The Coming Economic Collapse, Part 2 147 comments
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Today’s essay is part two of our three part series detailing the ongoing collapse of the US economy with a focus on why this coming fall will prove the “worst is over” crowd wrong yet again. On Friday we detailed three major developments. They were:
- The US’s economic shift from manufacturing to services
- The massive drop in US incomes
- The beginning of the debt bubble
If you missed that essay, you can read it here. Today, we’re addressing how the debt bubble encapsulated the US government as well as why Obama’s Stimulus Plan won’t fix anything.
To revisit the above three points, the US began outsourcing jobs in earnest soon after we re-opened trade with China in 1971. As outsourcing spread to higher and higher skilled jobs, this meant fewer jobs in the US market. This resulted in US consumers having to use credit to maintain their standard of living. It also meant more than one parent working to make ends meet.
On a national level, the US government began living beyond its means as well. Adjusted for inflation, gross tax receipts have only risen 40% in the last 39 years. However, over the same time period, total government spending increased 2,600%!!!
To fund this insanity, the US issued debt in the form of Treasuries. Foreign governments (most notably China) which were generally getting richer selling us stuff loaded up. The whole scheme is similar to buying a toy from the store, then having the store lend you money to buy another toy… ad infinitum: hardly a sensible long-term plan for financial solvency.
Now, everyone knows we run deficits. But not everyone knows that the deficits we publish are unbelievably understated. Corporations, in order to qualify for generally accepted accounting principles (GAAP) have to count their pension and healthcare expenses for retirees.
Uncle Sam doesn’t.
John Williams of www.shadowstats.com notes that official US deficit statistics do NOT include net present value of unfunded social security OR Medicare expenses. A lot of folks have made a big deal about the US running a $1 trillion deficit this year. Well, if you included the net value of those unfunded Social Security and Medicare expenses we cleared a $1 trillion deficit in 2007, a $5 TRILLION deficit in 2008 and are on course to clear a $9 TRILLION deficit this year.
To give you an idea of how big a problem these deficits are, consider that the US government could tax its citizens 100% of their earnings and NOT have a balanced budget.
In light of these issues, the Government’s $787 billion stimulus package doesn’t exactly breed confidence in an economic turnaround. Incomes have lagged inflation in this country for 30+ years. Creating a bunch of temporary positions related to construction and the like is NOT going to alter this in any significant way.
Moreover, most of the job growth in the last 10 years has come from Bubbles: two out of five jobs created between 2002 and 2007 came from the housing industry. The irony here, of course, is that the Stimulus Plan is merely following this trend, creating jobs from our latest (relatively unreported) Bubble: the Bubble in government spending and employment.
Bottom line: the US needs to create sustained job growth involving skilled professionals with high wage earning potential, NOT more guys laying concrete. We need fundamental structural changes to the US economy, NOT temporary positions resulting from one-time government projects.
And with a $9 trillion deficit in the works, $787 billion doesn’t really mean much in terms of increased tax receipts or job growth. Also, and this is bit of a personal aside, it’s hard to believe that throwing $787 billion towards creating jobs really shifts our economy away from financial services when we’ve thrown $2 trillion+ towards Wall Street and the banks (via direct loans and lending windows).
Tomorrow, I’ll address the likely outcome of today’s economic and financial woes. Until then…
Good Investing!
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This article has 147 comments:
Markets allocate resources based on merit. Governments misallocate resources based on patronage. Markets create wealth, Governments destroy it. Markets promote choice; Governments suppress it. Markets are based on a voluntary system of property rights and willing exchanges. Governments are based on a coercive system of entitlements and impositions.
It is not, I beleve, for individuals or Governments to decide the what, when and where of jobs and the composition of the economy: no individual can and Governments , by their very nature get in not just wrong but horribly wrong.
Only Free and Fair markets can get it right.
Our present grave economic/financial and decision making perversions and pathologies arise from the fact that free and fair markets are no longer permitted to function in important, indeed essential parts of the economy. This is because corrupt and self obsessed Big Corporations, advocacy and special interest groups and the Government profit hugely and consistently from suppressing or distorting market( eg credit, energy,water, labor, real estate, education, healtcare) signals. In large and growing parts of the economy Free and Fair markets do not exist or are no longer allowed to operate.
The more the markets are tortured and weakened the more the Government and its corporate, special interest and media allies claims that only they, the annointed few, have the answers.
Governments cannot credibly address the issues you discussed in Parts 1 and 2 of your essay and markets are not allowed to. No wonder the fundamentals of the economy, society, culture and national global stature continue to deteriorate.
Until the Government/market balance is reasonably restored, property rights and the rule of contracts are again honored, free and fair markets are again the norm and the middle class is again central in national decision making our condition cannot, reliably and consistently improve. It can, however, greatly worsen.
One thing you, and all that write on the feds leave out, the debt/future cost of government pensions and their best in the world health-care.
No one, even shadowstats, can find these numbers as the Fed divides them amongst the departments and buries it in salaries.
We have to wake up.
Most government employees work less than 25-30 years and retire early. Many retire to go back to work in another government job, thus earning themselves TWO or more government pensions.
Then those government employees point fingers at Social Security as being the problem. SS recipients have to work well into their 60s or 70s to draw back what they paid in.
Federal (and many state) employees, only have to show up for a couple decades to draw up to 80% of their HIGHEST salaries FOR LIFE. Don't discount their younger spouses drawing checks for their lifetimes too.
FUBAR is the word that best describes what our government has done to our children.
And yet, you can't get people to wake up and band together to stop it.
50 years of massive spending and failed policies have brought us to today.
I wish I felt it was fixable, but I don't. My fellow citizens can't be bothered with the truth. Good luck to us all.
Excust me, but two-out-of-five ain't "most." If you can't do basic math, why should anybody trust your doomsday opinions?
'Today we’re addressing how the debt bubble encapsulated the US government as well as why Obama’s Stimulus Plan won’t fix anything.'
The first several stimulus plans were Bush Stimulus plans, remember? But now it is not all Obama's fault? Where is some basic fairness and objectivity?
All federal spending programs must be introduced by the House of Representative.s (H.S. Civics). If you want to blame anyone for the debt we have grown since Coolidge blame Congress and work to enact Congressional Term Limits and return the country to its taxpayers.
TARP is not a stimulus plan and Obama doubled the stimulus plan that HE signed and, being the ultimate lying politicians, said he "inherited", like, and maybe this is true, he didn't kno wwhat was going on as an absentee Senator. Did Obama ever vote against a spending bill as a senator or vetor one as president? Not!
Watch the misery index.
On Jun 08 10:00 AM Ben Gee wrote:
> So call " free market" unfortunately was subjected to speculation
> and manipulation by finance institutions that created the housing
> bubble in the US that brought the biggest economy in the world to
> its knees. Someone has to set some sort of guide lines and the market
> itself had not been able to do that. Are we so sure that the economy
> would not collapse if the US government did not come to the rescue
> of its finance instututions and GM?
Yes, I am sure the government bail did nothing for the economy, in fact exacerbated the down trend by encouraging government and union control which has never proved to be efficient. Would those profitable car dealers still be employer?
Claiming what would happen had the government done something is a hollow question impossible to be objectively answered and, ignorant of reality.
Socialism isn't speculative and manipulative? Only the clueless would infer that and has little or no historical perspective.
Recent eruptions, or interruptions, in the educational systems have pitted science angainst faith, evolutionsts against creationists, "facts opposing "faith".
Current ecomomic conditions are being compared to recent recessions and to the great depression. We have excellent scientific data to support the economic inquiries. The "facts" are easy to determine.
What is not easy to determine is the "faith". Our paper dollar is not based on gold or any commodity. Our dollar, money, currency is based on "the full faith and credit of the United States government".
This may be a prudent time to examine your faith in the authorities of our government. It may also be a prudent time to examine your faith in the real authority of your life.
On Jun 08 09:08 AM redbaron wrote:
> Where were all these doomsday writers for the past 8 years? Bush
> created more debt than all other presidents combined, and now all
> of a sudden debt is a problem?
>
> 'Today we’re addressing how the debt bubble encapsulated the US government
> as well as why Obama’s Stimulus Plan won’t fix anything.'
>
> The first several stimulus plans were Bush Stimulus plans, remember?
> But now it is not all Obama's fault? Where is some basic fairness
> and objectivity?
On Jun 08 08:51 AM wg wrote:
> "Moreover, most of the job growth in the last 10 years has come from
> Bubbles: two out of five jobs created between 2002 and 2007 came
> from the housing industry."
>
> Excust me, but two-out-of-five ain't "most." If you can't do basic
> math, why should anybody trust your doomsday opinions?
On Jun 08 08:51 AM wg wrote:
> "Moreover, most of the job growth in the last 10 years has come from
> Bubbles: two out of five jobs created between 2002 and 2007 came
> from the housing industry."
>
> Excust me, but two-out-of-five ain't "most." If you can't do basic
> math, why should anybody trust your doomsday opinions?
Bush gave us 6 years of growth. HOGWASH. He gave us 6 years (and counting) of a stupid, senseless, MASSIVELY EXPENSIVE war (in oh so many ways besides dollar cost), massive budget and trade deficits beyond anything we have ever experienced before (and which we will be paying off for decades to come), a regulatory structure that ignored and by its favoritism of the "corporatocracy" actually contributed mightily to the impending doom we have now experienced in out financial markets, our economy, our personal wealth (as well as the future incomes and wealth of our children, grandchildren, great grandchildren), a collapsed dollar that went from over 1.20 to under .80 during his reign, an absolute and perhaps permanent destruction of the wealth and financial security of the middle class (while his favored few rich friends got stinking rich by the tax breaks he showered on them), massive increases in oil prices, growing, persistent imbedded inflation in food and energy prices, a destruction of the capitalist structure that had supported our economy for two centuries (and the outright adoption of socialism as his nationalization of the financials last year demonstrated).
I won't even get into his administration's maltreatment of U.S. citizens's rights under the Constitution, or the arrogance and hubris he demonstrated to a world which had as recently as 9/12/2001 looked to the U.S. as the beacon of hope, economic might, and freedom for its citizens.
Yeah, 6 years of growth. GIVE ME A BREAK!
On Jun 08 10:08 AM Prudent Man CFA wrote:
> Bush had to deal with 9/11 and Clinton's recession yet gave us six
> years of growth. Whose fault is it they the people over spent and
> over borrowed. Individual responsibility please!
>
> All federal spending programs must be introduced by the House of
> Representative.s (H.S. Civics). If you want to blame anyone for
> the debt we have grown since Coolidge blame Congress and work to
> enact Congressional Term Limits and return the country to its taxpayers.
>
>
> TARP is not a stimulus plan and Obama doubled the stimulus plan that
> HE signed and, being the ultimate lying politicians, said he "inherited",
> like, and maybe this is true, he didn't kno wwhat was going on as
> an absentee Senator. Did Obama ever vote against a spending bill
> as a senator or vetor one as president? Not!
>
> Watch the misery index.
I’d only disagree with one of your premises. You stated it in Part I, as well as here, that one of the developments boding ill for the country is, “The US’s economic shift from manufacturing to services.” Actually, the US is still the world’s #1 manufacturing economy. And any “shift” to services is more a common-sense result of the global shift for advanced nations with high literacy and education to lead the new information economy.
As I wrote in the current issue of our publication, Investors Edge, services are more than flipping burgers – they also include, as a much larger portion, software design, systems analysis, engineering services, etc. If manufacturing declines as a percentage of total goods and services because we are on the cutting edge of this cusp, I wouldn’t consider that a bad thing, at all. I’ll try to find some time today to post from that article, and would be interested in any comments you have…
Disappearance of income, persistent attrition in the gross taxation collected and the need to start paying out on unfunded liabilities are just through the looking glass from the masquerades of Rosy Scenario
Cutting the corporate taxes down to the lowest rate in the world would bring our manufacturing back to the U.S. ( thereby creating millions of new good jobs) and would have cost us less than the so called stimulus and pork barrel spending contained in the 787 billion tax bill that none of them even read before they voted on it. Washington has very few people left in it who have any common sense at all! Between the so representatives and the "sheeple citizens" we are so screwed!
this is an investment community discussion site and you will find very little sympathy for the plight of the common man here.
These people overwhelmingly voted for that dry drunk GWB, for no other reason than they thought they would get tax cuts.
Spending, bloated budgets, crazy foreign and domestic policy -- who cares. Greed reigned supreme.
Now that (shudder) a democrat has to clean up the mess (once again), the hypocrits are rediscovering their supposed 'fiscal-responsibility' roots they were ignoring for the last thirty years to be as obstructionist as possible. Politics, like the markets works in cycles. If Obama fails as they are rooting for, then another right-winger can take the helm and get us back on a wartime economy and social conscience. Best for profits, not so good for the people, but who cares about them anyways. The "I got mine" crowd do not care about any future beyond their own.
On Jun 08 09:08 AM redbaron wrote:
> Where were all these doomsday writers for the past 8 years? Bush
> created more debt than all other presidents combined, and now all
> of a sudden debt is a problem?
>
> 'Today we’re addressing how the debt bubble encapsulated the US government
> as well as why Obama’s Stimulus Plan won’t fix anything.'
>
> The first several stimulus plans were Bush Stimulus plans, remember?
> But now it is not all Obama's fault? Where is some basic fairness
> and objectivity?
On Jun 08 06:40 AM User 353732 wrote:
> I suggest that the path to a cure requires clarity about making and
> honoring distinctions between markets and governments.
> Markets allocate resources based on merit. Governments misallocate
> resources based on patronage. Markets create wealth, Governments
> destroy it. Markets promote choice; Governments suppress it. Markets
> are based on a voluntary system of property rights and willing exchanges.
> Governments are based on a coercive system of entitlements and impositions.
>
> It is not, I beleve, for individuals or Governments to decide the
> what, when and where of jobs and the composition of the economy:
> no individual can and Governments , by their very nature get in not
> just wrong but horribly wrong.
>
> Only Free and Fair markets can get it right.
>
> Our present grave economic/financial and decision making perversions
> and pathologies arise from the fact that free and fair markets are
> no longer permitted to function in important, indeed essential parts
> of the economy. This is because corrupt and self obsessed Big Corporations,
> advocacy and special interest groups and the Government profit hugely
> and consistently from suppressing or distorting market( eg credit,
> energy,water, labor, real estate, education, healtcare) signals.
> In large and growing parts of the economy Free and Fair markets do
> not exist or are no longer allowed to operate.
> The more the markets are tortured and weakened the more the Government
> and its corporate, special interest and media allies claims that
> only they, the annointed few, have the answers.
> Governments cannot credibly address the issues you discussed in Parts
> 1 and 2 of your essay and markets are not allowed to. No wonder the
> fundamentals of the economy, society, culture and national global
> stature continue to deteriorate.
>
> Until the Government/market balance is reasonably restored, property
> rights and the rule of contracts are again honored, free and fair
> markets are again the norm and the middle class is again central
> in national decision making our condition cannot, reliably and consistently
> improve. It can, however, greatly worsen.
Gargantuan unfunded taxpayer liabilities, deficits, bloated intrusive government, wars and deterioration of incomes have long come courtesy of both parties.
I don't think more trillions, however they are conjured up, will set us right.
On Jun 08 06:40 AM User 353732 wrote:
> I suggest that the path to a cure requires clarity about making and
> honoring distinctions between markets and governments.
> Markets allocate resources based on merit. Governments misallocate
> resources based on patronage. Markets create wealth, Governments
> destroy it. Markets promote choice; Governments suppress it. Markets
> are based on a voluntary system of property rights and willing exchanges.
> Governments are based on a coercive system of entitlements and impositions.
>
> It is not, I beleve, for individuals or Governments to decide the
> what, when and where of jobs and the composition of the economy:
> no individual can and Governments , by their very nature get in not
> just wrong but horribly wrong.
>
> Only Free and Fair markets can get it right.
>
> Our present grave economic/financial and decision making perversions
> and pathologies arise from the fact that free and fair markets are
> no longer permitted to function in important, indeed essential parts
> of the economy. This is because corrupt and self obsessed Big Corporations,
> advocacy and special interest groups and the Government profit hugely
> and consistently from suppressing or distorting market( eg credit,
> energy,water, labor, real estate, education, healtcare) signals.
> In large and growing parts of the economy Free and Fair markets do
> not exist or are no longer allowed to operate.
> The more the markets are tortured and weakened the more the Government
> and its corporate, special interest and media allies claims that
> only they, the annointed few, have the answers.
> Governments cannot credibly address the issues you discussed in
> Parts 1 and 2 of your essay and markets are not allowed to. No wonder
> the fundamentals of the economy, society, culture and national global
> stature continue to deteriorate.
>
> Until the Government/market balance is reasonably restored, property
> rights and the rule of contracts are again honored, free and fair
> markets are again the norm and the middle class is again central
> in national decision making our condition cannot, reliably and consistently
> improve. It can, however, greatly worsen.
If governments only destroy wealth, not create it, then I assume you consider the Interstate system (actually, all government-built and -maintained roads) simple destruction of wealth. The same with ARPAnet and what came of it.
Give the ideology a break and get real, buddy.
If it's that rich, then why are you not in on it? I WISH we could "show up" for 20 years and get 80% of our highest salary, and pass it on to our young wives, etc... whatever...
I was in a 25-year police retirement program, then a 30-year regular state employee retirement program. The pension return is 6%-6.25% of what we pay into it. When I retire -- at 67 -- I receive the funds based on my life expectancy. If I leave the pension to my wife or kids, they would receive a reduced annuity dividing the funds based on their life expectancy. The only time we do not lose money is if we overshoot our life expectancy. Many states, including mine and almost definitely yours, have made provisions for employees to opt out in favor of 457 defined contribution plans.
And, since many states have a balanced budget amendment, our funds are actually funded. Why would we point fingers at SSI? SSI is an unfunded Ponzi scheme, and you are not paying into anything - it is a transfer to current retirees. I don't know what you are talking about, but state retirement accounts have little to do with federal economic instability.
On Jun 08 08:45 AM TeresaE wrote:
... Most government employees work less than 25-30 years and retire early. Many retire to go back to work in another government job, thus earning themselves TWO or more government pensions.
Then those government employees point fingers at Social Security
as being the problem. SS recipients have to work well into their
> 60s or 70s to draw back what they paid in. Federal (and many state) employees, only have to show up for a couple
decades to draw up to 80% of their HIGHEST salaries FOR LIFE. Don't
> discount their younger spouses drawing checks for their lifetimes
> too.
On Jun 08 10:54 AM wpdragon wrote:
> My misery index rises every time I come to one of your idiotic revisionist
> history rants.
>
> Bush gave us 6 years of growth. HOGWASH. He gave us 6 years (and
> counting) of a stupid, senseless, MASSIVELY EXPENSIVE war (in oh
> so many ways besides dollar cost), massive budget and trade deficits
> beyond anything we have ever experienced before (and which we will
> be paying off for decades to come), a regulatory structure that ignored
> and by its favoritism of the "corporatocracy" actually contributed
> mightily to the impending doom we have now experienced in out financial
> markets, our economy, our personal wealth (as well as the future
> incomes and wealth of our children, grandchildren, great grandchildren),
> a collapsed dollar that went from over 1.20 to under .80 during his
> reign, an absolute and perhaps permanent destruction of the wealth
> and financial security of the middle class (while his favored few
> rich friends got stinking rich by the tax breaks he showered on them),
> massive increases in oil prices, growing, persistent imbedded inflation
> in food and energy prices, a destruction of the capitalist structure
> that had supported our economy for two centuries (and the outright
> adoption of socialism as his nationalization of the financials last
> year demonstrated).
>
> I won't even get into his administration's maltreatment of U.S. citizens's
> rights under the Constitution, or the arrogance and hubris he demonstrated
> to a world which had as recently as 9/12/2001 looked to the U.S.
> as the beacon of hope, economic might, and freedom for its citizens.
>
>
> Yeah, 6 years of growth. GIVE ME A BREAK!
>
> On Jun 08 10:08 AM Prudent Man CFA wrote:
Don't let our average citizens off the hook either. More often than not, we were seduced by the lure of the apparent "free lunch". We elected those people and we allowed them to remain in office after we had more than sufficient proof that their policies were flawed, and they were embarked on a program of serving their interests, not ours, and that they had sold their votes to the highest bidders.
This country needs to be purged from the inside, starting with all the elected criminals and their private sector co-conspritors. Clean out those who put their own interests ahead of our country's. If we don't do something very soon, our nation will sink into economic oblivion.
I HAVE BEEN FOCUSED ON OUTSOURCING AS THE MAIN CULPRIT THAT IS DESTROYING AMERICA MIGHTY INDUSTRIAL BASE, WHILE OTHERS WERE TALKING ABOUT HOUSING, NOW FINANCIAL WRITERS LIKE GRAHAM HAS BEGUN TO BRING IN PROPER PROSPECTIVE WHAT IT HAS DONE TO THE ECONOMY, BERNEKE AND OBAMA HAS NOT CAUGHT ON AS TO THE DESTRUCTIVE FORCE THAT OUTSOURCING WHICH STARTED ON A GRADUAL TREND 30 YEARS AGO IS MOVING ACROSS THE 50 STATES LIKE A TIDAL WAVE, NEITHER BUSH, NOR CLINTON PAID ANY ATTENTION AND NOW NEITHER BERNEKE NOR OBAMA IS ADRESSING THE CANCER WHICH IS SPREADING,
THEY WILL WHEN THE UNEMPLOYMENT REMAINS HIGH AND JOB CREATION DOES NOT EXCEED JOB LOSSES.
> "Moreover, most of the job growth in the last 10 years has come from
> Bubbles: two out of five jobs created between 2002 and 2007 came
> from the housing industry."
>
> Excust me, but two-out-of-five ain't "most." If you can't do basic
> math, why should anybody trust your doomsday opinions?
Two out of five is 40% and that is just ONE example. It follows that money flowed out all across our economy via the housing market, credit card debt and public debt. Much of that ended up in the stock market and in bloated corporate earnings.
But don't worry, we can fix it with more debt. Just watch, that's what they're doin.
POP!!!!!!!
Actually as a Federal employee anticipating retiring at the minimum retirement criteria of 55 yo w/ 30 years, I can anticipate receiving 55% of my high 3 base pay. I am a part of an prior retirement system knows as CSRS. Anyone hired after 1Jan84, has a much much smaller Fed. employee pension (FERS), which is based on a meager employee pension, social security, and contributions to a 401K (admittedly the gov't matches dollar for dollar up to 4% then 50 cents on the dollar up to a total of 6%.
On Jun 08 08:45 AM TeresaE wrote:
> Another great installment Graham.
>
> One thing you, and all that write on the feds leave out, the debt/future
> cost of government pensions and their best in the world health-care.
>
>
> No one, even shadowstats, can find these numbers as the Fed divides
> them amongst the departments and buries it in salaries.
>
> We have to wake up.
>
> Most government employees work less than 25-30 years and retire early.
> Many retire to go back to work in another government job, thus earning
> themselves TWO or more government pensions.
>
> Then those government employees point fingers at Social Security
> as being the problem. SS recipients have to work well into their
> 60s or 70s to draw back what they paid in.
>
> Federal (and many state) employees, only have to show up for a couple
> decades to draw up to 80% of their HIGHEST salaries FOR LIFE. Don't
> discount their younger spouses drawing checks for their lifetimes
> too.
>
> FUBAR is the word that best describes what our government has done
> to our children.
>
> And yet, you can't get people to wake up and band together to stop
> it.
>
> 50 years of massive spending and failed policies have brought us
> to today.
>
> I wish I felt it was fixable, but I don't. My fellow citizens can't
> be bothered with the truth. Good luck to us all.
On Jun 08 09:08 AM redbaron wrote:
> Where were all these doomsday writers for the past 8 years? Bush
> created more debt than all other presidents combined, and now all
> of a sudden debt is a problem?
>
> 'Today we’re addressing how the debt bubble encapsulated the US government
> as well as why Obama’s Stimulus Plan won’t fix anything.'
>
> The first several stimulus plans were Bush Stimulus plans, remember?
> But now it is not all Obama's fault? Where is some basic fairness
> and objectivity?
On Jun 08 08:51 AM wg wrote:
Excust me? If you can't do basic spelling you shouldn't be criticizing basic math failures.
> "Moreover, most of the job growth in the last 10 years has come from
> Bubbles: two out of five jobs created between 2002 and 2007 came
> from the housing industry."
>
> Excust me, but two-out-of-five ain't "most." If you can't do basic
> math, why should anybody trust your doomsday opinions?
(1) Bush is/was an idiot, please don't mention his name ever again, i almost forgot him until people here brought him back up......DON'T DO IT.
(2) Quote, "THE GREATEST COUNTRY ON EARTH THE USA." I dont mean to upset you Joseph but that's AUSTRALIA, we normally do not like to bring this up, as you guys honestly believe that, but the economic stats now back it up.
Please now refer to America as the "FORMER" greatest country in the world, or the "No 2" greatest country in the world.................... for your cooperation on this!
Business that guess better than other on interest rates gain a competitive advantage over their competitors.
Banks have to hedge against constantly moving interest rates by either offering ARMs, derivatives, or loaning to riskier people.
Free markets can't function well when interest rates manipulation and mass speculation dominate certain industries.
Government intervention, thousands upon thousands of law changes, etc...
Free markets are the solution for certain but our government and the Fed for self serving purposes never let them operate properly. As for the crooks you don't burn down the crop field to get rid of the bugs.
Debt is the new form of slaverly. Our governments on all levels are forcing all of us deeper and deeper into debt. At what point to people start fleeing from their slavery into other countries. At what point does America build a wall to keep us in? Inflation or slavery seem to be the only good options left. The odds of building up our economy fast enough to pay for all this debt seems remote with downward wage pressures from china. So we arrive at the massive confiscation of wealth via inflation, estate taxes, etc... OR slavery of the middle class and upper class via massively high tax rates.
Until the government chooses to let the business cycle FREELY operate we will continue to push it off by higher and higher debt levels. The pain will be terribly bad but putting it off onto our children will be even worse. Its time we pay the piper. No more deficits please. No more large banks.
On Jun 08 06:52 AM Marco Hickey wrote:
Nice article. Can you tell me where you found the information about
taxes rising only 40% versus government spending rising 2600%? Thanks.
a true democracy cannot exist when the someone has the supreme power of money printing, through which this someone controls everybody's economic activity!
restore the power of money printing to the people(going back to gold standard), ensure a fair, open and liberal market place, throw out all entitlements and benefit programs, make the market, the people in control of their own lives.
we don't need the government to tax(force) us to help the poor and needy. we can/should do this voluntarily. minimum income tax to fund a government that maintains the essentials of a society and nothing beyond that!
we don't need the government to help us (mis)manage our retirement fuding. we can do this through our own savings that don't get eroded by constant inflation(with a currency backed by gold).
a hundred years of social experiment based on keynesian theory(government intervention) has failed miserably!!
by comparison, in physics, an experiment could finish in nanosecond. thus we all honor einstein.
in social science, we've followed the wrong man.
i recommend everybody to study the austrian school of economics founded by ludwig von mises! he's the unknown einstein in economics. he predicted this miserable outcome of government intervention a long long time ago, but nobody listened. no bureaucrats would listen of course!!!
amen to american people!
wake up, american people!
the world need you to stand up and lead the civilization into the right direction!
a catastrophe is also an opportunity!
we need a true leader, not obama!
On Jun 08 08:16 AM Persevere wrote:
> Based upon a conversation I had with a current U.S. Congressman in
> 2003, your deficit numbers are way off! In 2003, The Congressman
> and I were were discussing the fact the U.S. Government requires
> us to use GAAP "accrual basis" accounting, yet the Government uses
> "cash basis" accounting. He told me that, if the truth be known,
> the actual Government debt is over 54 trillion dollars. Keep in
> mind, he told me that in 2003. You can imagine what it is currently,
> or maybe with your expertise, you can calculate it based upon a
> 54 Trillion deficit in 2003.
It seems incomes have risen...for the executives. While everyone else struggles. I wonder if this was accounted for, would all these be irrelevent points?
On Jun 08 08:51 AM wg wrote:
> "Moreover, most of the job growth in the last 10 years has come from
> Bubbles: two out of five jobs created between 2002 and 2007 came
> from the housing industry."
>
> Excust me, but two-out-of-five ain't "most." If you can't do basic
> math, why should anybody trust your doomsday opinions?
Smith, professor of economics and law at Chapman University, won his Nobel in 2002. He spoke Friday, June 5, before a standing-room-only crowd in Fraser Hall at Western Washington University.
Most people think of the Great Depression as originating in the stock market crash of 1929. But Smith's research indicates that the 1929 crash was itself the result of an earlier collapse in the boom housing market during the Roaring '20s. ...
Examples: Large numbers of adjustable-rate mortgages will reset at higher rates in the next couple of years, putting more households at risk of foreclosure and piling more losses on mortgage lenders. And sharp drops in consumer spending have yet to play themselves out in the commercial real estate markets. Increasing numbers of commercial loans to retailers are likely to go sour in the months ahead.
"That has yet to hit the banking sector," Smith said."
www.bellinghamherald.c...
On Jun 09 08:24 AM elcopone wrote:
> What about the fact that average executive earns 100 times the average
> worker? If this multiple was even close to rational, real incomes
> would have risen significantly. This multiple has been increasing
> dramaitically as well during the time frame you quote.
>
> It seems incomes have risen...for the executives. While everyone
> else struggles. I wonder if this was accounted for, would all these
> be irrelevent points?
You make many important points, but many of your supporting facts are bold assertions that are difficult to authenticate. For example, please consider the following:
"A lot of folks have made a big deal about the US running a $1 trillion deficit this year. Well, if you included the net value of those unfunded Social Security and Medicare expenses we cleared a $1 trillion deficit in 2007, a $5 TRILLION deficit in 2008 and are on course to clear a $9 TRILLION deficit this year."
This is a very interesting point, but without the arithmetic to support it, I am not certain how seriously to take this statement.
"The massive drop in US incomes"
----------------------...
There has been no "massive drop in US incomes"
Neither in this essay nor in your prior one do you offer any data to support this contention.
Very straightforward data makes this clear: payroll tax receipts. These are actual dollars coming out of actual paychecks. These receipts have gone up in per capita, rate adjusted, inflation adjusted terms in the period you describe.
The increase in payroll taxes --adjusted for rates-- gives clear evidence that incomes has been no "massive drop" in US incomes. Some sectors have lost high paying jobs. Other sectors have gained them. Union steel and autoworkers have clearly lost. On the other hand, Kentucky rural folks who've gone to work for Toyota now earn much _more_ than they did.
You have to look at real numbers if you want to say anything meaningful on this subject: where do your numbers come from? Do you have any?
You can consult payroll statistics at:
www.taxpolicycenter.or...
More stunning are the comments that praise this "three part series". I read Part 1 and just read and re-read Part 2. Part 2 is actually incoherent as a whole -- while the sentences and paragraphs can be read and understood, there is no logical flow or connection among the observations cobbled together here. Indeed, the critical juncture in the article is where the author writes "In light of these issues, the Government’s $787 billion stimulus package doesn’t exactly breed confidence in an economic turnaround" and then goes on to criticize Obama's failure to radically transform perceived structural employment issues. It's a non-sequitur. There is no obvious connection between the eventual deficit Judgment Day (which happens who knows when) and near- to intermediate-term economic activity.
By turning the printing presses on, the Fed and the U.S. Gov't have sparked inflation expectations (the Fed can't do it alone -- all that newly minted digital money has to flow into the economy (velocity), and the QE purchases essentially fund the stimulus... both parts are equal halves of Bernanke's metaphorical helicopter cash toss). Inflation expectations cause people to stop hoarding cash and invest it or spend it. (Conversely, I think we are all painfully aware of what deflationary expectations do.) Putting aside whether the average Joe is better off with a job that allows him to buy a $10 gallon of milk, or without a job but with milk at $2.50, there can be no doubt that these money-printing activities will lead to an increase in transactions and get the economic engine -- which had completely frozen (some seem to forget) -- churning again. This occurs as a result of increasing the money supply and getting it into the hands of consumers -- it doesn't really matter if those consumers are "pouring concrete" or getting stimulus checks (but it is certainly more politically palatable to create jobs rather than give straight hand-outs).
Without a doubt, inflation has a very real consequences (loss of wealth, price instability, transfers from creditors to debtors), but none of them automatically lead to decreased economic activity in the near future. What no one knows is whether interest rates will eventually reach the point where they choke off economic growth and whether that point is reach before or after the American consumer is out of the wilderness. So far, this article does nothing to answer that question or even suggest what facts are relevant to the inquiry. It is simply a bunch of grousing about huge deficits and the ill-positioned American worker.
I will keep an open mind for Part 3, but so far, not so good.
Great line... but $10 milk means $10 gas, 100K \ yr college, $10 per pound chicken etc...
Both situations are unaffordable & don't lead to "real" recovery. While doomsday is off the table, real recovery in the economic situation with a sustainable long term plan hasn't been presented either.
Every single last one of us is responsible for this mess. Our government, our central banking and treasury, our corporate oligarchs, our wealth-hungry over extending middle class who assumed way more debt than was ever realistic. We all bought in and fed this system that was at its heart unsustainable, and I fear that it will take the collapse in the strength of the dollar as the world's reserve currency before we fix this.
So?
Every single homeowner in America faces this same problem.
Their DEBT from their HOME is MORE than 100% of their earnings for the entire year!
Don't you see how stupid and silly this sounds, when it is put into perspective?
Just another talking point, courtesy of the Losers over at the G.O.P....
snooze and you lose....if your right I go short and celan up the other side....but it aint looking that way as there has been no massive sell off in may
John Williams does not include the productivity gains that will greatly improve our ability to pay for these items.
Obama has discussed manufacturing being offshored and has stated America will be where the technology resides. The flaw in that thinking is that idea generation does not allow the masses to pay their bills and the common person is not going to receive funding to stay home and generate ideas.
So what does the common person do without a job?
Besides starve....
In I&II the history is logical and well supported, but the conclusion is over-broad. You could have stopped at Part II and we'd all be just as informed.
Outsourcing is the free (labor) market in action. It has enabled wealth creation in countries that otherwise would be dependent on aid to avoid famine.
It has allowed companies to dramatically increase profitability, both on the employing and the employees side.
The American jobs that were the first candidates for outsourcing were the blatantly uneconomic ones.
The internet has now added an entire new dimension to outsourcing of jobs and will make it impossible to reverse or even slow down, without draconian limitations on economic freedoms.
Compared to the rest of the world, Americans have been overpaid.
In the longer run, wage rates will tend to a global equilibrium.
Wage protectionism is self-defeating.
mindyourpolitics.blogs...
The market is not going to collapse. Look at South American countries like Argentina or Brazil in the '80's as examples. Their currencies were worthless, the standard of living of their populous
declined. They became 3rd world countries. They lacked the capital to compete. It's more likely that the US would look like that. But I understand that your headline will draw more readers because there's nothing like calling for a good collapse to get people's attention.
As for "free markets", they exist only in theory like communism. Both systems are vuneralble to manipulation by the ruling class weither the ruling class calls itself capitalist or communist. Both will shape government policy to meet their needs at the expense of the population.
Yes, outsourcing would occur anyways, to take advantage of arbitrage opportunities around the globe - produce with cheap labour, sell in expensive markets... But government interference has only exacerbated the problems..
Outsourcing in moderation would be fine. It would be alright if foreign countries were outsourcing some of their jobs to the US as well. Outsourcing could work both ways. But right now we just outsource EVERYTHING. Outsourcing the entire economy is unsustainable and a major problem. We can't just consume and produce nothing forever... it doesn't work that way.
On Jun 09 09:04 PM TERN wrote:
> The populist argument against outsourcing, made by some commentators,
> is wrong.
> Outsourcing is the free (labor) market in action. It has enabled
> wealth creation in countries that otherwise would be dependent on
> aid to avoid famine.
> It has allowed companies to dramatically increase profitability,
> both on the employing and the employees side.
> The American jobs that were the first candidates for outsourcing
> were the blatantly uneconomic ones.
>
> The internet has now added an entire new dimension to outsourcing
> of jobs and will make it impossible to reverse or even slow down,
> without draconian limitations on economic freedoms.
>
> Compared to the rest of the world, Americans have been overpaid.
>
> In the longer run, wage rates will tend to a global equilibrium.
>
> Wage protectionism is self-defeating.
And btw "redbaron", folks like M.Rothbard have foretold this situation over 50 years back - the number of books addressing unsound government (mis)management of revenues began in earnest right after the 1913 heist by the Federal Reserve Cartel.
Issues like "taxing personal income" only feeds the monster (aka the REAL parasite with no ability to reduce it's blood-thirst on an otherwise healthy system).
Now go dogfight Snoopy.
On Jun 08 09:08 AM redbaron wrote:
> Where were all these doomsday writers for the past 8 years? Bush
> created more debt than all other presidents combined, and now all
> of a sudden debt is a problem?
>
> 'Today we’re addressing how the debt bubble encapsulated the US government
> as well as why Obama’s Stimulus Plan won’t fix anything.'
>
> The first several stimulus plans were Bush Stimulus plans, remember?
> But now it is not all Obama's fault? Where is some basic fairness
> and objectivity?
arabianmoney.net/2009/.../
On Jun 09 04:22 PM Skjellifetti wrote:
> John Williams of shadowstats.com notes that official US deficit
> statistics do NOT include net present value of unfunded social security
> OR Medicare expenses.
>
> John Williams does not include the productivity gains that will greatly
> improve our ability to pay for these items.
The US is essentially bankrupt and since there's no international bankruptcy court to wipe out its debts, it is going to inflate itself out of debt. Essentially it will print enough dollars to pay off all its debts. This will lead to massive inflation, but imagine if it had inflation like Zimbabwe where they revalued their dollar by removing 10 zeroes!! Essentially someone holding just one US dollar could have bought enough Zimbabwe dollars to pay off all their Zimbabwe dollar denominated debts up to a few years ago. Hopefully things will not get quite that bad in the US, but it is really the only way it can get out of this debt.
My guess is that the US will try to fix the health care system to limit its growth, cut back on debt through inflation, and cut back on Social Security and other benefits by increasing them at the CPI (which is far less than the actual inflation rate). This will be the painful part that no one talks about.
What the US is doing now is trying to do as much as it can with whatever money it can get from China and other countries while it still has a decent credit rating. Kind of like realizing you can't make your credit card payments anyway so you go out and buy even more stuff on credit before filing for bankruptcy.
Once it achieves this the US can then work to become a responsible member of the world economic community.
> Warren Buffett said "Don't be against America." We still agree with
> his statement. American people and United States are far more dynamic
> and strong than what most bearish forecasters think. At Sovestor.com.
> we are bullish on American economy going forward. Do you want to
> bet against Uncle Sam?
THIS IS NO LONGER AMERICA!
Americans now believe in socialism more than capitalism at the same time that Russia and China have become more capitalist than communist.
The brilliant growth of American industry in the 20th century happened while debt levels were relatively low and markets were relatively free.
Until America respects what made this country great in the first place, and starts to "hope" for a "change" back to manageable debt levels, free markets, and respect for the Constitution, my money's going elsewhere.
I rather they threw the $2 trillion towards universities and scientific research institutions. Something good could come from the scientists. Scientific innovations which benefits everybody.
Throw money to the Wall Street bankers? So that the bankers can come up with more financial innovations (which Greenspan was so worried would be stifled by over-regulation!) to enrich themselves???
The car will be powered by a permanant power cell that will not require drilling. Planning on this development to happen is like buying lottery tickets for your retirement or planning on socialism to rescue us from our human propensity to over consume what ever is at hand.
On Jun 08 12:27 PM Bob 123 wrote:
> Baron,
> this is an investment community discussion site and you will find
> very little sympathy for the plight of the common man here.
> These people overwhelmingly voted for that dry drunk GWB, for no
> other reason than they thought they would get tax cuts.
> Spending, bloated budgets, crazy foreign and domestic policy -- who
> cares. Greed reigned supreme.
> Now that (shudder) a democrat has to clean up the mess (once again),
> the hypocrits are rediscovering their supposed 'fiscal-responsibility'
> roots they were ignoring for the last thirty years to be as obstructionist
> as possible. Politics, like the markets works in cycles. If Obama
> fails as they are rooting for, then another right-winger can take
> the helm and get us back on a wartime economy and social conscience.
> Best for profits, not so good for the people, but who cares about
> them anyways. The "I got mine" crowd do not care about any future
> beyond their own.
>
> On Jun 08 09:08 AM redbaron wrote:
> The first several stimulus plans were Bush Stimulus plans, remember?
> But now it is not all Obama's fault? Where is some basic fairness
> and objectivity?
Yes, Pres. Bush's stimulus plans and deficit spending were wrong. Correcting Pres. Bush's foolishness with more of the same is madness. Pres. Obama campaigned on a theme of "change." Ironically, he is following the same borrow-print-spend path that was trudged by his predecessor.
> status as a civilized and advanced country, it is in our interest
> to provide and maintain baseline minimums and minumum standards in
> health, education, and housing/infrastructure.
sether, if these items that you mention are indispensible to a "civilized" country, then the Framers of the Constitution would've included them in our founding document, which is a compact between the citizens and the central government. They did not.
If a state government wishes to supply the above items, then I have no problem with that. It is not, however, a federal responsibility.
> How do you figure tax-and-spend, buying union votes, and nanny-state
> handouts amounts to "cleaning up the mess once again" ??
Curious, politicians don't want to clean up messes; they want to be re-elected. Pres. Obama has used taxpayer funds to bailout Chrysler and GM because the UAW supported his 2008 presidential run and because he wishes to keep its support in 2012. He is betting that the union money and footwork will help him when he runs for re-election.
On first blush, Pres. Obama's bet seems to be a sure-thing: thousands of UAW members in swing states will vote for his re-election, allowing him to carry those states. The level of borrowing and spending, plus the liquidity added by the Fed, though, will cause jumps in consumer prices and interest rates; we are already seeing this in the price of gas, which has risen in part because the dollar is being debased. It will be interesting to see in a few years if non-union voters turn against the Administration because of a fall in their standards of living.
A flexible system where innovation can flourish is what has changed the world, flat out! The world has seen exponential change in the last 50 yrs, much of it driven by the US. I worry that we are getting away from what got us to this point. Yes, there are casualties and growing pains but we should have the confidence to solve our own financial problems.
On Jun 09 01:51 PM Dirtnap wrote:
> I love a heated debate as much as the next guy, but I despise all
> this partisan BS being funneled by those who adhere to the ideology
> of the left or the right. If you think for even one second that Bush,
> or Obama, or Clinton, or Reagan were responsible for either our prosperity
> or our downfall, you need to take a look in the mirror. You, my friend,
> are a partisan sheep who has bought into the propaganda.
Teresa,
The Federal Retirement System you describe ("a couple of decades...") was "retired" in 1982. The system available to anyone hired since that date is much less generous and includes a actuarial penalty for retirement before 65 similar to that of Social Security. Most similar state plans were similarly changed at about the same time.
And are completely wrong about the spousal statement. There have been actuarial penalties based on the age of the spouse when a survivor option is selected in all such plans since they were implemented. Even the "gold plated" FRS and state "Plan 1" era systems had them.
You've gone all Limburger Cheese on us.
On Jun 08 08:45 AM TeresaE wrote:
> Another great installment Graham.
>
> One thing you, and all that write on the feds leave out, the debt/future
> cost of government pensions and their best in the world health-care.
>
>
> No one, even shadowstats, can find these numbers as the Fed divides
> them amongst the departments and buries it in salaries.
>
> We have to wake up.
>
> Most government employees work less than 25-30 years and retire early.
> Many retire to go back to work in another government job, thus earning
> themselves TWO or more government pensions.
>
> Then those government employees point fingers at Social Security
> as being the problem. SS recipients have to work well into their
> 60s or 70s to draw back what they paid in.
>
> Federal (and many state) employees, only have to show up for a couple
> decades to draw up to 80% of their HIGHEST salaries FOR LIFE. Don't
> discount their younger spouses drawing checks for their lifetimes
> too.
>
> FUBAR is the word that best describes what our government has done
> to our children.
>
> And yet, you can't get people to wake up and band together to stop
> it.
>
> 50 years of massive spending and failed policies have brought us
> to today.
>
> I wish I felt it was fixable, but I don't. My fellow citizens can't
> be bothered with the truth. Good luck to us all.
Oh, and I forgot that the nearly universal "formula" for benefit computation in the old plans was "2% per year of service up to 30 times average final compensation". AFC was typically the highest two years of service and could include cashed out accumulated annual leave.
That means that the maximum benefit was 60% of the AFC -- not the 80% you claim -- and only after 30 years of service. Not "a couple of decades". Most governments limit accrued leave to a couple of months, so the AFC might have been inflated by 1/12 or 8%. A nice little lift, no doubt. That too is excluded from current plans because they typically use the average of the highest five years' salary to compute the AFC.
Public safety and military typically had 2.5% per year of service and so could receive 75% of the AFC.
Finally, the "double dipping" you describe was forbidden for all except public safety and military retirees. They could move laterally to the ordinary civil service and begin accumulating service credits in the standard plan. Or of course a Federal retiree could go to work for a state or vice versa and accumulate credits. However, do the math. After 30 years a person is in her or his early fifties and simply does not have another 30 years to attain a "full" retirement in another system.
On Jun 10 10:21 AM Anandakos wrote:
>
> Teresa,
>
> The Federal Retirement System you describe ("a couple of decades...")
> was "retired" in 1982. The system available to anyone hired since
> that date is much less generous and includes a actuarial penalty
> for retirement before 65 similar to that of Social Security. Most
> similar state plans were similarly changed at about the same time.
>
>
> And are completely wrong about the spousal statement. There have
> been actuarial penalties based on the age of the spouse when a survivor
> option is selected in all such plans since they were implemented.
> Even the "gold plated" FRS and state "Plan 1" era systems had them.
>
>
> You've gone all Limburger Cheese on us.
>
> On Jun 08 08:45 AM TeresaE wrote:
Those of you arguing politics...that's the sideshow, the fireworks, the hucksters - dragging your attention and money away from focusing on the real issues.
Get out of the market now!
We are rhyming with June 1930.
For the last 30 years the US economy has been a Friedmanesque, supply-side, deregulating, trickle-down, tax-cutting (for the rich), Laffer-curve, Jude Wanniski, Voodoo economic Petri dish.
The experiment produced financial AIDS, which unfortunately we exported to the UK, and most of the rest of the world.
What country were you living in?
On Jun 09 06:29 AM JudeJin wrote:
> a hundred years of social experiment based on keynesian theory(government
> intervention) has failed miserably!!
>
> by comparison, in physics, an experiment could finish in nanosecond.
> thus we all honor einstein.
>
> in social science, we've followed the wrong man.
>
> i recommend everybody to study the austrian school of economics founded
> by ludwig von mises! he's the unknown einstein in economics. he predicted
> this miserable outcome of government intervention a long long time
> ago, but nobody listened. no bureaucrats would listen of course!!!
>
>
> amen to american people!
> wake up, american people!
> the world need you to stand up and lead the civilization into the
> right direction!
> a catastrophe is also an opportunity!
> we need a true leader, not obama!
>
>
>
No, what changed in 1971 was the gold standard. Nixon killed it and unleashed first, waves of inflation and then, to fix this, the US leadership encouraged outsourcing to cheaper labor markets to prevent inflation. See how easy this is to understand?
> under Ronald Reagan. His beliefs in the lowest taxes and biggest
> weapons programs were more important than a sound financial posture
> plus a Democratic Congress made very large deficient necessary [...]
Are you trying to use the word "deficit"?
"Deficient" is another thing entirely.
> For the last 30 years the US economy has been a Friedmanesque, supply-side,
> deregulating, trickle-down, tax-cutting (for the rich), Laffer-curve,
> Jude Wanniski, Voodoo economic Petri dish.
For the past 90+ years, we've had the biggest regulator in the economy: the Federal Reserve. As Mises noted, the fake booms that are created by central banks inevitably lead to busts. Please get your facts correct. If we had free banking and real money (gold- or silver-backed) then perhaps your criticism may be valid.
On Jun 09 10:35 AM charst46 wrote:
> It is interesting to note that during the 1950 and I believe the
> 1960's, executive (seekingalpha.com/symbo...) salaries were
> approximately 10x the average hourly worker wage of the CEO's firm.
> I am fairly certain that the IQ or EQ or what ever standard you chose
> to apply of the exec's of that time frame were no lower than those
> of today. In fact, they might have been higher.....
On Jun 08 08:51 AM wg wrote:
> "Moreover, most of the job growth in the last 10 years has come from
> Bubbles: two out of five jobs created between 2002 and 2007 came
> from the housing industry."
>
> Excust me, but two-out-of-five ain't "most." If you can't do basic
> math, why should anybody trust your doomsday opinions?
Not that I don't believe this or am calling the author out, but what is the source for this? I liked these two articles and agree in general but if the author wants to be taken more seriously he has to source his facts better. Otherwise, people who disagree are going to write you off and use that as an excuse to not take you seriously.
On Jun 10 03:09 PM beenaround wrote:
> 100 times the average? Really? That means if the average worker
> in a company makes $25k (I suspect it is higher in many) then the
> average exec in that firm makes 2.5 million. I don't believe that's
> true, especially when you consider that if you make $@%)k, you'd
> be in the top 1.5% of earners in the US (Source: US Census Bureau,
> 2006; income statistics for the year 2005). Sounds like more than
> a little hysteria here.
"Safety Net" systems now in place simply never contemplated an 18 - 24 month economic contraction. They were never designed to address unemployment claims in an environment of 9 to 10 percent unemployment rates for 12 months or more, to say nothing of a 40% long term unemployment. From a foreclosure, reposession, credit card default, and divorce stand point, many American families will never endure with at least one wage earner under or unemployed 6 mos. In May, that amounted to at least 4 million households.
"Safety Net" systems now in place simply never contemplated an 18 - 24 month economic contraction. They were never designed to address unemployment claims in an environment of 9 to 10 percent unemployment rates for 12 months or more, to say nothing of a 40% long term unemployment. From a foreclosure, reposession, credit card default, and divorce stand point, many American families will never endure with at least one wage earner under or unemployed 6 mos. In May, that amounted to at least 4 million households.
On Jun 08 06:40 AM User 353732 wrote:
> I suggest that the path to a cure requires clarity about making and
> honoring distinctions between markets and governments.
> Markets allocate resources based on merit. Governments misallocate
> resources based on patronage. Markets create wealth, Governments
> destroy it. Markets promote choice; Governments suppress it. Markets
> are based on a voluntary system of property rights and willing exchanges.
> Governments are based on a coercive system of entitlements and impositions.
>
> It is not, I beleve, for individuals or Governments to decide the
> what, when and where of jobs and the composition of the economy:
> no individual can and Governments , by their very nature get in not
> just wrong but horribly wrong.
>
> Only Free and Fair markets can get it right.
>
> Our present grave economic/financial and decision making perversions
> and pathologies arise from the fact that free and fair markets are
> no longer permitted to function in important, indeed essential parts
> of the economy. This is because corrupt and self obsessed Big Corporations,
> advocacy and special interest groups and the Government profit hugely
> and consistently from suppressing or distorting market( eg credit,
> energy,water, labor, real estate, education, healtcare) signals.
> In large and growing parts of the economy Free and Fair markets do
> not exist or are no longer allowed to operate.
> The more the markets are tortured and weakened the more the Government
> and its corporate, special interest and media allies claims that
> only they, the annointed few, have the answers.
> Governments cannot credibly address the issues you discussed in
> Parts 1 and 2 of your essay and markets are not allowed to. No wonder
> the fundamentals of the economy, society, culture and national global
> stature continue to deteriorate.
>
> Until the Government/market balance is reasonably restored, property
> rights and the rule of contracts are again honored, free and fair
> markets are again the norm and the middle class is again central
> in national decision making our condition cannot, reliably and consistently
> improve. It can, however, greatly worsen.
On Jun 08 10:08 AM Prudent Man CFA wrote:
> Bush had to deal with 9/11 and Clinton's recession yet gave us six
> years of growth. Whose fault is it they the people over spent and
> over borrowed. Individual responsibility please!
>
> All federal spending programs must be introduced by the House of
> Representative.s (H.S. Civics). If you want to blame anyone for
> the debt we have grown since Coolidge blame Congress and work to
> enact Congressional Term Limits and return the country to its taxpayers.
>
>
> TARP is not a stimulus plan and Obama doubled the stimulus plan that
> HE signed and, being the ultimate lying politicians, said he "inherited",
> like, and maybe this is true, he didn't kno wwhat was going on as
> an absentee Senator. Did Obama ever vote against a spending bill
> as a senator or vetor one as president? Not!
>
> Watch the misery index.
>
>"Markets create wealth, Governments destroy it. Markets promote >choice; Governments suppress it. Markets are based on a >voluntary system of property rights and willing exchanges. >Governments are based on a coercive system of entitlements >and impositions."
So, I guess you're saying this: "The Market Rules, So Shut Up!"
I'm a Capitalist, but I'm also a rationalist. Just because Capitalism matches rationalism well (at least, in the sense of equating choices made on my system of preferences which return to me the maximum dollar value that could be achieved) does not mean that I don't foresee dangers with such a system that could (and have) easily affect(ed) me.
So, why all the fuss on my part, huh? Well, I think the author has lost his mind. I'd expect this kind of rhetoric from home-schooled Christians, members of the Patriot/Militia movements of the 1990's, and generally from the same people who tend to start every political discussion with "Okay, but first America is the GREATEST country in the world...". Here at Seeking Alpha, I expect more.
So, where do I think this guy is going wrong? Lemme tell you:
How many opportunities have arbitrageurs taken in our history to swindle and bilk those whom they knew how to manipulate and willingly chose to do it because they were reasonably sure they could do it and do so at a mimimal cost? Countrywide ring a bell, anyone? How about the Savings and Loan scandals of the 1980's? Hell, we can go back to the Guilded Age and see the peak of abusive corporate practices in the domestic markets from the 1880's up to the late 1900's.
In like fashion, I'd ask just how many small, emergent companies have gotten bumped out of business by their more-successful, more established competitors who saw them as a threat and banded together in the form of a cartel to raise barriers-to-entry against new and rising stars? The Tucker automobile corporation is prime example of this in going against the big auto companies. Microsoft, Standard Oil, U.S. Steel....this list could get long if I stay here too much more.
If markets are such positive forces, lets take a little trip outside our national borders and check out how wonderful markets can be. Maybe we should ask Sweeta, a 11-year old prostitute in India who is part of a staggering number of underage sex workers spanning the length of the Indian subcontinent and driving east and north from there to encompass nearly all of southeast Asia. That's some superior resource allocation right there, huh? There we go, markets promoting the best of human choice and the expression of free self-determination of which products/services to appropriate... including the anal tissue of our 11-year old little bread-winner for the sake of the carnality of a decadent Westerner on "holiday".
Oh, Snap.
So we're supposed to keep the faith? We're supposed to believe without exception that the unbridled mechanisms of the market are best for all?
Markets are amoral constructs that care not for the welfare of those enter and exist them, or which games occur within their boundaries, or how those games are played. They can't care by definition. Only through regulation do we 'infuse' markets with some kind of characteristic notion of our own moral standards.
If the faithful of the markets hold a pure and unsullied conviction that markets are best in all cases and amongst and between all things...count me as an atheist.
arabianmoney.net/2009/.../
2 - Unions, it seems, have contributed to America's loss of competiveness as evidenced by their effect on the major industries.
3 - Lastly, lawyers, especially trial lawyers, contribute to a blame game/PC mentality that makes doing business in the US hardly worth the risk in some cases.
I see these three things as the greatest problems that America has, and I’d like to see if others feel the same.
2 - Unions, it seems, have contributed to America's loss of competiveness as evidenced by their effect on the major industries.
3 - Lastly, lawyers, especially trial lawyers, contribute to a blame game/PC mentality that makes doing business in the US hardly worth the risk in some cases.
I see these three things as the greatest problems that America has, and I’d like to see if others feel the same.
On Jun 09 05:34 PM Robert Nabloid wrote:
> Truth is, Bush screwed us, and Obama is currently screwing us. Either
> way, both parties have screwed us. Why isn't there a viable third
> party? Are the US citizens zombies who just vote for the man they
> like or the party they've always voted for, "just because"?
On Jun 08 09:08 AM redbaron wrote:
> Where were all these doomsday writers for the past 8 years? Bush
> created more debt than all other presidents combined, and now all
> of a sudden debt is a problem?
>
> 'Today we’re addressing how the debt bubble encapsulated the US government
> as well as why Obama’s Stimulus Plan won’t fix anything.'
>
> The first several stimulus plans were Bush Stimulus plans, remember?
> But now it is not all Obama's fault? Where is some basic fairness
> and objectivity?
> Debt is crated by congress, not presidents.
Yes and no. You are correct that Congress, as the appropriating body, has control over the purse strings. The President, however, always PROPOSES a budget and submits it to Congress first. The, after Congress hammers out a budget (including debt, like you point out), the President must either sign or veto the budget. Thus, the President DOES have a hand or two in creating the debt: (a) he proposes a budget that is too large and, accordingly, must be funded by borrowing and (b) he fails to veto a budget that is too large and requires borrowing.
Yes, it has risen so that banks could float preferred and other instruments to get themselves a life line. Now that they are flush the market will collapse. I am surprised by people's ignorance. Do you not see this? The bounce wasn't for your benefit, although you may have benefited, it was for the elites to cash up.
the world is not your oyster. Markets don't go up forever, and yes your beliefs and feelings about the markets need to be scrubbed. You are buying stocks from insiders who are selling out.
Remember one very important thing about investing, when you look around the room at a party and you don't see the schmuck, look in the mirror. IMHO you all are being played.
Honestly how many of you pulled out of the markets before October? Probably 5%, the rest were crushed. I rest my case
On Jun 10 10:22 PM Yo' Mamma wrote:
> >User 353732 said:
cha ching!
On Jun 11 05:33 AM markhall777 wrote:
> 1 - I think the Congress submits the budget to the Pres, so the Pres
> has limited power to control the Federal Budget unless he wants Govt.
> to come to a halt. Not that that would be that bad.
>
> 2 - Unions, it seems, have contributed to America's loss of competiveness
> as evidenced by their effect on the major industries.
>
> 3 - Lastly, lawyers, especially trial lawyers, contribute to a blame
> game/PC mentality that makes doing business in the US hardly worth
> the risk in some cases.
>
> I see these three things as the greatest problems that America has,
> and I’d like to see if others feel the same.
What high paying jobs can they work in?
You are looking at future through rear view mirror.
You might also consider fact that less than 15% of Americans have college degrees. With this crisis numbers will fall not rise.
What high paying jobs are going to be available for the remainder who seem fit only for manufacturing and service jobs.
Finance jobs demand college degrees for even admin help. I guess that means most Americans won't qualify.
American needs a massive education push.
Otherwise it will have the profile of a developing country, as will be unavilabe to maintain the life style accustmed to.
SS and Medicare will be empty by 2042. So think those hoping for support from there will just be out of luck!
This was a long time in the making;and Seymour Melman industrial engineering professor wrote about it:.
Do read the example of the machine tool industry as anecdotal evidence of big picture.
www.mises.org/journals...
The Neglected Costs of the Warfare State :
An Austrian Tribute to Seymour Melman
On Jun 08 08:51 AM wg wrote:
> "Moreover, most of the job growth in the last 10 years has come from
> Bubbles: two out of five jobs created between 2002 and 2007 came
> from the housing industry."
>
> Excust me, but two-out-of-five ain't "most." If you can't do basic
> math, why should anybody trust your doomsday opinions?
www.brasschecktv.com/p...
This country is supposed to be a republic by the way. Big difference. We pledge allegiance to the republic. In a republic every individual's rights are protected. Democracy means 51% get their way at the expense of the 49%.
On Jun 09 06:29 AM JudeJin wrote:
> it is such a horrible pity that the "greatest democratic" country
> elects the same batch of fools again and again because the constituents
> are misguided by the wrong notion of democracy!
>
> a true democracy cannot exist when the someone has the supreme power
> of money printing, through which this someone controls everybody's
> economic activity!
>
> restore the power of money printing to the people(going back to gold
> standard), ensure a fair, open and liberal market place, throw out
> all entitlements and benefit programs, make the market, the people
> in control of their own lives.
>
> we don't need the government to tax(force) us to help the poor and
> needy. we can/should do this voluntarily. minimum income tax to fund
> a government that maintains the essentials of a society and nothing
> beyond that!
>
> we don't need the government to help us (mis)manage our retirement
> fuding. we can do this through our own savings that don't get eroded
> by constant inflation(with a currency backed by gold).
>
> a hundred years of social experiment based on keynesian theory(government
> intervention) has failed miserably!!
>
> by comparison, in physics, an experiment could finish in nanosecond.
> thus we all honor einstein.
>
> in social science, we've followed the wrong man.
>
> i recommend everybody to study the austrian school of economics founded
> by ludwig von mises! he's the unknown einstein in economics. he predicted
> this miserable outcome of government intervention a long long time
> ago, but nobody listened. no bureaucrats would listen of course!!!
>
>
> amen to american people!
> wake up, american people!
> the world need you to stand up and lead the civilization into the
> right direction!
> a catastrophe is also an opportunity!
> we need a true leader, not obama!
>
>
>
On Jun 08 01:18 PM Jason Rines (iThinkBig) wrote:
> The above comment holds a lot of truth. Watch the politico inept
> and crooks in your backyard and vote them out in 2010 and 2012. Some
> of us will make it a lot easier for the public to conduct research
> online and do our part of patriotic duty.
theburningplatform.com...
Should I kill my family too?
This fantasy that if Bush had done nothing. We'd be in a better situation produces the certainty of delusion.
Bernanke isn't joking when he says he's trying to stabilize the financial system. If you think losing BA and Citibank in the same fashion as Lehman would be good for the country, you are mistaken.
People on the left and right have both talked about taking over these banks (afterall that's what letting them fail means). Has anyone talked about the logistical stress on the Fed? What about local creditors seizing subsidiary assets etc.? What a nightmare.
Alan Greenspan built the perfect America killing financial system: Mega Universal banks, bloated on a bubble with undervalued risk in their portfolios. I loved it when he said he was really surprised that management would make such bad decisions. What a joke!
On Jun 08 10:13 AM Prudent Man CFA wrote:
>
This fantasy that if Bush had done nothing. We'd be in a better situation produces the certainty of delusion.
Bernanke isn't joking when he says he's trying to stabilize the financial system. If you think losing BA and Citibank in the same fashion as Lehman would be good for the country, you are mistaken.
People on the left and right have both talked about taking over these banks (afterall that's what letting them fail means). Has anyone talked about the logistical stress on the Fed? What about local creditors seizing subsidiary assets etc.? What a nightmare.
Alan Greenspan built the perfect America killing financial system: Mega Universal banks, bloated on a bubble with undervalued risk in their portfolios. I loved it when he said he was really surprised that management would make such bad decisions. What a joke!
On Jun 08 10:13 AM Prudent Man CFA wrote:
>
This fantasy that if Bush had done nothing. We'd be in a better situation produces the certainty of delusion.
Bernanke isn't joking when he says he's trying to stabilize the financial system. If you think losing BA and Citibank in the same fashion as Lehman would be good for the country, you are mistaken.
People on the left and right have both talked about taking over these banks (afterall that's what letting them fail means). Has anyone talked about the logistical stress on the Fed? What about local creditors seizing subsidiary assets etc.? What a nightmare.
Alan Greenspan built the perfect America killing financial system: Mega Universal banks, bloated on a bubble with undervalued risk in their portfolios. I loved it when he said he was really surprised that management would make such bad decisions. What a joke!
On Jun 08 10:13 AM Prudent Man CFA wrote:
>
btw, what's "excust"?
On Jun 08 08:51 AM wg wrote:
> "Moreover, most of the job growth in the last 10 years has come from
> Bubbles: two out of five jobs created between 2002 and 2007 came
> from the housing industry."
>
> Excust me, but two-out-of-five ain't "most." If you can't do basic
> math, why should anybody trust your doomsday opinions?
I agree that one of the big problems is that we have transitioned from a economy that makes things (industrial) to one that buys things (service). The result is lower wages and huge trade deficits.
Keep going.
Jim Pearson
Pearson & Pearson
Some are or Grahams points are technically NOT correct. Medicare isn't a debt, instead it is a future liability. The liability can LEGALLY be legislated away (sorry folks, we just can't provide medicare). Medicare, is a big problem, but it is not technically a debt.
Same holds true with Social Security. This liability will be much harder to legislate away. In fact, the Government has said that it will cut benefits by 70% is social security isn't fixed.
seekingalpha.com/insta...
There are but a few buried data points: (Gov. bubble chart)
tinyurl.com/ksqzj3
Please , lets get it right as to why it happened or it will never get fixed. More importantly , the perpetrators will get off Scott free.
A vast majority of Americans {this esteemed audience excepted} can’t speak the language of finance, economics or money & banking…..this is why they will begin the next decade as slaves.
crisisbydesign.com.../
Should be required reading for every American regardless of political party who is concerned about his country’s future.
I’ve read “The Hidden Beginning” several times now and completely concur with Mr Wiseman.
It’s all about bank capital and reserve requirements.
HR 1207 Ron Paul’s Audit the Fed bill is now up to 222 cosponsors!
Watch the Banksters try and kill the Bill and audit by any means necessary.
Finally, agree that the big boys on the street have played this intermediate term bear market rally very well. They collaborated with the media - initially we saw the media portraying the "is it for real or is it just a short term upswing" stories. This allowed the big players to continue to get stocks for cheap from the investors who kept selling on every uptick from the March 09 lows. Now, the boys have got the media to play the "everything is fine now, we are in a bull market" theme, so that unsuspecting retail investors who sort of "missed the boat", would keep buying from them on every downtick in the market, until they realize that they have been taken for a ride.
It brings pain to the heart, to see such blatant manipulation. But, I for one, am ready for the next stock market crash, having "invested" in bear ETFs. Once again, Fall season should see the markets fall, or already fallen.
> Japans debt to GDP is
> nearly 200%. Great Britan at the height of its powers had a debt
> to GDP ratio of 225%. It still ruled the world for 100 years.
Well, the problem is that our debt-to-GDP ratio is over 700% :
* The national debt is about $11.4 trillion per the U.S. Treasury
* Medicare's unfunded liability is $74 trillion per its own trustees
* The Social Security unfunded liability is $17.5 trillion per its own trustees
* The GDP is about $14 trillion per the U.S. Government's Bureau of Economic Analysis
RATIO = ($11.4 T + $74 T + $17.5 T) / $14 T = 735%
The first time this sort of thing happened, tarriffs were placed on out of country products and the results were not good. Other countrys returned the favor. Does anyone know what happened after the first "tea party" ? WAR! Does anyone know what happened the last time we elected a president with the experience of this one? WAR! As any good historian knows, over 1,200,000 americans died. The scars have not healed. Southerners didn't like paying 5.00 for a item that could be bought from England for 1.00. Neither did they like paying more to ship cotton than iron makers payed. Does no one see the similarities?
Sleep well
Cottontop
On Jun 08 11:40 AM LCACM wrote:
> The author has written an excellent article based on facts and reason.
> The sorry state of affairs describe in the article will likely continue
> for the foreseable future, as it greatly benefits Corporate CEOs
> who send manufacturing jobs to China so that they can benefit from
> the Communist supplied slave labour. The savings can justify the
> sky high CEO salaries. Judging by all the Corporations outsourcing
> to China, Corporate CEOs seem to bet that Slavery is far more profitable
> compared to Democracy.
You are right.
BUY AMERICAN.
* User 353732: You said: "Markets allocate resources based on merit."
Asa a principle it's entirely devoid of fact. Markets allocate resources based on where the biggest players can make the fasted buck. That's empirical. Governments which support their citizens level the playing field so that markets CAN allocate resources based on merit. Unfortunately, many governments spend more time worrying about patronage than doing their jobs, which is why democracy has a chance to win... IF citizens pay attention and do something to keep government clean and in line.
General comment: Where is Part 3?
I was speaking of federal jobs.
And the lucky like State of Michigan with the 6th best paid cops, 3rd best paid correction officers and 6th best paid teachers. IF they were hired pre-Engler's attempt to fix this state.
I am sorry that I did not specify that many states/locals don't have it so good. But if you have ANY pension, that is more than most of your taxpayers--bank on that.
On Jun 08 01:25 PM 31October wrote:
> Don't make stuff up.
>
> If it's that rich, then why are you not in on it? I WISH we could
> "show up" for 20 years and get 80% of our highest salary, and pass
> it on to our young wives, etc... whatever...
>
> I was in a 25-year police retirement program, then a 30-year regular
> state employee retirement program. The pension return is 6%-6.25%
> of what we pay into it. When I retire -- at 67 -- I receive the
> funds based on my life expectancy. If I leave the pension to my
> wife or kids, they would receive a reduced annuity dividing the funds
> based on their life expectancy. The only time we do not lose money
> is if we overshoot our life expectancy. Many states, including mine
> and almost definitely yours, have made provisions for employees to
> opt out in favor of 457 defined contribution plans.
>
> And, since many states have a balanced budget amendment, our funds
> are actually funded. Why would we point fingers at SSI? SSI is
> an unfunded Ponzi scheme, and you are not paying into anything -
> it is a transfer to current retirees. I don't know what you are
> talking about, but state retirement accounts have little to do with
> federal economic instability.
> ... Most government employees work less than 25-30 years and retire
> early. Many retire to go back to work in another government job,
> thus earning themselves TWO or more government pensions.
> Then those government employees point fingers at Social Security
>
> as being the problem. SS recipients have to work well into their
Buy local and fresh, can or freeze it yourself.
Good luck finding clothing, tvs, or refrigerators with the Made in USA label.
On Jun 14 12:39 AM think4myself wrote:
> We need to stop blaming industry for outsourcing and start taking
> responsibility ourselves. Our purchase of imported goods is the real
> cause, and that can easily be fixed. If you want money to stay in
> the country start buying domestic goods.
true in every business in the US"
My husband and I have not been able to draw paychecks, or save one dime for retirement, for the past 3 years. Our employees were given raises in that same timeframe.
Not all businesses are crooked with greedy bastards running them.
And look around at the empty buildings, many of these "greedy" business owners have lost it all.
You see, when a small company struggles, the owners do stupid things like working paycheck free, or going into massive amounts of personal debt to try and save it.
The government and BIG corporations have created this mess, don't lump me in with them.
On Jun 13 11:51 PM cottontop wrote:
> Having lived a bit longer than most of your people, it could be that
> I could shed some light on a few things. Several years ago when "service"
> jobs were becoming more important, my question then and now was was
> and is,"will we be reduced to shining each others shoes" in order
> to make a living? Over simplification, yes! Thought provoking, again,
> yes. At about the same time, or maybe somewhat earlier, large manufacturing
> companys were failing or moving to warmer climes. Can it be that
> trade unions are pricing themselves out of business? Where is US
> Steel, and the other large steel companies? Several large companys
> can be named. Where are they? Japan, while having virtually no iron
> deposits or coal, is one of the largest steel makers in the world.
> The finished products are shipped out, the raw materials are shipped
> in; using what? Labor and oil. Shoes and other leather goods; Brazil.
> Cheap goods of every discription China. No point of going on with
> this part. Any thinking person gets the picture. Greed at the top,
> true in every business in the US. This happens under the nose of
> anti trust law. Me thinks something is rotten, not only in Denmark,
> but the US too. Does an auto maker in Detroit think that he can pay
> union people millions of dollars to sit on a beach somewhere, get
> over 100.00 an hour, counting benifits, and sell their products to
> people making 18.00 and 20.00 an hour? That kite will not fly very
> long, folks. The auto industry is on the verge of total ruin. <br/>
> The first time this sort of thing happened, tarriffs were placed
> on out of country products and the results were not good. Other countrys
> returned the favor. Does anyone know what happened after the first
> "tea party" ? WAR! Does anyone know what happened the last time we
> elected a president with the experience of this one? WAR! As any
> good historian knows, over 1,200,000 americans died. The scars have
> not healed. Southerners didn't like paying 5.00 for a item that could
> be bought from England for 1.00. Neither did they like paying more
> to ship cotton than iron makers payed. Does no one see the similarities?
>
> Sleep well
> Cottontop
On Jun 17 01:27 AM TeresaE wrote:
> You have great comments except the "Greed at the top,
> true in every business in the US"
>
> My husband and I have not been able to draw paychecks, or save one
> dime for retirement, for the past 3 years. Our employees were given
> raises in that same timeframe.
>
> Not all businesses are crooked with greedy bastards running them.
>
>
> And look around at the empty buildings, many of these "greedy" business
> owners have lost it all.
>
>
> You see, when a small company struggles, the owners do stupid things
> like working paycheck free, or going into massive amounts of personal
> debt to try and save it.
>
> The government and BIG corporations have created this mess, don't
> lump me in with them.