World Bank Predicts Global Economy Will Shrink in 2009

[BillyBobUSA]

Well, better late than neve, I guess.

http://www.foxnews.com/politics/2009/03/08/world-bank-predicts-global-economy-shrink/


NEW YORK -- The World Bank said Sunday that the global economy will shrink this year for the first time since World War II and that the global financial crisis will make it tougher for poor and developing nations to access needed financing.

Trade is forecast to fall to its lowest point in 80 years in 2009, as economic hardship ripples across the globe, the bank said. The most drastic trade slowdowns are expected in East Asia, where growth had been robust, the bank said in a paper prepared for a meeting of finance ministers and central bank officials next week.
The impact on the poorest countries will be severe, the bank said, predicting that a group of 129 countries face a shortfall of $270 to $700 billion this year. The bank, which offers low-interest loans and grants to developing nations, warned international financial institutions will not be able to cover even the low end of that estimate. Only one-quarter of those vulnerable countries will be able to ease the economic downturn through job creation or "safety net" programs, the bank said.

The ramifications of the growing financial crisis on the world's poorest nations will likely remain for some time, the bank said. Because richer nations are borrowing more, developing nations are being squeezed out and many financial organizations that have provided financing to lower-income countries "have virtually disappeared."

Developing countries that are still able to get credit will face higher borrowing costs and lower cash flow which will lead to weaker investment and slower growth, the bank said.

To ease the burden on developing nations, the bank urged cooperation from developed nations, global institutions and the private sector.

80 years is a very long time, going back all the way to....the Great Depression.

[ChrisSpencer]

Well, better late than neve, I guess.

http://www.foxnews.com/politics/2009/03/08/world-bank-predicts-global-economy-shrink/




80 years is a very long time, going back all the way to....the Great Depression.

The total US Economy will contract about 2-4% or so from the recession in total, which is (depending on which forecaster you listen to) going to last a total of 30-36 months.

[BillyBobUSA]

The total US Economy will contract about 2-4% or so from the recession in total, which is (depending on which forecaster you listen to) going to last a total of 30-36 months.

I think it is going to be worse than a 4% contraction.

Over $50 trillion in world wealth has been destroyed in an ongoing process. There are now over $1,140 TRILLION in derivitives floating around that are simply absurd in that there is no real economic activity or production that justifies such high contract values. The house of cards is still in the process of collapsing.

Dont trust the talking heads that sell advertising for their media host because people prefer to hear good news.

Instead, look for signs of the root causes abating; derivitives coming under control, average household debt reduced, real estate coming back in line with historical values, and a returning to rising average individual laborer incomes.

Then I would consider getting back into the market.

All the lollipop give-away rallys till then are simply fantasy bumps in a spiral downward.

[ChrisSpencer]

I think it is going to be worse than a 4% contraction.

Over $50 trillion in world wealth has been destroyed in an ongoing process. There are now over $1,140 TRILLION in derivitives floating around that are simply absurd in that there is no real economic activity or production that justifies such high contract values. The house of cards is still in the process of collapsing.

Dont trust the talking heads that sell advertising for their media host because people prefer to hear good news.

Instead, look for signs of the root causes abating; derivitives coming under control, average household debt reduced, real estate coming back in line with historical values, and a returning to rising average individual laborer incomes.

Then I would consider getting back into the market.

All the lollipop give-away rallys till then are simply fantasy bumps in a spiral downward.

House prices are very close to historical norms in the United States. Other countries, Canada especially, still are experiencing higher than historical norm house prices with a very real possibility of significant further contractions.

[BillyBobUSA]

House prices are very close to historical norms in the United States. Other countries, Canada especially, still are experiencing higher than historical norm house prices with a very real possibility of significant further contractions.


http://www.reuters.com/article/domesticNews/idUSTRE52B58720090312?feedTy (http://www.reuters.com/article/domesticNews/idUSTRE52B58720090312?feedTy)pe=RSS&feedName=domesticNews&rpc=22&sp=true


WASHINGTON (Reuters) - U.S. households suffered a record 9 percent drop
in wealth and pared debt in the fourth quarter as a deepening recession
battered confidence and finances, Federal Reserve data showed on
Thursday.

Household net worth dropped by $5.1 trillion from the prior quarter to
$51.5 trillion. For the full year, net worth dropped by $11.2 trillion,
reflecting steep declines in the housing and stock markets.

The declines in household net worth were the largest since quarterly and
annual records began in 1951 and 1946, respectively, said the Fed -- the
U.S. central bank.

Since a second-quarter 2007 peak of $64.4 trillion, household wealth has
dropped by about 20 percent, effectively wiping out four years of gains.
That has put a chill on consumer spending and added to Americans'
anxiety about their economic well-being.

Michael Feroli, an economist with JPMorgan in New York, called the $5.1
trillion quarterly drop a "showstopper."

"Given where the S&P 500 (stock index) is now and recent house price
data, we estimate consumers have lost about another $2.5 trillion in the
first quarter of the year," he said.

The slump in wealth has coincided with an increase in the personal
savings rate, which suggests households that had counted on rising real
estate and stock market gains to replace traditional savings were now
rebuilding rainy-day funds.

In the second quarter of 2007, when household wealth peaked, the savings
rate was a low 0.3 percent. In the fourth quarter of 2008, it reached
3.2 percent. Many economists expect the percentage to at least double in
the next couple of years.

[BillyBobUSA]

http://www.davemanuel.com/2008/05/11/how-long-will-it-take-the-real-esta (http://www.davemanuel.com/2008/05/11/how-long-will-it-take-the-real-esta)te-market-in-the-united-states-to-recover-some-perspective-from-the-past-30-years/

We have done some research and found a number of different cities in theUnited States that have experienced some kind of a major downturn intheir real estate markets over the past 30 years. We have then figuredout the median home prices in each city before the market popped, themedian home price at the "bottom" and the number of years that it took to recover.

One thing that you have to consider - these numbers DON'T take into account inflation. Meaning, let's say that you buy a home for $100k, and the value slips to $80k. Over a period of ten years, the value of the home recovers back to your original $100k. Technically speaking, your investment is back to even again. But if you factor in inflation, you are still well behind on your investment.

There was a major crash in California in the early 90's. Some markets fell as much as 25% - in Los Angeles, the median home price fell over 20% from 1990 until 1996. The Los Angeles real estate market took a full ten years to rebound to its 1990 high.

New York real estate doesn't always go up. In 1989, the average price of a house in New York was $213k. Over the next two years, prices dropped over 7% and took a full nine years to recover back to their 1989 highs.

San Francisco, another seemingly always-hot real estate market, suffered greatly in the early 90's as well. After touching a high of $286k in 1990, the San Francisco real estate market was cooled off by the nationwide recession. The market almost lost 10% of its total value, and ended up taking a full eight years to recover.

Houston and Austin, a couple of cities that experienced the highs and lows of the oil boom and bust in the 80's, both fell off dramatically in value in the mid 80's. The average home price in Austin, Texas dropped over 25% and took a full eight years to recover. Houston real estate prices dropped 20%+ and took a full fifteen years to rebound.

When you take into account inflation, some markets HAVE STILL NOT fully recovered over 20 years after the fact. California and New York recovered, and then some, but other markets such as Houston have still not fully recovered, when you take into account inflation.

The point of this article? Based on past data, don't expect a quick
rebound, especially if you currently own a home in an extremely hard hit market such as Miami or Phoenix.




http://money.cnn.com/2009/02/24/real_estate/Case_Shiller_December/ (http://money.cnn.com/2009/02/24/real_estate/Case_Shiller_December/)


The decline does not seem to be slowing - just the opposite. The average home price dropped 2.5% between November and December in the 20 top metro areas. That was a larger increase than the 2.3% drop a month earlier.

"The deterioration in U.S. home prices continues apace, with the rate of decline picking up steam late last year," said Mike Larson, an analyst with Weiss Research."Rising foreclosure activity is putting pressure on prices, as lenders are increasingly pursuing a 'take what we can get' selling strategy."...


Despite the drop in home prices, which has given affordability a big boost, the pace of home sales continues very weak. Existing homes have been selling at an annualized rate of fewer than 5 million, down more than 40% from the peak.

New home sales, at an annualized rate of about 331,000, are at their lowest level since the Census Bureau began keeping records back in 1963.