Where is the US economy headed?

More rate cuts from Fed expected Tuesday

By JEANNINE AVERSA, AP Economics Writer
Sat Mar 15, 4:20 PM ET

WASHINGTON - Desperate to aid an economy in crisis, the Federal Reserve is ready to deliver yet another big interest rate cut.

How big? One-half of a percentage point, some economists say. Investors and others hope for even more, a three-quarters cut or perhaps a full point, given the turmoil on Wall Street. It will be a close call, Fed watchers say.

They'll never catch on; it's not about rate cuts; it's about jobs...

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C I
I follow this thread with rapt attention.
I have a song to sing that I will do

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Rama, Don't get too wrapped up with this thread. LOL

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cicerone imposter wrote:

They'll never catch on; it's not about rate cuts; it's about jobs...

I told you a few pages back what we need to do to fix it, ci, which includes scrapping a few liberal policies.

okie wrote:

Well, since we are in a world market, we in aggregate as a country need to look at the product quality and price, how competitive are we? We are slipping, in my opinion.

My solutions would include lowering the cost of doing business here and increasing our skill level or ability to put out a good product.

To do that, part of the solution would be drastic tax and regulatory reform to enable more companies to stay here. I would also look at the "Fair Tax" as a possible way to level the playing field and be able to compete with the manufacture of goods overseas to be sold here. For example, goods produced overseas would suffer the same tax bite here as goods made here. It would essentially eliminate all income tax on businesses here. Another huge burden on our economy is the health care industry which has been burdened down with excessive and over intrusion by the federal government. They need to back out of the equation and we need to inject more market forces into health care. I am not against universal health care, perhaps, but I don't want it to be run by the federal government. We have almost universal auto insurance for example, so if anyone expects to ever need health care, they need to show the ability to pay for it. And health care insurance responsibilities should no longer be provided by employers. We need major reform, and this won't be easy to get it right, but government run health care is the absolute wrong solution to achieve the best results.

Secondly, we need drastic reform of our education system to make it more competitive and higher quality. I would incorporate competition into the market of education and destroy the monopolistic situation that we have now, that produces mediocrity and failure. Cost of education would decrease and quality would increase, which would give us both a short term boost and a long term boost. It would allow more people access to quality education, and it would provide more skilled workers later on.

These are good suggestions for starters, but these are mostly longer term.

Shorter term solutions are easy. Do what we can for ourselves, which would include drilling in ANWR, offshore, and loosening restrictions on all kinds of regulatory problems with doing business. One example would be licensing new power plants, mines, etc. Cut government spending and waste as soon as possible, like next year. Place hiring freezes on non-essential government bureaucracies. I have all kinds of suggestions, but these would be a good start.

I would add to the above some social engineering with tax policies and changes in our educational system to encourage young people to gain skills and be married before having children, and also to encourage families to stay together. And politicians need to start making this a big issue. A large percentage of our poverty problems is due to single parent families, unwed mothers, etc.

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I hear what you are saying, CI, about jobs...but

I don't mean to be an alarmist, but we came very close to falling over an abyss this past week. On Tuesday, the Fed put 200 billion into the banking system to prop up liquidity. But then on Friday the Fed had to bail out Bear Sterns. Bear Sterns is big, but there are bigger players out there.

Next week could be pretty rough and tumble with other shoes to drop from banks.
I see a half-point cut in the Fed rate at a minimum on Tuesday. 3/4 is possible. A 1% cut would, in my mind, show total panic by the Fed. I am betting on a half.

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rjb, It's my guess it can be either half or three-quarter; I think they're in a panic mode now.

The problem with the rate cuts aren't helping the consumers much when their pay isn't keeping up with the inflated cost of fuel, food, health care, and education.

Most consumers who have been propping up our economy by spending the equity in their homes are no longer in existence. Most are now paying on mortgages on a home that no longer has any equity left in them. The majority have already borrowed way beyond their ability to pay. Notice that the interest rates on credit card credit hasn't come down. Even 30-year mortgage rates have hiked above six percent.

The majority can no longer afford to buy homes much less borrow more money to prop up our economy.

We then have the banks running short of funds; a hell of a development for any economy.

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It appears to me that we are beginning to pay the price for living beyond our means, paycheck to paycheck, and borrowing the limit. Everything has to go right or we are in trouble, such as losing our jobs. Too many people do not save for a rainy day or have no money for emergencies. That includes government and citizens.

Another thought, too much of our economy is service economy, such as home construction, so in order for us to keep each other going, it is too highly dependent upon growth and expansion. If people quit spending on expansion of personal life style such as houses, etc., it puts too many people out of a job. Our service economy is a vicious circle that must expand to survive, and the size of the circle can become limited by many factors.

The service economy appears to me to be a recycling of the same wealth in a circle. You can only recycle it so many times before it diminishes, due to our trade deficit, etc. We desperately need to inject new wealth producing sectors of the economy, such as natural resources and manufacturing. We have agriculture but if we begin to lose more of that to other countries, that could also spell more trouble.

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I certainly don't disagree with you, okie,

CI, an interest rate cut by the Fed will matter not a bit to the consumers who are drowning in debt. They, unlike Bush or McCain or Clinton or Obama, actually go to a gas station or a grocery store.

I suspect that the numbers, the retail sales numbers, that come out for March, are going to be very bad. Really bad.

I am working on building a total of 15 floors on properties in Cville. Interest rates are coming down on paper, but the banks don't have any money. The banking system is seizing up.

So when you talk about jobs, CI, I have something like $40 million in labor and material ready to go, but thr banking system is in a "lock-down" due to stupid investments they made.

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Rate cuts WILL NOT help. At all. There may be a short-term bump in the markets but the overall picture will not change.

Okie, deregulation - offshoring - lack of tarriffs. These are the things which have lead to our current manufacturing woes here in America. Allowing companies to headquarters themselves in the Cayman Islands, or Dubai, in order to avoid paying taxes; can you say Halliburton/Kbr?

Did Bush, after 9/11, tell people to save? To live within their means, to scrimp, to contribute to the war effort? Did any Republican? No, they did not. Instead, Bush said 'Go out and shop!' You act as if these problems sprung up on their own. They did not. They were encouraged to happen by the short-sightedness of your party and some elements of mine.

Cycloptichorn

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These problems did not spring up on there own, nor did they spring up overnight. You cannot lay the blame at the feet of Republicans or Democrats altogether. Has any politician, Republican or Democrat, ever told citizens to not shop and spend? I don't remember any. It is actually the people's fault when you get right down to it. There is a problem and we are it. And politicians come from us and are elected by us, they are us.

I blame Republicans for not sticking to core principles of responsible budgeting, pay as you go. I blame Democrats for preaching the government should cough up more money for every social program, and also for not preaching citizenship. Instead of preaching individual responsibility, we hear mostly scapegoating, that if you are broke, it is the government's fault or if you are poor, it is the rich's fault, and so on.

And cyclops, companies go offshore because it is more economical. We drove them offshore. That is why I propose to eliminate corporate taxes. We had candidates that had some knowledge and decent ideas in regard to the economy, namely Huckabee and Romney, and the voters were too dumb to understand it.

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okie wrote: We had candidates that had some knowledge and decent ideas in regard to the economy, namely Huckabee and Romney, and the voters were too dumb to understand it.

Agreed: most don't have a clue. What is more surprising is that our ecocomy made more families suffer the consequeces for over five years now, but failed to act on them through their voting and persoal lifestyles. They were living for today, except today no longer has the cash to feed their poor habits.

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Quote:

our ecocomy made more families suffer the consequeces for over five years now, but failed to act on them through their voting and persoal lifestyles

ci, IMHO, this is because the nation is so polarized and there are only 2 choices in the end. Add the that the fact that the $ has more votes that the individual and the $ is controlled by business, only the rich (those that have the top 2-3% of corporate jobs) win. And they own both parties.....

There were two chicken companies in Arkansas, Oklahoma, Texas, Louisiana corridor, one Dem and one Rep. The Dem one did great during Clinton and went out of business because of the Bush administration. Surely, there is a white paper somewhere on this event.

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THANKFULLY, DOOM is far from impending for the happy few that belong to Forbes Magazine's annual list of billionaires worldwide. You'll be glad to learn that the list has grown to 1,125 gazillionaires, 179 more than last year, whose total net worth is $4.4 trillion -- 4,400,000,000,000 dollars. Of course there are differences in wealth: the average worth is a mere $3.9 billion -- just about $280 million more than last year -- but the average worth of the top 20 is about $20.8 billion, or about $3.3 billion more than last year. It is said that there is a lot of resentment on the part of the bottom listers toward the top of the food chain. Overall, they tend to be old, though the average age is 61 due to the arrival of a few youngsters. Take Yang Huiyan who owns Country Garden Holdings Co., a property company in equalitarian communist China. She's worth $7.4 billion (#125 on the list) and is only 26 years old. The average age of Chinese billionaires is 48, and in Russia 46, but the golden palm goes to Mark Zuckerberg, the founder of Facebook. At the tender age of 23, Zuckerberg is worth $1.5 billion (#785 on the list).

NUMBER ONE IS AMERICAN -- thank the Lord, we are still Numero Uno! His name? Warren Buffett, the 77-year-old chairman of Berkshire Hathaway, a company whose shares rose 28% in the past 12 months -- a better result than Citigroup to say the least. (Advice to investors: If you have cash on hand, grab a few shares of Berkshire Hathaway, at $139,000 each -- the most expensive on the New York Stock Exchange -- it's a steal!) Now, don't take me wrong. I actually like, or better said respect, Mr. Buffett. He's not only made his fortune the old fashioned way -- as the story goes, he claimed a $35 deduction with his first tax return for a bicycle he used to deliver newspapers. He was 13 years old -- but he's been an ardent advocate for keeping the estate tax (what reactionary conservatives à la bushy, including McCain, call the death tax) going, and has pledged or bequeathed his fortune to the not-for-profit (but status quo and elitist-keeping) Bill & Melinda Gates Foundation. So, as capitalists go, he is not that bad and evil, just a decent man whose smarts and hard work allowed him to play a system that he did not invent. He just took advantage of it (nothing wrong with that, as the saying goes).

http://www.swans.com/library/art14/desk067.html

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Good afternoon to yall.
I don't think we expect a President to have deep knowledge of every topic, despite what the candidates might say to the contrary. They must rely on the advice of advisors in the areas of economics, foreign affairs, environmental issues and on and on.
But really...
On Monday or Tuesday the Fed has to inject $200 bn into the banking system. And then in the wee hours of Friday morning, the Fed has to bail out Bear Stern.
And then Mr Bush comes out, is handed a script, and says that the $300 per person rebate will turn the economy around.
He probably believes that. He never goes to a gas station or a grocery store. But do his economic advisors believe that? Or was the message filtered through political advisors who convinced him to believe that?

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spent $1.60 (canadian) to buy the NYT on saturday - i buy it about every other week .
i'm glad i didn't read before going to bed yesterday ; i'm sure i would have had nightmares !
finally started reading it this morning and am not quite finished yet - slow reader .
it's truly frightening what's going on in the financial market - and there doesn't seem to be an end in sight !
i have to wonder how a "domino" effect can be prevented ?
a/t to several articles it's still unknown what the total write-downs will be - apparently even reasonable estimates cannot be made yet .
hbg

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hbg, Did you study macro-economics? It has to do with the money supply. It tries to measure the different forms of "currency" including all forms of bank deposits, credit cards, the actual circulation of money, and other monies due and payables. In reality, it's not science, but an art.

Here's my take on it: there's too much cash in circulation as it is, and I'm surprised our inflation rate is so low as our government claims it is.

We don't need consumers borrowing more money against future earnings when they're not able to keep up with current inflation rates.

In today's world economy, the dollar will be losing more value against all major currencies. I think there's another 15 to 20 percent future value loss in the books for the next four or five years.

To some extent, this is good for our country, because our products and services becomes more competitive in the world markets, and our balance of payments automatically decreases; a good thing for us. The Japanese and Chinese who holds most of our bonds continues to lose, and they have finally started to do more of their business in Euros and Pounds so it's not 100 percent US treasuries.

China is not a threat, because they're only creating more pollution with their expansion. One third of their water supply comes from the Yangtze River, and that's already one-third polluted with no way to correct that problem, and it provides one-third of China's water. Many places are already running short of drinking water; they are essentially killing themselves for expanding their economy.

Some countries in Europe are doing fine, but most are struggling to survive. With the downturn in the world economy, Europe will also suffer.

That so many politicians believe everybody on this planet should live a middle-class lifestyle is not realistic; the world's natural resources is finite.

And here's the zinger; it's good that the world economy is slowing down. Humans can't continue to rape the environment at the same level as the past century.

What was that about the money supply, again?

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holy ****, all that broken jewelry iw as collecting JUST PAID. finally, conserving and hoarding pays off!

im rich BITCHES!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

is gold still over a grand an ounce? and whos the idiot who told me not to invest in , well it wasnt investing but yeah.

GOLD ROCKS!!!!!!!!!!!!!!!!

wait a godamn second.

whats the inflation at right now?

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c.i. wrote :

Quote:

In today's world economy, the dollar will be losing more value against all major currencies. I think there's another 15 to 20 percent future value loss in the books for the next four or five years.

To some extent, this is good for our country, because our products and services becomes more competitive in the world markets, and our balance of payments automatically decreases; a good thing for us. The Japanese and Chinese who holds most of our bonds continues to lose, and they have finally started to do more of their business in Euros and Pounds so it's not 100 percent US treasuries.

as i've written before , canada almost became a basket case some 20 years ago - we were on the watchlist of the IMF .
the canadian $ fell to a low of 62 cents U.S.
now , i wouldn't want to compare the U.S. to canada , since we are only 1/10 the economic size of the U.S.

we had several tax increases , reduced unemployment benefits etc . - canadians are a little more willing to part with their money than americans , i believe . they are somewhat more complacent .
in the end it was oil , gas and minerals that saved our bacon , i'm sure .

i'm not sure that "cheapenng" the U.S. dollar alone will cure the american economic problems .
what are americans going to do if its government asks for more taxes from the citizens ?
i wish you and all americans the best - sure hope you won't have to go through what canadians went through .
hbg

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Unfortunately, our government worries more about their own electability over saving our country's economy, and the words "tax increase" is a game played by the conservatives against the liberals.

And it works. They're killing our economy.

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i'll be watching for "other" responses :wink:
hbg

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Where is the US economy headed?

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