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## Economic Recovery

Given that it appears the topic has been somewhat strayed from, I thought I would throw myself at the mercy of almighty mentordom, and repost a post I made in what I would consider a DOA thread just a few minutes ago, as it seems very relevant here:
 Forget The Double Dip, ECRI Sees A Major “Revival In Growth" Dec. 2, 2010 ...... What that means is we can finally put the fears of a double-dip recession to bed, says Economic Cycle Research Institute co-founder Lakshman Achuthan. “In October we were able to rule out this double-dip nightmare scenario,” he says. “We are able to see very clearly, with a good deal of conviction, a revival in growth,” he tells Aaron and Dan in this clip. The improvements are widespread, Achuthan says. * Profit growth and productivity are on the rise. Achuthan says that leads to more hiring and capital investment in equipment. * Housing has stabilized. The outlook may not be rosy, but “it’s not falling off a new cliff,” which means it’s not a drag. * Cheap capital as a result of low interest rates. The private sector continues to create jobs. * Pent-up demand. Thanks to the jump in jobs, people are less afraid of losing their positions, Achuthan suggests. And after two years of saving and worrying, consumers have “frugality fatigue” which is beginning to show in the improvements in holiday shopping data.

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 Quote by brainstorm One person working at a sandwich shop can make sandwiches for hundreds of people eliminated the need for them to make their own sandwich.
i believe this is the basis for what we would call an economy. Everyone specializing in doing something more efficiently than people can do individually. Then we exchange these specialized products. If we take your sandwich example to the other end of the spectrum, should we all start making our own cars? I know people who have, and have done a much better job than Detroit, but it took them years.

Though I do understand your point, and I do understand some peoples frustrations when it appears that we're using public money to, metaphorically speaking, wipe peoples butts.

 Quote by brainstorm If surplus labor-productivity was used to consolidate existing practices into more efficient ones, less and less labor hours would be required to fulfill basic needs and people would get most or at least much of their time back for other pursuits.
This is exactly what has happened, far fewer labor hours are required to fulfill basic needs. The difference is most people want much more than that.
 This is actually what many people believed would happen as a result of mass-production before it became evident that surplus labor hours would get recycled by expanding services, whether for necessity, luxury, or just whim.
You got it right with "luxury". Most people would rather work 8+ hours a day for someone else and live in relative luxury than to work fewer hours at a job, but live poorer.

But I do know someone in particular who just works part time for that very reason. He inherited his house, grows a garden, has chickens, cooks his own meals, washes dishes by hand, etc. He doesn't live rich by any means, but he seems more content than most would be without the standard of living most in the U.S. desire. And he's not even Amish.

But most people would rather take full advantage of the fact that their time is far too valuable to spend it cooking, sewing, washing dishes, etc.

 Quote by OmCheeto i believe this is the basis for what we would call an economy. Everyone specializing in doing something more efficiently than people can do individually. Then we exchange these specialized products. If we take your sandwich example to the other end of the spectrum, should we all start making our own cars? I know people who have, and have done a much better job than Detroit, but it took them years.
Economy just refers generally to labor, productivity, utilization of resources, consumption, etc. Economics occurred before industrialism, and economic activities may still be broadly identified as pre-industrial, industrial, or post-industrial. Many post-industrial economic activities are reminiscent of pre-industrial activities that are made possible by surplus labor liberated by automation and mass-production efficiency gains. Where industry lays-off workers, these workers can be utilized for services such as house-servant, food-service, etc. The question is whether it is economically beneficial to put all these industrial layoffs to work for each other in just any type of service since it creates unnecessary service-dependency and higher expectations for consumption that are simply not possible for everyone to attain when they are service-intensive.

 Though I do understand your point, and I do understand some peoples frustrations when it appears that we're using public money to, metaphorically speaking, wipe peoples butts.
Right, and what's even worse is that valuable resources are being used and wasted. E.g. people are not walking to each other's houses and offices to "wipe their butts." They're driving and seeking levels of compensation that facilitate consumption of excessive energy and other resources. In other words, they expect to get paid for doing little to consume lots.

 Quote by Al68 This is exactly what has happened, far fewer labor hours are required to fulfill basic needs. The difference is most people want much more than that.You got it right with "luxury". Most people would rather work 8+ hours a day for someone else and live in relative luxury than to work fewer hours at a job, but live poorer.
But there's not enough "luxury" for everyone to enjoy it and, even if there was, would it be worth the resource-drain?

 But I do know someone in particular who just works part time for that very reason. He inherited his house, grows a garden, has chickens, cooks his own meals, washes dishes by hand, etc. He doesn't live rich by any means, but he seems more content than most would be without the standard of living most in the U.S. desire. And he's not even Amish.
Technically everyone should be able to live like that since there are enough houses for everyone to inherit one. The reason there aren't is because instead of giving their house to their heir, some people borrow against their house to spend the money and then leave the house to the bank. The bank then has to sell the house to recoup the loan, which initiates the cycle of living on debt.

 But most people would rather take full advantage of the fact that their time is far too valuable to spend it cooking, sewing, washing dishes, etc.
Right, but when either private individuals OR government borrows money to fiscally stimulate the economy, the money these people get for their time ends up having to be repaid by the people who borrowed it. If they voluntarily borrowed it, that is somewhat fairer than if the government extracts repayment from them involuntarily, don't you think? It would make more sense to allow the economy to slow down to a level where it's simply not possible for everyone to make as much money as they want so that people will give up expecting to live a lifestyle that depends on other people going into debt, imo.

What would the economy look like if there was no personal credit and no government borrowing/spending? How many opportunities to get rich would there be? Yet, even if there weren't such opportunities, I still think there would be enough economic productivity and resources available for people to live above the poverty line, with basic food and shelter, and maybe even medical care. The problem is some people would rather thrive than survive, even when it means degrading other people's ability to live a non-poverty debt-free lifestyle. The economy the allows people to live free without going into debt even if they can't get rich is the one I would like to see recover.

 Quote by brainstorm What would the economy look like if there was no personal credit and no government borrowing/spending?
I think the short answer is that the economy would be much stronger, with a higher standard of living in general, if neither individuals nor government could overextend themselves by using too much (unsecured) credit.

Secured debt is completely different, since it results in net positive wealth creation instead of a drain on future wealth creation.

And government borrowing/spending is especially problematic because it uses as collateral an assumed future ability and willingness to confiscate private wealth that hasn't yet been created.
 Recognitions: Gold Member Question for brainstorm: Why does there have to be enough luxury for everyone to enjoy? There are people I know who, quite frankly, do not work and do not deserve the level of luxury that, for example, my parents have. In addition, some levels of work are just worth more than others. There's a reason that we pay doctors a lot more than we pay grocery workers.

 Quote by Al68 I think the short answer is that the economy would be much stronger, with a higher standard of living in general, if neither individuals nor government could overextend themselves by using too much (unsecured) credit. Secured debt is completely different, since it results in net positive wealth creation instead of a drain on future wealth creation.
What's the difference with secured debt?

 And government borrowing/spending is especially problematic because it uses as collateral an assumed future ability and willingness to confiscate private wealth that hasn't yet been created.
Well, you could look at the debt as a potential to fine future abuses of economic prosperity. The government could actually institutionalize a list of fines to repay the debt when they create it.

Still, the problem would remain that the economy would become accustomed to artificial levels of spending, which would make it vulnerable to a future in which this spending was curtailed. It's like if you're used to supplementing your regular income with loans and so you build up a budget based on the total income and then the loans stop (AND you have to start paying them back!)

 Quote by brainstorm What's the difference with secured debt?
The fact that the debt is secured with property that has more value than the debt. A conventional loan to buy a house, for example, does not reduce the net worth of the buyer.
 Well, you could look at the debt as a potential to fine future abuses of economic prosperity.
Not sure what that means, but the assumed future ability of government to confiscate (yet to be created) wealth is what actually provides confidence to lenders (buyers of government securities).

The debt itself, and the way it is planned to be repaid, is the abuse.

 Quote by Al68 The fact that the debt is secured with property that has more value than the debt. A conventional loan to buy a house, for example, does not reduce the net worth of the buyer.
But you still can't control for asset depreciation. It just depends on what the economy does with the fiscal stimulus from the lending. If it is invested in profit-value-added commerce, the economy will heat in the direction of new meltdown boom-bust cycles. What really needs to happen is for real property as well as other kinds of commodities to be traded with very low, if any profit margins and labor rates need to be kept at a level that stimulates widespread fiscal discipline among consumers. It is good to have forms of income security and labor-protection, to the extent that these prevent people from falling into desperate situations where they spend more than necessary to compensate for their hardship, by taking high interest loans, buying overpriced commodities, etc. But generally I think it would be good for the economy to have people be able to afford basic life necessities such as food and shelter without long-term debt. This is because debt produces a one-time windfall revenue for property-sellers, which creates an expectation of high average income in the future as well. This is a recipe for problems as people cannot afford to keep piling onto their long-term debts throughout their life-course.

 Not sure what that means, but the assumed future ability of government to confiscate (yet to be created) wealth is what actually provides confidence to lenders (buyers of government securities).
It means that the government can play an active role in holding risk-takers responsible for the crisis that led to the bailouts by identifying similar behavior and fining it through taxation. So, for example, crisis-creating business deals like house-flipping and other commodity-flipping could be saddled with the burden of repaying the debt and people who hold investments for longer-term would be exempted from repaying the debt.

 The debt itself, and the way it is planned to be repaid, is the abuse.
Yes, but it was an abuse to save the butts of the abusers who causes the meltdown. The meltdown was not caused by bad loans, as some people like to believe because it immunizes them against guilt. It was caused by an overheated market that got overheated in the first place by radical profiteering during the 1990s stock-trading and then similar profiteering in real estate once the stock-boom crashed and people were looking for better investments. Get-rich-quick economies cause crash-and-burn meltdowns. What else?

 Quote by Al68 I think the short answer is that the economy would be much stronger, with a higher standard of living in general, if neither individuals nor government could overextend themselves by using too much (unsecured) credit. Secured debt is completely different, since it results in net positive wealth creation instead of a drain on future wealth creation. And government borrowing/spending is especially problematic because it uses as collateral an assumed future ability and willingness to confiscate private wealth that hasn't yet been created.
This is the concept that EVERY business student understands, but politicians don't - there are no guarantees of future revenue or earnings.

Politicians now talk about $Trillion spending bills as though it's ordinary. Worse yet, they increase spending in the middle of a recession they label as the worst since the Great Depression. For some reason they also believe every dollar spent is "stimulative" - maybe they haven't seen any of the scandal doumentaries on wasted spending? On the other hand, maybe they don't realize their cash flow decreases unless they borrow during these periods? That would be bad (if they don't know IRS collections are down). There isn't a business on the planet that runs in such a way (and stays in business) s typically the business managers are fired (or prosecuted). Admin Still in recovery -  President Barack Obama will fly to California today to meet with three of America's most notable tech CEOs -- Apple's Steve Jobs, Facebook's Mark Zuckerberg, and Google's Eric Schmidt -- presumably to discuss job growth. . . . . . Google and Apple and Facebook have been doing tremendously well, generating a huge amount of wealthy and profits and products people like. But the dirty little secret here is that these companies actually don't create that many jobs. Google has less than 30,000 employees. Apple has 30,000 employees. Facebook just a few thousand total. Meanwhile, Apple's biggest contractor in China -- Foxconn -- has more than a million people working there. So these companies are creating wealth, not jobs here. And in Santa Clara county, the headquarters of all three firms, the unemployment rate is still above 10 percent. . . . . . http://marketplace.publicradio.org/d...ch-executives/ So just start you're own on-line social-networking, advertising service.  Quote by Astronuc Still in recovery - http://marketplace.publicradio.org/d...ch-executives/ So just start you're own on-line social-networking, advertising service. Indeed. This is just one side of the coin. If American's tend to like cheap electronics than this is the means of doing it. Admin Stuck in Phoenix, the Epicenter of Housing Crisis http://finance.yahoo.com/real-estate...is-marketwatch  In metropolitan Phoenix, two-thirds of all residential mortgages are underwater. Of these, some 200,000 are 50% larger than the current market value of the properties. Many homeowners have come to doubt whether they'll ever retrieve their lost equity. In this city of 4 million, the 14th largest in the United States, the median home price is down 53% since the bubble peaked in 2006 to just over$120,000. Only smaller cities such as Las Vegas and Orlando have witnessed equally catastrophic drops. . . . .
"Some local realtors dispute that pessimistic assessment. They point to strong existing home sales in June," but that is at prices well below what the previous owner paid.

 The unexpectedly severe downturn over the last five years shows that nobody really knows the future direction of the housing market. Gary Shilling, a respected forecaster, is predicting that prices could fall another 20% nationally, on top of the 30% decline that has already occurred.
The fundamentals of the economy seem rather poor.
 Although the current recession may have been initiated by the bursting of the housing bubble, I think that it was coming all along. The fact of the matter is that we have too many workers for the number of low-skill jobs that are available. Moreover, these workers do not have anywhere near the skills that the future job markets will demand. As President Clinton pointed out in a TV interview a while ago, there are more than three million high-paying jobs going begging in the US right now. These good jobs require mathematical, technical, and writing skills that today's high school students resolutely refuse to acquire. If your math skills include algebra, spherical trig, and at least an introduction to calculus, then there are jobs out there looking for you. The same is true if you are computer savvy with a solid base in data management. There are jobs looking for you (although you may have to compete with many Asians having the same skill set). Finally, let's say that you are going about your business when you see a problem that you think can be corrected. If you can write a report that describes the problem, its probable origins, how to fix it now, and how to keep it from reoccurring in the future; they you are one in a thousand. If this report is properly spelled, properly punctuated, and grammatically correct, you are one in ten thousand. Lastly, if this report is both brief and readable; then if you don't already have a good job, the fault is yours. What about those of you who are mathematically inept, scientifically uninformed, and not so hot at expressing yourself? All I can say is that I hope you like sleeping under bridges!
 Recognitions: Gold Member Yes the unemployment rate for those with a BA/BS and up is 5.1%, compared to ~9% for the country at large. http://www.usatoday.com/money/econom...ads06_ST_N.htm

 Quote by mheslep Yes the unemployment rate for those with a BA/BS and up is 5.1%, compared to ~9% for the country at large. http://www.usatoday.com/money/econom...ads06_ST_N.htm
Yes. I would hazard that the bulk of those with college degrees who are also unemployed have degrees in fields that--while eminently soul-satisfying and worthy of study--are fields that do not meet the needs of today's markets.

 Million-dollar-and-up homes are the fastest-growing segment of the U.S. foreclosure market, with banks seizing some 335% more such properties last year than they did in 2007.
http://realestate.yahoo.com/promo/5-...-for-sale.html

But more sobering -