114
   

Where is the US economy headed?

 
 
okie
 
  1  
Reply Thu 4 Nov, 2010 06:07 pm
@Cycloptichorn,
Cycloptichorn wrote:

Dude, back in May the market was only about 100 points lower than it closed today. How does that fit into your theory?

There are a lot of dumb financial theories out there, but the idea that the markets respond positively to Republicans winning and negatively to Democrats winning is one of the dumbest of all of them.

Cycloptichorn

I did not claim it was the only factor, in fact I said it was only one of many factors in play. I also made the observation that the election was apparently not a huge negative factor at least. Sometimes I wonder if you actually read what I have written?
0 Replies
 
spendius
 
  0  
Reply Thu 4 Nov, 2010 06:12 pm
@okie,
Quote:
I don't get the big deal about the working mother issue.


Oh--that's alright then. It must be very comforting not getting it. It is probably best if you carry on not getting it. I admit getting it can be discomfitting and especially when you know lots of working mothers and wish to not get them angry.
spendius
 
  0  
Reply Thu 4 Nov, 2010 06:16 pm
@cicerone imposter,
Look out--the bridge is back. Original intellectual creativity is on the prowl. And after buying a holiday in Tibet with the squits thrown in for free and another one that did 33 Norweigan ports in thirty seconds whilst eating a hamburger.
0 Replies
 
ican711nm
 
  1  
Reply Thu 4 Nov, 2010 07:00 pm
The srock market went up because many believe that investments will now go up.

Why do they think investments will now go up?

I think it has a great deal to do with the Republicans now acting like they will do what they say they will do! If they don't actually do what they say they will do, the market will crash again.
okie
 
  1  
Reply Thu 4 Nov, 2010 07:03 pm
@spendius,
spendius wrote:

Quote:
I don't get the big deal about the working mother issue.

Oh--that's alright then. It must be very comforting not getting it. It is probably best if you carry on not getting it. I admit getting it can be discomfitting and especially when you know lots of working mothers and wish to not get them angry.
Hey spendius, my own wife was a working mother at times, not a majority of the time. I still remember when our daughter was in grade school, maybe first grade or so, I used to fix her hair before she went to school, because I went to work later than my wife. One day the teacher asked her "Who did your hair?" Laughing
0 Replies
 
georgeob1
 
  3  
Reply Thu 4 Nov, 2010 07:57 pm
@ican711nm,
ican711nm wrote:

The srock market went up because many believe that investments will now go up.

Why do they think investments will now go up?

I think it has a great deal to do with the Republicans now acting like they will do what they say they will do! If they don't actually do what they say they will do, the market will crash again.


More likely it was the result of the Fed's massive injection of money into the economy. The dollar in effect is dropping, and anything like real asets commands more dollars. Commodity prices are rising as well. We'll see the real retail inflation soon enough.
okie
 
  0  
Reply Thu 4 Nov, 2010 08:13 pm
@georgeob1,
George, I have had this long held belief that the only way the government can climb out of its massive debt any at all, is to pay for it with inflated or devalued dollars. Thus printing more money will happen, then a period of severe inflation, which essentially devalues the debt in real dollars. How do you think about that?
plainoldme
 
  0  
Reply Thu 4 Nov, 2010 08:38 pm
@okie,
There was nothing to catch.
0 Replies
 
plainoldme
 
  0  
Reply Thu 4 Nov, 2010 08:43 pm
@georgeob1,
Today's news carried a squib about the Federal Reserve attempting to create a 2% inflation to help the economy.

If you think there will be retail inflation, it can only mean one of two things:

either the underpaid workers will revolt or the Chinese will demand more for the things they make for us.
0 Replies
 
cicerone imposter
 
  0  
Reply Thu 4 Nov, 2010 09:21 pm
@okie,
okie, If the government prints more money to pay off the debt, who pays for that printed money? DUH!
0 Replies
 
Cycloptichorn
 
  0  
Reply Fri 5 Nov, 2010 09:52 am
@georgeob1,
georgeob1 wrote:

ican711nm wrote:

The srock market went up because many believe that investments will now go up.

Why do they think investments will now go up?

I think it has a great deal to do with the Republicans now acting like they will do what they say they will do! If they don't actually do what they say they will do, the market will crash again.


More likely it was the result of the Fed's massive injection of money into the economy. The dollar in effect is dropping, and anything like real asets commands more dollars. Commodity prices are rising as well. We'll see the real retail inflation soon enough.


Thank you for injecting a little sanity into this discussion.

I can't help but notice that the inflation hawks have been 100% wrong for the last two years. Some retail inflation at this point wouldn't necessarily be a bad thing.

Cycloptichorn
Cycloptichorn
 
  0  
Reply Fri 5 Nov, 2010 09:53 am
Economy adds jobs, but only enough to hold steady. We need to double this in order to start getting ahead.

Still, it's fair to say that we aren't shedding jobs at the rate that we were before, and have three solid months now of flatness. Is this the bottom of the recession?

Quote:
October Employment Report: 151,000 Jobs, 9.6% Unemployment Rate

by CalculatedRisk on 11/05/2010 08:30:00 AM

From the BLS:

Nonfarm payroll employment increased by 151,000 in October, and the unemployment rate was unchanged at 9.6 percent, the U.S. Bureau of Labor Statistics reported today.

Both August and September payroll employment were revised up.

For the current employment recession, employment peaked in December 2007, and this recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only the early '80s recession with a peak of 10.8 percent was worse).

This is an improved employment report compared to recent months. I'll have much more soon ...


Cycloptichorn
cicerone imposter
 
  0  
Reply Fri 5 Nov, 2010 11:49 am
@Cycloptichorn,
Cyclo, Don't get too excited just yet; it requires 200,000 new jobs every month to keep up with the demand, and to rehire those in the unemployment sector. That's not going to happen any time soon. Some economists are saying it'll take another 3 - 4 years, but my crystal ball tells me it's going to take much longer - like ten years or more.
0 Replies
 
georgeob1
 
  2  
Reply Fri 5 Nov, 2010 11:53 am
@Cycloptichorn,
I suspect these are tough issues for everyone - even the economists. I agree that deflation is both hard to predict and harder still to correct. Worse we have no public memory or experience of it. Economic cycles are always easy to explain in retrospect but almost impossible to forecast reliably.
0 Replies
 
okie
 
  1  
Reply Fri 5 Nov, 2010 12:40 pm
@georgeob1,
georgeob1 wrote:

ican711nm wrote:

The srock market went up because many believe that investments will now go up.
Why do they think investments will now go up?
I think it has a great deal to do with the Republicans now acting like they will do what they say they will do! If they don't actually do what they say they will do, the market will crash again.

More likely it was the result of the Fed's massive injection of money into the economy. The dollar in effect is dropping, and anything like real asets commands more dollars. Commodity prices are rising as well. We'll see the real retail inflation soon enough.

I think there are a whole mix of factors at work here. I do not believe the market is reacting only to one issue or factor. It would be almost impossible to know how much influence is due to one factor vs another. Even if nothing happened with any factor, it is likely that the stock market would either go up or down, and the analysts would be able to manufacture some reason for it. I think much of it is emotional as well as statistical and cyclical, and emotions run high as a result of elections.

I agree that the injection of money probably had the most influence for yesterday, but I also think that the election at least did not have a negative influence overlaying all of the other factors influencing the market. In contrast, in the day or two following the 2008 election of Obama, the market suffered the biggest post-election drop ever. I do not believe that was totally unrelated to his election.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aj_ayFUP0riQ
"U.S. Stocks Post Biggest Post-Election Drop on Economic Concern"

Cycloptichorn
 
  0  
Reply Fri 5 Nov, 2010 12:45 pm
@okie,
Quote:

I think there are a whole mix of factors at work here. I do not believe the market is reacting only to one issue or factor.


Yeah, but that's because you are quite ignorant of how the market works.

Quote:

I agree that the injection of money probably had the most influence for yesterday, but I also think that the election at least did not have a negative influence overlaying all of the other factors influencing the market. In contrast, in the day or two following the 2008 election of Obama, the market suffered the biggest post-election drop ever. I do not believe that was totally unrelated to his election.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aj_ayFUP0riQ
"U.S. Stocks Post Biggest Post-Election Drop on Economic Concern"


This is ridiculous. The article doesn't say that people were concerned ABOUT Obama, but about the economy, which was still sorely hurting from the September 2008 crash.

Not only that, but just the day before this article, the market had been up 4-5% across the board. Where is your article showing that the markets cheered Obama's victory by rising 4% in one day?

You should be able to see what bullshit this entire tack of argumentation is, Okie. There's no logic behind it, only your emotional projections: you don't like and are scared of Obama, so you project that on to others, as if that explains actions. Then when someone like myself or George comes in and points out that this is not reflected by reality, you hedge your former comments and try and pretend you didn't say something dumb.

If you want to tie market movement to political events, go for it - but you should try and research it a little before posting. This is exactly what I was talking about the other day: when you start with conclusions you don't develop a logical series of steps to support your position and it quickly falls apart under investigation.

Cycloptichorn
okie
 
  1  
Reply Fri 5 Nov, 2010 01:17 pm
@Cycloptichorn,
Cycloptichorn wrote:
Then when someone like myself or George comes in and points out that this is not reflected by reality, you hedge your former comments and try and pretend you didn't say something dumb. Cycloptichorn

I never did say that the election was the "only" factor and "the" factor that propelled the market. Cyclops, I don't mind disagreements between us, but I do object to your misinterpretations and skewing of what I say here.

I have also been clear to say that this is my opinion about elections influencing stock markets, okay? If anyone could prove that one factor controlled the markets, they could become billionaires overnight. I do not claim to know all the answers about this at all, but surely it is well within my right to freedom of speech here to express my opinion about these events as they play out, and to offer speculation about it. I frankly think it is silly for people to believe that political policies, which elections influence, do not influence future consumer, business, and investor confidence. And that confidence does express itself in the markets, there could be little doubt about that.
0 Replies
 
ican711nm
 
  -1  
Reply Fri 5 Nov, 2010 01:17 pm
Quote:

http://www.ncpa.org/sub/dpd/index.php?Article_ID=20006&utm_source=newsletter&utm_medium=email&utm_campaign=DPD
Monetary Policy Easing is Nothing to Fear

As the storm gathered during 2008, the Federal Reserve aggressively eased monetary policy by using open market operations to drive short-term interest rates to near-zero levels. The Fed's lending during 2008 together with its asset purchases in frozen markets caused the assets in its balance sheet to increase sharply, from $800 billion before the crisis to over $2.3 trillion by year-end, says Robert McTeer, a distinguished fellow with the National Center for Policy Analysis.

Fed lending and asset purchases on such a massive scale caused equal expansion of its liabilities, most importantly the reserve deposits of commercial banks and thrifts. The expansion of bank reserves normally would have prompted additional bank lending and investing and thus expansion of monetary deposits. However, the last step in that process was never taken to any substantial extent.

Indeed, the massive loans and investments made by the Fed did not translated into overly rapid growth in the money supply, says McTeer.
• Despite the widespread slack in the economy, including an almost 10 percent official unemployment rate, money growth has not been overly rapid for the circumstances.
• M2, the most reliable measure of money, has grown only 3 percent over the past year, while the narrow M1 measure grew only 6.3 percent.
• Real gross domestic product (GDP) growth has decelerated recently, to an annual rate of 1.7 percent in the second quarter and 2 percent in the third, with over half of this meager growth attributable to inventories.
• Unemployment seems stuck at 9.6 percent; if discouraged workers and others marginally attached to the labor force are included, the unofficial unemployment rate exceeds 16 percent.

Moderate money growth, weak real GDP growth, declining total employment and persistently high unemployment have driven inflation down, not up. Under these circumstances, at least moderate Fed easing is needed, but it should take place routinely and without fanfare. Obsessing over inflation while it is falling and while deflation is emerging as a possibility is not helpful, says McTeer.

Source: Robert McTeer, "Monetary Policy Easing is Nothing to Fear," November 3, 2010.


http://www.ncpa.org/sub/dpd/index.php?Article_ID=20005&utm_source=newsletter&utm_medium=email&utm_campaign=DPD
Democrats Support Yet Another Bailout

The so-called Create Jobs and Save Benefits Act of 2010, introduced by Sen. Robert Casey (D-Pa.), is a microtargeted bailout for underfunded union pensions that could cost taxpayers billions, say F. Vincent Vernuccio, labor policy council, and Ivan Osorio, editorial director and fellow in labor policy, at the Competitive Enterprise Institute.
• The bill would create a special fund in the Pension Benefit Guarantee Corporation (PBGC), an agency chartered by Congress that insures private sector pensions.
• The PBGC is funded through premiums paid by private companies to insure retirees if a plan sponsor were to become insolvent.
• Casey's bill would direct taxpayer dollars to shore up some underfunded union pension plans.

Casey's bill would create a new fund for the PBGC called the "fifth" fund, which would be "obligations of the United States." In other words, taxpayers, not just PBGC premium payers, would be on the hook. Money in the "fifth" fund would go to "orphans" -- employees whose employers have stopped contributing to their plan -- of certain existing pensions.

Phyllis Borzi, the assistant secretary of labor for the agency in charge of pension plans, is skeptical that the legislation will fix the current situation. She commented that the root of the problem is a sharp decline in the number of new employers joining union pension plans and a dramatic drop in the ratio of employees to retirees.

Estimates on the bill's cost vary widely.
• Sen. Casey very conservatively predicts the bill will cost $8 billion to $10 billion.
• News outlets such as the Wall Street Journal, Washington Examiner and Fox Business estimate the bill could cost as much as $165 billion.

Source: F. Vincent Vernuccio and Ivan Osorio, "Democrats Support Yet Another Bailout," Competitive Enterprise Institute, November 1, 2010.


http://www.ncpa.org/sub/dpd/index.php?Article_ID=20007&utm_source=newsletter&utm_medium=email&utm_campaign=DPD
Put Department of Education in Timeout

The U.S. Department of Education was created with the primary stated goal of increasing students' test scores, but test scores for 17-year-old American students have remained essentially flat since 1970. The department's budget has grown to a whopping $107 billion this year. Per pupil, taxpayer-financed education spending (adjusted for inflation) has risen by more than 200 percent since 1970 (and 150-plus percent since 1980). Clearly and unambiguously, the department deserves a grade of F, says Richard W. Rahn, a senior fellow at the Cato Institute.

Many of the just-elected members of Congress have called for elimination of the Department of Education. What the new Congress can and should do, however, is greatly reduce the department's budget.
• The ratio of classroom teachers to pupils has grown very slowly over the past 40 years despite the huge increase in government spending on education.
• Most of the increase in spending has gone to education bureaucrats -- including more and more layers of "administrators" (assistant principals, deputy assistant principals, and on and on) -- and much of it is needless overhead.
• So, as those in Congress cut back the department's funding, they must be smart about it -- they need to insist that the funds be reduced for the middlemen and not the classroom teachers.

The nation is best served by having a highly competitive mix of public, private, nonprofit and for-profit educational institutions.

Source: Richard W. Rahn, "Put Department of Education in Timeout," Washington Times, November 2, 2010.


http://www.ncpa.org/sub/dpd/index.php?Article_ID=20008&utm_source=newsletter&utm_medium=email&utm_campaign=DPD
State Bailouts? They've Already Begun

The threat posed by the state fiscal crisis in the United States is vastly underestimated and underappreciated, says Meredith Whitney, CEO of Meredith Whitney Advisory Group LLC.

A clear example of this took place in Manhattan last week at the Economist magazine's Buttonwood Conference, where a panel role-played the federal government's response to a near default of the hypothetical state of New Jefferson. After various deliberations and simulated threats from the Chinese government, the panel reluctantly voted to grant New Jefferson an emergency bailout of $1.5 billion to cover the state's debt payment.

What this panel and so many other investors fail to appreciate is that state bailouts have already begun.
• Over 20 percent of California's debt issuance during 2009 and over 30 percent of its debt issuance in 2010 to date has been subsidized by the federal government in a program known as Build America Bonds.
• Under the program, the U.S. Treasury covers 35 percent of the interest paid by the bonds.
• California is not alone: Over 30 percent of Illinois's debt and over 40 percent of Nevada's debt issued since 2009 has also been subsidized with these bonds.

Beyond debt subsidies, general federal government transfers to states now stand at the highest levels on record. Today, more than 28 percent of state funding comes from federal government transfers, says Whitney.
These transfers have made states dependent on federal assistance.
• New York, for example, spent in excess of 250 percent of its tax receipts over the last decade.
• The largest 15 states by gross domestic product spent on average over 220 percent of their tax receipts.

At the same time, local governments now rely on state government transfers for 33 percent of their funding. Thus, when a state finds itself in a financial bind, it has the option of saving itself before saving one of its local municipalities.

Rather than waiting for more federal intervention, states need to make their own hard decisions and not kick the can down the road, says Whitney.

Source: Meredith Whitney, "State Bailouts? They've Already Begun," November 3, 2010.


http://www.ncpa.org/sub/dpd/index.php?Article_ID=20009&utm_source=newsletter&utm_medium=email&utm_campaign=DPD
A Primer on the Constitutionality of Health Reform

The legal battles over ObamaCare present the fundamental questions of where government gets its powers and what the constitutional limits to those powers are, say Ilya Shaprio, a senior fellow in constitutional studies, and Trevor Burrus, a legal associate, at the Cato Institute.

The strongest constitutional criticism of the legislation is that the individual mandate to buy health insurance exceeds Congress's power to "regulate commerce ... among the several states."
• Never before has the federal government required every man, woman and child to buy a particular good or service -- or pay a civil penalty for declining to do so.
• Never before have courts had to consider such a breathtaking assertion of raw power under the Commerce Clause.
• The lawsuits thus allege that an individual's choice not to purchase health insurance is not an economic activity that Congress can regulate.
While the Court has rejected nearly all Commerce Clause challenges since the New Deal, two such lawsuits have been successful, say Shapiro and Burrus.
• In 1995, the Court struck down a law prohibiting the possession of guns near schools because it was not "part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activities were regulated."
• Similarly, in 2000, the Court struck down the Violence Against Women Act because the gender-motivated violence it regulated had only an "attenuated" economic effect.

With the Commerce Clause justification facing a credible challenge, the government began to argue that the fine levied on those who fail to comply with the individual mandate is a "tax" authorized under Congress's power to tax for the general welfare. However, Congress specifically changed the term from "tax" to "penalty" in the last iteration of the bill and identified no revenue that would be raised from the "tax."

Finally, even if the individual mandate and its accompanying fine are deemed a tax, it would be an unconstitutional one, say Shapiro and Burrus.

Source: Ilya Shapiro and Trevor Burrus, "A Primer on the Constitutionality of Health Reform," Cato Institute, November 3, 2010.
cicerone imposter
 
  0  
Reply Fri 5 Nov, 2010 01:28 pm
@ican711nm,
ican, ncpa.org is a conservative organization without much credence when it comes to facts and history. Their message only supports the conservative meme without providing any evidence for their stance - on anything. Robert McTeer who wrote
Quote:
"Monetary Policy Easing is Nothing to Fear,"
doesn't know what he's talking about, because economics cannot be as precise as he makes it out to be in his article. Monetary policy is not science; it's an art. No definitive conclusions can be arrived at by any fed policy; that's a fact.

Your understanding of economics is non-existent. Quit listening to the conservative blogs, and learn Econ 101.
ican711nm
 
  0  
Reply Fri 5 Nov, 2010 03:01 pm
@cicerone imposter,
What evidence, Cice, have you provided to show your opinions have "much credence when it comes to facts and history?"
 

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