Where is the US economy headed?

Quote:

Yet a more ominous pall hangs over the industry, and the firms they have bought, than the prospect of investors losing some of their money. A large number of companies it bought in recent years look as if they are about to go to the wall.

Many will fail for the obvious reasons; too much was paid for them amid rosy forecasts as to how much debt they could carry. Heino Meerkatt of the Boston Consulting Group reckons that as many as half of the companies owned by private-equity firms may default on their debt within the next three years, leading to a wave of insolvencies, and losses of as much as $300 billion washing through the financial system (some $50 billion-80 billion of which may be borne by the banks).

http://www.economist.com/finance/displayStory.cfm?story_id=13110738&source=hptextfeature

another one of many waves of the economic collapse which is racing towards the shores........Yippee

The banks have many more losses to take, Nationalizing them is the ONLY option....nobody else but the national governments can take this much debt.

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There have been numerous articles in the Economist and other more reliable periodicals than TIME or Forbes, that have seen nationalization of the banks as coming very close to inevitable. I think they've essentially already been nationalized and all that remains is further regulation on the bad habits they've developed. I received an E mail from Citi Bank pleading for savings accounts at 4.99%. Right, like I'm going to put $ 10.00 into that galumphing giant ponzi bank. Where the trust has investments has only lost less than 6% so far in this meltdown, but I do have friends who have lost 40% on stocks and real property. I have trouble shedding a tear, mainly because they can afford it. There's many who got suckered into the stock market and real property who are not savvy economist and are hurting.

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@okie,

okie, Not true; the tax rebates last year didn't even show up as a blip on our GDP. The purpose for tax rebates is to help the poor and middle class survive the huge loss in their incomes and homes. What little money they add into the mix is not going to create more jobs; maybe you've noticed, but more retail businesses are going belly up - even with those tax rebates.

Long term creation of jobs like the maintenance and building of our infrastructure is probably the best way to stabilize our economy; those earning long term income will pay taxes and in turn spend money to help others earn income. This should have a cumulative effect on our economy.

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According to the dept of Labor, the unemployment rate today (2/13) is 7.6 %

Since this bill is supposed to provide and create jobs, lets see what happens.
If it does what the dems are saying its going to do, then by 2012 the unemployment rate should be at or near 0%.

So lets see...

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@mysteryman,

mm, You don't understand anything about economics, and your statements are just plain ignorant to look for zero percent unemployment.

The country is now bleeding over 100,000 jobs every week, and no "stimulus/recovery plan" is going to reverse that trend by 2012. What you fail to understand is that to have a stable economy, we must create over 150,000 every month to meet the demands of new workers (high school and college grads).

Get your head out of your arse.

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@mysteryman,

mysteryman wrote:

According to the dept of Labor, the unemployment rate today (2/13) is 7.6 %

Since this bill is supposed to provide and create jobs, lets see what happens.
If it does what the dems are saying its going to do, then by 2012 the unemployment rate should be at or near 0%.

So lets see...

This is actually not correct on your part. If it does what it's supposed to do, the unemployment rate should be 4-5% - average and natural.

Cycloptichorn

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@hawkeye10,

That's true; the banks have yet to have realized all their losses on their investments in housing, and they won't know until the housing market stabilizes. The feds had no choice but to infuse cash into those banks; the alternative would have been a depression which would not only hurt most Americans, but the world.

Unfortunately for us, we have come to realize that bankers are a bunch of incompetent ignoramuses who were responsible for the collapse of their own institutions, and still gave themselves bonuses from taxpayer funds; they don't have a clue.

Recovery is going to be a very long term project, and we'd better all pray this stimulus/recovery plan works, because if it doesn't we're all going to be in the **** house.

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@Cycloptichorn,

Cycloptichorn wrote:

This is actually not correct on your part. If it does what it's supposed to do, the unemployment rate should be 4-5% - average and natural.

Cycloptichorn

Is that a forecast to which you are willing to commit, Cyclo?? I'm willing to bet we won't see those levels for some time.

The incentive package basically institutes the Democrat social program under the guise of a crisis recovery program. The hell of it is that we will need to renew this unprecedented level of government spending when it expires in two years - governments at all levels will become addicted to them. That means the Treasury will continue to suck all the potential investment capital out of the economy (just to finance its debt) for an extended period. The result will be reduced investment in new business; reduced job creation; eventual high inflation and a return to the stagflation of the Jimmy Carter era.

We will move towards a government managed and operated economy with all the attendant efficiencies, creativity and innovation demonstrated by the failed central planniong of socialist reformers throughout the 20th century.

Some "stimulus" !

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@georgeob1,

Hi georgeob, Haven't seen you around for a bit. Can you imagine, I agree with most conservatives that all this social program spending included in the stimulus plan is wrong. They've included to many of the liberal programs that should be considered when our economy is back on track - and stablized; not when they grow the federal deficit at a time when the whole world is in a financial crisis.

I am personally disappointed in all those so-called experts on economics and finance who supposedly helped Obama with this plan. They are hell-bent on extending this pain for a much longer period.

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@georgeob1,

georgeob1 wrote:

Cycloptichorn wrote:

This is actually not correct on your part. If it does what it's supposed to do, the unemployment rate should be 4-5% - average and natural.

Cycloptichorn

Is that a forecast to which you are willing to commit, Cyclo?? I'm willing to bet we won't see those levels for some time.

The incentive package basically institutes the Democrat social program under the guise of a crisis recovery program. The hell of it is that we will need to renew this unprecedented level of government spending when it expires in two years - governments at all levels will become addicted to them. That means the Treasury will continue to suck all the potential investment capital out of the economy (just to finance its debt) for an extended period. The result will be reduced investment in new business; reduced job creation; eventual high inflation and a return to the stagflation of the Jimmy Carter era.

We will move towards a government managed and operated economy with all the attendant efficiencies, creativity and innovation demonstrated by the failed central planniong of socialist reformers throughout the 20th century.

Some "stimulus" !

Don't forget whose party was in control when these problems started, George. Make sure you spread the blame around nice and even when looking at the situation.

I think it's possible that we could see unemployment levels of 4-5% by 2012 - but it's more likely that it will be 6-7%. I would be happy to start seeing a leveling off in the number of jobs lost this year, or next at the least; it may take some time to climb out of the hole though.

The main part for me, however, is the necessity of reforming our banking and investment system.

Cycloptichorn

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@Cycloptichorn,

I wouldn't even attempt to forecast what our unemployment rate will be by 2012, and even shy away from how it'll trend by then.

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We should remember that Bush gave us trillions in tax cuts ( wildly disproportionately for the wealthy) and we got very little bang for the buck. Moreover, the cuts will be paid for by future generations, and will negatively affect our country for decades.

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@Advocate,

That's a fact missed by all the conservatives who continues to claim that income taxes is a transfer of wealth from the wealthy to the poor. It's actually a transfer of deficit to our children and grandchildren; a simple concept that's always missed by conservatives.

When Bush spent more than revenue, and still gave tax cuts to the wealthy, it insured huge deficit transfers to future generations. Some people just lack common sense.

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@Advocate,

Exactly Advocate, but what do you care about future generations? You just supported a series of bills that will increase our ENTIRE NATIONAL DEBT by 40% (and we're not even done yet).

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@cicerone imposter,

And you too CI....I agree, tax cuts were bad and we financed them which is worse.

But what common sense are people showing by supporting this stimulus bill?

Problem: The US has borrowed and spent too much money, leading to financial problems unseen in decades.

Solution: A LOT more borrowing and spending.

I mean, really?

1 Reply

@Advocate,

Advocate wrote:

We should remember that Bush gave us trillions in tax cuts ( wildly disproportionately for the wealthy) and we got very little bang for the buck. Moreover, the cuts will be paid for by future generations, and will negatively affect our country for decades.

The problem with your conclusion is that taxcuts do help business, however taxcuts are only one of the problems embedded into our economy. We are living with the others and ignoring them, things like inflated union labor costs, poor education skills, costly regulatory problems, costly benefit packages and medical costs, and a need to reform the entire tax system. Each one of these factors, plus other factors, are subjects in and of themselves, and all of them affect our ability to compete in the global marketplace.

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@maporsche,

There's a huge difference in the "need" to spend more today vs before this financial crisis. The problem is only in the way they weighed the stimulus plan towards too much social programs and not enough towards job creation.

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fHi to yall. The WSJ-Online is reporting that GM is poised to ask for an additional $5B on bailout money or else they go the bankruptcy route. That would be on top of the $13.2B GM has already gotten.
They will report to the Treasury on Tuesday on the status of their restructuring to date (through job cuts and other cost-saving efforts). The $5B is an estimate from some "sources."
The threat will pose a challange for the Obama administration: it will be seen as throwing good money after bad if the government acquisesces as well as caving in to management that many folks feel is incompetent; on the other hand a bankruptcy could be politically unpalatable if the reorganization results in the wholesale cutting of jobs and plants. GM cut 3400 salaried workers just last week on top of many more than that since their situation turned particularly bad.
There is another complicating factor re bankruptcy. Typically, as I am sure you are aware, Chapter 11 allows the company to get "debtor in possession" loans to tide it over during reorganization. It is unlikely that GM could find private investors willing to do that in the amount that they might need. So the government could face a situation where there is a bankruptcy AND the necessity for government investment.
That latter scenario suggests to me that they will get the bailout. I did not say, please note, SHOULD get the bailout.
We have talked at great length here about the cause of the automakers' woes as we each see it. There is no need, in my mind, to continue beating that dead horse. But I will certainly read along. It is nice to see the numbers of posters here bump up a bit.

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@realjohnboy,

Nationalization is looking increasingly likely.

Retool their plants to build clean-energy powered cars and in a few years sell the whole thing back to private interests.

Better than just handing them money...

Cycloptichorn

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@realjohnboy,

rjb wrote :

Quote:

We have talked at great length here about the cause of the automakers' woes as we each see it. There is no need, in my mind, to continue beating that dead horse.

it seems to me there are a lot of "dead" or at least exhausted horses (aka car manufacturers ) around the world .
i wonder if indian tata motors is still increasing production ?
a/t a graph i just looked at , brazil , india and china are the only major economies expected to expand in 2009 .
considering that they have large populations that still have an appetite - and perhaps the money - for consumer goods , that's not too surprising .
on the other hand , both britain and germany - who still had been doing relatively well until recently - are now in a recesion (probably very close to a depression ) .
german business news state that the german economy is now in as bad a shape as in 1949 ! that's the year after the currency reform !
so even the "witschafts wunder" is badly shaken - to say the least .
i wish one could be more cheerful .

speaking more personally , mrs h and i couldn't understand when banks kept sending us credit card applications over and over again with such messages "even if you already have a credit card ... it costs you nothing to accept our offer ! " , eventually we received phonecalls telling us that an application was not even needed : "just agree that we may send you our card ! " - btw those were almost exclusively american companies asking us to : "please accept ... " . unfortunately we had to disappoint them all .

we also had plenty of suggestions to refinance our house (paid for) , buy a new car , a boat ... ...
it's been going on for at least the last ten years - i think the bubble had to burst .
unfortunately there were too many people that believed that the lenders knew better than they , how much debt they could carry - it's caused a lot of damage - unnecessarily imo .
hbg

1 Reply

Where is the US economy headed?

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