What will the U.S. economy look like a month from now?

[cali]

AIG, Lehman Brothers, Merrill Lynch, Fannie Mae and Freddie Mac are hardly the only behemoths facing ruin. Even with the massive government intervention we're seeing, the economy is going to continue slip sliding away. The mortgage foreclosure crisis can only deepen. Winter is looming.

McCain can't win in this environment. His pick of Palin will become an increasing drag on the ticket.

[Suji to Seoul]

1. As George Carlin put it:

"A steaming, festering pile of gaseous shit."

[ThomWV]

2. I'm not sure if we might not be confusing finance with economics here

How will the economy look? About the same as it does now I suppose. How will our financial institutions look? I haven't got a clue.

[cali]

3. The financial institutions are entwined with the economy as a whole

look at the foreclosure crisis. Millions of people are likely going to lose their homes. That certainly effects the economy. It's not as if you can put the financial institutions in isolation.

[Virginia Dare]

4. We're in a downward free fall spiral until housing prices stabilize..

and it's anybody's guess as to when that will be. I don't trust any of the so-called "experts" thoughts on this, since these are the same people who told us there was no housing bubble and it would be a soft landing.

[ProfessorGAC]

6. Sorry Cali, But Thom Is Right

While everything involving money is intertwined, the economy as a whole is glacial is size and speed, while individual businesses are more rapid. (But still highly inertial.)

The issue with these banks and insurers/underwriters didn't happen suddenly. It's even less reasponable to assume that these financial disasters would trigger a faster reaction from a larger, and even more inertially bound macroeconomy.

To extend your argument to Thom to its extreme, every time a little coffee house goes out of business it affects the economy, because you can't put coffee houses in isolation.

The fact is that as big a deal as AIG and Lehman, and Fannie/Freddie are, there are still a comparatively small piece of the overall economy.

I'd be more worried about the long term effects of this crisis if the gov't DIDN'T do anything, not a short term effect caused by a few grosslly mismanaged firms, no matter how big.
The Professor

[OmahaBlueDog]

5. At some point, the dollar has to start dropping

When you keep printing money (essentially what the Treasury is doing) to pay for these bailouts, the wars, and the government pork d'jour, the dollar weakens in value.

The downside to that: gas and diesel prices will continue to rise, as will imported goods. Whenever gas and diesel rise, everything in the food chain rises. Inflation will become a problem. To curb inflation, the Fed will have to raise interest rates. This will further hamper the housing market and slow business growth.

The upside to that: US assets and exports become more attractive to overseas buyers. The US becomes more attractive as a tourist destination. This means that states like Florida and California should prosper,and may be helpedout of their long housing crisis as devalued property will look attractive to foreign investors. Certain industries (heavy equipment, aircraft) should benefit from the weak dollar and remain strong. Other US businesses and assets will become attractive take over targets.

I think the biggest near term impacts in one month will be:

a) what will the stock market look like? A down September almost always spells doom for the party in the WH.
b) Ike: how bad is the damage, really? $8B sounds low based on what I've seen so far on TV. How much does this impact life in one o America's biggest cities?
c) gas: if regular unleaded keeps falling, that's good for the GOP. If it starts ticking up as cold weather sets in, consumer misery will become more evident.

What the election will miss -- I predict this will be a horrid Xmas for retailers.