The US Economy

timberlandko wrote:

c.i. , the simple, plain, no-spin facts are that current and even pessimistically projected deficit figures are comfortably within supportable percentage-of-GDP levels, as evidenced by the entire fiscal history of The US

I would object that these numbers are deceiving. They don't account for the implicit government debt of Social Security, which is getting way higher than it was in the entire fiscal history of the US.

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Thomas, I'm not talking about, or, perhaps with the single exception of you, to, "serious critics" :wink:

As we've discussed, and differed on, I believe increased taxable earnings will result in increased absolute tax revenue despite lower tax rates, and I believe ... let me hedge that ... I HOPE fiscal restraint will be more a feature of The Current Administration's second term than has been the case with its first. Waste, fraud, and pork must be addressed proactively, and spending, particularly as regards subsidies and entitlements, must be brought under control. It is not atypical for such measures to be undertaken during second terms; harsh measures rarely bring much success to the electoral prospects of first terms.

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Again, Thomas, a valid observation, but I would look to reform both of the tax code and the Social Security code during The Second Administration; those aren't the sort of things typically tackled by first-timers. I'm confident we will see. I'm not so confident we will see stunning success, but I figure steps will be taken.

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Let's hope you're right, timber. Meanwhile, congratulations for your good unemployment news.I'm happy for you!

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timber, If the current and future deficit trend remains for the next decade, this country will be in great financial dificulties for the reasons Thomas has pointed to - we're going to have more retirees than workers, and there is no way the smaller ratio of workers to retirees are going to take care of this deficit plus fund social security and Medicare. Your optimism is misplaced - IMHO.

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You can see it this way .. or the other:

Quote:

The weak jobs figure helped the euro to reach another all-time high against the dollar of $1.2169, before the currency fell back to $1.2166.

It was the sixth straight trading session in a row that the euro has posted a record high.

"The dollar is ending the week on a weak note due to weak data," said David Mann, currency strategist at Standard Chartered.

"Sentiment is very strongly anti-dollar," he added.

The jobs news also hit stocks on Wall Street and the benchmark Dow Jones index closed down 0.7% at 9,862.68.

source: BBC online

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c.i., look for The Private Sector to assume more of the burden both for Medicare and for Social Security. That will outrage Democrats, but its inevitable, if we're not to slide into the socialist featherbed in which the EU currently wallows. Frankly, Social Security and Medicare both are intended to be supplemental support, not sole-provider of retirement benefits. Personal Medical Savings Accounts, and Personal Retirement Plans, funded largely by individual contributions as opposed to governmental levies are going to be real growth industries, IMO.

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Walter, look for the EU Central Bank to begin to take steps to ease the Euro's climb against the dollar, first among which steps will be urging the US to raise interest rates ... complaining that the declining dollar is a defacto tariff.

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timber, I think you're right; social security and MediCare will become privatized before the baby-boomers are ready to retire in about ten years. There is absolutely no way the government will be able to fund it with a smaller work force. The problem with privatization is the higher cost of administering these programs. The US now pays the highest cost for medical care, and it's gonna get worse.

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Many poor seniors are going to get a shock when they become liable for the first $1,492 in premiums and co-pay up to $3,600 in their drug costs.

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timberlandko wrote:

Odd, isn't it, that the opponents of The Current Administration pound on the record dollar-figure deficit totals, ignoring the relative, and imminently more relevant, percentages, yet simultaneously pound on employment percentages while ignoring the fact America has more people employed today than ever in history? No, not really odd. That's spin ... nothing odd there at all.

but the fact still remains that deficit as a percentage of GDP is still higher than it was under clinton. and the rate at which it is increasing is staggering. much faster than GDP growth.

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Stocks fell Friday after a government report showed that the economy added fewer jobs than forecast last month, denting some of the optimism that had lifted benchmark indexes to 18-month highs this week.
.
"You've got to have a good labor market to draw people into the stores and spend again," said Bernie Myszkowski, a fund manager with ABN Amro Asset Management. "If the employment numbers don't get stronger, it could be a reason for taking money off the table."

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One of the major weaknesses of the economic recovery is the slow growth in jobs. I've read several reports that it would require a minimum of 170,000 added jobs per month for our economy to really show sustainable growth. 57,000 jobs last month is fine, but not enough to make up for the 3 million jobs lost during the past three years. That's the reason I'm skeptical about the market going too high too fast. Greenspan's "irrational exuberance" is still at play.

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cool graphs, ye110man, interesting! can you believe how rich(er) we've become, over the years?

Timber - good point about the use of dollar-figure deficit totals versus deficit percentage of GDP. Its true, fair's fair - if anyone's gonna make the argument that record current deficits are emerging, one should compare the figure as percentage of GDP to earlier times / other countries as well, to put it in perspective. Will try to remember to do so next time I'm in the temptation of posting anything about it.

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If America is about to experience a major problem with the large numbers of retirees in the future to be supported fewer working age adults, they should consider what Canada is doing. They have ease up on their immigration policies. By allowing immigrants to move to Canada they will be able to solve their negative population growth, provide care for their elderly, increase their tax based and partially solved the current shortage on medical personnel. Selective immigration is what Canada is doing. They have opened up immigrant status in selected professions particular in the healthcare sector.

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NEW YORK (Reuters) - U.S. stocks were set to open lower on Monday as the dollar slid to record lows against the euro, deepening concerns that U.S. investments will lose some allure internationally.
The dollar's latest losses, hitting a record low against the euro for the seventh straight session, come after a disappointing U.S. jobs report on Friday, which sent the major indexes down.
"Early on, the market is still reeling from the jobs report on Friday," said Phil Flynn, vice president and senior market analyst with Alaron Trading Corp. "The dollar continues to show signs of weakness, and it is starting to have an effect on the stock market and commodity prices."
Stock futures were trading lower on Monday, below fair value, pointing to a lower open.
While monitoring the dollar, investors are also focusing this week on Tuesday's Federal Reserve (news - web sites)'s meeting, where the most expect no change in short-term interest rates. For some, that would be evidence that the U.S. economy is not yet on a firm growth path.
"The futures markets are continuing on their downward slide as traders seem to be taking profits ahead of tomorrow's Fed meeting and Thursday's all-important retail sales figures," said Harry Michas, stock index futures trader at manmarketmonitor.com. "The Fed is expected to leave rates unchanged once again, which has forced the dollar to slip to new lows. These factors are teaming up to push the equities markets lower."

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There was no way for me to predict the downward slide of the dollar against the yen and euro six-seven months ago, but I made the best guestimate that the market would end up this year at about the 9,000 range. I'll still stick by that forecast, because we still don't have job growth, and the retail sales can't keep up with less consumers with a net loss of three million jobs.

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This business of the "slide" of the dollar is puzzling to me. I recall quite clearly hearing news reports within the last few months of Bush's efforts to weaken the dollar to avoid some of the negative consequences to the US of a too-strong dollar. Now I read the news worrying that the dollar is too weak, and I can't help but conclude that one of the sides to this story is not being portrayed accurately.

Here's one such mention, which I found just now:

Quote:

Pushed by powerful global forces - including, analysts say, a thinly veiled effort on the part of the Bush administration to weaken the dollar - a strong euro may be here to stay. Because Asian policy makers have moved to limit the ascent of their own currencies, with an eye toward protecting the all-important U.S. export market, the euro has had to absorb much of the dollar's decline.
http://www.iht.com/articles/118410.html

Why would Bush actively work to weaken the dollar if that's always and only a bad thing? Why doesn't the news of the weaker dollar include any mentions of the positive consequences of same? As with lower interest rates there are good and bad effects here, so why is the news only citing the bad?

Perhaps this is an issue of the dollar becoming weaker than is desirable (somewhat weaker being okay, but now more weak than is ideal)?

Also, this Forbes article I found takes the position that the dollar is weak against the Euro not because of the state of our economy, but in spite of it:

Quote:

Stunning U.S. data fail to boost dollar; euro ebbs <-Link

NEW YORK, Dec 1 (Reuters) - The dollar, failing to capitalize on the fastest pace of growth in U.S. manufacturing in 20 years, made only minor gains versus its main rivals on Monday as investors shunned U.S. assets.

The euro pulled back from its record high $1.2041 in the wake of the factory activity data, but overall lost little ground, while the greenback slipped against the yen. Reports that Washington may repeal steel tariffs to head off a trade war proved only a short-term positive for the dollar.

"It is yet another day when the strong U.S. economic data has not been able to turn the dollar around," said Jeremy Fand, senior proprietary trader in foreign exchange at WestLB in New York.

"Medium term, the dollar decline in the face of persistently surprising good data on the U.S. doesn't make sense. The current account argument only goes so far and I believe the kind of growth we are seeing is strong enough to make the current account completely irrelevant," Fand added.

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Scrat, The weaker dollar makes our products and services most competitive in the world markets. We are by far the strongest economy in the world, and not even Japan as the second strongest economy has any chance of challenging our number one spot. The world's economy is also in decline, so the relative strength of the US dollar is still number one. Can you imagine what would happen if all of a sudden the EU contries economies went into a nose dive? The Euro would be worthless, because there isn't enough assets, products and services to back it up. Don't forget, the two strongest economy of the Euro is Germany and France, and they're both running their governments on deficit budgets - over 15 percent. I don't understand why the world money markets are devaluing the dollar, but it's temporary - IMHO.

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cicerone imposter wrote:

Don't forget, the two strongest economy of the Euro is Germany and France, and they're both running their governments on deficit budgets - over 15 percent.

c.i.

Could you please give me the source for that number? (We are talking here in Germany about 3.something%, nearly 4%)

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