Where is the US economy headed?

Advocate wrote:

OGIONIK wrote:
so our economy is like a pus filled tumor, and it needs cleansing?

That is very frank, and very true. I think there is a chance that Obama could be the right doctor to operate on it.

Obama the right doctor? If you want the patient to die from sepsis, he is.... Confused

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Good evening. I heard an interview today with David Walker, former Comptroller (read chief auditor) of the U.S. He now heads the non-partisan Peter Peterson Foundation, a NYC think tank on matters economic.
This should give you indigestion, Tak.
Walker claims that our national debt is not the $11T(rillion) reported. That is just the IOU's we have issued in the form of government securities. In addition, there is another $7T in unfunded Social Security benefits (including $1135 to me. I got my 1st check this month). And another $34T in Medicare. $8T of that is for the prescription drug program which was supposed to save money. Add another $1T for Miscellaneous, and the "true" national debt is $53T.
We are on target to add nearly $1T more this year. He faults both Mr Obama and Mr McCain for not addressing this problem. Obama for seeming to want to expand spending without a clear plan for paying for it; McCain for wanting to cut taxes without a clear plan for reducing spending. Walker claims that eliminating earmarks, withdrawing from Irag by say early 2009 and rolling back some of the Bush administration's tax cut would cut the budget deficit by only 15%.

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Too many Americans want something they can't afford.

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too many americans need something they cant afford...

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It is worth noting that over 70% of the US GDP is consumer spending and that the entire Federal Reserve strategy of Alan Greenspan after the March 2000 collapse of the stock market bubble, was to bring US interest rates to their lowest levels since the 1930's in order to stimulate consumer spending on credit, i.e. debt, to avoid "recession." Note the scale of the following store closings across America in recent weeks:

Ann Taylor closing 117 stores nationwide.

Eddie Bauer to close more stores after closing 27 stores in the first quarter.

Cache, a women's retailer is closing 20 to 23 stores this year.

Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide

Talbots, J. Jill closing stores. Talbots will close all 78 of its kids and men's stores plus another 22 underperforming stores. The 22 stores will be a mix of Talbots women's and J. Jill.

Gap Inc. closing 85 stores

Foot Locker to close 140 stores

Wickes Furniture is going out of business and closing all of its stores. The 37-year-old retailer that targets middle-income customers, filed for bankruptcy protection last month.

Levitz - the furniture retailer, announced it was going out of business and closing all 76 of its stores in December. The retailer dates back to 1910.

Zales, Piercing Pagoda plans to close 82 stores by July 31 followed by closing another 23 underperforming stores.

Disney Store owner has the right to close 98 stores.

Home Depot store closings 15 of them amid a slumping US economy and housing market. The move will affect 1,300 employees. It is the first time the world's largest home improvement store chain has ever closed a flagship store.

CompUSA (CLOSED).

Macy's - 9 stores closed

Movie Gallery - video rental company plans to close 400 of 3,500 Movie Gallery

and Hollywood Video stores in addition to the 520 locations the video rental

chain closed last fall as part of bankruptcy.

Pacific Sunwear - 153 Demo stores closing

Pep Boys - 33 stores of auto parts supplier closing

Sprint Nextel - 125 retail locations to close with 4,000 employees following 5,000 layoffs last year.

J. C. Penney, Lowe's and Office Depot are all scaling back

Ethan Allen Interiors: plans to close 12 of 300 stores to cut costs.

Wilsons the Leather Experts - closing 158 stores

Bombay Company: to close all 384 U.S.-based Bombay Company stores.

Dillard's Inc. will close another six stores this year.

http://www.globalresearch.ca/index.php?context=va&aid=9728

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hrmm, i think i see business opportunities..

all these stores closing is gonna equal FREE STUFF.

might not be any of their product, but they will most likely leave stuff behind or trash it...

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Ramafuchs wrote:

It is worth noting that over 70% of the US GDP is consumer spending and that the entire Federal Reserve strategy of Alan Greenspan after the March 2000 collapse of the stock market bubble, was to bring US interest rates to their lowest levels since the 1930's in order to stimulate consumer spending on credit, i.e. debt, to avoid "recession." Note the scale of the following store closings across America in recent weeks:

Ann Taylor closing 117 stores nationwide.

Eddie Bauer to close more stores after closing 27 stores in the first quarter.

Cache, a women's retailer is closing 20 to 23 stores this year.

Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide

Talbots, J. Jill closing stores. Talbots will close all 78 of its kids and men's stores plus another 22 underperforming stores. The 22 stores will be a mix of Talbots women's and J. Jill.

Gap Inc. closing 85 stores

Foot Locker to close 140 stores

Wickes Furniture is going out of business and closing all of its stores. The 37-year-old retailer that targets middle-income customers, filed for bankruptcy protection last month.

Levitz - the furniture retailer, announced it was going out of business and closing all 76 of its stores in December. The retailer dates back to 1910.

Zales, Piercing Pagoda plans to close 82 stores by July 31 followed by closing another 23 underperforming stores.

Disney Store owner has the right to close 98 stores.

Home Depot store closings 15 of them amid a slumping US economy and housing market. The move will affect 1,300 employees. It is the first time the world's largest home improvement store chain has ever closed a flagship store.

CompUSA (CLOSED).

Macy's - 9 stores closed

Movie Gallery - video rental company plans to close 400 of 3,500 Movie Gallery

and Hollywood Video stores in addition to the 520 locations the video rental

chain closed last fall as part of bankruptcy.

Pacific Sunwear - 153 Demo stores closing

Pep Boys - 33 stores of auto parts supplier closing

Sprint Nextel - 125 retail locations to close with 4,000 employees following 5,000 layoffs last year.

J. C. Penney, Lowe's and Office Depot are all scaling back

Ethan Allen Interiors: plans to close 12 of 300 stores to cut costs.

Wilsons the Leather Experts - closing 158 stores

Bombay Company: to close all 384 U.S.-based Bombay Company stores.

Dillard's Inc. will close another six stores this year.

http://www.globalresearch.ca/index.php?context=va&aid=9728[
/quote]

You forgot Starbucks...

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rjb, The federal deficit doesn't matter to most Americans. They don't understand "trillion" dollars in their brains. Whether the federal deficit is 54 trillion or 154 trillion has no meaning to the average American. They only understand that their wages are not keeping up with the cost of health care, fuel and food. They're looking at hundreds of dollars at a time, and continue to wonder if their jobs are safe, because they're now living from paycheck to paycheck. They've already spent whatever savings they had accumulated during the past decade.

As most businesses get squeezed by this "recession," they have no choice but to lay off their workers. That will exacerbate an already squeezed economy, and this will repeat itself over and over with more families falling into poverty. The demands to charities will increase exponentially, but most will receive less donations, because the people who used to donate have become their customers.

It's going to be a rough three to five years until all of this liquidity problem is cleaned up.

Even retailers like WalMart and Target are dropping their sales numbers; that's a sure sign that things will get a lot worse.

What confuses me more than anything is that in some parts of Silicon Valley, restaurants and shopping malls are full.

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THE RETAILER'S TALE
Chapter 1
I threatened or promised some time ago to write about retailing. Here is the 1st installment, beginning with some background. Feel free to scroll past this if you want.
I got into the retail business in about 1975. 33 years ago. We sell art supplies (paints, brushes, canvas) and craft supplies (beads, cake-making stuff, scrap-booking things).
In the 1970's, through the 1980's and into the early 1990's, that sucker was a cash cow, generating, at our peak, some $2M (as in million) in sales. Four stores in three cities. 32 employees. Good people then and good people now. Many are artists. A quirky bunch of folks, that most if not all of our customers find amusing, often getting to the point where they address each other on a 1st name basis. More about that later.

The demographic of our customers looks like this: mostly female, and mostly over the age of, say, 45. Middle to upper income. The exception to that is the college students taking art or architecture classes. They probably account for 15% of our business. Commercial accounts (ie architecture firms, schools) grab maybe 10%.

So, as I said, we were spinning off a lot of money for quite a few years. We (we being my dad and I) bought the building we were in (15,000 sq ft) on 3 floors for $80,000 in 1980. It was in kind of a rough part of town, but on the corner of 11th and West Main. There was a bar in the basement, featuring frequent brawls amongst patrons and stuff going on in the parking lot that I don't even want to talk about.

But I digress. The first warning flags went up in the early to mid 1990's. The internet emerged big time. An artist could look at her box of paints, high value and low weight, and didn't need us. She would need a tube of cadmium yellow and ultramarine blue. So she would order it on-line and get it cheaper and, oh yes, because it would come from out of state, could (wink, wink) avoid paying the 5% VA sales tax.

That is it for the 1st post. Anyone interested in hearing more?

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That is it for the 1st post. Anyone interested in hearing more?
Are you still doing the same job?
If yes with how many employees?

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"Life improves slowly
and goes wrong fast,
and only catastrophe
is clearly visible." - Edward Teller

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Ramafuchs wrote:

Are you still doing the same job?
If yes with how many employees?

No and fewer, ram. I have gone into semi-retirement and have cut back a lot on the time I spend on the retail business. I have new interests.
Your 2nd question is good. The Federal Reserve Bank (the central gov't bank) has 13 regional offices. The one that includes me is the Federal Reserve Bank of Richmond which covers about 4 states south of DC
About 2 years ago the Richmond Fed started a monthly survey of the retail sector in our region. Each month, on about the 20th of of the month, just over 100 of us report on how things are looking for that month in a very limited group of categories: Sales, Shopper traffic, Inventory (whether or not we are buying stuff), and also number of employees and average wage.
I was skeptical about this survey of a mere 100 of us, but I have become more confident. Our "flash" report correlates well with the stats that come out a couple of weeks after each month's end.

Your question about employment. The number of employees in our pool of 100 fell off dramatically in July. But the average wage has risen quite dramatically. Employers are cutting marginal workers while striving hard to provide for the most productive ones.
I am one of the 100 doing that.

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realjohnboy wrote:

Good evening. I heard an interview today with David Walker, former Comptroller (read chief auditor) of the U.S. He now heads the non-partisan Peter Peterson Foundation, a NYC think tank on matters economic.
This should give you indigestion, Tak.
Walker claims that our national debt is not the $11T(rillion) reported. That is just the IOU's we have issued in the form of government securities. In addition, there is another $7T in unfunded Social Security benefits (including $1135 to me. I got my 1st check this month). And another $34T in Medicare. $8T of that is for the prescription drug program which was supposed to save money. Add another $1T for Miscellaneous, and the "true" national debt is $53T.
We are on target to add nearly $1T more this year. He faults both Mr Obama and Mr McCain for not addressing this problem. Obama for seeming to want to expand spending without a clear plan for paying for it; McCain for wanting to cut taxes without a clear plan for reducing spending. Walker claims that eliminating earmarks, withdrawing from Irag by say early 2009 and rolling back some of the Bush administration's tax cut would cut the budget deficit by only 15%.

This is very true, and has been reported a number of times. I gather that the Republican remedy, including that of McCain, is to cut taxes further. Hopefully, Obama will win, and will join forces with the Dems in congress to apply some sanity to our economic plight.

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Remember when Bush said that social security was going to go bankrupt, and he pushed his personal savings plan? Back then, the experts said there was enough in the trust fund and collections for social security to last until 2043.

Fast forward to today; congress whether democrats or republican failed to act on social security to increase payroll deductions, increase the age or retirement, and/or reduce the benefit. As the baby-boomers begin to retire in a few years, we will have more on retirement collecting social security and medicare than there will be workers to support it. That's when the social security trust fund will no longer exist for congress to tap into like the general fund largess of the past. With the current federal deficit, any increase in expense will only exacerbate the macro-economics of our country further into the negative trend we have seen during the past several years.

I'm not so sure our government is capable of reversing this economic malaise.

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cicerone imposter wrote:

Remember when Bush said that social security was going to go bankrupt, and he pushed his personal savings plan? Back then, the experts said there was enough in the trust fund and collections for social security to last until 2043.

Fast forward to today; congress whether democrats or republican failed to act on social security to increase payroll deductions, increase the age or retirement, and/or reduce the benefit. As the baby-boomers begin to retire in a few years, we will have more on retirement collecting social security and medicare than there will be workers to support it. That's when the social security trust fund will no longer exist for congress to tap into like the general fund largess of the past. With the current federal deficit, any increase in expense will only exacerbate the macro-economics of our country further into the negative trend we have seen during the past several years.

I'm not so sure our government is capable of reversing this economic malaise.

Dollar wise at least as important is that the states and the feds do not have any way to pay the deferred income (retirement pensions) promised to government workers and the military. The problem is so out of control that most states have no idea how much they have promised to current workers, however every time someone tries to figure it out the numbers look worse than the last time.

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What I have seen at the local level is that both the cities and county government continues to expand retirement benefits for their workers at obscene rates (like 90 percent for safety officers) while they continue to cut funds for our local hospitals, schools, and other local services. A police officer can get 90 percent of their pre-retirement wages (that includes overtime pay) after 30 years on the job. Most will collect their benefits more years than they worked. It doesn't take a genius to figure out those kind of government spending cannot be sustained, but they go ahead and continue their ridiculous push for more spending while revenue continues to drop - and the deficit continues to increase.

There's no cure for stupid.

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cicerone imposter wrote:

What I have seen at the local level is that both the cities and county government continues to expand retirement benefits for their workers at obscene rates (like 90 percent for safety officers) while they continue to cut funds for our local hospitals, schools, and other local services. A police officer can get 90 percent of their pre-retirement wages (that includes overtime pay) after 30 years on the job. Most will collect their benefits more years than they worked. It doesn't take a genius to figure out those kind of government spending cannot be sustained, but they go ahead and continue their ridiculous push for more spending while revenue continues to drop - and the deficit continues to increase.

There's no cure for stupid.

not only that, but government employment goes up almost every year, and has for a long time. For all the yaking about how "entrepreneurs" drive the economy and the government should be minimal, the GOP in practice has gone the other way ever since the Gipper was in charge. The dems always favored big government, so the desire is unanimous. The only problem is the boomer's refusal to pay their own way, they are very happy to charge their lifestyle to their kids and grand kids, in this case in the form of deferred income for the ever increasing government workforce.

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Waiting for rjb's next chapters.

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Fannie Mae, the nation's largest mortgage finance company, offered additional evidence that the housing slump was deepening by reporting a $2.3 billion loss in the second quarter. The company's revenues were up slightly, to $4 billion from $3.8 billion, during the three-month period that ended June 30. But expenses related to foreclosures and other credit losses increased to $5.3 billion from $3.2 billion in the previous quarter. And the company signaled that those losses would probably accelerate. Fannie Mae's news comes two days after the nation's other housing giant, Freddie Mac, revealed a loss three times larger than analysts had anticipated. Both companies have been under intense scrutiny by regulators and investors concerned that a government bailout may become necessary.

http://www.nytimes.com/2008/08/09/business/09fannie.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1218405650-aLtO4C2ae16UHGMWmTC7Gg

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America's Economic Free Fall
By William Greider, The Nation
Posted on August 1, 2008, Printed on August 10, 2008
http://www.alternet.org/story/93509/

Washington can act with breathtaking urgency when the right people want something done. In this case, the people are Wall Street's titans, who are scared witless at the prospect of their historic implosion. Congress quickly agreed to enact a gargantuan bailout, with more to come, to calm the anxieties and halt the deflation of Wall Street giants. Put aside partisan bickering, no time for hearings, no need to think through the deeper implications. We haven't seen "bipartisan cooperation" like this since Washington decided to invade Iraq.

The bailouts are rewarding the very people and institutions whose reckless behavior caused this financial mess. Yet government demands nothing from them in return -- like new rules for prudent behavior and explicit obligations to serve the national interest. Washington ought to compel the financial players to rein in their appetite for profit in order to help save the country from a far worse fate: a depressed economy that cannot regain its normal energies. Instead, the Federal Reserve, the Treasury, the Democratic Congress and of course the Republicans meekly defer to the wise men of high finance, who no longer seem so all-knowing.

A generation of conservative propaganda, arguing that markets make wiser decisions than government, has been destroyed by these events. The interventions amount to socialism, American style, in which the government decides which private enterprises are "too big to fail." Trouble is, it was the government itself that created most of these mastodons -- including the all-purpose banking conglomerates. The mega-banks arose in the 1990s, when a Democratic President and Republican Congress repealed the New Deal-era Glass-Steagall Act, which prevented commercial banks from blending their business with investment banking. That combination was the source of incestuous self-dealing and fraudulent stock valuations that led directly to the Crash of 1929 and the Great Depression that followed.

The Federal Reserve's dereliction of duty is central to the financial failures. It betrayed the purpose for which the central bank was first created, in 1913, abandoning the sense of balance the Fed had long pursued and that Congress requires. Most politicians, not to mention the press, are too intimidated to question the Fed's daunting power, but their ignorance is about to compound the problem. Instead of demanding answers, the political system is about to expand the Fed's governing powers -- despite its failure to protect us. Treasury Secretary Paulson proposed and Democratic leaders have agreed to make the insulated Fed the "supercop" that oversees not only commercial banks and banking conglomerates but also the largest investment houses or anyone else big enough to destabilize the system. This "reform" would definitely reassure club members who are already too cozy with the central bankers. Everyone else would be left deeper in the dark.

http://www.alternet.org/module/printversion/93509
The above quote is my view only in better ENGLISH
Rama fuchs

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Where is the US economy headed?

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