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Economic Recovery

by Phrak
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Phrak
#1
Jun24-09, 10:20 PM
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The Economy Is Still at the Brink

http://query.nytimes.com/gst/fullpag...=&pagewanted=1

Mr. Obama thinks that the way to revive the economy is to restore confidence in it. If the mood is right, the capital will flow. But this belief is dangerously misguided. We are sympathetic to the extraordinary challenge the president faces, but if we've learned anything at all two years into the worst financial crisis of our lifetimes, it is that a capital-markets system this dependent on public confidence is a shockingly inadequate foundation upon which to rest our economy.
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bleedblue1234
#2
Jun25-09, 01:22 PM
P: 143
A lot of this mess could be largely avoided if the government hadn't stepped in years ago to continue this crazy scherade of propping up the US economy against the rest of the world and continuing to rely on the cheap easy credit that has moved the US economy along for the past 10-15 years.

China, the Middle East, and the rest of Eurasia have been largely willing to finance are debt (in ever increasing percentages relative to domestic markets) while the government continues to think that the solution to this idiotic policy that was started by the government and the FED, is... guess what? MORE OF IT.... we continue to flood the currency markets and everything else with cheap money.... just this week we had a record $106 billion treasury auction.... guess when the last record was? Two weeks ago. We will need to roll over about $1 trillion this year and add $2 trillion more debt to continue financing these crazy bailout schemes that set us up for more dire pain down the road.

All the things that the government does in the name of "helping" the economy have large unintended consequences down the road... cheap money led to the stock market bubble, and after it burst Greenspan lowered rates like a madman and inflated the housing bubble, followed by a quick rate increase that hammered the economy, followed by this supposed "crisis" and a quick jump to 0% interest rates..... which will surely incite either A) large inflation if the FED doesn't raise rates as the economy strengthens or B) jarring the economy back down as rates skyrocket as a result of this buildup of artificially low interest rates.

The US economy is 70-75% driven by internal consumption mostly financed from the rest of the world (most the BRIC nations) and we cannot hope for a true recovery without a VAST restructuring of our economy that can only be accomplished if government realises that they are the problem, they caused this mess, and the sooner they get out of the way the sooner the market can allocate productive work where it needs to go and turn the economy around for the better (not just a short term bubble-rally).
Astronuc
#3
Jun25-09, 03:34 PM
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Recovery's Missing Ingredient: New Jobs
Experts Warn of A Long Dry Spell
http://www.washingtonpost.com/wp-dyn...062101859.html

Despite signs that the recession gripping the nation's economy may be easing, the unemployment rate is projected to continue rising for another year before topping out in double digits, a prospect that threatens to slow growth, increase poverty and further complicate the Obama administration's message of optimism about the economic outlook.

The likelihood of severe unemployment extending into the 2010 midterm elections . . . .

So far, the White House has counseled patience even as the political debate surrounding its economic policies grows more urgent. Officials point out that job growth will not come until robust economic expansion takes hold, which they expect will happen as stimulus funding works its way through the economy. . . . .

With many forecasters projecting unemployment to remain above 10 percent next year and not return to pre-recession levels of roughly 5 percent for years after that, Obama is likely to be confronted with defending the effectiveness of his economic policies as the nation endures its worst employment situation in a generation.

. . . .
A friend was telling me about discussion on one the news programs in which an economist described various scenarios.

Some optimists predict a 'V-shaped' recession, which is apparently fairly typical of recessions over the past several decades. Others are predicting a 'W-shaped' recession, and the middl peak may be lower than the outer ends.

Still some pessimists predict and 'L-shaped' recession, i.e., little recovery for a long time.

And another pessimist thinks the recession shape with be that of an upside-down square root sign (√).

Phrak
#4
Jun25-09, 10:49 PM
P: 4,512
Economic Recovery

Per se, jobs do not directly contribute to economic recovery. It could be said that nonproductive jobs, jobs that neither sustained nor enhanced the economic infrastructure, but depleted it, contributed to the economic collapse; working for a blue sky company only produces blue sky--and at a price.

Jobs produce economic recovery through productivity.
Phrak
#5
Jun25-09, 11:15 PM
P: 4,512
bleedblue1234,

Low interest rates didn't contribute to the 1994-2000 market bubble. 401K savings plans, internet investing, and start-up companies did.

The Federal Reserve Corp was once said to manipulate interest rates to what they have decided is an optimal amount to hold the rate of inflation to 4.0 to 4.5 percent a year, under the assumption of constant economic conditions. But things happen.

The prime lending rate, defined as 3.5% above bank-to-bank overnight loans by the WSJ, was managed to ~5.0% between '94 and 2000. The market down-turn put the old-money interdependent business institutions at economic risk and in need of the liquidity of low interest rate loans. This, as one of the interdependent businesses, the Fed was eager to supply from 2001 unti 2005 when they thought they had avoided a '28 style depression. Doh!

http://en.wikipedia.org/wiki/File:Fe...effective).svg

So the wasted labor, lost to poor investments in the evolving technologies of the personal computer, the internet and communications, was defered to other hands. And yes, through the availability of cheap loans, the low lending rates contributed to the housing market bubble, obliged by an eager public who had no idea they were betting into a false economy.

Another bubble, less spoken of, was of consumerism, where paper profits were spent before realized.

Pretty mushy reasoning in my ramblings above, right? I wish someone here could pin things down better.
OmCheeto
#6
Jun26-09, 12:03 AM
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Quote Quote by Phrak View Post
The Economy Is Still at the Brink

Mr. Obama thinks that the way to revive the economy is to restore confidence in it.
I agree with Mr. Obama.

Economics: A social science.

It's very simple, it you stop and think about it for a few years.
Phrak
#7
Jun26-09, 12:26 AM
P: 4,512
Quote Quote by OmCheeto View Post
I agree with Mr. Obama.

Economics: A social science.

It's very simple, it you stop and think about it for a few years.
Can you eat confidence? Can you live sheltered in economic confidence with central heating? Can you drive economic confidence or does someone have to take some physical matter and rearrange it so you can push your foot down to make it go? We are physical creatures.

Talk can motivate people to add value to a rock and turn it into steel. Has Mr. Obama talked about any of these things? Will Mr Obama get around to these things; will Mr Obama motivate the legislation to promote these, or is he a very handsome, charming and confident critter in a suit offering no more than another Tennessee Valley Authority?

I'm not so easily taken by the charismatic. If he looses the self-grandure, starts to stutter, comes back ranting about RICO laws for corporate and governmant thieves, and it actually has demosterable effect, then maybe I could believe he's more than hot air.
rootX
#8
Jun26-09, 12:30 AM
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Quote Quote by Phrak View Post
Can you eat confidence? Can you live sheltered in economic confidence with central heating? Can you drive economic confidence or does someone have to take some physical matter and rearrange it so you can push your foot down to make it go? We are physical creatures.
Confidence in future ==> more Investments (Less savings also I believe) ==> Real production.
Ivan Seeking
#9
Jun26-09, 01:19 AM
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The Conference Board LEI for the U.S. increased sharply for the second consecutive month in May. In addition, the strengths among its components continued to exceed the weaknesses this month. Vendor performance, the interest rate spread, real money supply, stock prices, consumer expectations, and building permits contributed positively to the index, more than offsetting the negative contributions from weekly hours and initial unemployment claims. The index rose 1.2 percent (a 2.4 percent annual rate) between November 2008 and May 2009, the first time the index has increased over a six-month period since July 2007, and the strengths among the leading indicators have become balanced with the weaknesses during this period.

The Conference Board CEI for the U.S. continued to decrease in May, amid further declines in industrial production and employment. The six-month change in the index stands at -3.3 percent (a -6.4 percent annual rate) in the period through May, down from -2.3 percent (a -4.5 percent annual rate) during the previous six months. In May, the lagging economic index for the U.S. fell by the same amount as the coincident economic index, and the coincident-to-lagging ratio remained unchanged, as a result. Meanwhile, real GDP fell at a 5.7 percent annual rate in the first quarter of the year, following a contraction of 6.3 percent in the fourth quarter of 2008.

The Conference Board LEI for the U.S. , which had been on a general downtrend since reaching a peak in July 2007, has risen sharply in the past two months amid widespread strengths among its components. With these large and extensive increases, the six-month change in the index has become positive for the first time in two years. The Conference Board CEI for the U.S., a measure of current economic activity, remains on a decreasing trend but its pace of decline has stabilized in recent months. All in all, the behavior of the composite indexes continues to suggest that the recession that began in December 2007 will likely ease in the near term.
http://www.conference-board.org/econ...tput.cfm?cid=1
Office_Shredder
#10
Jun26-09, 02:00 PM
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Quote Quote by Phrak View Post
Can you eat confidence? Can you live sheltered in economic confidence with central heating? Can you drive economic confidence or does someone have to take some physical matter and rearrange it so you can push your foot down to make it go? We are physical creatures
You don't grow food if you don't think anyone will buy it. You don't build houses if you think nobody will buy it. You don't advertise your central heating installation business if you think nobody will call you. At its most base level, the economy is people doing things for each other, with an efficient means of exchange (money), and this only happens because everyone's confident that the system works
Phrak
#11
Jun26-09, 02:20 PM
P: 4,512
Quote Quote by Office_Shredder View Post
You don't grow food if you don't think anyone will buy it. You don't build houses if you think nobody will buy it. You don't advertise your central heating installation business if you think nobody will call you. At its most base level, the economy is people doing things for each other, with an efficient means of exchange (money), and this only happens because everyone's confident that the system works
People will eat. Farmers will grow food. Perhaps more soy and fewer artichokes.

I think you put your finger on it, whether you know it or not.

Poorly gauged confidence in the stock market lead its collaspe. Poorly gauged confidence in housing has left many upside down, owing more principle than they have equity. Confidence in the state of the economy 2000-2007 led to irrational consumer choices, which seems to be what you recommend.
bleedblue1234
#12
Jun26-09, 03:32 PM
P: 143
Quote Quote by rootX View Post
Confidence in future ==> more Investments (Less savings also I believe) ==> Real production.
yes as long as investment goes into things like production (factories, infrastructure, the works) but almost all of the capital in the US has been diverted from these such things and into frivolous items that produce no long term economic growth.....

and savings are necessary to finance large capital projects...
mheslep
#13
Jun26-09, 04:12 PM
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Quote Quote by Astronuc View Post
Recovery's Missing Ingredient: New Jobs
...
What recovery? There has to be one in progress for them to be missing. The credit crisis seems to have eased, but a 'recovery' addresses GDP, and it still moving the wrong way.
Ivan Seeking
#14
Jun26-09, 05:54 PM
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Quote Quote by mheslep View Post
What recovery? There has to be one in progress for them to be missing. The credit crisis seems to have eased, but a 'recovery' addresses GDP, and it still moving the wrong way.
So your position is that once Obama waved his magic wand, all of the numbers should instantly reverse? The question is whether the contraction is slowing or not.

Real GDP -- the measure of the value of goods and services produced in the economy -- fell at a 5.5% annual rate in the quarter after plunging at a 6.3% pace in the fourth quarter of 2008, the government said.

A month ago, the government had estimated GDP fell at a 5.7% pace in the January-through-March quarter. The government revises the estimates as it obtains more complete data not available earlier. Read the full government report.

Economists surveyed by MarketWatch were forecasting that the final estimate for first quarter GDP would be unchanged at a negative 5.7%. They expect the economy to contract 1.5% annualized in the second quarter (which ends next week) and to grow 1.3% in the quarter that begins July 1. See Economic Calendar...
http://www.marketwatch.com/story/gdp...-first-quarter
Astronuc
#15
Jun26-09, 05:58 PM
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Quote Quote by mheslep View Post
What recovery? There has to be one in progress for them to be missing. The credit crisis seems to have eased, but a 'recovery' addresses GDP, and it still moving the wrong way.
Well - I keep hearing that the rate of decline is lessening. But unemployment will apparently continue to increase to something like 10%.

On the other hand, I've heard mentioned "The credit crisis - part 2", which is apparently developing.
Ivan Seeking
#16
Jun26-09, 06:08 PM
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Quote Quote by Astronuc View Post
Well - I keep hearing that the rate of decline is lessening. But unemployment will apparently continue to increase to something like 10%.
As you know, that is why it is called a lagging indicator.

On the other hand, I've heard mentioned "The credit crisis - part 2", which is apparently developing.
We will see. I haven't heard anything suggesting that we will see a crisis like that already seen. Keep in mind that a normal recession turned disasterous because of the hidden CDS losses, and reckless lending practices.

Of course I have seen half of the alphabet [and now an inverted mathematical symbol] used to predict the nature of the recovery. And, of course, the worst case scenarios are precisely what the Obama admin was concerned about and trying to prevent with bold and decisive actions, and based on lessons from history. The inverted square root, or an L-shaped recovery were precisely the situations the Obama team was trying to prevent based on lessons from Japan.
Astronuc
#17
Jun26-09, 06:52 PM
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I don't care for the hype on the recovery. I want to hear the facts and dispassionate analysis.

Meahwhile - good news for Michigan:

http://marketplace.publicradio.org/d...6/pm_michigan/
General Electric plans to build a new research and development center in Michigan, and GM will make its Chevy Spark in the Great Lakes State. Mitchell Hartman reports why the companies are choosing to invest in and around the Motor City.
. . . .

There was some economic acceleration in and around Motor City today. General Electric is going to build a brand spanking new research center in the suburbs of Detroit. It's going to work on software for renewable energy, and jet engines, and gas turbines and that kind of thing.

But more to the point, it means 1,100 new jobs in a state that's lost well over a 100,000 of them in the past year alone. Also General Motors has decided to build its new subcompact, the Chevy Spark, in Orion, Mich. But from the Marketplace desk of no free lunch, there is a lot of money being laid on to grease the wheels of these big corporate decisions.
. . . .
26 June 2009 - http://www.genewscenter.com/Content/...ReleaseID=7157
GE To Open Advanced Manufacturing Technology & Software Center in Michigan
1,100 scientists, engineers and technologists will focus on information technology, energy and aviation R&D; drive progress in manufacturing capability

FAIRFIELD, Conn.--26 June 2009-- The General Electric Company (NYSE:GE) today announced that it will open an advanced manufacturing technology and software center in Michigan. The center is expected to grow to more than 1,100 GE employees over the next few years.

The Advanced Manufacturing and Software Technology Center will include a GE research and development facility that will be part of GEs Global Research network. It will house scientists and engineers who will develop next generation manufacturing technologies for GEs leading renewable energy, aircraft engine, gas turbine and other high-technology products. Such work will include development of composites, machining, inspection, casting and coating technologies for GEs Aviation and Energy businesses.

. . . .
Now if they can find long term employment for the other 99,000 people who lost their jobs in the last year, and the others who lost their job the year before that.
WheelsRCool
#18
Jun26-09, 09:31 PM
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I disagree with President Obama on most things, but I think it is too soon to be expecting a recovery. Remember, when Ronald Reagan came into office, and the Federal Reserve employed a contractionary monetary policy to contol inflation, which drove the economy into a steep recession, and taxes were cut to help the economy recover, the recession lasted from July 1981 to Novermber 1982. That is more than a year.

We cannot expect the economy to turn around within six months, especially with a financial crises of this magnitude. I am surprised the Obama administration itself seems to be a bit surprised on this, that the economy isn't "recovering" so fast. Give it at least another six months or a bit more to make a recovery IMO.


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