. No, sorry, I thought I had it there for a second.

Saul Hansell, from last year:

How Wall Street Lied to Its Computers

Recently, The Economist:

Darker days lie ahead.

Cormac McCarthy, "Blood Meridian":

At dusk they halted and built a fire and roasted the deer. The night was much enclosed about them and there were no stars. To the north they could see other fires that burned red and sullen along the invisible ridges. They ate and moved on, leaving the fire on the ground behind them, and as they rode up into the mountains this fire seemed to become altered of its location, now here, now there, drawing away, or shifting unaccountably along the flank of their movement. Like some ignis fatuus belated upon the road behind them which all could see and of which none spoke. For this will to deceive that is in things luminous may manifest itself likewise in retrospect and so by sleight of some fixed part of a journey already accomplished may also post men to fraudulent destinies.

Nation Ready To Be Lied To About Economy Again

A highly recommended interview with Ray Dalio:

Everybody should, at this point, try to understand ... that we are in a D-process. The D-process is a disease of sorts that is going to run its course.

2009 and 2010 will be the years of bankruptcies and restructurings. Loans will be written down and assets will be sold. It will be a very difficult time. It is going to surprise a lot of people. Everybody will be second-guessing everybody else.

If you think that restructuring the banks is going to get lending going again and you don't have to restructure the other pieces -- the mortgage piece, the corporate piece, the real-estate piece -- you are wrong.

There are too many nonviable entities. This is basically a structural issue. The '30s were very similar to this.

In late 2009, or more likely 2010, it is going to be a buying opportunity of the century.

From 1998, Stewart Brand:

This is a cross-generational issue. It's caring for children, grandchildren. In some cultures you're supposed to be responsible out to the seventh generation -- that's about 200 years.

From a year ago, Barry Ritholtz:

You're supposed to raise your standard of living by working harder, being clever, earning more income -- not by using your long-term savings. And now this current generation is pretty much fucked.

From 2007:

"Mom, we killed women on the street today. We killed kids on bikes. We had no choice."

Recently:

It’s hard to get people to do something bad all in one big jump, but if you can cut it up into small enough pieces, you can get people to do almost anything.

From late 2008, Peter Schiff:

We need a serious recession in this country, and the government needs to get out of the way, and let it happen.

Recession? No, It's a D-process, and It Will Be Long

Some caution that President Obama’s proposals try to achieve too many objectives at the expense of focusing tax dollars on the core issue of job creation.

In April, the recession would become the longest since the 1930s.

“We are in the thick of it now,” said Robert Barbera, chief economist for ITG Investment Technology Group.

Regarding the public:

My heart swells in my chest and while I laugh,
I feel fear, smell a faint stench of insanity.

Regarding Obama:

He has to start deciding whom to disappoint.

Recall Sequoia:

Get Real or Go Home.

Two quick reminders from Peter Schiff:

Tens of millions of people unemployed, inflation spiraling out of control, the government instituting price controls that result in shortages and blackouts and long lines for things.

I think things are going to get very bad.

We need a serious recession in this country, and the government needs to get out of the way, and let it happen.

All Under the Umbrella of Job Creation

Until David Rosenberg's recent research report is recovered (or is replaced by today's report), here's a roundup of recent media reporting in which Rosenberg appears.

On CNBC yesterday, he said:

"It’s pretty fool-hearted to believe that anything is going to reach any sustainable low until we put in a firm bottom on residential real estate valuation across the country."

He was brought in to CNBC to discuss his latest FT article:

We expect to be in recession through to the end of 2009 at the earliest, even with the help from intense monetary and fiscal stimulus before a recovery takes hold in 2010. Sustained negative wealth effects from the slide in housing and equity prices will reinforce the uptrend in the personal savings rate. This, in turn, creates a highly disinflationary environment as job losses mount and pushes the unemployment rate up towards 9 per cent in the US in the coming year.

What we probably need is a supply-side resolution, either creating regional land banks to ring-fence the inventory or a moratorium on new housing starts to prevent further corrosion in residential real estate values. Supply-demand divergences are likely to persist through 2009, in our view, and will require even further contraction in construction activity before balance is restored in the real estate market.

In a story for Reuters from earlier this week, he is quoted as saying:

"The pullback in consumer and business spending in the coming year will likely be so big that even under the latest leaks on the size of the coming fiscal package, we think it will barely offset half the retrenchment in organic private sector GDP."

Rosenberg is apparently quite vocal lately:

The [recent market] rally appears to hinge on a growing consensus view that the economy will start to rebound in the second half of 2009. And guess what? That view is almost certainly wrong, growls David Rosenberg, Merrill Lynch's North American economist, in reports published every day of the new trading year.

You see, he "growls" because he's bearish.

Here's another:

"The market may be focused less on the patient right now and more on the cure. This, in turn, means that the doctors better come up with something that is going to turn the economy around."

In the Monitor:

The US has experienced a two-decade expansion of credit availability – punctuated in recent years by phenomena such as mortgage loan... [ Read More (0.3k in body) ]

Rosenberg Roundup

Peter Schiff:

Tens of millions of people unemployed, inflation spiraling out of control, the government instituting price controls that result in shortages and blackouts and long lines for things.

I think things are going to get very bad.

Recently, Peter Schiff:

We need a serious recession in this country, and the government needs to get out of the way, and let it happen.

Take note:

If today we are shocked by shenanigans like the Enron debacle, insider trading, mutual fund abuses and the prevalence of special interests in politics, we need to get some perspective on our history.

Here's Thoreau:

“Men have an indistinct notion that if they keep up this activity of joint stocks and spades long enough all will at length ride somewhere, in next to no time, and for nothing; but though a crowd rushes to the depot, and the conductor shouts ‘All aboard!’ when the smoke is blown away and the vapor condensed, it will be perceived that a few are riding, but the rest are run over.”

Nassim Nicholas Taleb:

Many hedge fund managers ... are just picking up pennies in front of a steamroller. And sometimes the steamroller accelerates.

Jules Dupuit, via Ross Anderson:

It hits the poor, not because it wants to hurt them, but to frighten the rich ... Having refused the poor what is necessary, they give the rich what is superfluous.

Financial doomsayer Schiff still grim on future

Peter Schiff, president of Euro Pacific Capital, predicts that many homeowners who have little or no equity will stop paying their mortgage and then reduce their income to get the biggest payment cut possible. They could stop working overtime or, if two spouses work, one could quit. After the modification, they could try to boost their income again.

"This is a once-in-a-lifetime opportunity," Schiff says. "People are going to feel like complete morons if they don't participate. The people getting punished are the ones who never made an irresponsible decision to buy a house they couldn't afford."

You can say that again.

You Might Want To Think About Stopping Your Mortgage Payments and Reducing Your Income

The S&P 500 is headed for its biggest annual decline since the Great Depression, when it fell 47 percent in 1931.

``The final low will be much lower than this,'' and may not occur before the fourth quarter of next year, de Graaf said.

At a minimum, stocks are likely to revisit their lowest levels of 2002 and 2003, when a 51 percent slide from the March 2000 peak sent the S&P 500 as low as 768.63, said Mary Ann Bartels, chief market analyst at Merrill Lynch & Co. in New York.

The S&P 500 is likely to fall to around 680, 20 percent lower than yesterday's close, probably by the end of the year, said John Roque, senior technical analyst for New York-based brokerage Natixis Bleichroeder Inc.

This isn't the bottom

The presidential campaign has gone on for so long that it feels like one of those bad dreams in which you run in slow motion but never get anywhere.

There will be blood.

From the archive:

I was describing this to a friend over lunch in Palo Alto. As I was describing this the waiter came up behind me to take our order. I was in the middle of saying "it's very hard to enter the rectum, but once you do things move much faster", only to hear the waiter gasp. Whoops. I tried to explain saying "well, this is about" but with a horrified look he said "I do NOT want to know what this is about! Some people are just not interested in natural history, I guess.

A war born in spin has now reached its Lewis Carroll period. (“Now here, you see, it takes all the running you can do, to keep in the same place.”)

People say to me, "Whatever it takes." I tell them, It's going to take everything.

I've come to the conclusion that you actually want shifty, dishonest politicians elected by an apathetic populace. This means that things are working.

There are two reasons that people act: Carrots and Sticks. Lowering the barrier to entry might be a carrot, but the sticks are much more effective and come when the political situation makes it impossible for people to go about their lives without acting.

I'm confident that technology has improved the resources available to people if/when they choose to act. So far they don't need to, largely. Don't wish for times when they do. When people are involved and committed and political leaders are honest and have clear vision; that usually happens when things are really, really fucked up. Who are the U.S. Presidents we most admire? What was going on during their presidencies?

Eloquence is a sign of interesting times.

The Next Administration's Economy