What U.S. Economic Recovery? Five Destructive Myths

[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".

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:

http://www.marketwatch.com/story/why-consumers-cant-bail-out-the-us-economy-2011-09-15?pagenumber=2"

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...

 

[klimatos]

And let's not forget the youth-unemployment crisis. There's now a generation of young workers who are in danger of being permanently sidetracked in the labor markets and disconnected from society.

I don't know how it is in your community, but in mine (Northern California) it appears that high school students choose their courses so as to avoid any possible course that might give them a marketable skill. Mathematics, the hard sciences, and English composition are all ignored to concentrate on soft sciences and the arts--not because the students have any real interest in these subjects, but simply because they are less demanding. This does not bode well for their future, but they seem oblivious to that correlation.

 

[daveb]

Yet http://www.examiner.com/political-b...imulus-debt-and-deficits?fb_comment=34407431" piece that claims the stimulus was not a failure insofar as it wasn't enough.

Even some Republican economists and Nobel laureates like Paul Krugman argued that it was too small. Republican economist Mark Zandi, who advised John McCain on economic issues, when asked about the stimulus said, "I think we'd be in a measurably worse place if not for the stimulus. If we had not had the stimulus,.we'd have fewer jobs today than we actually have." Zandi was responding to when John Boehner contented that stimulus spending "has gotten us nowhere." Asked whether he agreed with Boehner, Zandi said "no." "Without the stimulus spending instead of a 9.5% unemployment rate, we'd have an 11.5 % unemployment rate" Zandi insisted. This is a Republican economic advisor, who, regardless of his politics understands modern economics – this is not Rush Limbaugh or Sean Hannity commenting.

 

[rhody]

I don't know how it is in your community, but in mine (Northern California) it appears that high school students choose their courses so as to avoid any possible course that might give them a marketable skill. Mathematics, the hard sciences, and English composition are all ignored to concentrate on soft sciences and the arts--not because the students have any real interest in these subjects, but simply because they are less demanding. This does not bode well for their future, but they seem oblivious to that correlation.

klimatos,

I have seen the same here and it continues into college. I have a daughter who graduated last year and I was astounded to see the numbers of students coming out with computer science degrees, math, etc... It was about 80% less in the "hard science disciplines" than when I attended. Your assessment is consistent with mine and IMO does not bode well for the future of our country.

Rhody...

 

[Hlafordlaes]

Worse here in Spain: 36% of young people never finish high school at all. Guess they were thinking they could make bucks in the now vanished construction industry. Good luck now.

@daveb: Few seem to understand aggregate demand and the multiplier effect, the rest seem to find denying reality altogether a nice contact sport. Probably same group who took basket weaving and motorcycle appreciation courses in high school.

 

[mheslep]

Yet http://www.examiner.com/political-b...imulus-debt-and-deficits?fb_comment=34407431" piece that claims the stimulus was not a failure insofar as it wasn't enough.

...Even some Republican economists and Nobel laureates like Paul Krugman argued that it was too small. Republican economist Mark Zandi,...

Yet another Zandi/Krugman rehash maybe. Mark Zandi is not a 'Republican economist'. He freely acknowledges being a registered Democrat, holds markedly liberal views, is a strong Keynesian. He was indeed on contract to deliver some basic econ data to the McCain campaign, but not policy advice. That's enough to give reporters leave to cite him as a Republican economist, giving the appearance of 'balance' to story on economics after putting in a hysterical Krugman blurb.
http://www.commentarymagazine.com/article/press-man-the-prisoner-of-zandi/

 

[mheslep]

There is a large and growing list of literature from working economists that suggest fiscal stimulus is ineffective.

http://www.volkerwieland.com/docs/CCTW%20Mar%202.pdf"
John F. Cogan, Tobias Cwik, John B. Taylor, Volker Wieland*
Journal of Economic Dynamics and Control, February 2009
http://www.voxeu.org/index.php?q=node/3949"

...Our analysis suggests government spending quickly crowds out private consumption and investment, because forward-looking households and firms will consider eventual increases in future taxes, government debt, and interest rates...

"[URL Empirical Analysis of the Revival of Fiscal Activism in the 2000s
[/URL]

Conclusion
In sum, this empirical examination of the direct effects of the three countercyclical
stimulus packages of the 2000s indicates that they did not have a positive effect on consumption and government purchases, and thus did not counter the decline in investment during the recessions as the basic Keynesian textbook model would suggest. Individuals and families largely saved the transfers and tax rebates. The federal government increased purchases, but by only an immaterial amount. State and local governments used the stimulus grants to reduce their net borrowing (largely by acquiring more financial assets) rather than to increase expenditures, and they shifted expenditures away from purchases toward transfers.

http://faculty.chicagobooth.edu/john.cochrane/research/papers/fiscal2.htm"

The central question is whether fiscal stimulus can do anything to raise the level of output. The question is not whether the “multiplier” exceeds one – whether deficit spending raises output by more than the value of that spending. The baseline question is whether the multiplier exceeds zero.

Some 'Keynesian' criticism is http://thinkmarkets.wordpress.com/2009/01/25/keynes-as-public-works-skeptic/"

Organized public works, at home and abroad, may be the right cure for a chronic tendency to a deficiency of effective demand. But they are not capable of sufficiently rapid organisation (and above all cannot be reversed or undone at a later date), to be the most serviceable instrument for the prevention of the trade cycle.

 

[rhody]

Finally, some potential good news to home owners who are attempting to sell in a troubled economy, something to think about.

I have to admit, this is creative.

http://www.marketwatch.com/story/ho...link=MW_GoogleNews&google_editors_picks=true"

Rhody...

 

[WhoWee]

How does this man have time for world travel, what is the purpose and what does it cost? After reading this I thought of the old term "the blind leading the blind".

http://news.yahoo.com/geithner-us-not-lecturing-europe-debt-103020729.html

"WROCLAW, Poland (AP) — U.S. Treasury Secretary Timothy Geithner has told eurozone finance officials the U.S. is not trying to lecture them on their debt crisis."

While he's not trying to lecture them - he might have some advice?http://news.yahoo.com/geithner-urge-bigger-efsf-rapid-action-source-154859873.html

"Euro zone leaders agreed in July to give the 440 billion euro ($601 billion) European Financial Stability Facility (EFSF) the right to intervene on bond markets, extend credit lines to governments and fund the recapitalization of banks.

Geithner will take part in an informal meeting of EU finance ministers on a one-day trip to the Polish city of Wroclaw on Friday, amid growing U.S. concern over the single currency bloc's inability to put an end to the sovereign debt crisis.

He is likely to tell the ministers that they should consider increasing the size of the EFSF to equip it better for the needs of potential bank recapitalization.

"He will probably tell Germany to give up its resistance to an increase in the size of the EFSF," the source said.

A well connected fund source told Reuters Geithner had been pushing for a solution for European banks along the lines of the TARP program in the United States, but had not made much headway."

 

[rhody]

This story puts a human face on a Greece's slow economic downward spiral,

http://online.wsj.com/article/SB100...8261061694524.html?google_editors_picks=true"

An honorable hard working man turned to desparation through no direct fault of his own.
I had never heard of this technique used by banks (domestic or as is the case here foreign) before either, at least not till reading this story:

Small businesses struggled with cash shortages because they had to pay their overhead when due, but wait months for hard cash from customers. Mr. Petrakis managed the same way other small entrepreneurs did: To get money quickly, he took his customers' postdated checks to banks and sold them at a discount.

If he had a check for €1,000 that couldn't be cashed for five months, a bank would give him €800 right away, then another €100 on the date the check became cashable, his lawyer, Aggelos Zervos, says. The bank would keep the remaining €100.

Could a scenario like the one portayed in this article happen, here in the U.S. ? If so, why, and if not, why not ?

Rhody...

 

[WhoWee]

This story puts a human face on a Greece's slow economic downward spiral,

http://online.wsj.com/article/SB100...8261061694524.html?google_editors_picks=true"

An honorable hard working man turned to desparation through no direct fault of his own.
I had never heard of this technique used by banks (domestic or as is the case here foreign) before either, at least not till reading this story:



Could a scenario like the one portayed in this article happen, here in the U.S. ? If so, why, and if not, why not ?

Rhody...

Factoring is a common practice in the US.
http://www.businessfinance.com/factoring-receivable.htm

Smaller retail merchants use their merchant accounts.
http://expressfinancing.americanexp...html?extlink=ps--G_-_P_-_C_-_Merchant_-_Loans

For individuals - there are "pay day" loans:
http://www.advanceamerica.net/payday-loans

 

[mheslep]

This story puts a human face on a Greece's slow economic downward spiral,

...

Could a scenario like the one portayed in this article happen, here in the U.S. ? If so, why, and if not, why not ?

Rhody...

Could happen, and does, everywhere: see credit cards. That's a ~20% loan the bank gave the guy.

 

[mheslep]

This story puts a human face on a Greece's slow economic downward spiral,

http://online.wsj.com/article/SB100...8261061694524.html?google_editors_picks=true"

An honorable hard working man turned to desparation through no direct fault of his own.
...

Greece's government and protected bureaucracy is where my anger goes with this story. Same WSJ issue:

http://online.wsj.com/article_email/SB10001424053111904194604576581011334285814-lMyQjAxMTAxMDEwOTExNDkyWj.html?mod=wsj_share_email

"The present government has done absolutely nothing during the last 12 months to speed up privatizations, reduce the public sector or open up closed professions," Athanasios Papandropoulos, a leading economic analyst, told me recently in an interview. "In these 12 months it has not fired even one civil servant. The only thing it is doing is trying to tax the private sector out of existence.
...
"Whereas more than 1,000 Greeks were losing their jobs in the private sector every day in August, the government was assuring civil servants with lifetime tenure that their job privileges were not in danger."

 

[rhody]

A ray of hope for young college graduates who choose to be in the following fields: Finance, Medical Assistant, Network Administration.

http://www.usnewsuniversitydirector...t-you-hired-right-away_11401.aspx?mcid=52491"

For graduates in these fields who have had no luck finding jobs, here is your chance to debunk this article.

Rhody...

 

[AlephZero]

Could a scenario like the one portayed in this article happen, here in the U.S. ? If so, why, and if not, why not ?

The part of the story that you quoted about discounting (or factoring) bills has been a standard (and perfectly respectable) business practice for hundreds of years, except that normally when you "sell" the bill to the factoring company or discount house (the bank, in your quote) they take over the responsibility of collecting the debt directly from your customer, and they also take the risk that they can't collect it. The 10% discount on the bill is your "insurance payment" for transferring the risk to them.

Financial fraud isn't a new invention, either.

 

[rhody]

http://www.usatoday.com/money/econo...ucks-jobs-for-usa-loans-donations/50641312/1"

Starting Nov. 1, Starbucks will collect donations of $5 or more from customers to stimulate U.S. job growth through its "Jobs for USA" program. The Seattle-based coffee chain is collaborating with the Opportunity Finance Network, a nonprofit that works with nearly 200 community development financial institutions to provide loans to small businesses and community groups.

Starbucks says 100% of donations will go toward loans for companies and organizations that can add jobs or stem job losses.

For any contribution 100% voluntary, I am all for. I have a problem when the government, state, local, or federal mandates a tax or fee and you have no choice but to pay it.

Rhody...

 

[MrNerd]

http://www.usatoday.com/money/econo...ucks-jobs-for-usa-loans-donations/50641312/1"

For any contribution 100% voluntary, I am all for. I have a problem when the government, state, local, or federal mandates a tax or fee and you have no choice but to pay it.

Rhody...

I agree, the government forces us to pay too many taxes that we don't want. I think of it like the greatest racketeering scam ever. Pay up or go to jail. However, I admit that the government also does a fair amount of good, too, with the money it collects(and doesn't waste). But I still don't want to pay for some taxes that I don't even want the effects of. I suppose it's hypocritical to say this before I even get a first job(I'm beginning to resent the world from my frustration), so I can't really say I pay too many taxes myself.

 

[rhody]

Wow,

http://www.latimes.com/news/nationw...hdakota-20110928,0,2405433.story?track=icymi"

This state epitomizes a problem the Obama administration may face even if it is able to turn the economy around by 2012: People have suffered in this recession, and even when back on their feet, they have long memories of what they lost along the way.

and

But Williams is losing his $1-million home in Montana to foreclosure, and spent his first few months in North Dakota camped out in a tiny RV with his family, going to the bathroom in a bucket and living without running water.

"We're starting over again at 60, and we're adaptable. But our hopes and dreams got washed by the wayside," he said, as he fed his grandsons carrots and potatoes in his kitchen, where he and his wife sleep on a foldout couch each night. Light bulbs hang from the ceiling near exposed sockets, and the yellow, peeling walls are stuffed with sacks of fiberglass for insulation.

Every incumbent should read this article, then plan accordingly. It's sink or swim time...

Rhody...

 

[mheslep]

Wow,

North Dakota isn't feeling the slump...

http://online.wsj.com/article/SB10001424052970204226204576602524023932438.html?KEYWORDS=hamm"

...[Oil company CEO]Mr. Hamm believes that if Mr. Obama truly wants more job creation, he should study North Dakota, the state with the lowest unemployment rate in the nation at 3.5%. He swears that number is overstated: "We can't find any unemployed people up there. The state has 18,000 unfilled jobs," Mr. Hamm insists. "And these are jobs that pay $60,000 to $80,000 a year." The economy is expanding so fast that North Dakota has a housing shortage.

...But Williams is losing his $1-million home in Montana to foreclosure,...

Million dollar home? That's probably two million on the coasts.

Every incumbent should read this article, then plan accordingly. It's sink or swim time...

Plan for what? Who's sinking in this story? Voters or incumbents? Should the incumbents plan to fix the problems of the million dollar home owners by imposing on everyone else? If there is an plan from the current administration, perhaps it is to look for strong job growth and harras business there:

A few months ago the Obama Justice Department brought charges against Continental and six other oil companies in North Dakota for causing the death of 28 migratory birds, in violation of the Migratory Bird Act. Continental's crime was killing one bird "the size of a sparrow" in its oil pits. The charges carry criminal penalties of up to six months in jail. "It's not even a rare bird. There're jillions of them," he explains. He says that "people in North Dakota are really outraged by these legal actions," which he views as "completely discriminatory" because the feds have rarely if ever prosecuted the Obama administration's beloved wind industry, which kills hundreds of thousands of birds each year.

Question: Do people imagine some incumbent politician made a 'plan' for the economic boom enjoyed by N. Dakota, or is more likely that tens of thousands of motivated people like Williams, some of them even rich, made the N. Dakota economy what it currently is?

 

[rhody]

Sobering news...

This does not bode well for the Greeks, according to the article, the Government only has funds to keep going to mid November.

http://content.usatoday.com/communities/ondeadline/post/2011/10/greece-paralyzed-by-24-hour-strike-by-civil-servants/1"

A nationwide strike by Greek civil servants to protest ever steeper austerity measures paralyzed the country today, bringing transport to a halt and grounding all flights.

Teachers and lawyers joined the work stoppage and even hospitals were running only on emergency staff, the Associated Press reports.

and

Greek civil servant and trade unionist Tiana Andreou told the BBC that people's lives hav been ruined by the austerity measures and that unions "have decided that we're going to stop this."

Rhody...

 

[mheslep]

Sobering news...

This does not bode well for the Greeks, according to the article, the Government only has funds to keep going to mid November.

http://content.usatoday.com/communities/ondeadline/post/2011/10/greece-paralyzed-by-24-hour-strike-by-civil-servants/1"
:

Let me guess, the striking civil servants will be paid while on strike.

...men and women shouted "traitors" at riot police in central Athens while a crowd of younger protesters chanted "cops, pigs, murderers."

Sure. It is the protesters that set fire to a bank, killing a pregnant woman so of course it is the police that murder.

 

[WhoWee]

I've been listening to news analysis day and night regarding the economy. Regardless of the channel - the question asked is (basically) "what will the Government do about this problem?". Perhaps the question asked should be "what have Government(s) done that contributed to these problems - what can be undone"?.

 

[John Creighto]

I've been listening to news analysis day and night regarding the economy. Regardless of the channel - the question asked is (basically) "what will the Government do about this problem?". Perhaps the question asked should be "what have Government(s) done that contributed to these problems - what can be undone"?.

For once I agree with you.

 

[rhody]

I like stories like this:

http://money.cnn.com/galleries/2011...neurs_under_25.fortune/index.html?iid=L_Jump"
From the Ooshma Garg review (Turbo, take notice...)

Her second and current venture, Gobble, connects customers with a network of chefs (at varying levels of expertise) to secure home-cooked, deliverable meals. Garg's interest in creating the company stemmed from her own dietary decline. "Starting [Anapata], my eating habits went down the drain," she explains. When her parents suggested she search for home-cooked meals in the Bay Area, Garg put an ad on Craigslist, asking for a home-cooked meal for six to eight dollars -- and got enough audition dishes to eat free for a month.

Rhody...

 

[WhoWee]

I've posted previously regarding the special medical benefits provided to Medicare eligible persons in Puerto Rico - this article discusses Social Security Disability.

my bold

http://www.nationaljournal.com/budget/wsj-state-flexibility-pushing-disability-program-to-insolvency-20110322

"The Social Security Disability Insurance program is set to run out of money in four to seven years in part because states have a lot of discretion in deterimining eligibility, the Wall Street Journal reports.
The story highlights the case of Puerto Rico, which has an acceptance rate four percentage points higher than the most generous U.S. states. Nine of the top 10 U.S. zip codes for disabled workers getting benefits are in Puerto Rico.

On its current trajectory, the disability insurance program -- created during the Eisenhower years -- would be the first major federal benefit program to run out of money."

 

[John Creighto]

I've posted previously regarding the special medical benefits provided to Medicare eligible persons in Puerto Rico - this article discusses Social Security Disability.

my bold

http://www.nationaljournal.com/budget/wsj-state-flexibility-pushing-disability-program-to-insolvency-20110322

"The Social Security Disability Insurance program is set to run out of money in four to seven years in part because states have a lot of discretion in deterimining eligibility, the Wall Street Journal reports.
The story highlights the case of Puerto Rico, which has an acceptance rate four percentage points higher than the most generous U.S. states. Nine of the top 10 U.S. zip codes for disabled workers getting benefits are in Puerto Rico.

On its current trajectory, the disability insurance program -- created during the Eisenhower years -- would be the first major federal benefit program to run out of money."

My understanding is that raising the contribution cap would make the fund self sustaining.

 

[WhoWee]

My understanding is that raising the contribution cap would make the fund self sustaining.

Are you comfortable that "Nine of the top 10 U.S. zip codes for disabled workers getting benefits are in Puerto Rico"? Increasing the contribution cap will fix the Social Security system - the Disability side is now expanding very fast and covers younger (20's, 30's, 40's, and 50's - not just 65+) age groups that will be covered for much longer time period.

 

[Astronuc]

October 18, 2011, 8:48 pm Investment Banking, NYTimes
Goldman Loss Offers a Bad Omen for Wall Street
http://dealbook.nytimes.com/2011/10/18/goldman-loss-offers-a-bad-omen-for-wall-street/

Wall Street is feeling the pinch. Last week, JPMorgan Chase reported that earnings dropped by 4 percent in the latest period. Both Bank of America and Citigroup booked banner profits. But much of those results were attributed to one-time accounting gains, rather than improved fundamentals.

Goldman, which has been known for its prowess in trading, has found itself buffeted by the choppy markets and economic turmoil. While the firm posted decent results in equity trading and investment management, it lost nearly $3 billion on its investments in stocks and bonds, more than offsetting the pockets of strength.

http://dealbook.nytimes.com/2011/10/19/morgan-stanley-posts-2-15-billion-profit/

Morgan Stanley Posts $2.15 Billion Profit Morgan Stanley, buoyed by solid performances in all its core divisions and a one-time accounting gain, announced third-quarter earnings of $2.15 billion, compared with a loss of $91 million a year ago.

http://dealbook.nytimes.com/2011/10/19/blackrock-earnings-fall-3-to-521-million/

BlackRock Earnings Fall 3%, to $521 Million BlackRock said that its third-quarter profit fell 3 percent, as the world's largest asset manager battled a volatile stock market and an anemic economic recovery.

 

[WhoWee]

I think this story might help explain why the economy isn't getting any better - even though Washington has spent at record levels. my bold

http://www.foxnews.com/politics/2011/10/19/reid-private-sector-jobs-have-been-doing-just-fine/

""The massive layoffs we have had in America today, of course, are rooted in the last administration, and it is very clear that private sector jobs are doing just fine. It's the public sector jobs where we have lost huge numbers, and that's what this legislation is all about," he said."

If the Majority Leader of the US Senate believes what he says on the floor of the Senate - we might never recover (IMO).

*****

Worse yet, unemployment in Nevada - Reid's home state is the highest in the nation. my bold

http://www.lasvegassun.com/news/2011/oct/18/nevada-bucks-trend/

"The Tax Foundation, in a study released Monday, says states routinely cut unemployment taxes to business during good economic times and raised them in bad times.

The state Employment Security Council voted this year to freeze the average tax rate for the 56,000 businesses at 2 percent assessed against an average salary of $26,400 for next year.

Council Chairman Paul Havas said raising unemployment taxes in bad times “is not a religion.” He said the state has done it in the past. But this time the state experienced the highest foreclosure rate in the nation and the highest unemployment rate.

“We work to preserve the lowest tax rate in the nation,” said Havas, chairman of the council for 36 years. That encourages employers to do more hiring.

The study showed Nevada had the 35th lowest tax rate among the 51 states in 2010. And the weekly payments to the unemployed were 18th highest in the nation.

Nevada has borrowed $736 million from the federal government to make the jobless payments. It is one of 34 states that got a loan from the government. And it will probably borrow more during this economic downturn.

The foundation said however Nevada was only one of 15 states that had an adequate reserve to make more than one year in payments going into the current economic downturn.

Nevada has had the highest unemployment rate among the states at more than 13 percent. But it is one of 18 states that have not imposed a solvency tax on employers. Havas said Nevada has preserved its system and “we don’t have to have a solvency tax.”"
****

If the Senator Majority Leader - from the state with the highest unemployment in the country - thinks "it is very clear that private sector jobs are doing just fine" - Harry Reid is either absolutely clueless or has other reasons to push for funding of more public sector (union?) jobs. Again - IMO.

 

[Astronuc]

I think this story might help explain why the economy isn't getting any better - even though Washington has spent at record levels. my bold
. . . .
If the Senator Majority Leader - from the state with the highest unemployment in the country - thinks "it is very clear that private sector jobs are doing just fine" - Harry Reid is either absolutely clueless or has other reasons to push for funding of more public sector (union?) jobs. Again - IMO.

There is also the little matter of the $billions spent by US govt in Nevada for the Yucca Mountain spent fuel repository. If the project is terminated, I don't suppose Nevada would return the money to the Treasury.

"$13.5 billion that has already spent on the project; . . ."
Ref: http://www.world-nuclear-news.org/newsarticle.aspx?id=20196
Yucca Mountain cost estimate rises to $96 billion (06 August 2008)

but then, a 17 months earlier:

Yucca Mountain costs put at $26.9 billion
19 March 2007
http://www.world-nuclear-news.org/newsarticle.aspx?id=13078&LangType=2057

 

[WhoWee]

There is also the little matter of the $billions spent by US govt in Nevada for the Yucca Mountain spent fuel repository. If the project is terminated, I don't suppose Nevada would return the money to the Treasury.

"$13.5 billion that has already spent on the project; . . ."
Ref: http://www.world-nuclear-news.org/newsarticle.aspx?id=20196
Yucca Mountain cost estimate rises to $96 billion (06 August 2008)

but then, a 17 months earlier:

Yucca Mountain costs put at $26.9 billion
19 March 2007
http://www.world-nuclear-news.org/newsarticle.aspx?id=13078&LangType=2057

This debate does not seem reasonable to me. The question isn't whether to operate nuclear sites or not - waste already exists and must be stored somewhere. This site was deemed safest and funds are already allocated.

On the fairness side of the equation, don't we all have some risk? Personally, I'm located at a point on the proposed delivery route (in link) that features 2 rail and 1 truck route. The chance of something happening in my backyard is probably greater than if I lived in one of the states surrounding the Yucca site.

 

[rhody]

The hand picked http://www.washingtonpost.com/busin...L_story.html?wprss&google_editors_picks=true" on deficit reduction is at loggerheads and is raising red flags on Capitol Hill.

Though the committee’s 12 members have been meeting for nearly two months in closed-door sessions, lawmakers, aides and others involved in the process say they have yet to reach consensus on the most basic elements of a plan to restrain government borrowing

This is my humble opinion only. We are headed for the perfect storm, all the signs are there, add the inability to come up with a plan by the supercommittee to the list, Time is running out folks. I am concerned.

Rhody...

 

[WhoWee]

The hand picked http://www.washingtonpost.com/busin...L_story.html?wprss&google_editors_picks=true" on deficit reduction is at loggerheads and is raising red flags on Capitol Hill.


This is my humble opinion only. We are headed for the perfect storm, all the signs are there, add the inability to come up with a plan by the supercommittee to the list, Time is running out folks. I am concerned.

Rhody...

Personally, I think the deal was made months ago to impose the drastic cuts - the "super committee" is smoke and mirrors and diverts blame - why else would the drastic cuts be set in stone?

 

[rhody]

http://www.csmonitor.com/Business/2...op-for-Americans-standard-of-living/(page)/3"

The average individual now has $1,315 less in disposable income than he or she did three years ago at the onset of the Great Recession – even though the recession ended, technically speaking, in mid-2009

and

...inflation eroding people's buying power by 3.25 percent since mid-2008

and

Income loss is hitting the middle class hard, especially in communities where manufacturing facilities have closed. When those jobs are gone, many workers have ended up in service-sector jobs that pay less.

and

The bulk of that decline is in real estate, which has lost $4.7 trillion in value, or 22 percent, since 2007.

Given this reality, I have contemplated this thought for some time. I am sure it has not been discussed in this thread before. I will pose it as a question.

Would you rather have an economy where deflation set the prices of goods/services/value of the dollar, or the opposite, inflation ?

Given today's circumstances, if I had to choose, I would pick deflation.

I realize this would have a ripple effect based on foreign currency value versus the dollar and that opens a whole other can or worms.

I remember living through the late 70's and with inflation at more than 18% how impressed I was at getting a 21% raise on my first real job. I shouldn't have been, when adjusted for inflation that was reduced to 3%. A bushel of money looks great until you realize what little you can buy with it.

Rhody...

 

[WhoWee]

http://www.csmonitor.com/Business/2...op-for-Americans-standard-of-living/(page)/3"

Given this reality, I have contemplated this thought for some time. I am sure it has not been discussed in this thread before. I will pose it as a question.

Would you rather have an economy where deflation set the prices of goods/services/value of the dollar, or the opposite, inflation ?

Given today's circumstances, if I had to choose, I would pick deflation.

I realize this would have a ripple effect based on foreign currency value sversus the dollar and that opens a whole other can or worms.

I remember living through the late 70's and with inflation at more than 18% how impressed I was at getting a 21% raise on my first real job. I shouldn't have been, when adjusted for inflation that was reduced to 3%. A bushel of money looks great until you realize what little you can buy with it.

Rhody...

Something very important from your link Rhody: "The bulk of that decline is in real estate, which has lost $4.7 trillion in value, or 22 percent, since 2007."

The decline in real estate values has also impacted small business. Can you imagine if you used your home to borrow money for your business or signed a lease at the top of the real estate bubble? The small business owners that did these things might find themselves locked-in to bubble rates for 10 to 20 years.

 

[John Creighto]

http://www.csmonitor.com/Business/2...op-for-Americans-standard-of-living/(page)/3"

Given this reality, I have contemplated this thought for some time. I am sure it has not been discussed in this thread before. I will pose it as a question.

Would you rather have an economy where deflation set the prices of goods/services/value of the dollar, or the opposite, inflation ?

Given today's circumstances, if I had to choose, I would pick deflation.

I realize this would have a ripple effect based on foreign currency value sversus the dollar and that opens a whole other can or worms.

I remember living through the late 70's and with inflation at more than 18% how impressed I was at getting a 21% raise on my first real job. I shouldn't have been, when adjusted for inflation that was reduced to 3%. A bushel of money looks great until you realize what little you can buy with it.

Rhody...

I’m okay, with a small amount of inflation provided the money is distributed so that debt growth is balanced by demand growth. In other words: inflation created by an artificial expansion of credit is bad but if consumers have the buying power to sustain the debts then it is okay. There must be a balance between the two types of injections of new money into the economy. The first type of injection is through the finical sector via loans. The other type of injection is through direct stimulus efforts via government spending. The government spending can either be though a negative income tax or through government services/projects. Negative income taxes are the preferred option because there is a much lower administrative cost.

When there is inflation without any corresponding growth in the buying power of the bottom half of the population then this clearly erodes wages and creates disparity. Consequently this type of inflation is bad and such imbalances are periodically corrected periodically though deflation. When the government injects large quantities of cheap money into the economy though the finical sector it becomes possible for the financial sector to make money on bad business fundamentals. Such wealth misallocation due to bad fundamentals is the reason that prior to the downturn the finical sector made up 40% of the economy.

As an example of how money could be made though bad economic fundamentals, consider that if a bank receives money at an interest rate lower than inflation from the Federal Reserve, then a bank can just stock pile commodities such as gold and earn a profit simply on inflation. For another example consider a large department store with access to cheap money that can simply build up their inventories and wait until the price is right to sell their goods putting small players who don’t have the same access to credit at a large disadvantage.

I cannot say that cheap money is allocated as badly as in my examples but we do know that prior to this last down turn there were plenty of bad loans created which is clearly a sign of a large misallocation of wealth due to the subsidization of credit though monetary policy.

 

[russ_watters]

http://www.csmonitor.com/Business/2...op-for-Americans-standard-of-living/(page)/3"

Given this reality, I have contemplated this thought for some time. I am sure it has not been discussed in this thread before. I will pose it as a question.

Would you rather have an economy where deflation set the prices of goods/services/value of the dollar, or the opposite, inflation ?

Given today's circumstances, if I had to choose, I would pick deflation.

Ok...

I remember living through the late 70's and with inflation at more than 18% how impressed I was at getting a 21% raise on my first real job. I shouldn't have been, when adjusted for inflation that was reduced to 3%. A bushel of money looks great until you realize what little you can buy with it.

Didn't you just argue against your own point? Yes, employers will adjust their pay levels to compensate for inflation and/or deflation.

 

[rhody]

Ok... Didn't you just argue against your own point? Yes, employers will adjust their pay levels to compensate for inflation and/or deflation.

I don't believe so Russ, I said I would rather have my smaller buying power buy more with products devalued accordingly, versus having inflation (10 - 20%) to deal with. I have no control over what the Fed, Business, the banks, or foreign governments do in the same regime.

I played straw man to stimulate a logical discussion. and it is working, a good thing IMHO.

Rhody...

 

[WhoWee]

I played straw man to stimulate a logical discussion. and it is working, a good thing IMHO.

Rhody...

I'll again cite this important point from your post:"The bulk of that decline is in real estate, which has lost $4.7 trillion in value, or 22 percent, since 2007."

Now a question - should the Government adjust Section 8 payments downward to compensate for the drop in real estate values?

 

[rhody]

I'll again cite this important point from your post:"The bulk of that decline is in real estate, which has lost $4.7 trillion in value, or 22 percent, since 2007."

Now a question - should the Government adjust Section 8 payments downward to compensate for the drop in real estate values?

Doesn't seem unreasonable, does it to you ? As long as the rents that go with it drop too. The Democrats will scream bloody murder though, that is a given.

Rhody...

 

[WhoWee]

Doesn't seem unreasonable, does it to you ? As long as the rents that go with it drop too. The Democrats will scream bloody murder though, that is a given.

Rhody...

I'd like to see the entire program re-evaluated - that's another very long discussion.

My point is focused on the real estate market - it hasn't hit bottom yet and any attempts to support prices from correcting can slow overall recovery.

As discussed up-thread, in some areas of the country banks are donating foreclosed houses to land banks or otherwise demolishing them to eliminate inventory and avoid paying taxes and insurance. In other areas, there is a feeding frenzy among bargain shoppers - many looking for properties to use in participation of Section 8 programs - where they are guaranteed significant long term returns.

Here's an over-simplified summary of the problem. The value of the rent voucher is based on the income of the beneficiaries - not the property market value or actual cost. The rent charged must be reasonable in that it's comparable to similar units or unassisted housing units. If comparable houses are renting for an average $600 per month and you purchase a foreclosure for $10,000 in the area then invest $10,000 (maybe pick up a green credit?) to bring it to standards - you'll realize a $7,200 per year cash flow from a $20,000 investment - assume $2,200 for taxes, insurance, and maintenance - pre-tax (all or part of the $10,000 might be considered a current year maintenance expense) cash flow +$5,000 or 25%.

http://www.bankforeclosuressale.com/list/oh/county035/cleveland.html

 

[gravenewworld]

Exactly, WHAT economic recovery? This recession isn't like the recessions of past, it is more than just due to down consumer consumption. This recession represents the culmination of years and years of terrible financial policies and a paradigm shift in world history. We are watching the end of American dominance. The US is going the way of England post 1900. The US will never fully recover. As a person in STEM myself, after I graduate from grad school, I'm definitely going to look globally for a job and look to a country where they are heavily investing in research and development. According to the CIA world factbook, the US economy is already a majority service economy. What's the point of staying here then as a future engineer? After the dust settles the only jobs outside of health care will probably be in retail, food preparation/restaurants, or related to tourism. We're toast .

 

[mheslep]

... As a person in STEM myself, after I graduate from grad school, I'm definitely going to look globally for a job and look to a country where they are heavily investing in research and development. ...

Which country is it that you suspect spends more on R & D?
http://en.wikipedia.org/wiki/List_of_countries_by_research_and_development_spending

 

[gravenewworld]

Which country is it that you suspect spends more on R & D?
http://en.wikipedia.org/wiki/List_of_countries_by_research_and_development_spending

Those stats say nothing about the future or changes in R and D spending either. They are only a snapshot of the a static moment in time. National rates of savings are intrinsically linked to investment expenditures over the long run. After Asian economies went under in 1997 and were subsequently bailed out by the IMF, they were forced to adopt strict fiscal measures. After Brazil melted down in the 1990s during its hyperinflation crisis they too adopted strict financial measures. It's the reason why both of those regions have been shielded from much of the current global economic meltdown and also why banks as well as the governments in those regions have hordes of cash and have more conservative investments. Meanwhile, here in the US, our entire economy has melted down after we deregulated huge financial institutions which failed after gambling on mortgage derivatives. It has plunged the US economy into a severe recession that has also led to a huge loss of government tax receipts. It's only a matter of time before the US is forced to adopt severe fiscal contraints which will add another blow to R and D expenditure, not to mention also the national rate of savings in the US has been atrocious for a long time.

Brazil and countries in Asia have vast reserves of cash in savings and are now using it to invest. Sure, the US may remain on top for now, but by the time I get out and need to look for a long term job that can last for more than 5 years, it will very likely be a different story.

 

[mheslep]

Those stats say nothing about the future or changes in R and D spending either. They are only a snapshot of the a static moment in time. National rates of savings are intrinsically linked to investment expenditures over the long run. ...

Brazil and countries in Asia have vast reserves of cash in savings and using it to invest. Sure, the US may remain on top for now, but by the time I get out and need to look for a long term job that can last for more than 5 years, it will very likely be a different story.

Well I'd reserve the term "vast" for only the cash reserves of US companies. But ok, what do you imagine is going on with the personal savings rate in the US? Going up or down in the last few years? Furthermore, do you think the best way to avoid another recession (official) is encourage more spending or more saving?

 

[John Creighto]

Well I'd reserve the term "vast" for only the cash reserves of US companies. But ok, what do you imagine is going on with the personal savings rate in the US? Going up or down in the last few years? Furthermore, do you think the best way to avoid another recession (official) is encourage more spending or more saving?

The amount of saving should be matched by the investment in industry. The growth in industrial capacity should match the growth in demand. Otherwise there will be imbalances and these imbalances will need to be corrected.

 

[JonDE]

Exactly, WHAT economic recovery? This recession isn't like the recessions of past, it is more than just due to down consumer consumption. This recession represents the culmination of years and years of terrible financial policies and a paradigm shift in world history. We are watching the end of American dominance. The US is going the way of England post 1900. The US will never fully recover. As a person in STEM myself, after I graduate from grad school, I'm definitely going to look globally for a job and look to a country where they are heavily investing in research and development. According to the CIA world factbook, the US economy is already a majority service economy. What's the point of staying here then as a future engineer? After the dust settles the only jobs outside of health care will probably be in retail, food preparation/restaurants, or related to tourism. We're toast .

First you need to realize that there is nothing wrong with America being largely a service based economy. This is more due to our technology and investment in it. I'll give you an example.
In 2007 China produced 2.8B tons of coal first in the world, America was 2nd with 1.1B tons, both were net exports and make up over half of all coal mined in the world. China, produced roughly 2.5X as much as the US does, but look deeper at the number. China employs 5,000,000 people in their coal industry, the US, less then 200,000, less then 100k of those are actually miners. So they produce 2.5X as much but employ about 25X as many people, so American coal miners are 10X more efficient then there Chinese counterparts. In America we still produce a ton of stuff, it just requires less and less people to do it ever year.

 

[John Creighto]

China employs 5,000,000 people in their coal industry, the US, less then 200,000, less then 100k of those are actually miners. So they produce 2.5X as much but employ about 25X as many people, so American coal miners are 10X more efficient then there Chinese counterparts. In America we still produce a ton of stuff, it just requires less and less people to do it ever year.

So if things can be produced so cheaply why is it that goods are so expensive for so many? If so much more value is being created who is enjoying the bounty of all this production?

The graph supporting your claim is striking
[URL]http://static.seekingalpha.com/uploads/2009/8/23/saupload_mfg2.jpg[/URL]
http://seekingalpha.com/article/157767-manufacturing-output-per-worker-hits-a-record-high
http://www.freerepublic.com/focus/f-chat/2695456/posts
Is the graph deceiving us? Has the value of what is produced not increased as much as shown for the worker worker. I think I'll give this more thought and address it in another thread.

 

[John Creighto]

It's going to take me a while to figure out how the statistics are calculated and what flaws may exist. The following link suggests significant flaws may exist.

But new evidence suggests that shifting production overseas has inflicted worse damage on the U.S. economy than the numbers show. BusinessWeek has learned of a gaping flaw in the way statistics treat offshoring, with serious economic and political implications. Top government statisticians now acknowledge that the problem exists, and say it could prove to be significant.

The short explanation is that the growth of domestic manufacturing has been substantially overstated in recent years.
...
"In some sectors, productivity growth may be an indicator not of how competitive American workers are in international markets," says Houseman, "but rather of how cost-uncompetitive they are." For example, furniture manufacturing has been transformed by offshoring in recent years. Imports have surged from $17.2 billion in 2000 to $30.3 billion in 2006, with virtually all of that increase coming from low-cost China. And the industry has lost 21% of its jobs during the same period.

Yet Washington's official statistics show that productivity per hour in the furniture industry went up by 23% and output by 3% between 2000 and 2005. Those numbers baffle longtime industry consultant Arthur Raymond of Raleigh, N.C., who has watched factory after factory close. "And we haven't pumped any money into the remaining plants," says Raymond. "How anybody can say that domestic production has stayed level is beyond me."

http://www.businessweek.com/magazine/content/07_25/b4039001.htm

Phantom GDP
The portion of real GDP, or of an increase real GDP, that occurs when domestic producers switch to lower cost imported inputs. Although it represents a valid gain from trade, it does not represent real output produced within the domestic economy, but may be treated as such in statistics.
Found on http://www-personal.umich.edu/~alandear/

http://www.encyclo.co.uk/define/phantom gdp

 

[JonDE]

It's going to take me a while to figure out how the statistics are calculated and what flaws may exist. The following link suggests significant flaws may exist.



http://www.businessweek.com/magazine/content/07_25/b4039001.htm


http://www.encyclo.co.uk/define/phantom gdp

Well its hard to take one mans opinion of an entire market, you can always find two different men who see things in entirely different ways. There is also the possibility that new technology isn't all that expensive, my mind is still blown by a commercial I saw a few weeks ago (I think by AT&T, but could have been google, apple or someone else) where they were showing a system that ran all the forklifts by computer, no dirvers needed. If that system is only a few 100 k that savings would be massive and would still be considered a relatively small investment.