About the Recession Door
REALonomics received positive and negative feedback, online and offline, regarding our PhotoBlog entitled “REALonomics: Recession!” posted yesterday, January 22, 2008. By this PhotoBlog we have proven that a picture is worth MORE than a thousand words!
About six weeks ago, REALonomics came to the conclusion that that we were at the door of recession, the strength of which we were not prepared to estimate. A post was prepared in advance but not published. After watching Washington’s call for stimulation, Chairman Bernanke’s testimony, the global market downturn two days ago and the Federal Reserves mid-night pajama telephone conference to lower the prime by .75, the highest reduction in a quarter century, we felt that our position was confirmed…the door to recession was now open…rather than text posting…be photo-blogged.
For too long, the real estate brokerage, mortgage and title industries have adopted a “let’s not say anything negative” approach to the largest financial crisis since the Great Depression. REALonomics thinks this passive position has been a huge mistake on the part of the industry and indeed, may have kept us from aggressively pursuing solutions within our industry.
Our “recession” call is not predicated on the old GDP decline rule (2 down quarters = recession). We believe we have entered a powerful global economy where the connectivity of markets, east and west, have re-written the old assumptions and rules, creating international definitions, rather than just national definitions of recession.
What would you call the following?
- A global financial institution crisis
- Real estate inventories at nearly 20 year highs
- Unprecedented escalation in foreclosures
- Huge market declines in Japan, Singapore, Hong Kong & other markets
- Calls for economic “stimulation” with uncharacteristic bi-partisan support
- A .75 cut in the prime by the Federal Reserve in an emergency conference
- Up-ticks in unemployment rates
- Declining consumer confidence and high personal indebtedness
- The weakest dollar value in recent memory…1/14th the value of 50 years ago
- Sell-off of significant percentages of national banks to foreign interests?
- Loss of most of the stock market gains for 2006-2007?
REALonomics believes the door of recession is now open and that we are passing into a zone of real economic challenge. It’s necessary to the clean-up and we cannot expect ‘happy days’ to be here again until we face the music…we won’t heal the industry’s problems until we acknowledge illness and create cures.
Your thoughts are?
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Ok, so you have pointed out some significant issues. What should we do?
Do we go into a hole,and wait till it goes away or do we look for the opportunity this most productive time has to offer. I would think the gamblers are loosing out right now, but the conservative person is watching the show with some amusment. So what? And who really cares. The things we have abillity to control ie. politians who spend more than they have. Or the family who runs up debt, just because they can. So really none of this information makes a difference.
Nice observations and questions. The entire point REALonomics continues to make is that we should constantly and consistently be asking what you ask, “what does this mean to the brokerage, mortgage and title industries with respect to our economic models.” You elude to a very real phenomenon in our industry; burying our heads in a hole, hoping and waiting for things to get better rather than proactively redesigning our industry into a more consumer-centric, profitable model that operates in a transparent culture. Great comment! -REALonomics.