News What is wrong with the US economy?

[russ_watters]

The president denies the US economy is in recession, while some (or many) economists disagree.

That statement is out of date:

"This quarter's going to be a difficult quarter for the U.S. economy. We are in a low growth period in the economy," White House spokesman Tony Fratto says, according to Reuters.

"Recession is a technical term," he adds. "Regardless of what you call it, we are clearly in a period of a slowdown in economic growth."

Update at 1:59 p.m. ET: Bush says he's concerned about the nation's financial health, but remains optimistic about the long-term effects of "pro-growth, low-tax policies that put faith in the American people."

"It's clear our economy has slowed," the president says. "But the good news is that we anticipated this and took steps to bolster the economy."

http://blogs.usatoday.com/ondeadline/2008/03/bush-to-make-ec.html

I'm surprised that that didn't get more press.

 

[russ_watters]

So the 'real' unemployment is much higher

As always, I will point out that since people who aren't looking for work are not ever included in the data, there is no discrepancy as you are implying. If today we suddenly found a way to include those people, then the unemployment number would jump, but it would also then be impossible to compare it with unemployment numbers in the past.

I'd also like to point out something about the people who are being exlcuded from the stat. They are people who have chosen not to look for jobs. You can't get a job if you don't look. So screw them: they are leeches. They don't deserve jobs and they don't deserve government assistance. They deserve to live in the poverty they've resigned themselves to.

 

[edward]

I'd also like to point out something about the people who are being exlcuded from the stat. They are people who have chosen not to look for jobs. You can't get a job if you don't look. So screw them: they are leeches. They don't deserve jobs and they don't deserve government assistance. They deserve to live in the poverty they've resigned themselves to.

You have just insulted thousands of previously hard working people in the midwest.

When the factories close and the work goes to Mexico and China there are very few places left to look for jobs.

The more than 209,000 nonfarm jobs Ohio lost from 2000 to 2007 made up the largest proportionate decline in employment since the Great Depression, a national manufacturing trade group said Wednesday.

Employment dropped by 3.7 percent, the biggest seven-year drop since the period starting in 1939, near the end of the Depression and including the years the U.S. military absorbed millions of American workers to fight World War II.

Moreover, according to the analysis the American Manufacturing Trade Action Coalition commissioned, only Michigan lost a greater proportion of its employment than Ohio during the period - 9.1 percent or 431,000 jobs.

http://www.cleveland.com/economy/plaindealer/index.ssf?/base/iseco/1203586283198830.xml&coll=2

 

[russ_watters]

You have just insulted thousands of previously hard working people in the midwest.

I'm ok with it. If they become hard working again, they can have the respect back. In the meantime, didn't their parents teach them not to quit when the going gets tough?

When the factories close and the work goes to Mexico and China there are very few places left to look for jobs.

Just because it is tough, that doesn't make quitting a virtue.

And there's always Pennsylvania...

 

[edward]

I'm ok with it. If they become hard working again, they can have the respect back. In the meantime, didn't their parents teach them not to quit when the going gets tough?

You are mistakenly presuming that these are all young people. How about the thousands of fifty somethings who have worked hard for the last 20 + years? Are they really slackers Russ?

Just because it is tough, that doesn't make quitting a virtue.

And there's always Pennsylvania...

Beating ones head against the wall trying to find jobs that no longer exist isn't a virtue either. There aren't even enough Walmart type jobs for everyone.

Add Pennsylvania plus quite a few other states.

 

[Noone]

Sorry but there is one problem that makes all other problems that's mainly that people don't give back to that of which they had taken from. Companies don't give back to the market that they take from. Mostly they give to those that work for them and give taxes to the goverment. So its people just buying things over and over and working for the money to buy that of which they buy ,so the problem is hording which makes a reaction from the action of hording its a domino effect that is due to the way the foundation of are world markets and are money system and working plat-forms -.- that's life for us all un less you got a lot of stock and are rich...

 

[Noone]

but the first step to fixing a problem the people precevie as a problem is id'ing the problem and the things that feed it

 

[Noone]

mainly due to the point its a matter of perception of the masses, a lot of people want change that will bring equal food water and shelter and rights to entertainment but the greed and corruption of peoples desires and wants will allways be a problem aswell

 

[Noone]

i vote that we all just give people what they want, unless what they want takes from what someone els wants

 

[Noone]

and if what they want takes from what someone els wants just show them what they want isn't really what they want... T.V. ads do it all the time... how do you all think dimonds were worth so much when people didnt use them for science... they made people think that it was worth somthing and it was somthing they needed... and we don't need what people are selling we all just need Food, Water, Air, Shelter, Entertainment, and love. also the protection of those and the maintaining of the purity of them... it just takes time for people to change. just like a computer program it can't change unless we show it how to and tell it how to were no difrent. we just need more things to get us happy :D

 

[Astronuc]

Interesting story

Derivatives the new 'ticking bomb'
Buffett and Gross warn: $516 trillion bubble is a disaster waiting to happen

ARROYO GRANDE, Calif. (MarketWatch) -- "Charlie and I believe Berkshire should be a fortress of financial strength" wrote Warren Buffett. That was five years before the subprime-credit meltdown.

"We try to be alert to any sort of mega-catastrophe risk, and that posture may make us unduly appreciative about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

That warning was in Buffett's 2002 letter to Berkshire shareholders. He saw a future that many others chose to ignore. The Iraq war build-up was at a fever-pitch. The imagery of WMDs and a mushroom cloud fresh in his mind.

Derivatives bubble explodes five times bigger in five years

Wall Street didn't listen to Buffett. Derivatives grew into a massive bubble, from about $100 trillion to $516 trillion by 2007. The new derivatives bubble was fueled by five key economic and political trends:

• Sarbanes-Oxley increased corporate disclosures and government oversight
• Federal Reserve's cheap money policies created the subprime-housing boom
• War budgets burdened the U.S. Treasury and future entitlements programs
• Trade deficits with China and others destroyed the value of the U.S. dollar
• Oil and commodity rich nations demanding equity payments rather than debt

To put things into perspective:

• U.S. annual gross domestic product is about $15 trillion
• U.S. money supply is also about $15 trillion
• Current proposed U.S. federal budget is $3 trillion
• U.S. government's maximum legal debt is $9 trillion
• U.S. mutual fund companies manage about $12 trillion
• World's GDPs for all nations is approximately $50 trillion
• Unfunded Social Security and Medicare benefits $50 trillion to $65 trillion
• Total value of the world's real estate is estimated at about $75 trillion
• Total value of world's stock and bond markets is more than $100 trillion
• BIS valuation of world's derivatives back in 2002 was about $100 trillion
• BIS 2007 valuation of the world's derivatives is now a whopping $516 trillion

One of the big questions, how much leverage is uncovered. The subprime mortgage crisis (meltdown) is just the tip of the iceberg.


Meanwhile - another big story - Carlyle Capital on the Verge of Collapse

Carlyle Capital, an affiliate of private equity firm Carlyle Group, said today it was in default on margin calls of over $400 million, and that it was unable to meet its margin calls and was now in default on about $16.6 billion of its debt!

 

[Astronuc]

Paulson admits deregulation has failed us all
Commentary: Mortgage proposals spell end to decades of looking other way

WASHINGTON (MarketWatch) -- You know things are very very bad on Wall Street when a guy like Henry Paulson -- Treasury secretary, solid Republican, and former Goldman Sachs CEO -- joins the crowd calling for more regulation over the financial markets.

Paulson spared no one in his criticism Thursday of the excesses of deregulation that has now created the worst global financial crisis in a generation, threatening the health of the U.S. economy, the savings of millions of Americans, and the survival of some of the biggest financial institutions in the world.

Wall Street and Washington both failed big time, he said. Wall Street invented new ways to make money by selling securities so complicated that no one could really follow which shell the pea was under. Fortunes were made on the paper Wall Street sold.
At the same time, Washington's watchdogs were dozing, tranquilized by the false assurance that Wall Street would police its own.

It's been obvious for years now that Wall Street could not be trusted, and finally official Washington agrees. The markets need a tougher cop to make sure that money-center banks, investment banks, credit-rating agencies, hedge funds, mortgage brokers and the rest don't let their own greed and arrogance ruin it for the rest of us.

"Regulation needs to catch up with innovation," Paulson said, and he was backed up by the rest of President Bush's working group on financial markets, including Federal Reserve Chairman Ben Bernanke and Securities and Exchange Commissioner Chris Cox. Not a commie among them.

The housing bubble wasn't a flaw; it was a predictable outcome of a system that rewarded smart people small fortunes for conjuring up ways to persuade people to borrow more than they could ever hope to pay back. All the profits were taken off the table quickly, but the staggering costs are only now being paid by homeowners, shareholders, builders and the rest of society.
. . . .

A sobering comment by Ted Campbell back in Jan 30, 2008 at the Commonwealth Club - According to a study by the Fed (Boston) approximately 60% of people pushed into subpirme (high interest rate) mortgages were clearly eligible for lower mortgage rates! That implies significant criminal culpability.

 

[russ_watters]

You are mistakenly presuming that these are all young people. How about the thousands of fifty somethings who have worked hard for the last 20 + years? Are they really slackers Russ?

I made no such presumption. Maybe those fiftysomthings also forgot what their parents taught them.

Beating ones head against the wall trying to find jobs that no longer exist isn't a virtue either. There aren't even enough Walmart type jobs for everyone.

Jobs exist, so people who don't have jobs should keep looking. Or not. I don't care: the point is that they don't deserve help if they aren't trying to help themselves.

 

[Poop-Loops]

I made no such presumption. Maybe those fiftysomthings also forgot what their parents taught them.

Go to war and get rich off of the profits of selling to needy countries at a high price? I thought that's what we were doing.

Jobs exist, so people who don't have jobs should keep looking. Or not. I don't care: the point is that they don't deserve help if they aren't trying to help themselves.

Right. Take a $6.50/hr job and call yourself "employed", forgetting that they cut your hours to 30/week and you can't feed your family for that.

Just out of curiosity, have you ever been in these people's shoes? Have you ever been unemployed and had trouble finding a job?

 

[russ_watters]

Go to war and get rich off of the profits of selling to needy countries at a high price? I thought that's what we were doing.

Since that doesn't make any sense, I doubt it.

Right. Take a $6.50/hr job and call yourself "employed", forgetting that they cut your hours to 30/week and you can't feed your family for that.

Right. If you aren't working and you are desperate and you find a job, you should take it. A bad job is better than no job and a little money is better than no money. This isn't rocket science.

Just out of curiosity, have you ever been in these people's shoes? Have you ever been unemployed and had trouble finding a job?

No.

 

[Astronuc]

Optimistic Bush says economy will bounce back

WASHINGTON (MarketWatch) -- The U.S. economy will emerge from its current problems "better and stronger than ever," President Bush said Friday in a major speech on the economy at the Economic Club of New York.

Speaking just hours after the Federal Reserve helped to engineer a rescue loan for investment bank Bear Stearns, Bush said that, although times are tough, the economy is resilient.

Bush says economic foundation is solid

Bush: "Our economy is obviously going through a tough time

Bush: Housing market is in process of correcting itself

Easy for him to say when he will walk away with a huge pension at taxpayers expense. Bush, Cheney, et al will laugh their way to the bank on the backs of US taxpayers while more people will face bunkruptcy and foreclosures, not to mention the nearly 4000 US soldiers killed and another 29300+ wounded. The wounded will receive minimal support from the US government - in order to keep cost down.


Paulson: Bear Stearns is another challenge for regulators

 

[Poop-Loops]

Since that doesn't make any sense, I doubt it.

Doesn't make sense? You think America just spontaneously jumped out of the Great Depression? No, WW2 had a LOT to do with it, and people were afraid that after the war, teh US would be back in the poor house.

The US made HUGE profits from WW2. Just like companies like Haliburton are making HUGE profits off of Gulf War 2. That is, after all, what their daddies taught them, right?

Right. If you aren't working and you are desperate and you find a job, you should take it. A bad job is better than no job and a little money is better than no money. This isn't rocket science.

You don't get hired at McDonalds if you have a degree in engineering or 20 years experience as some sort of technician. It's called being "overqualified" because they know that as soon as you get a better offer you are jumping ship.

Not to mention, your first two weeks at that sort of job are your "trial" weeks where you work part time to make sure you don't screw up.

Basically, what just happened was, the company, unless it went out of business, said "Thanks for all the money you made for us. Now GTFO." Shouldn't there be some sort of protection against that sort of thing?

Moreover, if you take a crappy job, you no longer count as being unemployed, even though it makes little difference since you can't feed your family. Country looks like it's doing fine when it's really going down the crapper.

No.

Why is it people who have had relatively easy lives who keep saying "Hurr hurr, if you don't have a job, it's your fault!"?

 

[turbo]

Why is it people who have had relatively easy lives who keep saying "Hurr hurr, if you don't have a job, it's your fault!"?

Because until they are confronted with some tough realities, they have no idea what suddenly-unemployed people are going through. It's easy to pontificate and say "just get a job" and put down the unemployed, but that glosses over some harsh realities. I have lots of friends in the pulp and paper industry and worked in it for many years. Many of the mills here are in remote locations, and towns grew up around the mills because they offered employment. When the former Great Northern Paper mill in Millinocket closed down, the town lost not only its biggest employer (BY FAR), but the bulk of its tax base. Guys I know with 20-30 years of experience were suddenly out of work, with kids in school, and with houses that were suddenly almost worthless. It's easy to smugly say "go find another job", but at 45-50 years old, it's tough to get a fair shot in the job market, and you somehow have to line up a place to stay near your new employment, pull what equity you can out of your property, and start over. When you have a house that might have been worth $80-100K in a remote mill town and the mill folds, you'll be lucky to get 25% of its previous value and if you're like many people, you may have about zero equity if you have refinanced to put in a new heating system, new roof, remodel, etc.

This same scenario has played out with mill after mill, as subsidized overseas paper (thanks for NAFTA, Bill!) has eaten more and more of the market. Now, with the collapse of the housing market, there is a huge glut of lumber here, and two of the three largest sawmills in the state have shut their doors, and the remaining one is operating at a loss so they can try to keep their skilled work force, and protect their share of the market, should the market improve in a year or two. Those paper mill and saw mill closures of course ripple back through the wood-suppliers, their truckers, the crews that harvest the wood, the landowners and on and on. It's easy to tell all those people "just get a job", but it is over-simplified and smug to do so.

 

[mheslep]

No

Why is it people who have had relatively easy lives who keep saying "Hurr hurr, if you don't have a job, it's your fault!"?

Just because he's never been unemployed, how can you possibly assume he's had it 'relatively easy'? Maybe he has, or maybe he's worked his butt off his entire life in jobs/education/the military and now has a demonstrated body of knowledge and work ethic that is highly desirable to many employers and also provides a good foundation for self employment?

 

[Poop-Loops]

You can work your butt off all you want, if you can't find a job, you won't get any money for it.

That's the whole point. There are times when the hardest working-people get a string of bad luck. To say that its their fault is ludicrous.

 

[russ_watters]

Easy for him to say...

It sure is easy to say, since it is trivially true. There is nothing wrong with reminding people of the obvious when they are feeling pessimistic and stop believing it.

 

[russ_watters]

Doesn't make sense? You think America just spontaneously jumped out of the Great Depression? No, WW2 had a LOT to do with it, and people were afraid that after the war, teh US would be back in the poor house.

That doesn't appear to have anything to do with what you said and its also self-contradictory. Yes, WWII helped a lot. So why do you say that war hurts the economy? And what does that have to do with "the profits of selling to needy countries at a high price"?

You don't get hired at McDonalds if you have a degree in engineering or 20 years experience as some sort of technician. It's called being "overqualified" because they know that as soon as you get a better offer you are jumping ship.

I don't see your point. Why would someone with an engineering degree want a job at McDonalds?

You're really jumping around here: in your previous post, you talked about if you can get a low-pay job. Now you're saying they can't get them. The truth of the matter is, though, that people do it.

Basically, what just happened was, the company, unless it went out of business, said "Thanks for all the money you made for us. Now GTFO." Shouldn't there be some sort of protection against that sort of thing?

Didn't the employee get anything out of the deal? And should there be protection for the company against a person quitting? And there is protection for employees who lose their jobs: unemployment insurance. But it is temporary and requires you to be actively looking for a job to qualify. And rightfully so.

Moreover, if you take a crappy job, you no longer count as being unemployed, even though it makes little difference since you can't feed your family. Country looks like it's doing fine when it's really going down the crapper.

Perhaps people who only look at one statistic might be fooled by that, but not people who look at a lot of different statistics. For example, what you talk about there would show up in household income stats.

Why is it people who have had relatively easy lives who keep saying "Hurr hurr, if you don't have a job, it's your fault!"?

I never said anything of the sort. And how do you know what kind of life I live or how I got where I am?

All I said was that quitting is not a virtue and is not something that should be rewarded.

 

[russ_watters]

Because until they are confronted with some tough realities, they have no idea what suddenly-unemployed people are going through.

Again, I never claimed to know what such people are going through. In fact, I made no general value judegment about such a group of people. I never mentioned them. What I said was very specific. Don't expand it to be something it wasn't. Here it is again:

They are people who have chosen not to look for jobs. You can't get a job if you don't look. So screw them: they are leeches. They don't deserve jobs and they don't deserve government assistance. They deserve to live in the poverty they've resigned themselves to.

Again, it's very specific and simple: if someone chooses not to look for a job they won't find one. And they deserve no help because they aren't trying to help themselves. Someone in a desperate situation who does whatever they can even if it means working at McDonalds is making a legitimate effort and is therefore worthy of assistance.

 

[Astronuc]

It sure is easy to say, since it is trivially true. There is nothing wrong with reminding people of the obvious when they are feeling pessimistic and stop believing it.

Except that Bush is wrong.

 

[turbo]

Again, I never claimed to know what such people are going through. In fact, I made no general value judegment about such a group of people. I never mentioned them. What I said was very specific. Don't expand it to be something it wasn't. Here it is again: Again, it's very specific and simple: if someone chooses not to look for a job they won't find one. And they deserve no help because they aren't trying to help themselves. Someone in a desperate situation who does whatever they can even if it means working at McDonalds is making a legitimate effort and is therefore worthy of assistance.

My comments were not directed at you in particular, Russ. You noticed I used the word "they" to make a general statement about people who over-simplify and say "get a job" without a feeling for the logistics involved. I have been there. A mill that I worked at in 1975 was bought out by a competitor. We processed all remaining inventory, and the new owners stripped the mill of all the best equipment and shut the place down. A mill that had provided the bulk of the employment to people in a 20 mile radius of the place was suddenly gone. The town never recovered. You can buy a 4-bedroom house there for less than $50K easy.

20 years later, a company that I worked for as a technical/sales consultant was bought out by a competitor, and since they had duplicate field services, they let all of us go and retained all their own staff. I went from making over $80K/yr to nothing. Fortunately, my wife and I are not idiots and we had socked away enough money to weather that, plus she was working. It took me about 9 months to find a job that would substantially replace those wages, but I did it.

I hope you never lose your job - at least without a Plan B firmly in place. It's pretty crappy, and you have to be ready to roll with it.

 

[edward]

This doesn't sound good. Are all of the fat cats going to expect a fed bail out now??

March 15 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke is being forced to throw out four decades of monetary history by a financial system choking on miscalculated risks and a deepening recession.

Bernanke and the four Fed governors voted yesterday to become creditors to Bear Stearns Cos., a securities firm that isn't a bank, by invoking a law that hasn't been used since the 1960s. Three days earlier, the Fed said it would swap Treasury notes on its balance sheet for privately issued mortgage-backed securities held by Wall Street firms.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aY2RvFA.yO_Q&refer=home

 

[russ_watters]

Except that Bush is wrong.

If the economy doesn't bounce back "better and stronger than ever", it'd be the first time in US history and if it happens we should just dissolve the country because the experiment has finally failed.

No, what he said is trivially, redundantly true. The US economy will bounce back and when it does -- redundantly -- it will be better than it was before the slowdown. That's why they call it a "recovery". Everything Bush said there is self-evidently true.

Jeez, Astronuc - you really believe the US is in for complete and permanent economic collapse?

 

[Jimmy Snyder]

If the economy doesn't bounce back "better and stronger than ever", it'd be the first time in US history and if it happens we should just dissolve the country because the experiment has finally failed.

The unprecedented prosperity of the US has often been cited as a kind of report card on our system of government of the people, for the people and by the people. None the less, I don't agree that if the economy stagnated, then we should revert to a kingdom as if the experiment were an economic one.

For all the griping you hear about the economy, it is actually doing great. How long do you expect it will be before you hear another one of those "In a country as rich as ours ..." arguments from the very mouths of those who now tell us that the economy is in a shambles and will never recover? It's a downturn people, buck up. Sit down and talk to your parents and/or grandparents that lived through the great depression.

 

[Jimmy Snyder]

As for Bush's speech in which he erroneously implied that it is not the end of the world, he is not so stupid as to repeat the Carter "malaise' speech. Carter was, of course, the smartest President we ever had. Just because Bush is the stupidest President we ever had doesn't mean he isn't more intelligent than Carter. The job of getting us out of the current downturn belongs to anybody who wants it. That means me for one. You too if you are interested in the position. Bush can't do it on his own you know. If you read his job description, it includes 'cheerleader in chief'. Carter should have been fired for misfeasance on the basis of that speech. All you cheerleaders for the opposition, shake your pompoms all you want, you can't discourage me, go discourage someone else.

 

[russ_watters]

As for Bush's speech in which he erroneously implied that it is not the end of the world, he is not so stupid as to repeat the Carter "malaise' speech. Carter was, of course, the smartest President we ever had. Just because Bush is the stupidest President we ever had doesn't mean he isn't more intelligent than Carter. The job of getting us out of the current downturn belongs to anybody who wants it. That means me for one. You too if you are interested in the position. Bush can't do it on his own you know. If you read his job description, it includes 'cheerleader in chief'. Carter should have been fired for misfeasance on the basis of that speech. All you cheerleaders for the opposition, shake your pompoms all you want, you can't discourage me, go discourage someone else.

You got it exactly.