Thread: The strongest economy in the world

American economy is declining now as far as I know from the bbc and cnn news.

If this is true why does it cost me twice as much to live here compared to 8 yrs. ago?
But gold and farmland, water if you can figure out how.

^
Couldn't follow the link to the article. To tell you the truth, I didn't read anything in there except speculation followed by opinion. No real analysis or data to defend the premise.

I am suspicious of anyone that starts out slamming Keynesian Economics with a broad brush, as if it didn't have a place in dealing with problems faced by governments, societies, and some problems in macro economics. These are the same postures assumed by Reagan et al to cut government programs, cut taxes for the wealthy, cut regulation of business and finance. I read it as an economic ideological piece more than anything.

When will the jobs return. Varied answers:

7,000 a day losing benefits
The Senate had been bickering over the details since September, and that cost more than 200,000 people their benefits. Some 7,000 unemployed Americans run out of benefits each day, according to the National Employment Law Project.
Millions of Americans are now depending on unemployment benefits, as the unemployment rate continues to soar. The unemployment rate hit a 26-year high of 9.8% in September, and is expected to go even higher when the October numbers are released on Friday.
More than one in three people who are unemployed have been out of work for at least six months, according to the law project.
Lawmakers twice lengthened the time people can receive checks to as much as 79 weeks, depending on the state. But at least one Republican warned this would be the final extension.


"The public needs to ... know, this is the last extension," said Johnny Isakson, R-Ga.

Unless you're a bankster.


Link & Entire: Congress extends unemployment benefits by up to 20 weeks - Nov. 5, 2009

Here's your Hope & Change boys!

Originally Posted by Milkman

7,000 a day losing benefits
The Senate had been bickering over the details since September, and that cost more than 200,000 people their benefits. Some 7,000 unemployed Americans run out of benefits each day, according to the National Employment Law Project.
Millions of Americans are now depending on unemployment benefits, as the unemployment rate continues to soar. The unemployment rate hit a 26-year high of 9.8% in September, and is expected to go even higher when the October numbers are released on Friday.
More than one in three people who are unemployed have been out of work for at least six months, according to the law project.
Lawmakers twice lengthened the time people can receive checks to as much as 79 weeks, depending on the state. But at least one Republican warned this would be the final extension.


"The public needs to ... know, this is the last extension," said Johnny Isakson, R-Ga.

The government cant go on supporting these parasites forever. (the unemployed I mean, not the bankers). They should go out and find a job like normal people.

Originally Posted by sabang

An interesting piece of historical revisionism recurs in many of these economic doomsday scenario's- namely the Keynesian policies of the 'New Deal' are routinely blamed for lengthening and making the Great Depression worse- and just about all other evils of the World ever since. It is rarely questioned in these Blogs, just swallowed whole. Inconveniently, economic history if you study it (and I have ) tells you the opposite- Keynesian economics alleviated the effects of the Depression, and helped pull the US economy out of it by stimulating economic demand and economic activity via government spending. Another more recent example, closer to home, is Thaksinomics- which was considered such a major success that economic delegations from all over the world (including China) were sent to study it.

The more recent economic fad is 'Supply side' or Monetarist economics. This originated in the University of Chicago, it's intellectual mentor and champion being Milton Friedman- unquestionably a brilliant economist. Supply side economics (at it's purest and most naive) simply says that the only government involvement in the broad economy should be via influencing the supply of money, via Interest rate policies and selective Central bank buying and selling of Bonds. This was seized on aggressively by the Right wing brains trust behind the Reagan administration, and has basically been the economic mantra ever since. Until, that is, the recent near collapse of the worlds financial system, and plunging of our economies into severe Recession

Most common sense economists know that, in fact, Economic policy is a combination of both Supply and Demand side policies. Unfortunately in the modern era, there have been very few of these. The general approach is that day to day economic policy can be carried out via monetary supply policies, but government regulatory and spending (Keynesian) policies have their role to play as well- especially in times of economic upheaval such as recessions, depressions, and supply shocks such as the Opec crisis. But more routinely however via government infrastructural investment, such as ports and highways. Given the large amount of economic activity that is in fact a direct result of government spending, it is hard to argue with the common sense of this.

In actuality, the 'small government' Monetarists and their Political talking heads presided over an era of not just Big government, but Big government getting Bigger- so to deny that government spending and consumption has no role to play in the economy is just naive. And to say that Gov't should just leave the business and finance sector to it's own devices, with little or no Regulation- absolutely Catastrophic. When it comes down to it, Reagan and (worse) Bush did not shrink government at all- they just underfunded it and ran it into debt, whilst aggressively deregulating the Private sector- a direct result of naive Monetarism was the era of Deregulation, especially in the Financial industry. Bank lending policies were the business of the banks only, Derivatives multiplied- and were not listed as Liabilities on balance sheets. Insurers insured 'Risk' way beyond the capacity to pay- because their true Liabilities were never even listed on their Balance Sheets! The traditional borders between Commercial and Investment banks were eliminated with the repeal of the Glass Steagall act. And the rich got Richer, the Poor poorer, the Middle class remained about the same- and everyone, including the Government, borrowed excessively.

The Upshot- economic disaster. Pretty much the whole banking sector has had to be bailed out with taxpayers money. Our whole financial system has had to be saved from collapse by government spending- there was no other way, short of letting it all collapse, and starting from scratch (basically, the Ron Paul solution). Part of the overall government 'bailout' spending has been to stimulate economic demand too, Keynesian style- but only a fraction. Now those same Monetarists that led us down the road of financial ruin in the first place are saying how bad this is- while conveniently ignoring the fact that most government bailouts have in fact been to save the sorry arses of the financial and banking system that their policies caused the rout of in the first place.

I think I am understating the point by saying they have very little credibility left.

The point all these highly educated economists (who incidentally got us into this mess), are missing is that in the end the only form of real wealth is actual goods and services that can be used and traded. Since the earliest times of civilization people used precious items such as gold to replace the barter system and make trade more viable. That led to national currencies made of gold and eventually bank notes which were guaranteed to be redeemable in gold. Then as the world economy became even more sophisticated we abandoned the gold standard altogether and relied on bank notes that were a promise to pay the bearer whatever it happened to be worth in trade on the day it was swapped for real goods or services. A system based on faith in a particular countries ability to produce tradable goods and services either now or in the near future.

Where the whole system of fiat paper money backed only in faith falls down is when one countries paper currency becomes dominant and that country fails to meet the tradable value of its currency with actual production. You get a situation then where the face value of paper money used for trade is out of whack with the actual value of the goods and services being traded. Like the beach tribe trading pretty sea shells with the mountain tribes for pigs and yams. Pretty soon the mountain tribes have more sea shells than they know what to do with so the tradable value of the sea shells goes down. And thats whats happening to the $US right now (and has been for several years). USA has been parasitic on the rest of the world through their $ hegemony and getting real goods and services from other countries at a discounted rate because their paper $US is overvalued. Likewise, the value of US exports has been overvalued because of their overvalued currency. Once again its been like the early days of the beach tribe trading their endless supply of sea shells to the mountain tribe. Pennies from heaven as real usable goods flow in in exchange for a seemingly endless supply of paper money. But its a system based on faith in the value of paper money rather than actual production of real tradable goods and services.
As soon as that faith disappears the whole system falls down, and the value of the paper money declines.

I believe we are at that turning point now where a rapid decline in the trading value of the $US is about to occur. Its been happening slowly for several years now anyway, but the out of control greed and excesses of the US banking sector have simply accelerated the process of adjustment.
When things looked bleak on the world economic scene last year, a lot of the worlds money fled stock and went into $USs as a safe haven of investment, pushing up its tradable value of the $US. That just made the whole situation worse and harder to pull out of. Now, a year later we have the US government printing, borrowing and spending money like crazy. Flooding the world with $USs and $US debt, I believe in an attempt to bring the tradable value of the $US back into equilibrium with production.

My own view is that the current appearance of a recovery is simply a debt funded bounce intended to discourage further investment in the $US and allow this world currency to get back in balance with actual production.

Originally Posted by Boon Mee

Here's your Hope & Change boys!

Once again, who is responsible for creating this mess?

Originally Posted by StrontiumDog

Originally Posted by Boon Mee

Here's your Hope & Change boys!

Once again, who is responsible for creating this mess?

Uh...the guy who's picture is graphically displayed above?

Originally Posted by StrontiumDog

Once again, who is responsible for creating this mess?

Ooh, ooh, I know this one! It's Clinton right? He had a blow job and stuff

Originally Posted by slackula

Originally Posted by StrontiumDog

Once again, who is responsible for creating this mess?

Ooh, ooh, I know this one! It's Clinton right? He had a blow job and stuff

Heh...getting closer!

Give it up, Boon. The lie that this mess is Obama's making is truly Bush league, even worse than the proverbial "The dog ate my homework". And you're not even an 8 year old.

No, wait.... That would explain everything.

Think carefully, Boonykins. Who's economy AKA train wreck did Obama inheret?Yes, child, there are problems fixing it, but indicators say that he seems to be on schedule. I know you're all whiney because we're not there yet, and you have these little tantrums because it was the fault of all those Big Important People you believe in and that must hurt so bad you can't face it. But don't worry. Just sit in the back seat while the grown-ups get us back on track.

Originally Posted by MrG

Think carefully, Boonykins. Who's economy AKA train wreck did Obama inheret?Yes, child, there are problems fixing it, but indicators say that he seems to be on schedule. I know you're all whiney because we're not there yet, and you have these little tantrums because it was the fault of all those Big Important People you believe in and that must hurt so bad you can't face it. But don't worry. Just sit in the back seat while the grown-ups get us back on track.

Heh...and this is back on track? On schedule, eh?

^
What's your solution?

The only real solution to the unemployment problem is to get the trading value of the $US down into balance with productivity. The flight of international money into $US (?safe haven) during the current recession has been exactly the opposite of what USA and the world needs. But how to discourage investors from further inflating the value of the dollar? Well, a policy of spend, borrow and print on a massive scale would seem to be the only answer. And it does finally appear to be having some effect with the $US once again on the decline.

Still, its going to take time for the US consumer/debtor nation to make the transition back to a nett exporter nation to replace the consumer driven jobs with production jobs. Its not going to happen in Obamas first term, thats for sure, though there may be some positive trends in the right direction by then.

There are a few things to consider if USA is to get back producing actual wealth rather than debt. All those jobs that have gone overseas in manufacturing wont just return overnight as the physical infrastructure will need to be reestablished first. And although unskilled labour in the US is relatively cheap compared to other developed countries, the new manufacturing players in the game such as China can do it even cheaper. Something that affects manufacturing in all developed countries these days. The emphasis has to be on quality rather than quantity to compete now. But of course when the $US depreciates it will make domestically made products far more competitive price wise with imported stuff. And the US domestic market is huge. Big enough to support a lot of domestic industry if given a competitive chance. All that translates into a job recovery, but it wont happen overnight. First the government has got to get the $US back down to a realistic value. Something that has been gradually happening anyway over the past several years until the recent world financial crisis panicked investors into $USs and drove its trading value back up to unrealistic uncompetitive levels.

Bottom line is that unemployment levels in USA are bound to stay high for a while to come yet, even if the $US did take a sudden crash and loose its place as the worlds default trading currency. Which BTW is certainly on the cards as part of the worlds economic reforms needed. The USA has prospered on a wave of inflated currency value and debt for many years. Now its time to pay the piper and it wouldn't be any different if the Republicans were in power. They would almost certainly be doing exactly the same thing even if they say something different now they are in opposition and dont have to take any responsibility for the situation as it unfolds. They are just playing negative politics is all.

Originally Posted by Boon Mee

Originally Posted by MrG

Think carefully, Boonykins. Who's economy AKA train wreck did Obama inheret?Yes, child, there are problems fixing it, but indicators say that he seems to be on schedule. I know you're all whiney because we're not there yet, and you have these little tantrums because it was the fault of all those Big Important People you believe in and that must hurt so bad you can't face it. But don't worry. Just sit in the back seat while the grown-ups get us back on track.

Heh...and this is back on track? On schedule, eh?

Surprisingly enough, unemployment is often the result of a recession.

Bush's policies created this mess. He left office as it was all falling apart. Anything else is a lie.

Originally Posted by MrG

^
What's your solution?

Lower corporate tax rate for starters.
One reason japan is still in stagflation is they did exactly what the states are doing right now - pumping money into banks, car companies etc. Let the free market prevail and allow business to fail if they must. The recovery will happen faster...

Bad planning and foolish financial behavior + bad economy = tough times:

Americans have more than triple the debt they had in 1982, and less than half the savings. They spend 10 weeks longer off the job. And a bigger share of them have no health insurance, leaving them one medical emergency away from financial ruin.For these reasons, the unemployed are more vulnerable today to foreclosure and bankruptcy than they were a generation ago.


Far greater debt loads
People carry an average of about $46,000 in debt — mortgages, credit cards, auto loans and other consumer debt. That's a far bigger load than in 1982, when per capita debt totaled about $14,000 in today's dollars.


If you're unemployed today, the odds are better that you'll stay unemployed longer than a generation ago.And government surveys suggest that if you get laid off, it's more likely to be for good. Today's unemployed have been out of work about half a year on average. In the early 1980s, they spent about four months without jobs.
One reason is that industries such as construction and finance may never bulk back up to pre-recession levels. Even before the economy went south, demand for their products was inflated by the housing bubble.

Layoffs more permanent
Another reason layoffs are more permanent: Manufacturers these days are more aggressive about using technology to boost productivity — or they hire cheaper workers overseas as the economy improves.

Flimsier safety nets
For those who lose jobs today, the safety net is much flimsier.

Scott Stewart / AP

Unidentified unemployed auto and steel workers picket in front of the White House in Washington, D.C., on Aug. 4, 1982.
Layoffs have forced some older workers into retirement, yet fewer of them can fall back on traditional pensions that pay a steady monthly sum. Only 11 percent of active workers have a traditional pension, according to the Employee Benefit Research Institute. That's down from 50

Link & Entire:
Jobless: 10 percent is tougher than it used to be - Economy in Turmoil- msnbc.com

Originally Posted by Milkman

Originally Posted by Boon Mee

Originally Posted by MrG

^
What's your solution?

Lower corporate tax rate for starters.
One reason japan is still in stagflation is they did exactly what the states are doing right now - pumping money into banks, car companies etc. Let the free market prevail and allow business to fail if they must. The recovery will happen faster...

I agree with you on this Boon.

To paraphrase Jim Rogers, it's throwing bad money at bad things.

Let these S.N.A.F.U.S. die off and let the competent replace the incompetent.

Don't get it, Milk. Corporations not paying their share of the Social Contract is part of what got us into this mess. Corporate taxes, combined with tax breaks, off-shore homebases, etc. are already low to non existant. A lot of them get money back. Will subsidizing the oil industry more than we do create more jobs or wealth? I'm doubting the myth.

Originally Posted by MrG

Originally Posted by Milkman

Originally Posted by Boon Mee

Originally Posted by MrG

^
What's your solution?

Lower corporate tax rate for starters.
One reason japan is still in stagflation is they did exactly what the states are doing right now - pumping money into banks, car companies etc. Let the free market prevail and allow business to fail if they must. The recovery will happen faster...

I agree with you on this Boon.

To paraphrase Jim Rogers, it's throwing bad money at bad things.

Let these S.N.A.F.U.S. die off and let the competent replace the incompetent.

Don't get it, Milk. Corporations not paying their share of the Social Contract is part of what got us into this mess. Corporate taxes, combined with tax breaks, off-shore homebases, etc. are already low to non existant. A lot of them get money back. Will subsidizing the oil industry more than we do create more jobs or wealth? I'm doubting the myth.

MrG.

I think we actually agree.

My point was: the bailout was throwing taxpayer money at companies that were
irresponsible, reckless, and greedy.

This is incompetence.

Let the incomepetent fail, and let the competent replace them - other companies.