When did the recession that shaped the 2008 primaries begin?

[darklordoftech]

I think Iraq was the main political issue throughout most of 2007, but by the time of 2008 Iowa caucuses, everyone was talking about the recession. When did the transition happen?

[Mr.Phips]

I think Iraq was the main political issue throughout most of 2007, but by the time of 2008 Iowa caucuses, everyone was talking about the recession. When did the transition happen?

Probably by April even though the recession wasn’t declared until December.

[136or142]

The recession started at the end of  2007 due to the rise in interest rates caused, in part, by the sharp rise in oil prices which caused a rise in general prices.

My recollection is that this was a recession that really wasn't noticed until the Financial Meltdown that occurred sometime around Labor Day of 2008.

The concern wasn't so much the recession as the sharp rise in gasoline prices.

It's unlikely that John McCain would have won the Republican nomination had the recession been a major concern given that, by his own admission, he wasn't all that knowledgeable on economics. 

[Beet]

The recession started at the end of  2007 due to the rise in interest rates caused, in part, by the sharp rise in oil prices which caused a rise in general prices.

My recollection is that this was a recession that really wasn't noticed until the Financial Meltdown that occurred sometime around Labor Day of 2008.

The concern wasn't so much the recession as the sharp rise in gasoline prices.

It's unlikely that John McCain would have won the Republican nomination had the recession been a major concern given that, by his own admission, he wasn't all that knowledgeable on economics. 

This is accurate. The recession didn't make much of an impact on the narrative until September.

[OSR stands with Israel]

The recession started at the end of  2007 due to the rise in interest rates caused, in part, by the sharp rise in oil prices which caused a rise in general prices.

My recollection is that this was a recession that really wasn't noticed until the Financial Meltdown that occurred sometime around Labor Day of 2008.

The concern wasn't so much the recession as the sharp rise in gasoline prices.

It's unlikely that John McCain would have won the Republican nomination had the recession been a major concern given that, by his own admission, he wasn't all that knowledgeable on economics. 

If the recession was a major concern in the primaries the 08 election probably is a contest between Romney and Hillary

[Ban my account ffs!]

It didn’t impact the primaries so much.  Throughout 2007 there was talk of the “cooling housing market” and whether that could put us into recession.

The housing market was getting really bad during 2008 but kind of under the surface.  With skyrocketing oil prices, people I think had a similar feeling to what they might’ve had in 1930.  The frenzy of the good times had quickly come to an end, but it seemed like we might just limp along for a while and move on.

Then September and the sh**t hit the fan not unlike how things began spiraling downward late in 1930 and the real depression began.

[Southern Senator North Carolina Yankee]

The recession was declared around June 2008, as having begun in December 2007.



The housing market began to go down in late 2006. This led to a credit crunch as banks raced to tighten lending in mid 2007, which severely hampered the 2007 back to school and Christmas shopping seasons.

Nobody really understood how bad it was until it was too late. An estimate for instance said that if housing prices declined 20%, that it would cost 1% of GDP and increase unemployment slightly. This came from one of the Fed banks, I think KS City. They didn't realize how much the housing bubble was being used to sustain consumption via home equity lines of credit and such forth, nor the amount of exposure and "systemic risk" that the banks had exposed themselves too.

Since wages had not increased at all except slightly during the end of 2006, which was the first time since the 1990's when that had happened, it meant that a lot of the demand was being driven by credit of one form or another. When risk exposed banks began to see the writing on the wall and tightened the credit markets substantially to try and save themselves, they drove the economy into the ground, which came back and made their situation even more precarious as more mortgages went bad and triggered the byzantine network of liabilities that were now connected with it. That is what led to the collapse of several banks in 2008 and the bailouts later that year.

The economy was starting to enter the discussion by late 2007, especially among Romney supporters who felt Romney was better to handle economic issues compared to the other GOP contenders. This was redoubled later on when it became clear much too late in 2008 that McCain was out of his depth and looked it compared to Obama. National Security and yes oil prices were the dominant topic through mid 2008.

The recession itself wasn't really focused on, neither was housing. Instead, the focus was on the components that weakened the economy like as some said oil prices. Romney had hit McCain on offshore drilling and being against drilling in ANWR. In 2008, seeing an opportunity, McCain took a "for the good of the country flip flop" and began hammering Obama for opposing drilling offshore, while Gas prices were surging to their record peaks in August 2008. Obama had just completed his European speaking tour and McCain hit him for being more focused on global celebrity while people were paying $4 a gallon. The 1930's might have been one month away, but for August, it was playing out like 1979-1980, especially when Obama made the comment about inflating tires to save gas. The Rick Warren summit also occurred at this time, which combined with the Palin selection, helped to unify and enthuse the GOP base for the first time that cycle. Then it all went to hell...


The economy as an issue in and of itself dominated landscape from September 2008 until 2014. It was the top rated issue in polling months prior, but the political class is typically a day behind and a dollar short.

[Southern Senator North Carolina Yankee]

The recession started at the end of  2007 due to the rise in interest rates caused, in part, by the sharp rise in oil prices which caused a rise in general prices.

This is incorrect, as it fails to account for the massive impact of the housing bubble's collapse, which was the leading cause of the recession. Gas prices, were essentially Gasoline on the fire.

The Federal Reserve had left interest rates to lag for a long time in the early 2000s because the recovery from that recession was rather weak. Then in 2005, they changed course and began aggressive raising interest rates. A lot of people had taken adjustable rate mortgages, especially those people who were in houses they couldn't afford, and these began to default and certainly people in this group quit buying houses. Their incomes could not sustain these higher rates.

Fewer people buying, more people getting foreclosed, means that housing slowed down, leveled off and then started to decline by mid 2006. The rest after that is in my previous post.

[136or142]

The recession was declared around June 2008, as having begun in December 2007.

The housing market began to go down in late 2006. This led to a credit crunch as banks raced to tighten lending in mid 2007, which severely hampered the 2007 back to school and Christmas shopping seasons.

Nobody really understood how bad it was until it was too late. An estimate for instance said that if housing prices declined 20%, that it would cost 1% of GDP and increase unemployment slightly. This came from one of the Fed banks, I think KS City. They didn't realize how much the housing bubble was being used to sustain consumption via home equity lines of credit and such forth, nor the amount of exposure and "systemic risk" that the banks had exposed themselves too.

Since wages had not increased at all except slightly during the end of 2006, which was the first time since the 1990's when that had happened, it meant that a lot of the demand was being driven by credit of one form or another. When risk exposed banks began to see the writing on the wall and tightened the credit markets substantially to try and save themselves, they drove the economy into the ground, which came back and made their situation even more precarious as more mortgages went bad and triggered the byzantine network of liabilities that were now connected with it. That is what led to the collapse of several banks in 2008 and the bailouts later that year.

The economy was starting to enter the discussion by late 2007, especially among Romney supporters who felt Romney was better to handle economic issues compared to the other GOP contenders. This was redoubled later on when it became clear much too late in 2008 that McCain was out of his depth and looked it compared to Obama. National Security and yes oil prices were the dominant topic through mid 2008.

The recession itself wasn't really focused on, neither was housing. Instead, the focus was on the components that weakened the economy like as some said oil prices. Romney had hit McCain on offshore drilling and being against drilling in ANWR. In 2008, seeing an opportunity, McCain took a "for the good of the country flip flop" and began hammering Obama for opposing drilling offshore, while Gas prices were surging to their record peaks in August 2008. Obama had just completed his European speaking tour and McCain hit him for being more focused on global celebrity while people were paying $4 a gallon. The 1930's might have been one month away, but for August, it was playing out like 1979-1980, especially when Obama made the comment about inflating tires to save gas. The Rick Warren summit also occurred at this time, which combined with the Palin selection, helped to unify and enthuse the GOP base for the first time that cycle. Then it all went to hell...


The economy as an issue in and of itself dominated landscape from September 2008 until 2014. It was the top rated issue in polling months prior, but the political class is typically a day behind and a dollar short.

I mentioned previously how oil prices were significantly noticed with the rise in gasoline prices.  Of course, in addition to a general short term rise in general prices as energy costs filtered through, oil prices also led to a large increase in home heating and cooling for many people.

The significance of the rise in oil prices is the increase they caused in general prices likely sparked off inflationary pressures and that's what led to the increase in the Fed Rate and interest rates in general.

https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135

The Fed rate peaked at 5.25% at the end of July 2006.  Although it was in 2007 that oil prices really spiked.

https://inflationdata.com/articles/inflation-adjusted-prices/historical-crude-oil-prices-table/

It was likely the increase in interest rates combined with the increase in prices caused by the oil price spike that led to the number of mortgage defaults being as high as it was.

I'm not really sure caused the increase in oil prices, but it would be interesting to know what would have happened to the mortgage meltdown had the price of a barrel of oil remained in the $30-40 range (in today's dollars.)

In terms of the politics, I remember a similar situation, but I remember more about McCain's meltdown.

First, although McCain chose Sarah Palin because at the time she was regarded as something of a 'maverick reformer', I think it's likely he also chose her in part because she came from an oil state.  The Republican slogans coming out of their convention was something like "yes to all of the above" but also, from Palin herself (or her speech writers) "drill, baby, drill."

In regards to McCain's meltdown, there were basically three events, if I recall correctly.

1. McCain accused Obama of trying to talk down the economy, and said something like "the fundamentals of the economy are strong."

2.McCain reversed course and, I believe, before the first debate, called for a postponement (or cancelling) of the debate and a postponing of campaigning.  This looked like panic and Obama turned down the offer saying something like "President's sometimes have to be able to walk and chew gum at the same time."

3.Both McCain and Obama attended some meeting with various officials including Fed Chair Ben Bernanke and the Treasury Secretary, and, I believe Bernanke commented something like "Obama seemed knowledgeable and asked intelligent questions while McCain was silent."

[Southern Senator North Carolina Yankee]

Obama had a wall street insider that was feeding him up to date information on financial markets and such, I don't remember the guys name it was in a PBS documentary from 2012, but it helped him come off as informed about the situation while yes, McCain was out of his depth.


The problem with Gasoline as the leading culprit, is that it surged too late to cause the problems. Housing was already declining when oil prices spiked. It doesn't help and it made things worse yes, but it is not the leading or primary cause of the recession.

The leading cause of the recession was threefold and all of it connects back to housing or related expenditures/investments.

1. Substitution of Housing Bubble in place of a real economic recovery after 2001.
2. Substitution of debt for pay increases to fuel domestic consumption (which is primary driver of our GDP)
3. The entangling of liabilities caused by the parceling up and selling off the ownership of the mortgages, which in turn fueled their ability to keep lending at such lower rates for so long.

Banks would give loans and then sell the notes to people who would in turn splice them up and then take splices of different mortgages and float them on them on the market as a single mortgage backed security and sell them to investment banks, hedge funds and so on. The Investment banks were told these were all Triple A rated and solid investments, so they bought them up like candy. Credit Default swaps also came into play with this and finally you ended up with AIG insurance basically backstopping what would turn out to be billions of dollars in mortgage backed securities. The biggest bailout of them all, was AIG and it gets overlooked. Imagine you are a CEO and one day you wake up with a phone call demanding a payout on a insurance policy that is larger than most country's GDP.

This whole entanglement is called Systemic Risk. It caused the credit crunch in mid 2007 that in turn caused the recession itself. But take it back further, all of this churning over paper over and over again is what generated the consumption that funded the entirety of the 2000's economic expansion. You basically had the whole economy being driven by a large ponzi scheme.

This is why Clinton is also starting to bear much of the blame for this. Signing Nafta helped to gut the wage increases among many of those working people with the ARMs, and in general terms forced a lot of people to rely on credit cards instead of incomes to sustain spending. Not enough was done to mitigate the damage to rural and working class manufacturing communities. A lot of those workers went to construction, where they faced intense competition and wage depression from under the table illegals that Clinton and Bush had allowed to illegally cross into the country, only for all them to be crushed like a piano dropping on their heads when Housing collapsed in 2006. Clinton and Bush both pushed low income housing without covering the most important base to achieve that, sustainable incomes. It is why lottery winners often lose the houses they buy with the winnings. Clinton signed the laws the legalized/deregulated all of those financial securities listed in the above paragraph, which gets overlooked by the repeal of Glass-Steagal, but is in my opinion far more important in terms of the cause of the Great Recession though both played a role.

[136or142]

Obama had a wall street insider that was feeding him up to date information on financial markets and such, I don't remember the guys name it was in a PBS documentary from 2012, but it helped him come off as informed about the situation while yes, McCain was out of his depth.


The problem with Gasoline as the leading culprit, is that it surged too late to cause the problems. Housing was already declining when oil prices spiked. It doesn't help and it made things worse yes, but it is not the leading or primary cause of the recession.

The leading cause of the recession was threefold and all of it connects back to housing or related expenditures/investments.

1. Substitution of Housing Bubble in place of a real economic recovery after 2001.
2. Substitution of debt for pay increases to fuel domestic consumption (which is primary driver of our GDP)
3. The entangling of liabilities caused by the parceling up and selling off the ownership of the mortgages, which in turn fueled their ability to keep lending at such lower rates for so long.

Banks would give loans and then sell the notes to people who would in turn splice them up and then take splices of different mortgages and float them on them on the market as a single mortgage backed security and sell them to investment banks, hedge funds and so on. The Investment banks were told these were all Triple A rated and solid investments, so they bought them up like candy. Credit Default swaps also came into play with this and finally you ended up with AIG insurance basically backstopping what would turn out to be billions of dollars in mortgage backed securities. The biggest bailout of them all, was AIG and it gets overlooked. Imagine you are a CEO and one day you wake up with a phone call demanding a payout on a insurance policy that is larger than most country's GDP.

This whole entanglement is called Systemic Risk. It caused the credit crunch in mid 2007 that in turn caused the recession itself. But take it back further, all of this churning over paper over and over again is what generated the consumption that funded the entirety of the 2000's economic expansion. You basically had the whole economy being driven by a large ponzi scheme.

This is why Clinton is also starting to bear much of the blame for this. Signing Nafta helped to gut the wage increases among many of those working people with the ARMs, and in general terms forced a lot of people to rely on credit cards instead of incomes to sustain spending. Not enough was done to mitigate the damage to rural and working class manufacturing communities. A lot of those workers went to construction, where they faced intense competition and wage depression from under the table illegals that Clinton and Bush had allowed to illegally cross into the country, only for all them to be crushed like a piano dropping on their heads when Housing collapsed in 2006. Clinton and Bush both pushed low income housing without covering the most important base to achieve that, sustainable incomes. It is why lottery winners often lose the houses they buy with the winnings. Clinton signed the laws the legalized/deregulated all of those financial securities listed in the above paragraph, which gets overlooked by the repeal of Glass-Steagal, but is in my opinion far more important in terms of the cause of the Great Recession though both played a role.

I agree with the first part more than the second part.

Both are counterfactual though.  Had the lending not gone to housing, it may have gone to spending that would have led to sustainable growth (like more research and development.)  Of course, it's reasonable to assume that the banks knew who else were seeking loans and they figured the best return for them was the fraudulent housing loans.  So, it's reasonable to assume that, if it weren't for the housing loans, a great deal of the money simply wouldn't have been lent out at all, which would have meant a lower recorded GDP in those years.

In regards to the free trade agreements and Bill Clinton, I think that is a straight out counterfactual.  There are other reasons why income inequality has increased so much and why the bottom 50% or so have not had any real gains in earnings for the last 40-50 years.  I think a great deal more of this relates to anti private sector union policies than anything else.

----------------------------------------------------------------------------------------------------------
A couple other points:

1.That banks were allowed to repackage their loans and sell them to third parties created a moral hazard.  The job of banks in the economy is to assess risk and the selling of these loans meant that risk was no longer their direct concern.  The people that bought these bundled loans, based on the 'opinion' of the rating agencies, actually liked the riskier housing loans because it meant a higher interest rate was charged.

2.Here in Canada, the Liberals are being criticized for the last quarter of essentially zero growth especially in contrast with the U.S.  Leaving aside the degree to which U.S GDP growth was juiced by the tax cuts, the auto loans going bad in the U.S and some concern over some of the other loans should also raise concerns over how 'real' the U.S GDP growth really is.  This is especially a contrast with Canada, as we have some pretty tough 'stress tests' in place on the banks to limit mortgage loans.

It's also interesting in regards to the media with the Canadian budget coming up amid rumors that the government might ease these stress tests in order to potentially juice Canadian GDP in the run-up to the election.  The Canadian media seems to be both criticizing the 0% GDP growth in the last quarter and wondering if it's too hard to get mortgages at the same time as criticizing the government for potentially lifting the stress tests and potentially endangering the long term health of the economy.

[courts]

I think Iraq was the main political issue throughout most of 2007, but by the time of 2008 Iowa caucuses, everyone was talking about the recession. When did the transition happen?

by january 2008 going by polling. at latest

[Southern Senator North Carolina Yankee]

Obama had a wall street insider that was feeding him up to date information on financial markets and such, I don't remember the guys name it was in a PBS documentary from 2012, but it helped him come off as informed about the situation while yes, McCain was out of his depth.


The problem with Gasoline as the leading culprit, is that it surged too late to cause the problems. Housing was already declining when oil prices spiked. It doesn't help and it made things worse yes, but it is not the leading or primary cause of the recession.

The leading cause of the recession was threefold and all of it connects back to housing or related expenditures/investments.

1. Substitution of Housing Bubble in place of a real economic recovery after 2001.
2. Substitution of debt for pay increases to fuel domestic consumption (which is primary driver of our GDP)
3. The entangling of liabilities caused by the parceling up and selling off the ownership of the mortgages, which in turn fueled their ability to keep lending at such lower rates for so long.

Banks would give loans and then sell the notes to people who would in turn splice them up and then take splices of different mortgages and float them on them on the market as a single mortgage backed security and sell them to investment banks, hedge funds and so on. The Investment banks were told these were all Triple A rated and solid investments, so they bought them up like candy. Credit Default swaps also came into play with this and finally you ended up with AIG insurance basically backstopping what would turn out to be billions of dollars in mortgage backed securities. The biggest bailout of them all, was AIG and it gets overlooked. Imagine you are a CEO and one day you wake up with a phone call demanding a payout on a insurance policy that is larger than most country's GDP.

This whole entanglement is called Systemic Risk. It caused the credit crunch in mid 2007 that in turn caused the recession itself. But take it back further, all of this churning over paper over and over again is what generated the consumption that funded the entirety of the 2000's economic expansion. You basically had the whole economy being driven by a large ponzi scheme.

This is why Clinton is also starting to bear much of the blame for this. Signing Nafta helped to gut the wage increases among many of those working people with the ARMs, and in general terms forced a lot of people to rely on credit cards instead of incomes to sustain spending. Not enough was done to mitigate the damage to rural and working class manufacturing communities. A lot of those workers went to construction, where they faced intense competition and wage depression from under the table illegals that Clinton and Bush had allowed to illegally cross into the country, only for all them to be crushed like a piano dropping on their heads when Housing collapsed in 2006. Clinton and Bush both pushed low income housing without covering the most important base to achieve that, sustainable incomes. It is why lottery winners often lose the houses they buy with the winnings. Clinton signed the laws the legalized/deregulated all of those financial securities listed in the above paragraph, which gets overlooked by the repeal of Glass-Steagal, but is in my opinion far more important in terms of the cause of the Great Recession though both played a role.

I agree with the first part more than the second part.

Both are counterfactual though.  Had the lending not gone to housing, it may have gone to spending that would have led to sustainable growth (like more research and development.)  Of course, it's reasonable to assume that the banks knew who else were seeking loans and they figured the best return for them was the fraudulent housing loans.  So, it's reasonable to assume that, if it weren't for the housing loans, a great deal of the money simply wouldn't have been lent out at all, which would have meant a lower recorded GDP in those years.

In regards to the free trade agreements and Bill Clinton, I think that is a straight out counterfactual.  There are other reasons why income inequality has increased so much and why the bottom 50% or so have not had any real gains in earnings for the last 40-50 years.  I think a great deal more of this relates to anti private sector union policies than anything else.

----------------------------------------------------------------------------------------------------------
A couple other points:

1.That banks were allowed to repackage their loans and sell them to third parties created a moral hazard.  The job of banks in the economy is to assess risk and the selling of these loans meant that risk was no longer their direct concern.  The people that bought these bundled loans, based on the 'opinion' of the rating agencies, actually liked the riskier housing loans because it meant a higher interest rate was charged.

2.Here in Canada, the Liberals are being criticized for the last quarter of essentially zero growth especially in contrast with the U.S.  Leaving aside the degree to which U.S GDP growth was juiced by the tax cuts, the auto loans going bad in the U.S and some concern over some of the other loans should also raise concerns over how 'real' the U.S GDP growth really is.  This is especially a contrast with Canada, as we have some pretty tough 'stress tests' in place on the banks to limit mortgage loans.

It's also interesting in regards to the media with the Canadian budget coming up amid rumors that the government might ease these stress tests in order to potentially juice Canadian GDP in the run-up to the election.  The Canadian media seems to be both criticizing the 0% GDP growth in the last quarter and wondering if it's too hard to get mortgages at the same time as criticizing the government for potentially lifting the stress tests and potentially endangering the long term health of the economy.

If growth was slower than polices would have focused on stimulating the economy in other ways absent housing such as perhaps by investing in infrastructure or something.