According to an Online Poll on CNN, nearly half of America (48% actually) believe that the country is heading towards a far worse scenario than a Double-Dip Recession later this year but a 2nd Great Depression at least according to this article I found:
"Restriction breeds creativity." - Sheldon Menery on EDH / Commander in Magic: The Gathering
"Cancel Culture is the real reason why everyone's not allowed to have nice things anymore." - Anonymous
"For what will it profit a man if he gains the whole world, and loses his own soul?" - Mark 8:36
"Most men and women will grow up to love their servitude and will never dream of revolution." - Aldous Huxley, Brave New World
"Every life decision is always a risk / reward proposition." - Sanjay Gupta
Many 'experts' feel we would be in a full blown depression had it not been for the bank bailouts. We probably will get there anyway, its just going to take a little more time. There just are not the jobs as a whole to keep everyone employed and we with college grads/high school grads coming into the working world, the unempolyed just keeps getting more and more. Fix the unemployment and you fix the economy. Infrastructure would be a good start.
Yeah but it would take $22 Trillion to fix the entire infrastructure of the United States. Nobody has that kind of money as far as I know. Sure we can fix the infrastructure in sums but to do a full $22 Trillion is almost impossible, plus the recent Mississippi floods was due to failure in infrastructure and in part caused by our Armed Forces anyway.
Not only do we need to fix unemployment, we also need to fix the Nation's Debt/Deficit, create more jobs, regulate Government spending, and possibly make a new Amendment to the Constitution to make sure another financial crisis like this one never happens again. Though skeptics say that another one is looming in 2014 which is not that far away or If the U.S. dies this year financially later is still in question I presume.
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"Restriction breeds creativity." - Sheldon Menery on EDH / Commander in Magic: The Gathering
"Cancel Culture is the real reason why everyone's not allowed to have nice things anymore." - Anonymous
"For what will it profit a man if he gains the whole world, and loses his own soul?" - Mark 8:36
"Most men and women will grow up to love their servitude and will never dream of revolution." - Aldous Huxley, Brave New World
"Every life decision is always a risk / reward proposition." - Sanjay Gupta
I don't think we're going see a Second Great Depression with its 25% unemployment rate and exacerbation by policy makers at the time (read: Federal Reserve, etc).
However, I do think there is a strong likelihood that we will see something similar to Japan's "Lost Decade."
Unfortunately, there are quite a few similarities.
(1) a massive wave of speculation by companies, in part because position in which credit was both easily available and extremely cheap
(2) combination of exceptionally high land values and exceptionally low interest rates (I think you can see where this is going)
(3) result: massive borrowing & a bubble.
Then you get the same type of fallout we saw in the United States along with injection of money into firms that were "too big to fail."
Japan lost a decade, but much of that was in part to Japanese cultural frugality...something that certainly isn't a norm in the United States.
Obama has acknowledged that the U.S. may have its own "lost decade" as well, though it may be more painful to the United States than Japan if only because consumers in the United States typically aren't as frugal as Japanese consumers.
I personally think we can fix the infrastructure and the debt together. Fixing the infrastructure would create jobs. More jobs would mean more spending and borrowing by the people. Which inturn would mean more taxes to payoff things.
The infrastructure fix/repair could be an on going thing to keep the unemployment rates down and keep us out of a depression. It would be a giant leap of faith, but one well worth it in my opinion. I would rather go down trying, then just sit there watching us flounder.
1. We've stopped the "Great Depression 2.0 (really 3.0, if you count the 1890's)" thanks to Keynes.
2. The recovery will take 4-7 years, we back to where we were originally back before the crash.
3. The basic gist is that we're not going to avoid #2, no matter what we do. The best thing to do is make long term investments and long terms, and gradually increase taxation and adjust to an era of austerity and necessary social changes. We've already maxed out the credit card, and the states in block grants used them for short term rather than long term expenditures like they were supposed to.
Quote from Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison[/quote »
Is the 2007-2008 U.S. sub-prime mortgage financial crisis truly a new and different phenomena? Our examination of the longer historical record finds stunning qualitative and quantitative parallels to 18 earlier post-war banking crises in industrialized countries. Specifically, the run-up in U.S. equity and housing prices (which, for countries experiencing large capital inflows, stands out as the best leading indicator in the financial crisis literature) closely tracks the average of the earlier crises. Another important parallel is the inverted v-shape curve for output growth the U.S. experienced as its economy slowed in the eve of the crisis. Among other indicators, the run-up in U.S. public debt and is actually somewhat below the average of other episodes, and its pre-crisis inflation level is also lower. On the other hand, the United States current account deficit trajectory is worse than average. A critical question is whether the U.S. crisis will prove similar to the most severe industrialized-country crises, in which case growth may fall significantly below trend for an extended period. Or will it prove like one of the milder episodes, where the recovery is relatively fast? Much will depend on how large the shock to the financial system proves to be and, to a lesser extent, on the efficacy of the subsequent policy response.
The gist is that it was bad, and recovery is going to be very slow until we get another economic boom and well raise taxes and decrease spending. Tax cuts don't work long term, and Reagan was wrong on just cutting. The question is what to cut when, and the difference between "good taxes and bad taxes."
For example, consumption taxes increase savings and have behaviors that reinforce a producer economy. Another issue is the shyness of current venture capitalists in the States, they want to make big on the next Google or Facebook but don't want to go into something such as polymers that we're developing here in the States.
In general Caramine Rhinehart's research is a good read on the financial aspects:
NEW YORK (CNNMoney) -- The economy is still struggling. And Americans are in for a long and painful adjustment period.
One major reason: their own household debt.
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Many experts say private debt owed by households, as well as businesses, is an even bigger problem than the government debt that's getting so much attention lately. And it won't be solved without a difficult stretch of high unemployment and slow growth that will likely last for six or seven more years, producing America's own version of Japan's "Lost Decade."
"I think it's one of the major headwinds we're fighting against right now," said David Wyss, a visiting fellow at Brown University and former chief economist at Standard & Poor's.
Following a real estate bust that hit Japan in the 1990s, the economy fell into a prolonged period of economic stagnation that lasted for years and became known as the country's 'Lost Decade.'
In the U.S., the situation is shaping up to be similarly stubborn.
"I think we're in for a lot of disappointment," said Carmen Reinhart, a senior fellow at the Peterson Institute for International Economics and a leading expert on financial crises. "If historic norms hold, deleveraging isn't pretty, and it is not a smooth process. We're already four years into this. I don't think the next six years look great."
The bubble economy that led to the recession was fueled by American consumers, businesses and banks taking on too much debt, particularly in real estate, during the decade before the crisis.
Fewer jobs for the unemployed
Total private sector debt -- held by consumers and businesses combined -- peaked at 283% of gross domestic product in early 2008 -- nearly three times the size of the entire economy.
The good news is that since the recession, consumers have been paying off debt and saving more. Private debt fell to 234% by the end of last year, though much of that decline resulted from bad mortgage debt shifting from banks to the government through the bailout of mortgage finance giants Fannie Mae and Freddie Mac, Reinhart said.
But even with some modest improvement in savings in recent years, households still can't afford the current debt levels, which are well above the average disposable income.
"At least households are being prudent and rational and bringing the debt down. But I worry we'll see it leveling off higher than I think it should," said Wyss.
That's the major reason why it will be more difficult for Americans to start spending again as they did coming out of past downturns when they had only a fraction of current debt burdens.
'Zombie consumers'
Without a jump in consumer spending, the economy is unlikely to really get going again. And until that happens, Americans can expect to see lingering high unemployment and additional suffering in the years ahead.
"The engine-of-growth role that [consumer spending] played in earlier recoveries is unlikely in this one," Reinhart said.
Stephen Roach, the chair of Morgan Stanley Asia, wrote a recent note suggesting that American consumers were turning into "zombie consumers," greatly because "burdened with underwater mortgages, excessive debt, and subpar saving, U.S. consumers are stretched as never before."
And the process of unwinding those huge debt loads is slow going.
Despite Americans paying down debt, saving more of their paychecks, and shedding some of their debt through bankruptcy and foreclosure, Reinhart estimates that the amount of consumer debt alone has declined to only about 92% of the gross domestic product.
That's down from only 98% at its high point at the end of 2007 -- a peak that shot up from less than 70% in 1999.
"The deleveraging process doesn't really get underway quickly," Reinhart said.
Calling all extreme savers! Do you do unusual things to save a couple bucks? We're not looking for coupon clippers and recyclers -- if you have an unusual way to save money, please e-mail [email]blake.ellis@turner.com[/email] and you could be included in an upcoming story on CNNMoney.
First Published: June 8, 2011: 5:27 AM ET
We had the opportunity without the huge military build up to properly pull out a huge WPA work projects to increase our economic possibilities frontier higher with infrastructure investments, but with Boomers aging and go "MINE, MINE, MINE" with social dollars we're in for a decade of neglect on infrastructure, again. Overall, I think Xers and Millenials when the power in our court will start making the necessary adjustments in the 2020's.
Though skeptics say that another one is looming in 2014 which is not that far away or If the U.S. dies this year financially later is still in question I presume.
Which "skeptic?" If it's that guy you linked before with the silver scheme, he's a moron with an ax to grind.
Overall my own opinion, if we can move past the "Ryan Plan" which is just basically redressed Austrianism which Americans will not go for and instead go something more realistic with a pessimistic outlook on the economy with heavy infrastructure investments and cuts to retirement packages we'll do fine. It means that bigger government in areas, smaller government in other areas and higher taxes. It's simple, but not easy with a people raised on prosperity and entitlement.
I think that while we are staving off a depression for now before the decades out we will go through another great depression. The job market is getting worse by the day. More young people are getting out of school (myself and everyone i know included) and can't get work after getting in debt to earn degrees to get work and the jobs just aren't there or they are quickly taken by people with more experience. The older generation is all gimme with social funds and programs leaving nothing for my generation. A nation wide project to revamp the infrastructure would be great in that it would create all kinds of jobs but as has been pointed out they money just is not there. I would say take maybe 50-60% of or military spending and use it but im not getting into that right now.
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The disaster was NEARLY averted with Obama's stimulus package. But they forgot to make sure the states didn't spend it like full on ☺☺☺☺ing silly people. One state famously spent it on a bridge to nowhere. Most of them spent it on...nothing. They just sort of let it trickle away. If properly spent, most of our interstate system would have been overhauled, and much of the potential workforce would have been employed for 5-12 months, enough time for business/consumer confidence to improve.
It's hard to say, with something as complex as the US economy. I'm inclined to say that things can definitely get worse or at best stagnate, though. The government is obviously unwilling to invest in important industries, believes that all regulation is bad, and focuses too much on cutting the wrong taxes. In 2008, the Fed was able to save the economy when Congress foundered; now we can't lower interest rates any more, and the Fed's a lot more cautious. The American economy is pretty resilient, but the incompetency of our government can go a long way towards making things worse for us.
With all this said, I'm just someone watching from the sidelines. I'm no economist.
Overall my own opinion, if we can move past the "Ryan Plan" which is just basically redressed Austrianism which Americans will not go for and instead go something more realistic with a pessimistic outlook on the economy with heavy infrastructure investments and cuts to retirement packages we'll do fine.
The Ryan plan isn't something pulled out of Hayek's playbook. Ryan may like Hayek's ideology, but he's made a lot of concessions - keeping Medicare and other entitlement spending out of the plan among them - that is bad economics, even under Austrian terms.
I kinda wish we were more of a technocracy to handle our problems. There is something wrong when Rep. Joe Blow Lawyer is voting on legislation to handle things like technology. I think the hardest part of a technocracy would be preventing the revolving door, on the way in, on the way out is easy. How would you keep a person from Haliburton who gets elected to the economics/business council from favoring haliburton or big business in general at the expense of everything else?
I kinda wish we were more of a technocracy to handle our problems. There is something wrong when Rep. Joe Blow Lawyer is voting on legislation to handle things like technology. I think the hardest part of a technocracy would be preventing the revolving door, on the way in, on the way out is easy. How would you keep a person from Haliburton who gets elected to the economics/business council from favoring haliburton or big business in general at the expense of everything else?
Hoover was a technocrat, and was an engineer by trade and you know where he ranks in popular opinion for handling the economy. McNamara was also a technocrat during the Kennedy and Johnson Administrations, during the Vietnam War made several mistakes relating to the technocratic overreliance on a numbers game.
The main sort of leaders you want are people have that a lot of emotional intelligence, leadership experience, and a philosophy that's not too naive. Reagan had some of those qualities, but bad economic advice from the supply side school. Frankly, on the conservative for the 20th century I'd have to say Eisenhower made the best balance.
For liberal, nothing beats FDR, but on personality and management skills Truman was the better leader since he was straight forward and listened to people. FDR was a prick that liked to play head games.
Overall, I look at who people surround themselves with. Lincoln was famous for this thanks to Team of Rivals, but the problem comes up often that not everyone has Lincoln's emotional intelligence to pull that off. Nixon in comparison was weird, but he knew how to pick some of the best like Kissinger. Had Nixon been able to work with Ted Kennedy more, the US would be quite different today. But that was Kennedy's idiocy on several issues, such as when he tried to backstab Carter.
The Ryan plan isn't something pulled out of Hayek's playbook. Ryan may like Hayek's ideology, but he's made a lot of concessions - keeping Medicare and other entitlement spending out of the plan among them - that is bad economics, even under Austrian terms.
"Public Choice Theory" without Amartya San's work and a few others is useless, and there are more people in the Austrian tradition than just Hayek. In part it is based on recommendations from the Clinton economic team, however Summers and friends have a lot of problems when it comes to finances and the like with the economy. I will admit though that I do like Bernanke so far, much more than I ever liked Greenspan trying to play the role of John Galt.
If we could just rid of supply side economics tripping the rift when it comes to "faith" that "revenues will return shortly" like during the Reagan years and rain manna because we're a special country, we'll far return to sanity with a gradual increase in taxation.
Overall I think the tailspin is mostly from the bond markets reacting to the deadlock in Washington and it's basically telling each of the Nero's to stop playing footsie with the debt limit and get some long term plans in place on taxation, entitlement reform, and some spending increases on things such as infrastructure.
Fact: Most Americans know crap-all about economics. Who cares what 48% of them think?
It's a nascent science, overall I really do not think we're much past the "Freuds" when it comes to economics with people still clinging to Keynes, Hayek, Ricardo, and ect. for an easy policy fix. I include Llaffer here as well, his curve is a nice simplification of specific concepts but his conclusions are quirky.
I think there really is another depression coming but I think it wouldn't be as bad as people think it would. I mean it would come because the education systems suck and in almost all the West people are generally pretty lazy. But looking overall at America, USA still has huge unused land that can support a growing economy (something that china doesn't have),a lot of natural resources and maybe even more importantly, lots of young people from Latin America constantly immigrating to USA all the time and economies run on young people (something china will soon not have because of their 1 child policy).
I wouldn't be surprised if it happened sometime soon since it's already in really rough shape as it is, so it wouldn't really take much to send us into a depression.
I know a good amount of my friends who can't find summer jobs and I even know some college grads who can't find jobs in their sector so they have to work at walmart again.
plus a lot of older people are retiring, which could help younger people find jobs but could drain a lot on the system.
I know people might think I'm adding much but i just thought I'd add my opinion on it
plus a lot of older people are retiring, which could help younger people find jobs but could drain a lot on the system.
Yea but here comes the immigration part of the economy. So you have a good balance of young and old people and not many industrialized countries have that.
Yea but here comes the immigration part of the economy. So you have a good balance of young and old people and not many industrialized countries have that.
yeah, true, immigrants could balance it out, I never thought of it that way
yeah, true, immigrants could balance it out, I never thought of it that way
In a single word: Canada. Seriously, they have one of the best immigration policies of the west. It's seriously one of their better programs, but it's in jeopardy because of public sentiments.
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Here is my principle: Taxes shall be levied according to ability to pay. That is the only American principle.
lol, my social and political issues prof was talking about that on Thursday, he was saying he thinks it's not good enough though.
how do you think it's in jeopardy though?
Apparently, the Huffington Post does. Which, in all honesty, should have been seen as a warning. (In other words: Good point!)
I read something interesting today at a Barnes and Nobel suggesting that our perspective is ridiculous. When we look back in time at the last 8,000 or so years, we see constant improvement. Then we look toward tomorrow and speculate that everything is just going to fall apart.
Why?
Harkius
Because it is falling apart, relative to our experience in our lifetimes.
See that's just bad memory. I can't recall the world having actually objectively being better in my lifetime than it is right now.
Harkius
I remember my family doing wonderfully about ten years ago, and we're doing much worse now. I suspect I'm not in the minority with that sentiment in this country.
So.... 48% of Americans think we're headed toward a second great depression. That's wonderful. And where did they get their degrees in global economics?
Oh yeah. Right.
Honestly, some of this polling-based nonsense is just absurd. Polling is useful for a very few select things: policy popularity and political approval ratings (but, statistically, only about 6 months before an election). Asking Joe Schmoe about economics (especially with such a bombastically worded question) is only going to be good, at BEST, to get a less scientific indicator than the Consumer Confidence Index.
Is the economy bad? Yup. Is it grossly slanted in such a manner that encourages runaway capitalistic raping of the middle class by the top 1%? Yup. Are housing prices falling at historic rates, even after all this time? Yup.
On the other hand, it should come as no surprise that the economy is in the crapper right now, given that half of America's wealth is now in the hands of 1% of Americans, given as we have a consumer-based economy. If the consumers don't have money to spend, the economy cannot and will not improve. Furthermore, the housing market is still basically in free-fall... until you realize that, even with all the value that land and property have lost, we're still within bubble-level housing pricing. Historically, the average American house cost about three times the average American's yearly income; at our per-capita, that'd be a home value of a little under $150K, in today's money. The average house on the market is still somewhere around 190K, or almost 33% more than history has suggested is sustainable or appropriate.
So, my two bits on the economy? It's going to get better, probably once housing finally falls about another 25% to where it belongs and some sort of a taxation policy is enacted that actually puts money into circulation, instead of concentrating it in the hands of the super-rich. Pratchett said it best in Making Money: The value of money is in the circulation of money; the more it moves, the wealthier all are for having had it and spent it to their advantage. Money out of circulation is nothing but a millstone around the neck of the economy. By that standard, the best plan for a Governmental taxation plan would be to have a relatively high progressive income tax rate, a lower, but still progressive property tax rate, and no sales tax whatsoever, to encourage people to not hoard more money than they need to, but I'll leave actual tax proposals to people who are qualified to do so... people with Ph.D.s in global economics.
The average lion is approximately 190 cm long and 60 cm wide = 11400 cm2 = 0.00000114 km2
Now, if we take that times a trillion we get 11,400,000 km2 of lion.
Teach me, please, what other kinds of economy are there? What are the advantages and disadvantages? Because this consumer-based economy thing seems...bad.
Harkius
it tends to go in phases.
aragarian died off a while ago to a certain extint. it still exists in some countries, but most it is not a primary function of the economy.
industrial/manufacturing: most of the known world is still here. we left this phase back in the 90's during the tech boom.
information/service: which is where we are at. deal with offering goods and services to the general public and world wide.
downside is that you have to import goods and materials.
while the US still has a manufacturing base it is no where as large as it use to be. cost is the biggest reason. other countries can do it cheaper.
So.... 48% of Americans think we're headed toward a second great depression. That's wonderful. And where did they get their degrees in global economics?
i agree i do not think we are headed for a 2nd depression, However the economic symbols are not there for any recovery and it has been that way for a while. the economy has stagnated and unless we can get it going again it could get worse.
Is it grossly slanted in such a manner that encourages runaway capitalistic raping of the middle class by the top 1%? Yup. Are housing prices falling at historic rates, even after all this time? Yup.
housing prices are adjusting themselves back to normal levels after 4 year super-inflated housing bubble. that 500K home that was only worth 200 is simply going back to that 200 level.
also there are so much inventory that supply is greater than demand. unless you are getting an FHA loan most people cannot afford the 20% down payment on a house.
as for the top 1%. the people that know how to make money in these markets will continue to make money in these markets. that is just the way things go.
so unless they are breaking the law they are simply applying their knowledge and skills.
The value of money is in the circulation of money
i agree but just be wary of this. the reason that we haven't see stagflation yet is that all of that money didn't make it into circulation. if it had then we would be even worse off than we are now.
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aragarian died off a while ago to a certain extint. it still exists in some countries, but most it is not a primary function of the economy.
industrial/manufacturing: most of the known world is still here. we left this phase back in the 90's during the tech boom.
information/service: which is where we are at. deal with offering goods and services to the general public and world wide.
downside is that you have to import goods and materials.
while the US still has a manufacturing base it is no where as large as it use to be. cost is the biggest reason. other countries can do it cheaper.
Well, we're in a service/consumer-based economy which is moving towards a fully information-based economy. Some sectors of our business sector are working fully within the new model, but the vast majority of our economy is retail, which is in no way shape or form information based, but rather commodity-based.
housing prices are adjusting themselves back to normal levels after 4 year super-inflated housing bubble. that 500K home that was only worth 200 is simply going back to that 200 level.
also there are so much inventory that supply is greater than demand. unless you are getting an FHA loan most people cannot afford the 20% down payment on a house.
Well... no. There's more going on than this. Housing prices are now about where they were in 2000. The problem is that the economic policies of the 1980-90s, combined with the historically low relative prices that we've paid for food and most other necessities, conspired to create a valuation boom across the economy which lasted for decades.
The simplistic, but not entirely accurate version, is that because Consumer X had more money to spend on non-essential items, and because economic conditions were made right for both Consumer X and Corporation X (and Government Entity X) to raid their equity/savings/pension funds in order to take a stab at major long-term financial gain, that financial gain materialized. However, since the financial gain was never anything more than our valuation of whatever it is that they were buying (stocks, property, or commodities; the actual physical item never changed or became better in any way), once the dream evaporated, the market needed to sink back to the levels that actually reflect the real, proportional value of whatever the bubble'd item was.
Housing, since it has been bubbling for by FAR the longest (arguably since the end of the 1970s recession), has the farthest to fall before its valuation is fair.
as for the top 1%. the people that know how to make money in these markets will continue to make money in these markets. that is just the way things go.
so unless they are breaking the law they are simply applying their knowledge and skills.
Well... I see what you're getting at. Here's the problem:
In terms of game theory, the American economy is a Zero Sum Plus game. What this means is that, by the rules of the game, there is an item in circulation (money) which you want to control the largest proportion of; whoever does so is the 'winner.' That's the Zero Sum part. The Plus part means that there's some body, in this case the Federal Government, which has the ability to introduce more money to the game. So long as the government does this at a rate that mirrors the growth of the population, the value of money remains unchanged, and the long term game can continue (that's the economy). That's the plus part.
Some players are playing to win (trying to get the most money), but most players are only playing because they have to in order to eat/have a home/wear clothes. Both strategies are fine, but the model has to accommodate each.
Generally speaking, it's healthy to have a few players who are 'winning.' If everyone's making the same amount of money, the game no longer becomes a game and there's no reason to play any more. For the same reason, we have to keep any player or group of players from ACTUALLY winning, which means, in real terms, eliminating other players from the game (i.e. controlling so much money that non-winning players in the game start to die). However, since the Fed is watching the game and can't allow people to starve, it injects EXTRA money into the game when the average player needs it to be injected in order to not fall into a very bad spot. Doing so decreases the value of all money in the game, but keeps Joe Schmoe going.
Let's look at this in terms of real money. The U.S.' GDP is $14.2 trillion, and we know that the top 1% control half of that. Hence, the average players are playing with $7.1 trillion. Now' we've got 307 million players, according to the latest census, which means that 304 million of those players (removing the top 1%) are playing with that $7.1 trillion. Simple division tells us that the average non-super-rich player in our game is only playing with $23,355. Now, the poverty line, which the government says is where a person can't afford basic necessities, is $10,830 in the Lower 48, and a little more elsewhere, but which doesn't include stuff like gasoline, a car to get to work, or day-care. That means that the average player of our economic game is working at less than twice poverty, and that the more money the top 1% have, the less money the remaining 99% have to increase their margin above the poverty line.
Those same averaging-$20K/year folk are struggling to pay for mortgages valued at $200K (10 times their annual income), college for their kids (My local big state U, which is Div 1 but not prestigious, is $10K before fees and housing), or half their annual income, PLUS the half of their income which is that $10K or so a year worth of basic bloody necessities, like food and a car and clothes.
Here's the important bit: It's those 99% of players, the non-'winners,' which account for almost all of our consumer-based spending as they buy those necessities and one or two luxury items. However, the smaller their margins are, the less they can spare, and the less money is in circulation in a way that creates growth and value in the economy. That's why the Fed keeps printing money. It devalues everything in play, but it keeps the game going as more and more of the tracking currency is removed from play by the super-rich. The only sustainable way for the game to continue is to actually reduce the portion of wealth which is out of play, because the current game rules are moving circulating money out of play faster than it's being printed. Thus, at our current rate, the game ends.
I know that I wrote a dissertation to respond to a fairly simple point; I hope that you'll forgive that.
i agree but just be wary of this. the reason that we haven't see stagflation yet is that all of that money didn't make it into circulation. if it had then we would be even worse off than we are now.
Yeah, it was a gross oversimplification, but it's an equally gross oversimplification to say that circulation = stagflation. Circulation + unrestrained printing of more money = stagflation.
The average lion is approximately 190 cm long and 60 cm wide = 11400 cm2 = 0.00000114 km2
Now, if we take that times a trillion we get 11,400,000 km2 of lion.
You're not going to like this answer, but that doesn't change its truth. You weren't doing better. It was merely an illusion. The economy you are remembering was based on heady but misguided expectations, which led to precisely where we are today. You were doing about as well ten years ago as you are now. Unless you've gotten an education or invented a product. In which case, you're doing better. Or had a patent/copyright expire. In which case, you might be doing worse.
Harkius
Actually my family is taking in less than half of the income we were taking in in 2004. My parents both lost their jobs and while my dad was able to get another job (with 30K less per year) my mom has been chronically unemployed or underemployed ever since.
And my mom is trying to buy a business right now, but can't because she can't find a loan because our credit is shot, because we needed to use credit cards to keep our house and pay the bills when both of my parents were unemployed.
http://www.huffingtonpost.com/2011/06/09/nearly-half-of-americans-fear-depression_n_874406.html?icid=main%7Chtmlws-main-n%7Cdl1%7Csec3_lnk1%7C215615
"Restriction breeds creativity." - Sheldon Menery on EDH / Commander in Magic: The Gathering
"Cancel Culture is the real reason why everyone's not allowed to have nice things anymore." - Anonymous
"For what will it profit a man if he gains the whole world, and loses his own soul?" - Mark 8:36
"Most men and women will grow up to love their servitude and will never dream of revolution." - Aldous Huxley, Brave New World
"Every life decision is always a risk / reward proposition." - Sanjay Gupta
Not only do we need to fix unemployment, we also need to fix the Nation's Debt/Deficit, create more jobs, regulate Government spending, and possibly make a new Amendment to the Constitution to make sure another financial crisis like this one never happens again. Though skeptics say that another one is looming in 2014 which is not that far away or If the U.S. dies this year financially later is still in question I presume.
"Restriction breeds creativity." - Sheldon Menery on EDH / Commander in Magic: The Gathering
"Cancel Culture is the real reason why everyone's not allowed to have nice things anymore." - Anonymous
"For what will it profit a man if he gains the whole world, and loses his own soul?" - Mark 8:36
"Most men and women will grow up to love their servitude and will never dream of revolution." - Aldous Huxley, Brave New World
"Every life decision is always a risk / reward proposition." - Sanjay Gupta
However, I do think there is a strong likelihood that we will see something similar to Japan's "Lost Decade."
Unfortunately, there are quite a few similarities.
(1) a massive wave of speculation by companies, in part because position in which credit was both easily available and extremely cheap
(2) combination of exceptionally high land values and exceptionally low interest rates (I think you can see where this is going)
(3) result: massive borrowing & a bubble.
Then you get the same type of fallout we saw in the United States along with injection of money into firms that were "too big to fail."
Japan lost a decade, but much of that was in part to Japanese cultural frugality...something that certainly isn't a norm in the United States.
Obama has acknowledged that the U.S. may have its own "lost decade" as well, though it may be more painful to the United States than Japan if only because consumers in the United States typically aren't as frugal as Japanese consumers.
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The infrastructure fix/repair could be an on going thing to keep the unemployment rates down and keep us out of a depression. It would be a giant leap of faith, but one well worth it in my opinion. I would rather go down trying, then just sit there watching us flounder.
1. We've stopped the "Great Depression 2.0 (really 3.0, if you count the 1890's)" thanks to Keynes.
2. The recovery will take 4-7 years, we back to where we were originally back before the crash.
3. The basic gist is that we're not going to avoid #2, no matter what we do. The best thing to do is make long term investments and long terms, and gradually increase taxation and adjust to an era of austerity and necessary social changes. We've already maxed out the credit card, and the states in block grants used them for short term rather than long term expenditures like they were supposed to.
http://ideas.repec.org/p/nbr/nberwo/13761.html
The gist is that it was bad, and recovery is going to be very slow until we get another economic boom and well raise taxes and decrease spending. Tax cuts don't work long term, and Reagan was wrong on just cutting. The question is what to cut when, and the difference between "good taxes and bad taxes."
For example, consumption taxes increase savings and have behaviors that reinforce a producer economy. Another issue is the shyness of current venture capitalists in the States, they want to make big on the next Google or Facebook but don't want to go into something such as polymers that we're developing here in the States.
In general Caramine Rhinehart's research is a good read on the financial aspects:
http://en.wikipedia.org/wiki/Carmen_Reinhart
http://terpconnect.umd.edu/~creinhar/Papers.html
http://money.cnn.com/2011/06/08/news/economy/economy_debt_unemployment/?cnn=yes
We had the opportunity without the huge military build up to properly pull out a huge WPA work projects to increase our economic possibilities frontier higher with infrastructure investments, but with Boomers aging and go "MINE, MINE, MINE" with social dollars we're in for a decade of neglect on infrastructure, again. Overall, I think Xers and Millenials when the power in our court will start making the necessary adjustments in the 2020's.
Which "skeptic?" If it's that guy you linked before with the silver scheme, he's a moron with an ax to grind.
Overall my own opinion, if we can move past the "Ryan Plan" which is just basically redressed Austrianism which Americans will not go for and instead go something more realistic with a pessimistic outlook on the economy with heavy infrastructure investments and cuts to retirement packages we'll do fine. It means that bigger government in areas, smaller government in other areas and higher taxes. It's simple, but not easy with a people raised on prosperity and entitlement.
Ambition must be made to counteract ambition.
Individualities may form communities, but it is institutions alone that can create a nation.
Nothing succeeds like the appearance of success.
Here is my principle: Taxes shall be levied according to ability to pay. That is the only American principle.
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With all this said, I'm just someone watching from the sidelines. I'm no economist.
The Ryan plan isn't something pulled out of Hayek's playbook. Ryan may like Hayek's ideology, but he's made a lot of concessions - keeping Medicare and other entitlement spending out of the plan among them - that is bad economics, even under Austrian terms.
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Hoover was a technocrat, and was an engineer by trade and you know where he ranks in popular opinion for handling the economy. McNamara was also a technocrat during the Kennedy and Johnson Administrations, during the Vietnam War made several mistakes relating to the technocratic overreliance on a numbers game.
The main sort of leaders you want are people have that a lot of emotional intelligence, leadership experience, and a philosophy that's not too naive. Reagan had some of those qualities, but bad economic advice from the supply side school. Frankly, on the conservative for the 20th century I'd have to say Eisenhower made the best balance.
For liberal, nothing beats FDR, but on personality and management skills Truman was the better leader since he was straight forward and listened to people. FDR was a prick that liked to play head games.
Overall, I look at who people surround themselves with. Lincoln was famous for this thanks to Team of Rivals, but the problem comes up often that not everyone has Lincoln's emotional intelligence to pull that off. Nixon in comparison was weird, but he knew how to pick some of the best like Kissinger. Had Nixon been able to work with Ted Kennedy more, the US would be quite different today. But that was Kennedy's idiocy on several issues, such as when he tried to backstab Carter.
"Public Choice Theory" without Amartya San's work and a few others is useless, and there are more people in the Austrian tradition than just Hayek. In part it is based on recommendations from the Clinton economic team, however Summers and friends have a lot of problems when it comes to finances and the like with the economy. I will admit though that I do like Bernanke so far, much more than I ever liked Greenspan trying to play the role of John Galt.
If we could just rid of supply side economics tripping the rift when it comes to "faith" that "revenues will return shortly" like during the Reagan years and rain manna because we're a special country, we'll far return to sanity with a gradual increase in taxation.
Overall I think the tailspin is mostly from the bond markets reacting to the deadlock in Washington and it's basically telling each of the Nero's to stop playing footsie with the debt limit and get some long term plans in place on taxation, entitlement reform, and some spending increases on things such as infrastructure.
It's a nascent science, overall I really do not think we're much past the "Freuds" when it comes to economics with people still clinging to Keynes, Hayek, Ricardo, and ect. for an easy policy fix. I include Llaffer here as well, his curve is a nice simplification of specific concepts but his conclusions are quirky.
Ambition must be made to counteract ambition.
Individualities may form communities, but it is institutions alone that can create a nation.
Nothing succeeds like the appearance of success.
Here is my principle: Taxes shall be levied according to ability to pay. That is the only American principle.
I know a good amount of my friends who can't find summer jobs and I even know some college grads who can't find jobs in their sector so they have to work at walmart again.
plus a lot of older people are retiring, which could help younger people find jobs but could drain a lot on the system.
I know people might think I'm adding much but i just thought I'd add my opinion on it
standard
BU control
BG infect
modern:
mill
edh:
devour for power
Shizuko ramp
Yea but here comes the immigration part of the economy. So you have a good balance of young and old people and not many industrialized countries have that.
yeah, true, immigrants could balance it out, I never thought of it that way
standard
BU control
BG infect
modern:
mill
edh:
devour for power
Shizuko ramp
In a single word: Canada. Seriously, they have one of the best immigration policies of the west. It's seriously one of their better programs, but it's in jeopardy because of public sentiments.
Ambition must be made to counteract ambition.
Individualities may form communities, but it is institutions alone that can create a nation.
Nothing succeeds like the appearance of success.
Here is my principle: Taxes shall be levied according to ability to pay. That is the only American principle.
how do you think it's in jeopardy though?
standard
BU control
BG infect
modern:
mill
edh:
devour for power
Shizuko ramp
Because it is falling apart, relative to our experience in our lifetimes.
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I remember my family doing wonderfully about ten years ago, and we're doing much worse now. I suspect I'm not in the minority with that sentiment in this country.
Thanks to the [Æther] shop for the sig!
Oh yeah. Right.
Honestly, some of this polling-based nonsense is just absurd. Polling is useful for a very few select things: policy popularity and political approval ratings (but, statistically, only about 6 months before an election). Asking Joe Schmoe about economics (especially with such a bombastically worded question) is only going to be good, at BEST, to get a less scientific indicator than the Consumer Confidence Index.
Is the economy bad? Yup. Is it grossly slanted in such a manner that encourages runaway capitalistic raping of the middle class by the top 1%? Yup. Are housing prices falling at historic rates, even after all this time? Yup.
On the other hand, it should come as no surprise that the economy is in the crapper right now, given that half of America's wealth is now in the hands of 1% of Americans, given as we have a consumer-based economy. If the consumers don't have money to spend, the economy cannot and will not improve. Furthermore, the housing market is still basically in free-fall... until you realize that, even with all the value that land and property have lost, we're still within bubble-level housing pricing. Historically, the average American house cost about three times the average American's yearly income; at our per-capita, that'd be a home value of a little under $150K, in today's money. The average house on the market is still somewhere around 190K, or almost 33% more than history has suggested is sustainable or appropriate.
So, my two bits on the economy? It's going to get better, probably once housing finally falls about another 25% to where it belongs and some sort of a taxation policy is enacted that actually puts money into circulation, instead of concentrating it in the hands of the super-rich. Pratchett said it best in Making Money: The value of money is in the circulation of money; the more it moves, the wealthier all are for having had it and spent it to their advantage. Money out of circulation is nothing but a millstone around the neck of the economy. By that standard, the best plan for a Governmental taxation plan would be to have a relatively high progressive income tax rate, a lower, but still progressive property tax rate, and no sales tax whatsoever, to encourage people to not hoard more money than they need to, but I'll leave actual tax proposals to people who are qualified to do so... people with Ph.D.s in global economics.
Magnificent Quote of the day:
it tends to go in phases.
aragarian died off a while ago to a certain extint. it still exists in some countries, but most it is not a primary function of the economy.
industrial/manufacturing: most of the known world is still here. we left this phase back in the 90's during the tech boom.
information/service: which is where we are at. deal with offering goods and services to the general public and world wide.
downside is that you have to import goods and materials.
while the US still has a manufacturing base it is no where as large as it use to be. cost is the biggest reason. other countries can do it cheaper.
i agree i do not think we are headed for a 2nd depression, However the economic symbols are not there for any recovery and it has been that way for a while. the economy has stagnated and unless we can get it going again it could get worse.
housing prices are adjusting themselves back to normal levels after 4 year super-inflated housing bubble. that 500K home that was only worth 200 is simply going back to that 200 level.
also there are so much inventory that supply is greater than demand. unless you are getting an FHA loan most people cannot afford the 20% down payment on a house.
as for the top 1%. the people that know how to make money in these markets will continue to make money in these markets. that is just the way things go.
so unless they are breaking the law they are simply applying their knowledge and skills.
i agree but just be wary of this. the reason that we haven't see stagflation yet is that all of that money didn't make it into circulation. if it had then we would be even worse off than we are now.
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Well, we're in a service/consumer-based economy which is moving towards a fully information-based economy. Some sectors of our business sector are working fully within the new model, but the vast majority of our economy is retail, which is in no way shape or form information based, but rather commodity-based.
Well... no. There's more going on than this. Housing prices are now about where they were in 2000. The problem is that the economic policies of the 1980-90s, combined with the historically low relative prices that we've paid for food and most other necessities, conspired to create a valuation boom across the economy which lasted for decades.
The simplistic, but not entirely accurate version, is that because Consumer X had more money to spend on non-essential items, and because economic conditions were made right for both Consumer X and Corporation X (and Government Entity X) to raid their equity/savings/pension funds in order to take a stab at major long-term financial gain, that financial gain materialized. However, since the financial gain was never anything more than our valuation of whatever it is that they were buying (stocks, property, or commodities; the actual physical item never changed or became better in any way), once the dream evaporated, the market needed to sink back to the levels that actually reflect the real, proportional value of whatever the bubble'd item was.
Housing, since it has been bubbling for by FAR the longest (arguably since the end of the 1970s recession), has the farthest to fall before its valuation is fair.
Well... I see what you're getting at. Here's the problem:
In terms of game theory, the American economy is a Zero Sum Plus game. What this means is that, by the rules of the game, there is an item in circulation (money) which you want to control the largest proportion of; whoever does so is the 'winner.' That's the Zero Sum part. The Plus part means that there's some body, in this case the Federal Government, which has the ability to introduce more money to the game. So long as the government does this at a rate that mirrors the growth of the population, the value of money remains unchanged, and the long term game can continue (that's the economy). That's the plus part.
Some players are playing to win (trying to get the most money), but most players are only playing because they have to in order to eat/have a home/wear clothes. Both strategies are fine, but the model has to accommodate each.
Generally speaking, it's healthy to have a few players who are 'winning.' If everyone's making the same amount of money, the game no longer becomes a game and there's no reason to play any more. For the same reason, we have to keep any player or group of players from ACTUALLY winning, which means, in real terms, eliminating other players from the game (i.e. controlling so much money that non-winning players in the game start to die). However, since the Fed is watching the game and can't allow people to starve, it injects EXTRA money into the game when the average player needs it to be injected in order to not fall into a very bad spot. Doing so decreases the value of all money in the game, but keeps Joe Schmoe going.
Let's look at this in terms of real money. The U.S.' GDP is $14.2 trillion, and we know that the top 1% control half of that. Hence, the average players are playing with $7.1 trillion. Now' we've got 307 million players, according to the latest census, which means that 304 million of those players (removing the top 1%) are playing with that $7.1 trillion. Simple division tells us that the average non-super-rich player in our game is only playing with $23,355. Now, the poverty line, which the government says is where a person can't afford basic necessities, is $10,830 in the Lower 48, and a little more elsewhere, but which doesn't include stuff like gasoline, a car to get to work, or day-care. That means that the average player of our economic game is working at less than twice poverty, and that the more money the top 1% have, the less money the remaining 99% have to increase their margin above the poverty line.
Those same averaging-$20K/year folk are struggling to pay for mortgages valued at $200K (10 times their annual income), college for their kids (My local big state U, which is Div 1 but not prestigious, is $10K before fees and housing), or half their annual income, PLUS the half of their income which is that $10K or so a year worth of basic bloody necessities, like food and a car and clothes.
Here's the important bit: It's those 99% of players, the non-'winners,' which account for almost all of our consumer-based spending as they buy those necessities and one or two luxury items. However, the smaller their margins are, the less they can spare, and the less money is in circulation in a way that creates growth and value in the economy. That's why the Fed keeps printing money. It devalues everything in play, but it keeps the game going as more and more of the tracking currency is removed from play by the super-rich. The only sustainable way for the game to continue is to actually reduce the portion of wealth which is out of play, because the current game rules are moving circulating money out of play faster than it's being printed. Thus, at our current rate, the game ends.
I know that I wrote a dissertation to respond to a fairly simple point; I hope that you'll forgive that.
Yeah, it was a gross oversimplification, but it's an equally gross oversimplification to say that circulation = stagflation. Circulation + unrestrained printing of more money = stagflation.
Magnificent Quote of the day:
Actually my family is taking in less than half of the income we were taking in in 2004. My parents both lost their jobs and while my dad was able to get another job (with 30K less per year) my mom has been chronically unemployed or underemployed ever since.
And my mom is trying to buy a business right now, but can't because she can't find a loan because our credit is shot, because we needed to use credit cards to keep our house and pay the bills when both of my parents were unemployed.
So in my case, no, it's not an illusion.
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