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Where is the US economy headed?

 
 
ican711nm
 
  1  
Reply Mon 22 Feb, 2010 02:06 pm
Quote:

http://www.ncpa.org/sub/dpd/index.php?Article_ID=19018&utm_source=newsletter&utm_medium=email&utm_campaign=DPD
FINANCIAL CRISIS: LESSONS LEARNED
The federal government responded aggressively -- at a huge cost -- to the financial crisis that began in the fall of 2008, says Laurence J. Kotlikoff, a professor of economics at Boston University and a senior fellow with the National Center for Policy Analysis. But nearly two years later little progress has been seen in the country's economic health.

In his forthcoming book, "Jimmy Stewart Is Dead: Ending the World's Ongoing Financial Plague with Limited Purpose Banking," Kotlikoff discusses the problems with the explicit and implicit guarantees the federal government has made:

* Around $12.5 trillion has been pledged by the federal government ($2.5 trillion in direct expenditures and roughly $10 trillion in contingent commitments) to keep the financial sector afloat.

* The fiscal gap in the United States (the difference between the government's official debt plus its discretionary spending and the amount of taxes current and future citizens will pay) is currently estimated by Jagadeesh Gokhale of the Cato Institute and Kent Smetters of the University of Pennsylvania at $77 trillion.

* This is more than five times the United States' present gross domestic product.

However, the U.S. economy is still in trouble and people are still losing jobs. There is increasing concern that the Bush-Obama economic rescue effort has failed and will instead spell massive tax hikes, hyperinflation and high interest rates.

The U.S. economy is down because distrust is high, says Kotlikoff. The underlying cause of crises in our financial system is not people taking risks. It is people risking other people's money without their knowledge, understanding and consent -- in investments that are backed by implicit government guarantees. In the latest crisis, bankers invested depositors' and other creditors' money in risky instruments, including collateralized debt obligations, many of which were, themselves, invested in fundamentally fraudulent securities. When the investments failed, financial institutions and corporations that were too large to fail were propped up, bailed out or bought out by the federal government.

The way to avoid these recurring crises and restore trust is to return the financial system to its principal function: bringing together suppliers and demanders of funds. This could be done by requiring all financial corporations, including insurance companies, to adopt the pass-through model of asset ownership used by mutual funds.

This would eliminate the need for government guarantees and a host of regulatory agencies. The federal government would create transparency by certifying and disclosing all the financial statements in all financial securities purchased by the mutual funds and also by arranging for independent ratings and appraisals of these securities. It would not tell anyone how much they could borrow or how much risk they could take. Individuals would decide what mutual funds to buy, but they would do so knowing, to the maximum extent possible, what it is they are buying.

Source: Laurence J. Kotlikoff, "Financial Crisis: Lessons Learned," National Center for Policy Analysis, Brief Analysis No. 693, February 22, 2010.

0 Replies
 
realjohnboy
 
  1  
Reply Mon 22 Feb, 2010 05:42 pm
Good afternoon to yall.
As I am sure you all are aware, the bulk of the credit card reform legislation went into effect today. Most of the changes have been phased in over the last few months. Here is some financial stuff that might not have made it to the main stream media.
> There is now a little box on your statement showing what your balance is (in my case, $3,250), the interest rate (15.24%) and how long it would take me to pay it off if I paid only the minimum ($64/month). In my case...ready for this...23 years. 23 YEARS!
> The credit card industry has countered with increased interest rates and new fees. The top 12 issuers have cut credit lines by some $1tn in total (most of which was not being used) and eliminating millions of accounts. The number of cards is down by some 15% in 2009.
> Some argue that the new consumer legislation had the unintended consequence of making credit cards more expensive and more difficult to get. That could be, but I would contend that that may not be bad if you believe it is good to rein in rampant and reckless consumerism.
> An estimate I saw was that the new rules will cost the top 12 card issuers $10bn in lost interest. That is big, considering that:
In 2007 they earned $19bn;
In 2008 they earned $6.3bn due to a big hit from write-offs;
2009 has yet to be reported, but write-offs are reported to be $35bn, double normal.
2 more points before we return to the regularly scheduled discussion on this thread:
> In 2009 (unclear as to whether it was for the 4th quarter or for the year), credit card issuers still sent out 575 million pieces of junk mail offering us credit cards. That is down by 1/3rd. How many of those did you get?
> I saw an article indicating that consumers are trying, and seemingly managing to pay down their credit card debt...even if it means falling behind on their mortgage debt. They need their credit card to eat and they realize it might take awhile for the mortgage holder to take any action.

Carry on. -johnboy
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mysteryman
 
  1  
Reply Mon 22 Feb, 2010 06:40 pm
I have a question for all you economic geniuses.
I am considering moving some of my investment money, and the "Wilshire 5000" was recommended to me.
Do any of you know much about it?

I found some info on line, but I am not all that familiar with it at all.
realjohnboy
 
  1  
Reply Mon 22 Feb, 2010 07:15 pm
@mysteryman,
Caveat: None of us here is qualified to give investment advice.
MM: Wilshire invests in a huge range of American businesses but the bulk of their holdings (70%) are in the biggest 500 companies.
I think I know about how old you and your lady are. You probably are looking for safe and steady growth vs income...but I don't know that.
I think, but am not sure, that Wilshire has a management fee that is a bit stiff.
I think you could find something better.
I think that, if asked to give investment advice, I would look for some fund that focuses on companies that pay dividends in the 3 or 4% range. Sleepy stocks that will never soar, but are consistently profitable in this economy and will prosper if there is a recovery. Reinvest those dividends.
Obviously, that is just my opinion. You could go to Vegas and put everything down on red or black.
mysteryman
 
  1  
Reply Mon 22 Feb, 2010 08:59 pm
@realjohnboy,
I wasnt asking for investment advice, so no worries there.
I just had never heard of the Wilshire 5000 and was wondering if anyone else had.

But I thank you for the info.
0 Replies
 
ican711nm
 
  1  
Reply Tue 23 Feb, 2010 11:09 am
In BARACK OBAMA'S RULES FOR REVOLUTION, THE ALINSKY MODEL, David Horowitz wrote:


Three of Obama's mentors in Chicago were trained by Saul Alinsky. Obama was hired in 1986 by the Alinsky team to organize residents on the South Side. The proposed solution to every problem on the South Side was distribution of government funds.

According to Alinsky:

Radicals should be "political relativists." They should take an agnostic view of means and ends;

The radical is not a reformer of the system but its would-be destroyer;

The radical is building his own kingdom, a kingdom of heaven on earth;

The revolutionary’s purpose is to undermine the system by taking from the HAVES and giving it to the HAVENOTS and then see what happens;

We should not forget to acknowledge the very first radical known to man who rebelled against the establishment and did it so effectively that he at least won his own kingdom"Lucifer;

We are not virtuous by not wanting power. We are really cowards for not wanting power, because power is good and powerlessness is evil;

The most basic principle for radicals is lie to opponents and disarm them by pretending to be moderates and liberals;

"The issue is never the issue. The issue is always the revolution."The stated cause is never the real cause, but only an occasion to advance the real cause which is accumulation of power to make the revolution;

The standard of the revolution is democracy--a democracy which upends all social hierarchies, including those based on merit;

Alinsky built his initial power base among the underclass and the urban poor by calling to make the last ones first and the first ones also last ones.

0 Replies
 
okie
 
  1  
Reply Tue 23 Feb, 2010 10:03 pm
This does not bode well for future prospects of economic recovery. People and businesses do not see the positive signs that they want, to make them optimistic. I think it all starts at the top, namely no leadership, or no good leadership. I am going to predict that as polls later this summer show a very likely big victory by Republicans in Congress, we will then start to see more definite signs of confidence in a recovery.

http://www.conference-board.org/economics/ConsumerConfidence.cfm

" The Conference Board Consumer Confidence Index® Declines Sharply
February 23, 2010


The Conference Board Consumer Confidence Index®, which had increased in January, declined sharply in February. The Index now stands at 46.0 (1985=100), down from 56.5 in January. The Present Situation Index decreased to 19.4 from 25.2. The Expectations Index declined to 63.8 from 77.3 last month.

....
Concerns about current business conditions and the job market pushed the Present Situation Index down to its lowest level in 27 years (Feb. 1983, 17.5). Consumers' short-term outlook also took a turn for the worse, with fewer consumers anticipating an improvement in business conditions and the job market over the next six months. Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending.""


0 Replies
 
okie
 
  1  
Reply Thu 25 Feb, 2010 08:32 pm
More bad news for the economy. Meanwhile Obama spends precious time trying to ram Obamacare down our throats, against the will of the American people.

http://www.businessweek.com/news/2010-02-24/u-s-economy-new-home-sales-unexpectedly-fall-to-record-low.html

" U.S. Economy: New-Home Sales Decline to Record LowFeb. 24 (Bloomberg) -- Sales of new homes in the U.S. unexpectedly fell in January to the lowest level on record, a sign that an extension of a government tax credit may not be enough to rekindle demand."
0 Replies
 
realjohnboy
 
  1  
Reply Fri 26 Feb, 2010 05:34 pm
Good evening to yall. There really is no need to "scream," Okie, with bold and red posts. I may be stupid but I am not visually impaired. Leave that **** to Ican.
You mentioned yesterday the decline in new home sales. Today comes news of existing home sales for January - down (I am doing this from memory) some 7.2% after a bad month in December.
Some of it could be attributable to bad weather or to fewer new homes being built. With regard to existing homes, the number of foreclosed properties has continued to grow which has driven down prices. Some folks might have considered moving up, but they can't sell the home they already own.
Add to that the fragile economy - which has consumers skittish - and the fact that many homeowners are under water, meaning they would have to write a check to the bank even if they found a buyer. And, banks are, for the most part, not making mortgage loans anymore.
I read that 25% of existing home purchases in January were paid for in cash by, it is assumed, investors thinking they could buy stuff on the cheap.

As you know, Okie, the $8K tax credit that expired in 11/09 was extended through 4/10. In addition, the government program to buy MBS's (Mortgage Backed Securities) expires soon. If that happens, interest rates on mortgages could rise.

I am curious, Okie, as to what - if anything - you think the government should do. What would be the expected consequence of doing "something." What would be the outcome of doing "nothing."

Thank yall for thinking about this.
okie
 
  1  
Reply Fri 26 Feb, 2010 10:14 pm
@realjohnboy,
realjohnboy wrote:

Good evening to yall. There really is no need to "scream," Okie, with bold and red posts. I may be stupid but I am not visually impaired. Leave that **** to Ican.

Not screaming, I am simply highlighting the important points. I don't buy the silly concept of big type or whatever on the web as being screaming or whatever. Using bold type and colors help people read things that they would not otherwise read. Perhaps not you, but others.
Quote:
I am curious, Okie, as to what - if anything - you think the government should do. What would be the expected consequence of doing "something." What would be the outcome of doing "nothing."

Thank yall for thinking about this.

I'm glad you are curious. The best the government can do under the circumstances is to muddle along with the current losers in office, until a new group of people can be elected. What we really need ultimately to help fix our problems is a new group of people in Congress and the administration that believe in freedom, liberty, and capitalism. We are currently suffering from the overall effects of having socialists in office, who cannot be trusted in terms of future policy, people and businesses cannot count on fair and reasonable policies in the future that will be friendly to jobs and capitalism, therefore the atmosphere is not conducive to investment, taking risks, and working hard for yourself and your family, because there is the threat that it will all be undercut or taken away from you by the socialists in office.

We also need to restore confidence in government, and that could start with cleaning up the corruption and waste. We were told one of the biggest reasons for the beginning of this entire meltdown or recession was bad home loans, and to this day nothing has been done about fixing Fannie and Freddie, and I would not expect anything in that regard as long as the Democrats are in office. Actually prosecuting the fraud in those organiztions, and in the government would begin to start to restore some confidence in the system.
ican711nm
 
  1  
Reply Sat 27 Feb, 2010 11:56 am
@okie,
okie wrote:
The best the government can do under the circumstances is to muddle along with the current losers in office, until a new group of people can be elected.

Obama can be impeached before 2012, by electing to the House in 2010 a majority who want him impeached.

Obama can be removed before 2012 by electing to the Senate in 2010 a two-thirds majority who want him removed.

In the unlikely event that were to happen, Obama might be intimidated enough to resign first like Nixon did when faced with the same threat.
au1929
 
  1  
Reply Sat 27 Feb, 2010 12:34 pm
@ican711nm,
That has about as much chance of happening as the talked about end of the world predicted for 2012. What could of course and may happen that the incumbents will lose in the upcoming election and a new set of bloodsuckers will be elected.
0 Replies
 
parados
 
  2  
Reply Sat 27 Feb, 2010 12:42 pm
@ican711nm,
We must pass a public option so ican can get the mental health care he needs.
parados
 
  1  
Reply Sat 27 Feb, 2010 12:46 pm
@okie,
Quote:
What we really need ultimately to help fix our problems is a new group of people in Congress and the administration that believe in freedom, liberty, and capitalism

"belief" never fixed anything okie. You certainly haven't proposed any action that would come close to solving problems. In fact your lack of action would have made matters much worse than they are currently according to just about every economist.
plainoldme
 
  1  
Reply Sat 27 Feb, 2010 01:05 pm
What a thing to stumble upon in 2010 when everyone is blaming Congress and Obama and a strong force is attempting to vindicate bush.
0 Replies
 
ican711nm
 
  1  
Reply Sat 27 Feb, 2010 01:08 pm
@parados,
parados wrote:
We must pass a public option so ican can get the mental health care he needs.
You act like a disciple of Barach Obama who acts like a disciple of Saul Alinsky.
Saul Alinsky wrote:
Radicals should be political relativists. They should take an agnostic view of means and ends;
The radical is not a reformer of the system but its would-be destroyer;
The radical is building his own kingdom, a kingdom of heaven on earth;
The revolutionary’s purpose is to undermine the system by taking from the haves and giving it to the have-nots, and then see what happens;
The most basic principle for radicals is lie to opponents and disarm them by pretending to be moderates and liberals;
The radical organizer does not have a fixed truth"truth to him is relative and changing; everything to him is relative and changing; He is a political relativist.

0 Replies
 
plainoldme
 
  1  
Reply Sat 27 Feb, 2010 01:11 pm
For another reason, I have been researching the economy. Sorry, but wages for the bottom (that means 80% of the population) four quintiles of the population have been flat since 1979. Between 1979 and 1999, the wages for the top quintile doubled.

Two things, the information, from the Congressional Budget Office, was from 1979 to 1999. And, while the top quintile doubled over all, when you extracted the top 10%, the graph traveled upwards from around $135,000 to $300,000. THen, when you narrowed things down to the top 5%, the figures started at around$350,000 and soared to more than $800,000.

Now, you righties, government had nothing to do with these leeches earning so much. In fact, the lack of government surveillance and control is the issue. After all, lobbyists are now the fourth branch of government.

I saw that "Business is not the answer. Business is the problem" with no apologies to ronald reagan.
0 Replies
 
plainoldme
 
  1  
Reply Sat 27 Feb, 2010 01:12 pm
@parados,
What has the right ever done for AMerica but destroy it in small increments?
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plainoldme
 
  1  
Reply Sat 27 Feb, 2010 01:14 pm
@mysteryman,
love to help but . . . I have made an average of $15,000 before taxes since . . . I don't know . . . 1998?
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plainoldme
 
  1  
Reply Sat 27 Feb, 2010 01:15 pm
@parados,
The deficit doubled under ronald reagan.
0 Replies
 
 

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