Where is the US economy headed?

C I
William Blake had said
""You never know what is enough unless you know what is more than enough."

Is there such a thing as "too much money"?

Yes. Too much money creates inflation - as is the current status of the US dollar.

The feds attempts to control inflation by adjussting the short-term rates by a quarter point means nothing in the world where energy and food costs continues to escalate in double digits.

Most consumers do not understand macro-economics. The value of the dollar continues its downward slide as our dollar becomes less valuable, because most countries understand that the US dollar is over-valued and over-supplied. The only benefit for the US is that our products and services become more competitive in the world markets, and our balance of payments gets a free ride; our balance of payment is reduced by about one-third.

Our future still doesn't look very rosey; the full extent of the subprime debacle hasn't been revealed.

I'm talking about the individual and MONEY...

Of course the answer is yes. What the hell would you need all that money for?

There is no overall utility in owning a slice of our shared resources so large. Only the opportunity to further one's avarice.

Cycloptichorn

Give me some and I 'll show you!

You joke, but my point stands. The pursuit of vast sums of money is an addiction akin to gambling and drug use. It is not a virtue to be lauded by a problem to be treated.

Cycloptichorn

White House economic forecast more optimistic than others

International Herald Tribune, The Associated PressPublished: November 29, 2007






WASHINGTON: The White House issued an economic forecast Thursday that called for "solid growth" through next year, a prediction more optimistic than that of the Federal Reserve and far more optimistic than those of many analysts on Wall Street.

The administration predicted that the U.S. economy would expand by 2.7 percent in 2008, that unemployment would remain below 5 percent and that the outlook would be even better in 2009.

By contrast, Fed officials are predicting "subpar" growth through next year, starting with a sharp slowdown over the next six months. The "central tendency" of forecasts by Fed policy makers is for growth to slow to between 1.8 percent and 2.5 percent next year.

The White House was closer to the central bank on its estimate about unemployment, predicting that it would average 4.9 percent next year - up only slightly from 4.7 percent. But many analysts think the central bank's unemployment forecast is itself too optimistic, because it is inconsistent with its forecast for slower growth.

The White House forecast came after government data issued Thursday showed that U.S. home prices had marked a quarterly decline for the first time in 13 years. Home prices slipped 0.4 percent nationwide in the July-September period, compared with the previous quarter, the Office of Federal Housing Enterprise Oversight said


There is none so blind as one who will not see.

Au
It depends.
But most of the economists around the globe are very cautious to predict the future .

on CNBC this morning several commentators discussed the various measures the U.S. government is undertaking to help financial institutions and others that have been hit hard by the subprime mortgage deals .
one of the older chaps finally added his two cents worth : "yea , and it'll me done on MY dime !" .
(he hadd several days ago chastised the financial institutions that had contributed to the mess and had guessed correctly that it'll be mostly the taxpayers who'll be footing the bill to try and keep some of the financial institutions from sinking - seems that he was right) .
hbg

If Bush's prognostications about the US economy next year is anything like his prognostications about Iraq; we're in big doodle.

What's there to see?

Worsening Credit Crisis Leading to Meltdown of Financial System and Severe US Recession
Stock-Markets / Credit Crunch
http://www.marketoracle.co.uk/Article2875.html

The Economic Consequences of Mr. Bush
The next president will have to deal with yet another crippling legacy of George W. Bush: the economy. A Nobel laureate, Joseph E. Stiglitz, sees a generation-long struggle to recoup.
by
Joseph E. Stiglitz
December

http://www.vanityfair.com/politics/features/2007/12/bush200712

The situation may be even more dire. Recent work by Susan Houseman concludes that US statistical data systems, which were set in place prior to the development of offshoring, are counting some foreign production as part of US productivity and GDP growth, thus overstating the actual performance of the US economy.

The falling dollar has pushed oil to $100 a barrel, which in turn will drive up other prices. The falling dollar means that the imports and offshored production on which Americans are dependent will rise in price. This is not a formula to produce a rise in US real incomes.

In the 21st century, the US economy has been driven by consumers going deeper in debt. Consumption fueled by increases in indebtedness received its greatest boost from Fed chairman Alan Greenspan's low interest rate policy. Greenspan covered up the adverse effects of offshoring on the US economy by engineering a housing boom. The boom created employment in construction and financial firms and pushed up home prices, thus creating equity for consumers to spend to keep consumer demand growing.

This source of US economic growth is exhausted and imploding. The full consequences of the housing bust remain to be realized. American consumers lack discretionary income and can pay higher taxes only by reducing their consumption. The service industries, which have provided the only source of new jobs in the 21st century, are already experiencing falling demand. A tax increase would cause widespread distress.

As John Maynard Keynes and his followers made clear, a tax increase on a recessionary economy is a recipe for falling tax revenues as well as economic hardship.

Superpower America is a ship of fools in denial of their plight. While offshoring kills American economic prospects, "free market economists" sing its praises. While war imposes enormous costs on a bankrupt country, neoconservatives call for more war, and Republicans and Democrats appropriate war funds which can only be obtained by borrowing abroad.
http://www.vdare.com/roberts/071127_destruction.htm

Rama, That's the reason I'm against the feds cutting short-term interest rates now; it only exacerbates borrowing by consuners already in debt, and peanlizes those who have savings. More debt and less savings is the wrong formula for today's economy. We're already drowning in debt; more only makes things worse for everybody.

And what about the mortgage mess? Should the Gov solve the mess, others have made for themselves?

Why not face the reality that some individuals should be home owners while others should just be renters?

No the government should but out of this.

I agree; the government should not be bailing out those folks, both investors and buyers, who made bad financial decisions.

Americans are very pessimistic when asked about the likelihood that a variety of specific economic events will occur over the next year. Americans believe that the United States will move into a recession; that grocery prices, out-of-pocket healthcare costs, and gas prices will go up; that unemployment will rise; and that housing prices will go down. These findings are in line with other recent Gallup data showing that almost 8 out of 10 Americans believe the U.S. economy is getting worse rather than better.

The new data -- from Gallup's nationally representative telephone panel survey, conducted Nov. 26-29 -- show that from 53% to 90% of Americans believe that each of the seven events tested, all of which most observers would likely view as negative, will definitely or probably happen over the next 12 months.

http://www.gallup.com/poll/103108/Americans-Predict-Recession-Price-Increases.aspx
Poll is not the main yardstick to assess the economic development i.
But it can give a vague idea about the future .

Henry Paulson's Priorities

By PAUL KRUGMAN
Published: December 10, 2007
By Bush administration standards, Henry Paulson, the Treasury secretary, is a good guy. He isn't conspicuously incompetent; and he isn't trying to mislead us into war, justify torture or protect corrupt contractors.

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But Mr. Paulson's actions reflect the priorities of the administration he serves. And that, ultimately, is what's wrong with the mortgage relief plan he unveiled last week.

The plan is, as a Times editorial put it yesterday, "too little, too late and too voluntary." But from the administration's point of view these failings aren't bugs, they're features.

In fact, there's a growing consensus among financial observers that the Paulson plan isn't mainly intended to achieve real results. The point is, instead, to create the appearance of action, thereby undercutting political support for actual attempts to help families in trouble.

In particular, the Paulson plan is probably an attempt to take the wind out of Barney Frank's sails. Mr. Frank, the Democratic chairman of the House Financial Services Committee, has sponsored legislation that would give judges in bankruptcy cases the ability to rewrite mortgage loan terms. But "Bankers Hope Bush Subprime Plan Will Scuttle House Bill," as a headline in CongressDaily put it.

As Elizabeth Warren, the Harvard bankruptcy expert, puts it, "The administration's subprime mortgage plan is the bank lobby's dream." Given the Bush record, that should come as no surprise.

There are, in fact, three distinct concerns associated with the rising tide of foreclosures in America.

One is financial stability: as banks and other institutions take huge losses on their mortgage-related investments, the financial system as a whole is getting wobbly.

Another is human suffering: hundreds of thousands, and probably millions, of American families will lose their homes.

Finally, there's injustice: the subprime boom involved predatory lending ?- high-interest loans foisted on borrowers who qualified for lower rates ?- on an epic scale. The Wall Street Journal found that more than 55 percent of subprime loans made at the height of the housing bubble "went to people with credit scores high enough to often qualify for conventional loans with far better terms."

And in a declining housing market, these victims are stuck, unable to refinance.

So there are three problems. But Mr. Paulson's plan ?- or, to use its official name, the Hope Now Alliance plan ?- is entirely focused on reducing investor losses. Any minor relief it might provide to troubled borrowers is clearly incidental. And it is does nothing for the victims of predatory lending.

The plan sets voluntary guidelines under which some, but only some, borrowers whose mortgage payments are set to rise may get temporary relief.

This is supposed to help investors, because foreclosing on a house is expensive: there are big legal fees, and the house normally sells for less than the value of the mortgage. "Foreclosure is to no one's benefit," said Mr. Paulson in a White House interactive forum. "I've heard estimates that mortgage investors lose 40 to 50 percent on their investment if it goes into foreclosure."

But won't the borrowers gain, too? Not if the planners can help it. Relief is restricted to borrowers whose mortgage debt is at least 97 percent of the house's value ?- which means that in many, perhaps most, cases those who get debt relief will be borrowers who owe more than their house is worth. These people would be nearly as well off in financial terms if they simply walked away.

And what about people with good credit who were misled into bad mortgage deals, who should have been steered to loans with better terms? They get nothing: the Paulson plan specifically excludes borrowers with good credit scores. In fact, the plan actually provides an incentive for some people to miss debt payments, because that would make them look like bad credit risks and eligible for relief.

Now, Mr. Paulson's attempt to help investors, while doing little or nothing for distressed and defrauded borrowers, might make sense if his plan would reduce investor losses enough to seriously improve the overall financial situation.

But only a small fraction of subprime borrowers will qualify for relief, and many of these borrowers will eventually face foreclosure anyway. So the plan is unlikely to reduce overall mortgage-related losses by more than a few percent, at most ?- not enough to make any real difference to financial stability. Indeed, interest-rate spreads that have been signaling a crisis of confidence in the financial system didn't narrow at all when the plan was announced.

Still, you might say that the Paulson plan is better than nothing. But the relevant alternative isn't nothing; it's a plan that ?- like Barney Frank's proposal ?- would actually help working families. And that's what the administration is trying to avoid.