News What are the potential impacts of public confidence on the economy's recovery?

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The discussion centers on the precarious state of the U.S. economy, emphasizing that restoring public confidence is insufficient for recovery. Critics argue that reliance on cheap credit and government interventions has exacerbated the financial crisis, suggesting that a significant restructuring of the economy is necessary. The conversation highlights the ongoing challenges of rising unemployment, projected to exceed 10%, and the slow pace of economic recovery, with GDP still declining. Various recovery scenarios are debated, including V-shaped, W-shaped, and L-shaped recoveries, with pessimism about the immediate future.The dialogue also touches on the implications of national debt, which is growing rapidly and could lead to a future crisis if not addressed. Participants express skepticism about the effectiveness of government stimulus measures, pointing out that only a fraction of allocated funds have been spent, and stress the need for job creation and productive investments to drive genuine recovery. The discussion reflects a broader concern about the sustainability of economic policies and the potential for long-term consequences stemming from current fiscal practices.
  • #391
mheslep said:
As I understand it, one of the more fundamental and problematic issues with micro lending is finding away to grant ownership even of the small scraps of property held by the poor. Solve that (somehow?) and one goes a long way towards curing mass poverty.
How is owning your own plot in the slums supposed to benefit people without income? Even if ownership doesn't come with a tax-burden, what are you supposed to do for money except borrow against your property? Then, you can fortify your makeshift rain-shelter and develop it into a more solid dwelling, but how are you supposed to repay the loan? Somehow you have to have income, and if you have income what is wrong with continuing to live the way you are living for a little while longer to save up for things you would borrow to get?

Debt in any form is mainly a benefit to the lenders. By going into debt-dependency, borrowers get caught in a cycle of subservience to get the money to pay off their debt so that their credit improves so they can take out more loans. Debt is basically a recipe for indenturement to wage labor. Why saddle the global poor with the structured-employment system of economic/social control that has alienated so many people in developed economies? Why not allow them to develop a free economy where they can choose when and what work to do to achieve specific goals instead of indebting them into indentured servitude?
 
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  • #392
brainstorm said:
How is owning your own plot in the slums supposed to benefit people without income? Even if ownership doesn't come with a tax-burden, what are you supposed to do for money except borrow against your property? Then, you can fortify your makeshift rain-shelter and develop it into a more solid dwelling, but how are you supposed to repay the loan? Somehow you have to have income, and if you have income what is wrong with continuing to live the way you are living for a little while longer to save up for things you would borrow to get?

Debt in any form is mainly a benefit to the lenders. By going into debt-dependency, borrowers get caught in a cycle of subservience to get the money to pay off their debt so that their credit improves so they can take out more loans. Debt is basically a recipe for indenturement to wage labor. Why saddle the global poor with the structured-employment system of economic/social control that has alienated so many people in developed economies? Why not allow them to develop a free economy where they can choose when and what work to do to achieve specific goals instead of indebting them into indentured servitude?
Um - microloans enable the poor to borrow at low interest rates to purchase goods which they can resell or turn into saleable items. For example, if a poor person can buy fabric and turn it into clothes to sell at several times the cost, then they generate revenue to earn a wage/salary and repay the loan. The loans are low interest, so there is not a huge debt burden. Please read about micro-loans or micro-financing before making assertions as to why it can't work or why it's a form of 'indenturement'.

The matter of legal recognition of private property and ownership of capital is another issue entirely.

The poor are already saddled with a structured-employment system more or less.
 
  • #393
brainstorm said:
How is owning your own plot in the slums supposed to benefit people without income? Even if ownership doesn't come with a tax-burden, what are you supposed to do for money except borrow against your property? Then, you can fortify your makeshift rain-shelter and develop it into a more solid dwelling, but how are you supposed to repay the loan? Somehow you have to have income, and if you have income what is wrong with continuing to live the way you are living for a little while longer to save up for things you would borrow to get?
In the case of a perpetual shanty town and poverty, we assume subsistence income never allows anyone to save, not that they would have access to a bank to save any money or secure space to hold property. With that as a given (otherwise we don't have perpetual shanty), the way to move up is to gain access to lending, then the shanty carpenter can buy some tools so that he can improve multiple shanties for a fee, not just his own; the shanty cook buys a stove so she can cook for many for a fee, not just her own family, etc. The productivity of each grows through the specialization of labor, and so does their wealth. Edit: I see Astronuc was first to it and better above.

Debt in any form is mainly a benefit to the lenders. By going into debt-dependency, borrowers get caught in a cycle of subservience to get the money to pay off their debt so that their credit improves so they can take out more loans. Debt is basically a recipe for indenturement to wage labor. Why saddle the global poor with the structured-employment system of economic/social control that has alienated so many people in developed economies? Why not allow them to develop a free economy where they can choose when and what work to do to achieve specific goals instead of indebting them into indentured servitude?
I don't accept any of those assertions, but consider this: In free economies, people regularly choose to borrow money. So which is it, a debt ban or a free economy?
 
  • #394
mheslep said:
In the case of a perpetual shanty town and poverty, we assume subsistence income never allows anyone to save, not that they would have access to a bank to save any money or secure space to hold property. With that as a given (otherwise we don't have perpetual shanty), the way to move up is to gain access to lending, then the shanty carpenter can buy some tools so that he can improve multiple shanties for a fee, not just his own; the shanty cook buys a stove so she can cook for many for a fee, not just her own family, etc. The productivity of each grows through the specialization of labor, and so does their wealth. Edit: I see Astronuc was first to it and better above.
Well, the other side of that is that people will be using the little income they have to pay for cooking or other services. Why can't people just cooperate to help each other increase their wealth, for example by helping each other fortify a dwelling or dig a sewage line? That helps them keep their expenditures low and avoid going into debt.

I don't accept any of those assertions, but consider this: In free economies, people regularly choose to borrow money. So which is it, a debt ban or a free economy?
Isn't debt the main method of obliging people to indentured servitude in 'free' economies?
 
  • #395
brainstorm said:
Well, the other side of that is that people will be using the little income they have to pay for cooking or other services. Why can't people just cooperate to help each other increase their wealth, for example by helping each other fortify a dwelling or dig a sewage line? That helps them keep their expenditures low and avoid going into debt.
http://www.econlib.org/library/Smith/smWN.html" , Adam Smith, 1776

Isn't debt the main method of obliging people to indentured servitude in 'free' economies?
Most all adults in modern free economies acquire some debt. To say all such people are indentured servants is silly, so I'll move on ...
 
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  • #396
mheslep said:
Most all adults in modern free economies acquire some debt. To say all such people are indentured servants is silly, so I'll move on ...

It seems to me that the opinion that holding debt is normal is what's wrong fiscally with this country these days. The government holds so much debt these days a trillion dollar deficit doesn't bother people, and credit cards are the norm for purchases.

As Dave Ramsey Points out- Proverbs 22:7, "The rich rule over the poor, and the borrower is slave of the lender." Now I'm not religious and don't find much of the bible to be particularly useful, but this phrase is pretty accurate concerning the borrower-lender relationship...

My wife and I decided we were done being slaves to the credit card companies and are in the process of paying off ALL of our debt. It wasn't "normal" for people to finance cars 50-60 years ago (in fact debts were generally frowned upon by society), but these days people expect a car payment to be part of life. Why is it ok now?

http://www.daveramsey.com/article/the-truth-about-debt/"
 
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  • #397
Mech_Engineer said:
It seems to me that the opinion that holding debt is normal is what's wrong fiscally with this country these days. The government holds so much debt these days a trillion dollar deficit doesn't bother people, and credit cards are the norm for purchases.
Agree, dangerously overdone.

As Dave Ramsey Points out- Proverbs 22:7, "The rich rule over the poor, and the borrower is slave of the lender." Now I'm not religious and don't find much of the bible to be particularly useful, but this phrase is pretty accurate concerning the borrower-lender relationship...
Disagree. I'd use 'insightful' maybe rather than 'accurate'. The bible provides parables not technical manuals. Borrowing just to consume beyond the limits of present income creates all kinds of problems, but even those don't make us slaves in a modern society. We don't have debtor prisons.

My wife and I decided we were done being slaves to the credit card companies and are in the process of paying off ALL of our debt. It wasn't "normal" for people to finance cars 50-60 years ago (in fact debts were generally frowned upon by society), but these days people expect a car payment to be part of life. Why is it ok now?
Agreed, generally speaking, if, say, the loan is taken to finance an upscale car. If the car is purchased on loan to enable transportation to a job or an education not otherwise available, no I don't object.
 
  • #398
mheslep said:
Disagree. I'd use 'insightful' maybe rather than 'accurate'. The bible provides parables not technical manuals. Borrowing just to consume beyond the limits of present income creates all kinds of problems, but even those don't make us slaves in a modern society. We don't have debtor prisons.

So maybe it's more of an analogy than scientific fact. Still it's safer to think of debt in a slave/master mindset than a "business partner/loan" mindset (which is how most people justify pety debt IMO).

mheslep said:
Agreed, generally speaking, if, say, the loan is taken to finance an upscale car. If the car is purchased on loan to enable transportation to a job or an education not otherwise available, no I don't object.

...and so people finance a $30k new car at 7.5% interest for 5 years justifying it as needed expense (~$600/mo), when they could have saved $600/mo up for a year and bought a $7000 used Honda Civic in cash. By financing, not only did they buy a new car which will depreciate to less than half it's purchase price in the time they take to pay it off, they also paid more than $6000 in interest payments and lost $15k or more ($250/mo) in depreciation.

People these days even finance pety things that were unheard of a few decades ago, like a $2000 refrigerator or $1000 TV. How hard is it to save up for these things? When did financing such a relatively small purchase become the norm?!
 
  • #400
Mech_Engineer said:
So maybe it's more of an analogy than scientific fact. Still it's safer to think of debt in a slave/master mindset than a "business partner/loan" mindset (which is how most people justify pety debt IMO).



...and so people finance a $30k new car at 7.5% interest for 5 years justifying it as needed expense (~$600/mo), when they could have saved $600/mo up for a year and bought a $7000 used Honda Civic in cash. By financing, not only did they buy a new car which will depreciate to less than half it's purchase price in the time they take to pay it off, they also paid more than $6000 in interest payments and lost $15k or more ($250/mo) in depreciation.

People these days even finance pety things that were unheard of a few decades ago, like a $2000 refrigerator or $1000 TV. How hard is it to save up for these things? When did financing such a relatively small purchase become the norm?!

It's a bad idea to finance things that decrease in value. Cars, furniture, appliances...no way!
 
  • #401
lisab said:
It's a bad idea to finance things that decrease in value. Cars, furniture, appliances...no way!

Thank you! If the entire US (including the government) thought this way, we'd be in a lot better place than we are now...
 
  • #402
lisab said:
It's a bad idea to finance things that decrease in value. Cars, furniture, appliances...no way!
I agree. The trick is in defining 'things' that the loan enables. If the loan enables say, a car PLUS a job that more than pays for the car and loan, then the overall net 'thing' has does not decrease in value over time.
 
  • #403
lisab said:
It's a bad idea to finance things that decrease in value. Cars, furniture, appliances...no way!
So true. My wife and I have not had a bank-loan in decades, and the last one to be retired was on our previous house. Buy essential stuff with cash, take care of it, and repair or replace as needed. In the meantime, all the interest that you would have paid to lenders goes to your savings.

Today's bad news: My wife's ~10-year-old Subaru Legacy seems to have developed a leaky head-gasket. I checked around and found independent mechanics quoting around $1800 for head-gasket-replacement.

Today's good news: Car prices are stable, and dealers are eager to sell in this crappy economy, so I ought to be able to buy her a replacement at a decent price, plus get some extra bucks off for the trade-in without trying to saddle someone else with an expensive repair. The dealership can take their time repairing her car after they buy it, giving them an attractive used vehicle to sell at a fair price.
 
  • #404
Good seven point argument from a conservative Chicago school economist in favor of QE2, written to conservatives who oppose it.
http://www.themoneyillusion.com/?p=7875

1. The Fed isn’t really trying to create inflation.

The Fed doesn’t directly control inflation; they influence total nominal spending, which is roughly what Keynesians call aggregate demand. Whether higher nominal spending results in higher inflation depends on a number of factors, such as whether the economy has a lot of underutilized resources. But it’s certainly true that for any given increase in NGDP, the Fed would prefer more RGDP growth and less inflation. Even after QE2, the Fed still expects less than 2% inflation for years to come. If the Fed had any marketing sense, they’d be telling the public they are trying to boost recovery by increasing national income, not increasing the cost of living. It would also have the virtue of being true.

[...]
 
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  • #405
mheslep said:
I agree. The trick is in defining 'things' that the loan enables. If the loan enables say, a car PLUS a job that more than pays for the car and loan, then the overall net 'thing' has does not decrease in value over time.

The problem is, they could just as easily buy a cheap used car for cash that got them to and from the job (at least in the short-term). And of course there's public transport, and carpooling, etc. etc. It just wouldn't be as fashionable...
 
  • #406
Mech_Engineer said:
The problem is, they could just as easily buy a cheap used car for cash that got them to and from the job (at least in the short-term). And of course there's public transport, and carpooling, etc. etc. It just wouldn't be as fashionable...
If you live in central Maine, buying a car that can't perform in snow-storms before the roads are plowed isn't an option if you need to get to work and keep your job. My wife and I live in a town with only about 1000 people and she has to get work about 20 minutes away(IF the roads are clear and the weather is cooperative). Car-pooling is not an option, and there is no public transportation. We bought her present Legacy used (3 years old) and it has served us well, but that was a lucky private sale - no such luck on a dealer's lot.

I'm going to buy her another Legacy (or Forester, perhaps), new and for cash, and we'll maintain it and try to keep it alive for as long as possible. Minor investment to keep her in reliable transportation for another 10 years or so. And we won't pay a dime in interest.
 
  • #407
turbo-1 said:
If you live in central Maine, buying a car that can't perform in snow-storms before the roads are plowed isn't an option if you need to get to work and keep your job. My wife and I live in a town with only about 1000 people and she has to get work about 20 minutes away(IF the roads are clear and the weather is cooperative). Car-pooling is not an option, and there is no public transportation. We bought her present Legacy used (3 years old) and it has served us well, but that was a lucky private sale - no such luck on a dealer's lot.

I'm going to buy her another Legacy (or Forester, perhaps), new and for cash, and we'll maintain it and try to keep it alive for as long as possible. Minor investment to keep her in reliable transportation for another 10 years or so. And we won't pay a dime in interest.

You can't tell me that you can't find a used AWD or 4WD vehicle for cheap, because I know better!
 
  • #408
Mech_Engineer said:
You can't tell me that you can't find a used AWD or 4WD vehicle for cheap, because I know better!
Come here and point me to one. In this economic climate, people are nursing their vehicles along. You can buy plenty of vehicles with problems (disclosed and undisclosed), and plenty of 4WDs that get really crappy gas mileage. It took me weeks of dedicated searching to find my wife's current Legacy - luckily a college instructor was REALLY nervous about the Legacy's warranty running out, and we got a real good deal on it. I figured if that guy was so anal about the warranty, he probably babied the car and kept up with oil, oil filter, air filter, etc. It worked out fine.

I'll buy new this time. Peace-of-mind is worth it. All winter long, my wife leaves for work in the dark and returns home in the dark, or dusk at best. I want her to have a reliable vehicle that meets her needs.
 
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  • #409
turbo-1 said:
Come here and point me to one. In this economic climate, people are nursing their vehicles along. You can buy plenty of vehicles with problems (disclosed and undisclosed), and plenty of 4WDs that get really crappy gas mileage.

The point is, in my opinion if a person has saved up $5000 and wants a car to get to work, they should be buying a $5000 car not using it for a down payment on a $30k car. I'm not saying you should never spend more than $5000 on a car...

turbo-1 said:
It took me weeks of dedicated searching to find my wife's current Legacy - luckily a college instructor was REALLY nervous about the Legacy's warranty running out, and we got a real good deal on it. I figured if that guy was so anal about the warranty, he probably babied the car and kept up with oil, oil filter, air filter, etc. It worked out fine.

Weeks of searching is nothing! I spend months researching and looking before I buy, and I'm not afarid to drive 2000 miles to get what I want!

turbo-1 said:
I'll buy new this time. Peace-of-mind is worth it. All winter long, my wife leaves for work in the dark and returns home in the dark, or dusk at best. I want her to have a reliable vehicle that meets her needs.

In my opinion, you can buy the same peace of mind with a 2-3 year old car, and at the same time you can save a lot of money.
 
  • #410
Mech_Engineer said:
In my opinion, you can buy the same peace of mind with a 2-3 year old car, and at the same time you can save a lot of money.
I did exactly that when we bought her Legacy. I have not bought a new vehicle in about 25 years, until I got my current Forester. I don't like to take the "new-car" depreciation, but when you buy with an eye toward long-term return and reliability, it can make sense - especially when new car prices are depressed and relatively short-used cars (leases and such) are too expensive and difficult to evaluate. I'm not paying mechanics to do forensics on used car after used car, so until recent years, I relied on my gut, and what I could find out about previous owners.
 
  • #411
Something to look forward to or ponder - what if -

California Will Default On Its Debt, Says Chris Whalen
http://finance.yahoo.com/tech-ticker/article/535616/California-Will-Default-On-Its-Debt%2C-Says-Chris-Whalen

He makes some interesting points.
 
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  • #412
Astronuc said:
Something to look forward to or ponder - what if -

California Will Default On Its Debt, Says Chris Whalen
http://finance.yahoo.com/tech-ticker/article/535616/California-Will-Default-On-Its-Debt%2C-Says-Chris-Whalen

He makes some interesting points.
And some salient points. The rest of the US can't be expected to bail out CA, or any other state that benefited so much from the boom-times and excesses of the past few decades. We didn't share in the largess and shouldn't have to pick up the tab for the crash.
 
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  • #413
turbo-1 said:
And some salient points. The rest of the US can't be expected to bail out CA, or any other state that benefited so much from the boom-times and excesses of the past few decades. We didn't share in the largess and shouldn't have to pick up the tab for the crash.

Let's not forget, they need financial support to pay for their social spending and union contracts. They need to make drastic spending cuts - otherwise a bailout will only encourage them to spend more.

BTW, "Healthcare Reform" doesn't appear to be helping their situation
http://www.dhcs.ca.gov/Documents/Health Care Reform Fiscal Summary Chart 8-5-2010.pdf

The "Notes":

"Note: Cost and savings estimates have been adjusted for inflation and/or population growth (6% annual for Medi-Cal Costs, 1.45% annual for Eligibility Determinations, and 6% annual for State-Only Programs). Inpatient rate increases have not been assumed but would cost an additional $900 million to $1.25 billion in General Funds, not adjusted for inflation. General Fund impact may also be greater than estimated depending on demand of newly enrolled individuals for county-administered programs including mental health, alcohol and drug treatment, and in-home supportive services and due to the loss of Disproportionate Share Hospital (DSH) funding for county hospitals. Reduction to the state’s DHS funding has not been included. Costs to California for the expansion population will increase further in the year 2020 when federal financial participation for the expansion population decreases to 90 percent.
Finally, we note that uncertainties in enrollment/population/caseload and other economic factors over the ten-year estimate window may impact long-term costs and savings. Changes in those factors relative to current assumptions may produce fluctuations in costs or savings above or below the estimates presented here."
 
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  • #414
mheslep said:
Most all adults in modern free economies acquire some debt. To say all such people are indentured servants is silly, so I'll move on ...

I'm just curious. Do you really consider this kind of normative reasoning sufficient? If someone says they slap their wife around on a daily basis to keep her submissive and to call it spouse-abuse is silly, would you accept that as sufficient reason to withdraw your claim that it is abusive?
 
  • #415
turbo-1 said:
And some salient points. The rest of the US can't be expected to bail out CA, or any other state that benefited so much from the boom-times and excesses of the past few decades. We didn't share in the largess and shouldn't have to pick up the tab for the crash.
The problem is that prosperity trickles down to some degree in all directions. So you can't really say that no one benefited from a CA boom, the same as homeless people can't say that they don't benefit from other people's labor and prosperity. The problem with these bailouts, imo, is that they try to prevent the bubbles from collapsing completely instead of just providing people with basic means to get by and restart their lives, such as food-stamps, access to abandoned property, etc.
 
  • #416
turbo-1 said:
And some salient points. The rest of the US can't be expected to bail out CA, or any other state that benefited so much from the boom-times and excesses of the past few decades. We didn't share in the largess and shouldn't have to pick up the tab for the crash.

Agreed.

California has continued to extended benefits to a larger populace, and has failed to be fiscally responsible. However, the government will intervene. Then the rest of the US will be burdened with helping California. There will be no lesson learned.

States have to be responsible for their actions. California going into insolvency while not economically viable… must happen. There has to be corrections made. If we continue with advocating fiscal irresponsibility, the US economy as a whole will be next. And this is what exactly is happening.

I just can’t understand while people complain about the trickling effects of insolvency with more government intervention. All it does is extend what eventually will fail.

I live in Louisiana, overall our economy is doing well. The state has taken steps every year to decrease spending. As a graduate student, I've personally felt the cuts in education. However, we make do. More cuts are coming but compared to the rest of the United States our losses haven’t been that great. The state has saved though out the years and has been dipping into its general saving but at the same time returning revenue back.
 
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  • #417
bleedblue1234 said:
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.

Absolutely correct. In a system with sound money (like gold and silver), a crisis like this would never have occured. Government involvement is the source of the problems.
 
  • #418
readaynrand said:
Absolutely correct. In a system with sound money (like gold and silver), a crisis like this would never have occured. Government involvement is the source of the problems.
And business played a role.
 
  • #419
Astronuc said:
And business played a role.
A big role. More government involvement (regulation of derivative investment products for instance, and requiring heavy capitalization levels for companies engaging in very risky investments, for instance) might have saved us from some of the devastation. Instead, financial giants packaged over-rated "investment" products of dubious worth and made billions until the bubble collapsed, and the taxpayers found themselves on the hook for billions more. "Too big to fail" is a license to steal.
 
  • #420
turbo-1 said:
A big role. More government involvement (regulation of derivative investment products for instance, and requiring heavy capitalization levels for companies engaging in very risky investments, for instance) might have saved us from some of the devastation.
Yeah, more government interference as a solution for problems caused by government interference. Nice vicious cycle we're in there. How convenient is that for power hungry politicians?
 
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