If Kerry had won Ohio, would the world economy have crashed in 2008?

[Clarko95 📚💰📈]

Of course, the housing bubble had begun in 2001 and peaked in 2005. He would've come into office a dead President walking in terms of the economy


After 9/11 and the 2001 recession, the Federal Reserve cut interest rates to 1.00% from 6.50% and hoped it would stimulate homebuying, consumer spending, manufacturing, business hiring, etc. but it turns out most of the capital was shoveled into the residential real estate market, just as had happened during the 1984 - 1989 real estate bubble. While from 1996 - 2000 housing prices were increasing by about 4 - 5% per year (which is strong, but not exactly bubble levels. It was more a bounce-back from the 1989-1995 real estate depression, similar to what we're seeing now after the 2008 crash), from 2001 onward they were exploding by 7%, 8%, even 12% in 2005.

One of the reasons investors put so much money into real estate was the fact that it was seen as a relatively safe investment (you can literally live in your investment) and there was no shortage of people wanting homes who would take out loans they didn't read, and politicians happy enough to give people homes (Democrats) and claim credit for the roaring economy and stock market (Republicans).

In 2004 - 2005, as unemployment fell back to 5%, GDP grew at 3%, and income had begun to rise, the Fed hiked interest rates to 5.25%. Home values peaked in December 2005, and then home sale prices peaked in March 2006. From late-2005 to early-2007 the housing market basically slid sideways, until the interest rate hikes began hitting homeowners in terms of higher mortgage payments, which lead to huge defaults and foreclosures beginning in May 2007. In 2007, over 2 million people lost their homes to foreclosure. The stalling, and then declining, housing market (lots of well-paying construction jobs were at risk) combined with huge imbalances in the US economy (our trade deficit that was was a horrifying $850 billion, and 3.8 million manufacturing jobs had disappeared 2001-2007) led to a recession beginning that December, but the financial crisis didn't happen until September 2008 because the few banks that began to fail in 2007 were able to take out some lines of credit from the government and the big banks were able to cover their losses in other sectors (until everything went to hell in 2008).

President Kerry was screwed from before he even began his campaign, so yes the crash still would've happened. But how his administration would have reacted to it is a whole 'nother debate. I see two scenarios with him. First, you could argue that his admin would not have let Lehman fail (Bush was committed to free markets) and his regulatory agency appointees would have red flags everywhere starting in 2005, and thus this would've prevented the financial crisis from getting too out of hand (but still quite severe). Or I could see him mirroring Bush's mistakes of not intervening, because he didn't want to be "that Democrat" who bailed out the fat cats (we have to remember how the Left, and all political rhetoric, would've changed had Kerry defeated Bush in 2004) until it was too late.

[Clarko95 📚💰📈]

I wonder how long people think it will before the next financial crisis? The economy is very average and is chugging along at a conservative pace...there seems to be no bubbles. And unless there is another global disaster like war or a major major natural disaster, its all out of sight and out of mind.

The longest period of uninterrupted expansion the US has seen was 1991 - 2001, followed by 1961 - 1969 then 1983 - 1990. The last recession ended in June of 2009, so the current expansion would have to surpass June of 2019 to break the record. Crazy right?

While it's true that the slow rate of expansion is preventing any bubbles and could drag the expansion out, I think that when the Fed raises rates it may rock the stock market and slow the housing market, causing a soft landing like what happened in 1995. I could see Europe flaring up again in 2016 - 2018 and causing even a minor recession in the States, but it would be very shallow but drawn out, kind of what happened to the US 2001-2003 or Italy 2011-2013.

I'm personally betting on a small recession 2018 - 2019, which will screw over whoever succeeds Obama and screws me as a I graduate. Another possibility is a "paper recession" where GDP growth goes negative for two quarters, but the job market remains strong (like what happened in Q1 2014) or affects only a few sectors, and unemployment fluctuates slightly. I could see government budget cuts and/or a Fed rate hike causing that.