Where is the US economy headed?

@realjohnboy,

Ok. I was just answering your questions. For me it's a conversation, not a consest.

@georgeob1,

georgeob1 wrote:

Ok. I was just answering your questions. For me it's a conversation, not a contest.

True enough.
Moving on:
Cicerone predicts, on another thread, that the Dow has another 1200 point downside potential. Could be, or not.
I got to thinking, though, that the stock market is perhaps collateral damage. Sure enough, the financials could be in deep doo-doo. And there are certain companies in certain sectors not doing well. But the business sector is, in general, not doing too badly.
Profits staying steady. Margins not being squeezed and cash and more cash piling up.
The "problem" is, I think, that advances in technology are increasing productivity without the need for additional labor.
70% of our economic activity relies on consumers.
I note that same store sales at Wal-Mart have declined for the 9th straight quarter. It could be because of a flawed business plan or it could be something more serious.
I'm going to have to do some more mulling.

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@realjohnboy,

I think people are scared and not spending when they can avoid it. In short we will likely have a renewed recession. Our idiot Administration has steadily insisted that the cure for our ills is the redistribution of wealth through their good offices in taxing the rich and increasing benefits (at the ruling party's discretion) to the favored parts of the population. Despite all the rhetoric, I think people are too smart to buy that. They know such remedies involve merely the redistribution of pain and the progressive loss of freedom and private initiative: nothing in their proposed actions will solve the basic economic and competitiveness problem that faces us.

Business profits will, in many cases, remain OK. However the value of company stock is determined by three basic things (1) the liquid equity (cash) the company holds; (2) current profits; and (3) the expectation oif future profit growth. Curnent profitability alone in a recession is not indicative of growth.

What we do need is new private sector economic activity. From petroleum & energy production, to mining and (in its slavish support of unions) manufacturing, and everywhere in its increased regulatory reach, the administration is doing all it can to stop that from happening. It is truly crazy.

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@georgeob1,

No the best way is to cut benefits to the poor and middle class and give more wealth to the same group that already have 5o percent of the total.

Oh well no medicare and no SS any longer but Bill Gate got to keep another billion dollars so I am happy.

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@georgeob1,

Good night, George. I am off to bed. See you tomorrow, when we can perhaps talk about scaling back the powers of the EPA so that "fraccing" in the Marcellus region can continue.

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@georgeob1,

Actually there are really two issues, but you seem to lean towards "wealth transfer" over our increasing national debt. Both are important issues, and that's where our government has failed.

The majority of Americans favor taxing the rich more, and I also agree with this "policy."

1 Reply

@realjohnboy,

rjb, I read the tea leaves on the macro level of economics; the strongest economies are lowering their economic expectations, and it's also impossible for Germany to bailout the whole of the Euro countries in trouble.

When the economists were predicting a 3% increase in our GDP earlier this year for the last half of this year, I had to laugh. Their tea leaves are looking black when it should be reading red.

Jobs are the key, and there's no sign of any improvement for the foreseeable future.

That's over 70% of my tea leaves.

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@georgeob1,

I don't suppose the phrase "been there and done that" means anything to you.

Under the previous administration we did see lots of years of deregulation and low taxes. The corporate world has seen their profit rise and they sit on wealth while the working class stagnate with low paying jobs or no jobs.

What I am trying to say that just because a company will see profits, stock holders see their investments give good returns (whatever the phrase is) don't mean they will turn around and offer jobs if they don't see a need to do so.

In other words with the advancement of technology and getting labor in other countries where they don't have to pay decent wages or benefits (slave labor) there is no need to offer an employee a job where they will have offer decent wages (not so decent in recent years as the cost of living has not been keeping of with wages) and benefits. Moreover, a lot of the companies have their companies overseas in countries where they don't have to pay taxes so our country don't even get their revenues.

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@cicerone imposter,

Quote:

When the economists were predicting a 3% increase in our GDP earlier this year for the last half of this year, I had to laugh.

I wonder if ci. could provide a link to him LOLing earlier this year. He might be claiming credit for his legendary hindsight like when he denied recommending selling gold at £1495 when it burst through £1800.

He's so used to relying on nobody remembering what he had said that he relies on us remembering what he hasn't said as well.

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@spendius,

This thread, and others like it, seem to me to be an aspect of that game by which we all pretend we have a choice at election time. A lot of sentimental structures are resting on the notion that we do have a choice and playing this game provides the illusion that we do.

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@georgeob1,

Quote:

What the hell does the expressed intention of an executive of the company have to do with it ? It isn't against the law to believe (correctly in my opinion) that labor unions are positively destructive to the health and productivity of any organization they infect.

Actually it IS against the law to retaliate against unions for something that it was legal for them to do. That is the real issue here.

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@cicerone imposter,

cicerone imposter wrote:

Actually there are really two issues, but you seem to lean towards "wealth transfer" over our increasing national debt. Both are important issues, and that's where our government has failed.

I'm not sure I get your meaning here. Actually the issues confronting (in varying degrees) the nations of Europe and North America have at least five identifiable significant components;
==> High and fast increasing levels of public (and in some cases private) debt.
==> Decades of growing economic competition from what was once called the "Third World" that have effectively destroyed the once thriving industrial (coal, steel, aluminum, msanufacturing, textile) economies of Europe and North America.
==> Accelerating demographic changes that are making previously successful social welfare programs financially unsustainable - a main driver for the growing public debt cited above.
==> A degree of widespread political paralysis as the beneficiaries of social welfare and other government subsidies resist any change (both needed and harmful) to the handouts that sustain them.
==> A serious cyclic recession, compounded by a bubble in public and private sector borrowing , that has brought all these issues, simultaneously to the fore.

It appears to me that you may be oversimplifying the matter and advocating a "policy" (i.e. "tax the rich") that fails to address the underlying issues and which alone is demonstrably incapable of solving even just the problem of public debt.

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@cicerone imposter,

cicerone imposter wrote:

rjb, I read the tea leaves on the macro level of economics; the strongest economies are lowering their economic expectations, and it's also impossible for Germany to bailout the whole of the Euro countries in trouble.

When the economists were predicting a 3% increase in our GDP earlier this year for the last half of this year, I had to laugh. Their tea leaves are looking black when it should be reading red.

Jobs are the key, and there's no sign of any improvement for the foreseeable future.

That's over 70% of my tea leaves.

when economists look around the globe they don't see any engines of recovery (growth), market watchers say that they don't see anyone who wants to buy in right now, bank watchers report the European bank balance sheets are relentlessly turning into ****.....you can feel the tires sliding on mud as this car heads for the cliff....

We need both for EU leaders to make a big move (dissolve the Euro or fully unify finances) and for Washington to stop bickering and stop lieing and come up with a credible way forward....the liklihood that we will git either is slim however.

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@georgeob1,

georgeob1 wrote:

What we do need is new private sector economic activity. From petroleum & energy production, to mining and (in its slavish support of unions) manufacturing, and everywhere in its increased regulatory reach, the administration is doing all it can to stop that from happening. It is truly crazy.

Even if deregulating the energy and manufacturing sectors is an effective supply-side policy (which is far from clear to me), it won't fix the current economy. The current economy is limited by lack of aggregate demand, and you can't fix a demand-side problem by strengthening the supply side. In fact, I would venture a bet: If a Republican candidate defeats Obama in November 2012 and takes office in January 2013, I predict the unemployment will be higher, the employment rate lower, and real wages lower, come January 2014. Care to bet against me?

1 Reply

@Thomas,

Thomas wrote:

georgeob1 wrote:
What we do need is new private sector economic activity. From petroleum & energy production, to mining and (in its slavish support of unions) manufacturing, and everywhere in its increased regulatory reach, the administration is doing all it can to stop that from happening. It is truly crazy.

Even if deregulating the energy and manufacturing sectors is an effective supply-side policy (which is far from clear to me), it won't fix the current economy. The current economy is limited by lack of aggregate demand, and you can't fix a demand-side problem by strengthening the supply side. In fact, I would venture a bet: If a Republican candidate defeats Obama in November 2012 and takes office in January 2013, I predict the unemployment will be higher, the employment rate lower, and real wages lower, come January 2014. Care to bet against me?

I think it would be a foolish bet for either of us - too many uncontrolled variables and poorly defined reference conditions. However, I'm willing.

I believe the intrinsic limitations of the strict supply/demand side distinctions you (and most economists) apply here reduce their utility in this matter. Even at constant aggregate demand, replacing imported Venezuelan or Middle East oil with domestically produced sources involving domestic employment for both direct labor and management can be a significant benefit. Same goes for domestic production of minerals. Both are also important for their potential to reduce the price setting power of foreign producers on whom we are becoming increasingly dependent.

How many marginally competitive U.S. manufacturers could benefit from reduced domestic labor costs to expand their market shares - again with fixed aggregate demand? An important contributor to the spectrum of economic challenges we (and Europe) face is the loss of our industrial & manufactiring bases to "third world" competitors. The reluctance of workers, labor unions and companies as well to accept competitive cost challenges is understandable, but inflexibility and finger-pointing helps no one. (The labor "peace or condominium" established in Germany a few decades ago is something that I don't fully understand. However its beneficial effects for everyone in Germany are undeniable.) In this regard I believe that extended unemployment benefits, higher minimum wages and typical union demands - all have bad side effects that are only rarely either noted or acknowledged.

We have foolishly created a destructive impasse in our policies for the production and distribution of energy, which is a fundamental element of nearly all economic activity. The Byzantine environmental pernmitting process for new projects of any kind has enabled loonies of every stripe to block almost any capitol investments in this area - ranging from new transmission lines for electrical power to the construction of new powerplants of any type. Our environmental policies are focused on shutting down the use of coal which accounts for about 30% of our total energy consumption without enabling any cost-effective alternatives. The role of leadership is to find a synthesis in the case of such contrradictions. Our current leadership has failed completely in this area, making a bad situation far worse.

Our current Administration hasn't yet offered anything that has yielded detectable beneficial effects in a still worsening situation. Indeed the main effects have been to delay our confrontation with inescapable fundamental issues ranging from gathering Federal and Local government financial crises to labor market adaptability and the assimilation of generally hard-working and adaptable immigrants. What would you do?

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@georgeob1,

georgeob1 wrote:

... and the assimilation of generally hard-working and adaptable immigrants.

I gave your post a thumbs up, George, even though I disagree with more than a bit of your argument. With regard to the quote above, Mayor Michael Bloomberg (I-NYC) was on a local talk show and he made some comments relative to legal immigration. He talked about the job losses in the national economy in the last 4 years (6% of the work force vs 1/2% in NYC), with most of that being in "big business" which has been quick to "cut fat" and "automate." NYC, he claims, has encouraged "small business" through "incubators."
He ended by saying that "Immigrants don't take away jobs; they create jobs."
The reader comments to the article were pretty brutal.

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@realjohnboy,

realjohnboy wrote:

He ended by saying that "Immigrants don't take away jobs; they create jobs."
The reader comments to the article were pretty brutal.

My personal inclination is to say that jobs draw immigrants (from other areas as well as internationally), which is pretty much the opposite of saying immigrants create jobs.

As I say, just my personal inclination.

1 Reply

@roger,

Quote:

My personal inclination is to say that jobs draw immigrants (from other areas as well as internationally), which is pretty much the opposite of saying immigrants create jobs

The benefit of jobs = # jobs x wages....and we know damn well that immigration lowers wages by skewing the labor market supply/demand equation. I also see that the housing and commercial markets that have done the best are the ones where supply has been constrained, either through restrictive government policy or lack of land to build on. Those places where building was easy and cheap are the places where many buildings went up fast, and now have a high vacancy rate and low prices because of the glut. I dont think america benefits from either the importation of large numbers of illegals who can be manipulated to work cheap nor from the the importation of large numbers of skilled workers who similarly drive down the wages of the upper ends of the labor market. At the end of the day citizens need to be able to afford to buy the products in the markets, we have seen that left to their own devices that the holders of capital will most of the time work to drive down wages, thus destroying the capitalist economy.

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@hawkeye10,

Quote:

At the end of the day citizens need to be able to afford to buy the products in the markets, we have seen that left to their own devices that the holders of capital will most of the time work to drive down wages, thus destroying the capitalist economy.

Welcome to the reality of capitalism!

1 Reply

@realjohnboy,

realjohnboy wrote:

georgeob1 wrote:

... and the assimilation of generally hard-working and adaptable immigrants.

I gave your post a thumbs up, George, even though I disagree with more than a bit of your argument. With regard to the quote above, Mayor Michael Bloomberg (I-NYC) was on a local talk show and he made some comments relative to legal immigration. He talked about the job losses in the national economy in the last 4 years (6% of the work force vs 1/2% in NYC), with most of that being in "big business" which has been quick to "cut fat" and "automate." NYC, he claims, has encouraged "small business" through "incubators."
He ended by saying that "Immigrants don't take away jobs; they create jobs."
The reader comments to the article were pretty brutal.

Thank you, but ... With what do you disagree?

I'm not certain I understand your position with respect to immigration. My perception is that this country has long been the beneficiary of the immigration of ambitious risk-taking people from all over the world, and that it has benefitted us greatly. I recall once at a university library reading accounts of the influx of immigrants to this country in the late 19th century - tales of "uneducated, illiterate tribes of alien people who are addicted to crime, and who will surely wreck the country", etc. They were then, of course referring to the flood of Russian & Polish Jews and Italians - who succeeded the waves of Irish and Germans who preceeded them. It didn't turn out as they forecast.

Today, as earlier, the immigrants are taking (and creating) jobs that the natives generally won't do.

1 Reply

Where is the US economy headed?

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