News What is wrong with the US economy? Part 2

[phoenixy]

Money in the hole

http://www.theonion.com/content/video/in_the_know_should_the_government

 

[mgb_phys]

http://miscellanea.wellingtongrey.net/comics/2008-10-08-behavior-modification-loop-of-fail.png

 

[Art]

How many people are employed by foreign car makers in the USA?
I thought the big 3 only employed about 250,00 between them.
So a bailout and special protection deals for the US companies could end up costing more jobs if the other makers are forced out of the US.

Then what happens when the German/Japanese govt. offers a 25Bn bailout to Merc/BMW/VW or Toyota to bring the jobs back home - and close their US plants?

As a general rule uncompetitive industries should be allowed to fail however to avoid reaching that point it is incumbent on govt's to create a climate giving companies the best possible chance of success.

This means the gov't is responsible for ensuring domestic industry and foreign companies operate on a level playing field and to pursue fiscal policies designed to help the manufacturing sector.

As an example Britain's ship building industry disappeared practically overnight when their Korean competitors could produce ships cheaper than UK companies could buy the raw materials for. This was not because the Koreans were so much better at business it was because they massively subsidized the steel which went into the ships.

Another example was how the Japanese came to dominate certain industries by using a technique which came to be known as 'dumping' whereby exports were marginally costed (only variable costs are recovered) whereas domestic sales were absorption costed (Both fixed costs and variable costs are recovered). Again no matter how well you run your business you cannot compete with this.

The other key aspect is persuading investors to put their money into industries, that even when well run, will return a nett profit of only around 7% p.a. when the financial companies were offering astronomical returns, though this latter problem has probably now corrected itself without gov't policy changes

In the case of the big 3, if they have a viable plan to use the bail out money to modernise their plants and products as the US steel industry did back when it was on it's knees then it is worth doing. If however the money is wasted allowing the companies to continue with their inefficient products and methods then they should be abandoned and allowed to fail.

 

[mheslep]

PPP makes a couple of bold assumptions, each patently false. First it is based on the premise of the 'law of one price' which assumes a perfect market and no shipping costs, tariffs or other barriers to trade and secondly it assumes all income is spent locally.

It is also based on a basket of goods which ignores cultural differences and does not allow for quality differences between the content of one basket and the other being compared.

For developed countries GDP per capita is probably the more valid measure not least because a large percentage of the income earned will not be spent locally but will be spent abroad either on consumables or investments.

The problems with PPP are so manifold it led the economist to only half jokingly create it's own PPP big Mac index.

Not at all. The Big Mac index emphasizes the need for some kind of correction to raw GDP. PPP is not perfect. GDP otherwise uncorrected is only useful for tracking in country over time. Comparisons across countries without some kind of cost of living correction don't make any sense.

 

[edward]

The big three got caught between a rock and a hard spot. Originally and up until recently the Japanese cars only appealed to a smaller well defined group of people.

The big three tried to satisfy a much wider spectrum of buyers. While Toyota was making lightweight trucks and small cars the U.S. automakers still tried to be more accommodating to the general demand.

The big three had a demand for heavy pick up trucks that the Japanese couldn't compete with. You won't see a Toyota Tundra out on a heavy construction site because they have a very low GVWR.

The big three made; SUV versions of the big trucks, heavier luxury cars along mid size SUVs and a line of mediocre small cars and everything was great until the price of oil shot up.

By the time of the big oil crunch the Japanese had perfected their smaller vehicles to where they had a near big car feel.

Then the big swing came and everyone wanted a compact high mileage vehicle. Why didn't the big three see it coming?? I would imagine because we had gone through oil price fluctuations before and the tide had always turned before.

Except for perhaps in hindsight, I don't think that there ever was a win win point in the past for The big three to retool for a massive increase in production of small vehicles.

Ironically that time has at last come and they are broke.

Of my closest three neighbors one drives; a Lincoln pick up truck, one a GMC Yukon, and the third a Toyota Prius. I drive a Honda Minivan. All of the vehicles are 04 or newer.

There was obviously still a mix in buyer demand even in recent years.

I could go along with letting the big three fail if it was just the executives who went down. The real situation goes well beyond losing 250,000 union factory jobs. Millions of jobs are auto related and the guys behind the counter at the Chevrolet dealer parts department are definitely not union.

 

[mgb_phys]

The big three made; SUV versions of the big trucks, heavier luxury cars along mid size SUVs and a line of mediocre small cars and everything was great until the price of oil shot up.

So where has all the money gone from these $14K profit per vehicle models?
Difficult to see how after years of record sales you can suddenly be broke in one quarter.

Millions of jobs are auto related and the guys behind the counter at the Chevrolet dealer parts department are definitely not union.

Maybe we can persaude the Japanese to make vehicles that need more spare parts.

The important point is what is the bailout for?
If it's to protect American jobs then give it to Toyota. They employ more Americans than Chrysler (possibly more than GM?) and are more likely to keep those jobs around rather than asking for another bailout next quarter.

If it's to protect an American industry for strategic reasons then force them to sell off their shares in overseas makers. Why prop up Ford if some of that money is going to Masda? It's like giving federal morgage assistance to someone with a new Merc in the driveway.

 

[russ_watters]

Ironically, Ford sold most of its stake in Mazda today, but you have it backwards: Money to bail out Ford does not go to Mazda. Money given to Mazda goes to Ford.

 

[mgb_phys]

Money to bail out Ford does not go to Mazda. Money given to Mazda goes to Ford.

But how can that be? A Japanese car company more profitable than Ford?
When Ford trucks are all built by 6ft tall supermen cowboys who only stop wiping the manly sweat from their brow long enough to stare into the sunset - Iv'e seen the ads!

 

[mheslep]

So where has all the money gone from these $14K profit per vehicle models?
Difficult to see how after years of record sales you can suddenly be broke in one quarter.


Maybe we can persaude the Japanese to make vehicles that need more spare parts.

The important point is what is the bailout for?
If it's to protect American jobs then give it to Toyota. They employ more Americans than Chrysler (possibly more than GM?)

Toyota doesn't need a bail out. N. American car market has fallen to 10 M cars per year. The big three need 15M cars/year to break even. Thus they will continue to lose money unless they restructure; a bail out won't help that, it simply allows them to lose money longer, or until the market changes. The transplants are all geared to handle much less.

 

[edward]

So where has all the money gone from these $14K profit per vehicle models?
Difficult to see how after years of record sales you can suddenly be broke in one quarter.

Wall Street manged to do the same

The important point is what is the bailout for?
If it's to protect American jobs then give it to Toyota. They employ more Americans than Chrysler (possibly more than GM?) and are more likely to keep those jobs around rather than asking for another bailout next quarter.

There are more auto related jobs that will be lost than auto manufacturing. Toyota and it's jobs will still be here. Auto workers won't have to try to relocate when it is impossible to sell their homes.

If it's to protect an American industry for strategic reasons then force them to sell off their shares in overseas makers. Why prop up Ford if some of that money is going to Masda? It's like giving federal morgage assistance to someone with a new Merc in the driveway.

Ford is selling their interest in Mazda.

A large part of the Big three problem is the economy. For that matter the economy is effecting Japanese car sales. Honda was down 20% in September from a year ago, then down again in October.

If Japanese automakers get in trouble the Japanese government bail them out in a flash.

Giving hundreds of billions to bankers who totally failed isn't exactly setting a good example. I can see where the big three think they should be worth 25 billion to this country is reasonable in comparison.

 

[edward]

Toyota doesn't need a bail out. N. American car market has fallen to 10 M cars per year. The big three need 15M cars/year to break even. Thus they will continue to lose money unless they restructure; a bail out won't help that, it simply allows them to lose money longer, or until the market changes. The transplants are all geared to handle much less.

I don't see where an infusion of money would interfere with a restructuring. It could be a provision of the deal. The cost of bankruptcy restructuring would put them under even greater financial pressure.

A restructuring of debt under bankruptcy can take years. Locally ASARCO is in their third year.

 

[edward]

But how can that be? A Japanese car company more profitable than Ford?
When Ford trucks are all built by 6ft tall supermen cowboys who only stop wiping the manly sweat from their brow long enough to stare into the sunset - Iv'e seen the ads!

If Toyota tried to build trucks of equivalent GVWR, they might not find it so easy. Toyota Tundra sales are down by 47% over last year.

http://www.mysanantonio.com/business/Sales_of_Toyota_Tundra_pickups_cut_in_half.html

It looks like Chey has a winner with the new Malibu.

* Key vehicles: Chevrolet Impala up 6.3 percent, Chevrolet
Malibu up 82 percent, Chevrolet Silverado down 35 percent,
Chevrolet Tahoe down 77 percent, GMC Sierra down 35 percent.

http://www.reuters.com/article/companyNewsAndPR/idUSN0332589120081103

 

[mheslep]

I don't see where an infusion of money would interfere with a restructuring. ...

My point was a bailout allows them to avoid doing the restructuring. Id go further and say they can not restructure some commitments without the enabling bankruptcy laws.

 

[edward]

My point was a bailout allows them to avoid doing the restructuring. Id go further and say they can not restructure some commitments without the enabling bankruptcy laws.

The big point right now is to keep people working.

 

[Jimmy Snyder]

A spokesperson for The United States of America (ticker symbol USA), a wholly owned subsidiary of USACorp, today announced that President and CEO George W. Bush would be receiving a bonus of options to buy 470,000 shares of USA stock at a strike price of $32.15, 5% higher than yesterday's closing price. In addition, Mr. Bush will receive 470,000 options if USA is the victim of a hostile takeover. This is widely seen as a poison pill aimed at Democratic Party, Inc. (ticker symbol GOP) which has expressed interest in buying up shares. A large number of stockholders have expressed dissatisfaction with the current board and Mr. Barack Obama, a high ranking GOP official claims to have enough votes to oust Mr. Bush and his team. There are rumors of a bidding war with Warren Buffet who had tried to take USA private last year.

 

[mgb_phys]

An indian tribe made an offer of a $20 of beads and trinkets for Manhattan.

 

[Ivan Seeking]

The Dow closed below 8000 today.

 

[Ivan Seeking]

7,552.29

Almost a 50% loss over the last year. I was hoping that we had already hit bottom.

Gosh, I sure wish my social security was tied to the market.

 

[turbo]

7,552.29

Almost a 50% loss over the last year. I was hoping that we had already hit bottom.

Gosh, I sure wish my social security was tied to the market.

My retirement IRA is largely tied to the market. Luckily, I have circled the wagons and won't have to start drawing on the market-based investments for at least a few years, hopefully after some of my portfolio has recovered. Interest on my biggest money-market account is tied to the Fed Prime, and for years it has galled me to no end that the Fed cuts lending rates whenever Wall Street whimpers, to the detriment of people who have saved all their lives. Can Bush and his cronies leave early? Please?

 

[Office_Shredder]

A spokesperson for The United States of America (ticker symbol USA), a wholly owned subsidiary of USACorp, today announced that President and CEO George W. Bush would be receiving a bonus of options to buy 470,000 shares of USA stock at a strike price of $32.15, 5% higher than yesterday's closing price. In addition, Mr. Bush will receive 470,000 options if USA is the victim of a hostile takeover. This is widely seen as a poison pill aimed at Democratic Party, Inc. (ticker symbol GOP) which has expressed interest in buying up shares. A large number of stockholders have expressed dissatisfaction with the current board and Mr. Barack Obama, a high ranking GOP official claims to have enough votes to oust Mr. Bush and his team. There are rumors of a bidding war with Warren Buffet who had tried to take USA private last year.

It was humorous until you confused who the GOP was

 

[Jimmy Snyder]

It was humorous until you confused who the GOP was

My bad. In my defense, I've been told it's a common mistake.

 

[jal]

This does not sound very good.

http://news.yahoo.com/s/afp/20081120/bs_afp/financeeconomyusgulf_081120072928
US seeks 300 billion dlrs from Gulf states: report
Thu Nov 20, 2:29 am ET

KUWAIT CITY (AFP) – The United States has asked four oil-rich Gulf states for close to 300 billion dollars to help it curb the global financial meltdown, Kuwait's daily Al-Seyassah reported Thursday.
The daily also said that the United States has asked Kuwait to forgive its Iraqi debt estimated at around 16 billion dollars.

 

[Ivan Seeking]

What role did the credit rating agencies play in the current economic crisis? This week, a former managing director at Standard & Poor's speaks out on U.S. television for the first time about how he was pressured to compromise standards in a push for profits. Frank Raiter reveals what was really going on behind closed doors at the credit rating agencies the public relies on to evaluate the safety of their investments.

"During this period, profit was primary; analytics were secondary," Raiter tells NOW Senior Correspondent Maria Hinojosa.

Who was watching the watchers? Surprising new revelations about the economic debacle, this week on NOW...

http://www.pbs.org/now/shows/446/index.html

Very interesting.

 

[Astronuc]

What I see as a future problem is the how the government plans to repay the money borrowed. Something else will have to be cut, otherwise, the government will be on permanent revolving credit.

Some have mentioned that at some point the government will have to raise taxes, but there certainly will be a lot of resistance.


Also, it's not clear that the systemic flaws in the US economy are being addressed - primarily too much bought on credit, and too many defaults (with the result that too much is received for next to nothing).

Amendment: I would add economic disparity as another major flaw in the US economy.

 

[Jimmy Snyder]

otherwise, the government will be on permanent revolving credit.

Permanent? Oh no! According to the second chart on this page http://www.cedarcomm.com/~stevelm1/usdebt.htm" , the gov't has been on temporary revolving credit since 1791.

 

[mgb_phys]

U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit
http://bloomberg.com/apps/news?pid=20601109&sid=arEE1iClqDrk&refer=home

 

[Ivan Seeking]

Another big rally today; up almost 400 points right now.

 

[Astronuc]

Permanent? Oh no! According to the second chart on this page http://www.cedarcomm.com/~stevelm1/usdebt.htm" , the gov't has been on temporary revolving credit since 1791.

Yeah - I should have said escalating revolving credit.

 

[mgb_phys]

the gov't has been on temporary revolving credit since 1791.

That's why we keep getting those annoying loan ads on TV aimed at countries that are in debt:
<sing>If you own your throne - you can get that loan - call 1-800-get...<.sing>

 

[Ivan Seeking]

Bloomberg says this will be the biggest two-day rally since 1987.

 

[jal]

The financial system has already consummed 40 - 50% of all the savings to cover their ***.
Now they will take the remainded.

http://money.cnn.com/2008/11/25/news/economy/paulson_consumer/index.htm?cnn=yes
Fed bets $800 billion on consumers
Central bank and Treasury announce a massive plan to jumpstart lending.
-----
When you lend money to a mining operation, (buy shares), you know that its for operating expenses that will generate a product that will generate revenues.
When you lend money to a the banking system, such as the bail out plan and buying shares, ask yourself, what operating costs are you covering and what will be the product that will be produced that will generate an income.
If the banking system is not covering its operating cost in the spread between borrowing and lending rates then it needs to raise/take money from your saving plans.

jal

 

[mheslep]

The financial system has already consummed 40 - 50% of all the savings to cover their ***.
Now they will take the remainded...

Who is 'they'? The recently proposed stimulus does not go financial institutions.

 

[Art]

Who is 'they'? The recently proposed stimulus does not go financial institutions.

From the new package, $100 billion is going to buy doubtful/bad debts from Freddie and Fanny and a further £500 billion is to be used to buy mortgage backed securities. How do you figure this money is not going to the financial institutions?

The remaining $200 billion is to be used to promote lending to consumers. Presumably this too will be through the existing banking system and so again primarily helps the banks especially if the banks, like the last lot of 'stimulus' cash they received, just stuff it under their mattress.

 

[mheslep]

From the new package, $100 billion is going to buy doubtful/bad debts from Freddie and Fanny and a further £500 billion is to be used to buy mortgage backed securities. How do you figure this money is not going to the financial institutions?

The remaining $200 billion is to be used to promote lending to consumers. Presumably this too will be through the existing banking system and so again primarily helps the banks especially if the banks, like the last lot of 'stimulus' cash they received, just stuff it under their mattress.

I mistook the above post to be about the 'new' $500B stimulus plan announced Monday Nov 25 by the Obama transition people; though the details are not out yet, that $500B I take to be real money out the door spending to municipalities and individuals, out of reach of any eventual treasury recovery. The money.cnn link from Jal is indeed more financial institution injections as you detailed, though there's a good chance the US treasury will recover part of that (TARP money).

I don't subscribe to the Keynesian stimulus game; the last US stimulus months back accomplished little or nothing. If the stimulus suggestion means that greater deficits can be tolerated (and I don't know that they can), then I'd favor an across the board temporary tax cut instead. Indeed the Obama people stated 'tax cuts' would be part of their new stimulus package.
http://online.wsj.com/article/SB122747905110751527.html?mod=todays_us_page_one"

 

[CaptainQuasar]

I don't subscribe to the Keynesian stimulus game;

Does that mean that you only believe in Reganesque "trickle down" stimulus or that you don't believe it's possible for the government to stimulate the economy at all? I'm curious because by specifying "Keynesian" there it seems like you're leaving yourself an out to favor some sort of stimulus in the future if you designate it as "non-Keynesian."

⚛​

 

[Astronuc]

U.S. Details $800 Billion Loan Plans
http://www.nytimes.com/2008/11/26/business/economy/26fed.html

WASHINGTON — The Federal Reserve and the Treasury announced $800 billion in new lending programs on Tuesday, sending a message that they would print as much money as needed to revive the nation’s crippled banking system.

So much of the prosperity over the past two decades has been an illusion - given that many trillions of (virtual) $ in the equities and financial markets seems to evaporated.

'Trickle down' was more like 'tinkle down'.

 

[mgb_phys]

So much of the prosperity over the past two decades has been an illusion

You mean a $10T growth in economic activity and a $10T deficit at the same times wasn't just a coincidence?

 

[mheslep]

Does that mean that you only believe in Reganesque "trickle down" stimulus or that you don't believe it's possible for the government to stimulate the economy at all? I'm curious because by specifying "Keynesian" there it seems like you're leaving yourself an out to favor some sort of stimulus in the future if you designate it as "non-Keynesian."

⚛​

'Stimulus' of late pretty much implies a direct government invention; I believe 'trickle down' is generally considered an action of the private economy.

I believe the only real factors in economic growth are productivity increases, infrastructure, education and the rule of law, then perhaps tax cuts after all the above. The federal government can directly fund infrastructure to positive effect, though often inefficiently, but that takes some time.

 

[Office_Shredder]

'Stimulus' of late pretty much implies a direct government invention; I believe 'trickle down' is generally considered an action of the private economy.

Trickle down usually refers to cutting taxes for rich people in order that they spend it and the money 'trickles down' to the lower classes. Cutting taxes to get this effect is as much government intervention as anything else

 

[mheslep]

Trickle down usually refers to cutting taxes for rich people in order that they spend it and the money 'trickles down' to the lower classes. Cutting taxes to get this effect is as much government intervention as anything else

Ok, call it what you will, I'd favor an across the board tax cut before simply mailing checks, though other than for the capital gains and corporate tax rates, I don't think that would help much with jobs either. Those cuts should go along with spending cuts - there are some areas like Obama's just mentioned farm credits to the rich - that not even the most stimulus minded could claim actually stimulate.

Productivity, infrastructure, education, rule of law.

 

[turbo]

Trickle down usually refers to cutting taxes for rich people in order that they spend it and the money 'trickles down' to the lower classes. Cutting taxes to get this effect is as much government intervention as anything else

It is an entirely disingenuous form of "intervention" because it is premised on the notion that when the wealthy get tax cuts, they plow the money right back into investments that create jobs for the poor and middle-class of the US. That has proven NOT to be the case - it is a neocon fiction used to justify welfare for the wealthy. The people who benefit most from the US economy should pay a proportionately higher share of taxes - an idea floated again and again by Warren Buffet. Reagan and W did their level best to destroy progressive taxation in the US, and it's going to be a tough road for Obama if he wants to reverse the damage.

 

[Office_Shredder]

It is an entirely disingenuous form of "intervention" because it is premised on the notion that when the wealthy get tax cuts, they plow the money right back into investments that create jobs for the poor and middle-class of the US. That has proven NOT to be the case - it is a neocon fiction used to justify welfare for the wealthy. The people who benefit most from the US economy should pay a proportionately higher share of taxes - an idea floated again and again by Warren Buffet. Reagan and W did their level best to destroy progressive taxation in the US, and it's going to be a tough road for Obama if he wants to reverse the damage.

I used the word intervention not to imply it was a good way of fixing the economy, but to simply indicate that it is government meddling in the economy in an attempt to fix it

 

[mheslep]

...The people who benefit most from the US economy should pay a proportionately higher share of taxes ...

They do pay a much higher share now as you know, overwhelmingly so. Of course they benefit, but one could also argue that those people do the most to create the economic growth.

 

[kronon]

Apologies if this has already been posted. Its extraordinary. Video of Peter Schiffs comments over 2006/07.

 

[OmCheeto]

Apologies if this has already been posted. Its extraordinary. Video of Peter Schiffs comments over 2006/07.

I've never heard of him before, but I think I like this Peter Schiff.

http://www.financialsense.com/fsu/editorials/schiff/2008/1121.html"
by Peter Schiff, Euro Pacific Capital | November 21, 2008
...
This transformation will not be fun, but it is necessary. Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base. Only by swallowing this tough medicine now will our sick economy ever recover. By accepting a lower standard of living today, we will eventually be rewarded with a higher one tomorrow.

This seems to mirror my "wheelbarrows full of cash" statement a few weeks ago.

He must be brilliant.

 

[kronon]

yep, he was able to predict your statement 3 years in advance - he must be brilliant!

what gets me most about the clip is actually seeing the madness of crowds in action. Its pretty scary and shows just how way off things can get.

He almost reminds me of the first guy who dared say, "erm , maybe the sun won't actually care if the first born is not sacrificed".

 

[OmCheeto]

yep, he was able to predict your statement 3 years in advance - he must be brilliant!

what gets me most about the clip is actually seeing the madness of crowds in action. Its pretty scary and shows just how way off things can get.

He almost reminds me of the first guy who dared say, "erm , maybe the sun won't actually care if the first born is not sacrificed".

I would like to say, that with 6 billion people on the planet, someone is bound to get lucky and make a correct prediction of what is going to happen 3 to 6 years down the road.

But as far as I can tell, Mr. Schiff wasn't guessing. He knew.

It's good to know that there is someone that I can now trust enough to listen to regarding economic matters. I would guess that my previous disinterest in the subject was because I recognized that the world has been far too full of "experts" pushing their opinions around as fact.

I wonder how far back his predictions go. Right after the start of the 2nd gulf war(5.7 years ago), I decided(based on many factors) the the US government should raise taxes on gasoline so the total cost would be around $4.00 per gallon. We should use that money to build an alternate fuel infrastructure. Of course, people have been saying similar things since the mid 1950's from what I've read. But I thought it was funny how my $4/gal number came true, in a roundabout, not so funny, capital sucking, economy crippling kind of way.

Unfortunately, http://www.financialsense.com/fsu/editorials/schiff/archive.html" only go back to 2005. I'll have to email him and see if he thinks the idea is still viable.

 

[Al68]

Trickle down usually refers to cutting taxes for rich people in order that they spend it and the money 'trickles down' to the lower classes. Cutting taxes to get this effect is as much government intervention as anything else

Trickle down usually refers to a fictional economic theory, which no politician has ever claimed to believe in. Which makes it a strawman argument.

And letting people keep their own money instead of confiscating it is "government intervention"? Wow. Just wow.

 

[Astronuc]

Trickle down usually refers to a fictional economic theory, which no politician has ever claimed to believe in. Which makes it a strawman argument.

'Trickle down theory' is considered a pejorative term synonymous with Reaganomics, and various people in the Reagan administration used the term to justify the tax and spending policies of the Reagan years. Reagan believed it, and so did David Stockman in the early 80's.

. . . Yet he was conceding what the liberal Keynesian critics had argued from the outset—the supply-side theory was not a new economic theory at all but only new language and argument to conceal a hoary old Republican doctrine: give the tax cuts to the top brackets, the wealthiest individuals and largest enterprises, and let the good effects "trickle down" through the economy to reach everyone else. Yes, Stockman conceded, when one stripped away the new rhetoric emphasizing across-the-board cuts, the supply-side theory was really new clothes for the unpopular doctrine of the old Republican orthodoxy. "It's kind of hard to sell 'trickle down,'" he explained, "so the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory."
. . . .

The Education of David Stockman (Dec, 1981)
http://www.theatlantic.com/doc/198112/david-stockman/5


Meanwhile - Meltdown far from over, new mortgage crisis looms
http://news.yahoo.com/s/ap/20081128/ap_on_bi_ge/meltdown_coming_soon

WASHINGTON – Black Friday's retail shoppers hunting for holiday bargains won't be enough to stave off what's likely to become the next economic crisis. Malls from Michigan to Georgia are entering foreclosure, commercial victims of the same events poisoning the housing market.

Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.

That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies' credit.

"We're probably in the first inning of the commercial mortgage problem," said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.

. . . .

It appears that the next problem in the US economy is the wave of defaults and foreclosures on commercial property. I've already seen that locally. Some commercial properties are going for half their previous value.

 

[Al68]

'Trickle down theory' is considered a pejorative term synonymous with Reaganomics, and various people in the Reagan administration used the term to justify the tax and spending policies of the Reagan years. Reagan believed it, and so did David Stockman in the early 80's.

Every time I've heard "trickle down economics" described by democrats, it's not even remotely similar to Reaganomics or supply side economics as they would be understood by their adherents, or anything that actually happened in the 1980s.

I've never heard a politician say "Gee, we, as government, should just give all the money to rich people so that it will trickle down to the rest". That's too absurd to even be worthy of discussion.

Claiming that their opponents believe such nonsense is obviously not an attempt to sway the opinion of smart people. It's to stir up hatred in the rest.