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## What U.S. Economic Recovery? Five Destructive Myths

 Quote by Ivan Seeking The goal is to stimulate consumer spending - the heart of any recovery. Increased consumer spending in turns creates new jobs. And that ten dollars per week almost all goes to consumer spending.
That's something that goes all but un-noticed in the political wrangling. Consumer spending is by far the biggest driver of our economy. Giving tax-breaks for specific industries, or bailing out parts of our national economy have nowhere near the immediacy or the strength of the effect that putting extra dollars in consumers' pockets can have. Driving wealth toward the bottom tier of wage-earners would result in spending NOW because the least affluent of us tend to spend all their disposable income, and they tend to stimulate their local economies by doing so. The "Main Street" effects of local spending have been blunted somewhat by the invasion of the big-box stores into rural and suburban America, but consumer spending is still a powerful influence on local economies.

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 Quote by turbo That's something that goes all but un-noticed in the political wrangling. Consumer spending is by far the biggest driver of our economy. Giving tax-breaks for specific industries, or bailing out parts of our national economy have nowhere near the immediacy or the strength of the effect that putting extra dollars in consumers' pockets can have. Driving wealth toward the bottom tier of wage-earners would result in spending NOW because the least affluent of us tend to spend all their disposable income, and they tend to stimulate their local economies by doing so. The "Main Street" effects of local spending have been blunted somewhat by the invasion of the big-box stores into rural and suburban America, but consumer spending is still a powerful influence on local economies.
Yes, and part of the key is to keep the benefit small enough [small but over a large population] that it gets spent, instead of being saved or used to pay debt. This helps to maximize the bang for every buck.

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 Quote by Guardian's Elliot ... There is strong ideological resistance to the policies that make decent wages in a full employment economy feasible: capital controls, allowing strong trade unions, wage subsidies, and protectionism...
I'm curious as to which vetted economic theory states protectionism is the path to full employment.

 Quote by Ivan Seeking Yes, and part of the key is to keep the benefit small enough [small but over a large population] that it gets spent, instead of being saved or used to pay debt. This helps to maximize the bang for every buck.
Well I guess you're happy with the $10 (approximate) benefit size (small) and it certainly does get spent - not saved or reinvested as capital. As for the$10 spent on fuel that allows another $10 to be spent elsewhere - if fuel prices were lower (and the extra$10 wasn't being sent offshore) the $20 could be spent elsewhere. Recognitions: Gold Member 5 retirement tactics in a low-interest-rate world  The yield on the 10-year U.S. Treasury note is about 2%, or one-half its yield in February. The yield on the two-year note is 0.22%, about two-thirds its yield at the beginning of 2011. Meanwhile, inflation has risen 3.63% over the 12 months ending July 2011. Let’s put this in perspective. If in February you had a$500,000 portfolio of 10-year U.S. Treasury notes throwing off $20,000 in income to fund your living expenses, and for some reason you had to reinvest all that money in the 10-year notes being issued today, your portfolio would generate only$10,000 in interest income. Meanwhile, the cost of goods and services that your $20,000 in interest income once paid for has now risen to$20,600.
The bottom line, prioritize your expenses, and learn to do more with less, unless you want to take on more risk, a dicey thing to do if you are retired.

Rhody...

 Quote by rhody 5 retirement tactics in a low-interest-rate world The bottom line, prioritize your expenses, and learn to do more with less, unless you want to take on more risk, a dicey thing to do if you are retired. Rhody...
 Quote by rhody 5 retirement tactics in a low-interest-rate world 5 retirement tactics in a low-interest-rate world The yield on the 10-year U.S. Treasury note is about 2%, or one-half its yield in February. The yield on the two-year note is 0.22%, about two-thirds its yield at the beginning of 2011. Meanwhile, inflation has risen 3.63% over the 12 months ending July 2011. Let’s put this in perspective. If in February you had a $500,000 portfolio of 10-year U.S. Treasury notes throwing off$20,000 in income to fund your living expenses, and for some reason you had to reinvest all that money in the 10-year notes being issued today, your portfolio would generate only $10,000 in interest income. Meanwhile, the cost of goods and services that your$20,000 in interest income once paid for has now risen to $20,600. The bottom line, prioritize your expenses, and learn to do more with less, unless you want to take on more risk, a dicey thing to do if you are retired. Rhody... The only good thing about the recession is devalued assets - especially real estate - but it's clearly not for everyone.  There are Asian stocks paying 5% dividends. Recognitions: Gold Member  Quote by rhody 5 retirement tactics in a low-interest-rate world The bottom line, prioritize your expenses, and learn to do more with less, unless you want to take on more risk, a dicey thing to do if you are retired. Rhody... As if to add a punctuation mark to what I have been reporting... particulary my post above, what are your plans when faced with this ? Young, old, rich, poor, anywhere in between ? We Are in 'Worse Situation' Than in 2008: Roubini  Europe has come into increasing focus in recent weeks, with some even questioning whether the single currency can survive this crisis. Roubini believes there will eventually be an enlargement of the European Financial Stability Facility (EFSF) or a common euro zone bond. He thinks that the euro zone governments should try to weaken the value of the euro. The strength of the currency is worrying some economists because of the potential effect on exports from the euro region. "Unless there is economic growth there will be this problem again,” said Roubini. “Fiscal austerity is negative for growth… (Governments) should work on denominated GDP not just on austerity." He was pessimistic about the UK’s immediate economic future, and believes the British economy is "on the verge of a double dip." Rhody...  Quote by rhody As if to add a punctuation mark to what I have been reporting... particulary my post above, what are your plans when faced with this ? Young, old, rich, poor, anywhere in between ? We Are in 'Worse Situation' Than in 2008: Roubini Rhody... While this isn't the politics forum - I'd like to use the current debate in the US as a framework for this comment. In 2008, the US economy was in recession and the President and Congress decided a LARGE stimulus plan was required - nearly$1Trillion in spending. The problem with a grand scheme of this type can be summed up by President Obama's recent comments that "shovel ready" projects weren't actually "shovel ready".

What he meant was that it's difficult to spend that much money in a short time period in a productive way.

Accordingly, much of the funding was routed into state Governments that allocated funds to operating expenses and other short term uses - instead of making spending cuts that are underway now (in some cases). Now, the President is being urged to attempt an additional spending program to do what the first program failed to do - that is create construction related (includes manufacturing of materials) jobs.

The danger of enacting a major short term spending plan is - what if it doesn't work? What is the contingency plan?

My point is this - small steps in a long range plan can cost less and be more productive than throwing large sums of money at a problem.

If you own a home and the electric bill is $200 and you only budgeted$100 - what do you do to solve the problem? Your plan might be to borrow $100 from someone - or charge a credit card? However, if you don't reduce your consumption of electric immediately - you will need to repeat the borrowing or make cuts somewhere else to pay the next bill. Unless you decide to have the electric disconnected - there will be another bill. In economics - for every action there is a reaction. Given a fixed income budget with 100% allocation of funds (no savings) - spending increases in one area require cuts in another area or a supplement to the cash flow. If the currency is devalued - there will be a reaction somewhere else - possibly higher prices on imported goods (such as energy and food). Blog Entries: 3  Quote by WhoWee The danger of enacting a major short term spending plan is - what if it doesn't work? What is the contingency plan? The other alternatives are: Let the market adjust to the new reality or change the dynamics in the economy.  My point is this - small steps in a long range plan can cost less and be more productive than throwing large sums of money at a problem. Well, in some sense this is simply a metaphor you are right there is diminishing marginal return in short term stimulus.  If you own a home and the electric bill is$200 and you only budgeted $100 - what do you do to solve the problem? Your plan might be to borrow$100 from someone - or charge a credit card? However, if you don't reduce your consumption of electric immediately - you will need to repeat the borrowing or make cuts somewhere else to pay the next bill. Unless you decide to have the electric disconnected - there will be another bill.
Of course if you are lucky you get a better job.
 In economics - for every action there is a reaction. Given a fixed income budget with 100% allocation of funds (no savings) - spending increases in one area require cuts in another area or a supplement to the cash flow. If the currency is devalued - there will be a reaction somewhere else - possibly higher prices on imported goods (such as energy and food).
Can America compete with free trade given the relative value of its currency to China? Without inflation trade deficits cannot be sustained very long.

 President Obama is giving a much anticipated speech about jobs tonight to a joint session of Congress. Also today, the most recent jobs report shows first time unemployment claims remained over 400,000 again this week. http://money.cnn.com/2011/09/08/news...fits/index.htm "The number of first-time filers for unemployment benefits rose to 414,000 in the week ended Sept. 3, the Labor Department said Thursday. The number was up 2,000 from a revised 412,000 the week before. "It's just more of the same," said John Canally, investment strategist and economist at LPL Financial. "We're not seeing much hiring, but not any massive layoffs either." Economists typically say initial claims need to fall below 400,000 to reduce the unemployment rate, and they were expecting claims to hit that level in the latest report. Jobless claims have remained around or above 400,000 since early April." While it may be the ideal to leave Job A for a higher paying Job B - in this economy an educated person may need to accept any job they can find - and hold on tight.

 Quote by mheslep I'm curious as to which vetted economic theory states protectionism is the path to full employment.
The US economy from 1700 to 1960.

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 Quote by mheslep I'm curious as to which vetted economic theory states protectionism is the path to full employment.
 Quote by edpell The US economy from 1700 to 1960.
Really? Have a go at the unemployment rate history then:

 Quote by Wiki, Smoot-Hawley The "dutiable tariff rate" peak of 1932 was 59.1%, second only to the 61.7% rate of 1830. .... Unemployment was at 7.8% in 1930 when the Smoot-Hawley tariff was passed, but it jumped to 16.3% in 1931, 24.9% in 1932, and 25.1% in 1933....

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More Americans 'double up' in tough economy
 There's been talk of people sharing homes during the recession, and now the Census Bureau has released the data to prove it. This spring, there were 21.8 million "doubled-up" households across the nation, a 10.7 percent increase from the 19.7 million households in the spring of 2007, the Census Bureau said. That means 18.3 percent of all households were combined households. Much of the increase was the result of adult children who either moved back home during the recession or never left. Among adults between the ages of 25 and 34, some 5.9 million were living with their parents this spring, up from 4.7 million before the recession hit in 2007. That 25 percent increase translated to 14.2 percent of all young adults living with their parents in March, the bureau said.
Rhody...

 Quote by rhody
There were some reports yesterday calling the 25 - 34 year age group forced to move back in with their parents the "boomerang" generation. The comment was made in the discussion about the poverty level for a family of 4 being adjusted to $22,314. Please label this entire post IMO as I don't have a link to one of the interviews - the point was that if the "boomeranger" didn't live with their parents - one or the other or both might qualify as "poor". Recognitions: Gold Member  Quote by WhoWee There were some reports yesterday calling the 25 - 34 year age group forced to move back in with their parents the "boomerang" generation. The comment was made in the discussion about the poverty level for a family of 4 being adjusted to$22,314. Please label this entire post IMO as I don't have a link to one of the interviews - the point was that if the "boomeranger" didn't live with their parents - one or the other or both might qualify as "poor".
WhoWee,

You are correct. I went back and reviewed the link, the information presented is speculative at best, and should be considered the author of the article's opinion, not to be taken as hard fact.

On to today's news:

Why consumers can’t bail out the U.S. economy

 BOSTON (MarketWatch) — The dismal scientists are fond of saying that consumer spending accounts for two-thirds of the U.S. economy. And if that still holds true, the U.S. economy — jobs bill or not — is in for more dismal times. Let us connect the dots: There’s the just-released Census Bureau report noting that median household income has fallen to \$49,445 in 2010, some 7.1% below its peak in 1999. No income equals no spending. Plus, there’s a new white paper suggesting that U.S. households still have far too much debt (and not enough income or liquid assets) to drive the economy in anything more than a modest way. In fact, given the current and foreseeable state of household debt and income, gross domestic product growth over the next few years will likely appear anemic compared to pre-crisis growth rates, according to the BlackRock Investment Institute paper.
Rhody...