NakedPuts Wrote: ------------------------------------------------------- > We’ve all seen this chart: > > http://cr4re.com/charts/charts.html#category=Emplo > yment&chart=JobLossesRecessionStartMay2011.jpg > > This economy is coming back, whether you like it > or not. There can be hiccups, but excepting that > 1948 line, it’s generally pretty smooth. The > economy is bigger than politics, policies and > politicians. The only large risks I can see are > if the Republicans are successfully able to > negotiate huge near term spending cuts (which is > unlikely even if they do procure large spending > cuts in general; it’s always easier to cut the > future dollar) or if they force the US to default. Naked, I really like the chart you linked in. It’s a clever way to put things into perspective. I disagree with you on your comments on the republicans though. Both parties are to blame. GWB spent big and put the country into red in a huge way. BO doubled down with a short sighted populist approach that feels warm and fuzzy in the short term, at a hugh price in the long term.
Absolutely both parties are to blame for the current state of affairs. However, I view the risks to the economy in the near term are driven by the GOP. I’m going to get political now, but I think that the GOP sees that same chart I posted, realizes where it’s going to be in 15 months (just a few months before the election), and knows they won’t retake the White House unless they can keep the economy in the crapper for another 2 years.
But if GOP takes measures (or the lack of it) to keep the economy in the “crapper”. Voters will see through that right away. What GOP is doing now is to bargain enough consessions from the dem (publically or privately) to secure and win more support from their constituents. Either way, a short sighted populist approach (what B.O. is doing) is not the long-term solution. Just look at Peru’s stock market reaction to their leftist new president (down 13% in a day) and Egyptian stock market reaction to their new populist budget a week ago (down 4 or 5% in a day).
AlphaSeeker Wrote: ------------------------------------------------------- > But if GOP takes measures (or the lack of it) to > keep the economy in the “crapper”. Voters will see > through that right away. Yeah, just like the WMDs and “Saddam was behind Sept 11th too.”
bchadwick Wrote: ------------------------------------------------------- > AlphaSeeker Wrote: > -------------------------------------------------- > ----- > > But if GOP takes measures (or the lack of it) > to > > keep the economy in the “crapper”. Voters will > see > > through that right away. > > > Yeah, just like the WMDs and “Saddam was behind > Sept 11th too.” Good point, even though not much related to our subject of economy. But on your claim, that’s certainly where people (including many gop) fault GWB on… I do too. To be fair, that’s more or less, on man’s belief. That man happened to be the president and has a great deal of power to pursue on his false belief.
You guys are way over thinking this, as the economy is on its own track right now that is independent from anything our elected officials can do at this point to try and manage it, either negatively, or, positively. Bernanke thinks he is impacting the economy but he is not, all he’s doing is distorting the price discovery mechanism for stocks and bonds, thus allowing for a fiat exapnsion in equity prices that reflects neither company fundamentals nor appropriate risk premiums. QEx has done absolutely nothing to impact real economic growth (who would ever expect it to anyways?), nada, zip zilch, and has in fact crowded out real savings and investment to the detriment of our financial markets, banking sector, and general economy. As our condition worsens further, we will simply throw more money at the problem, but because we have built an economy that can only function on credit expansion that fuels the pruchase of cheap goods from China, injecting more liquidity only serves to make the economy even more dependent on credit and cheap dollars to function–a vicious circle which we can not escape. Such a situation is unsustainable for obvious reasons and will end very badly either through hyperinflation or default, with the former the more likey to prevail. And what is the most that the GOP can do at this point, block unemployment extension legislation? That runs out in December, but they will have no choice but to pretend and extend. All the while the risk in the system, which is already greater than in 2007-08, continues to builds until an acute shock event causes the entire ponzi scheme to come crumbling down.
So if there is nothing that the Fed does that affects the real economy, why should we even care what it does?
equity_analyst Wrote: ------------------------------------------------------- > Bernanke thinks he is impacting the economy but he > is not, all he’s doing is distorting the price > discovery mechanism for stocks and bonds, thus > allowing for a fiat exapnsion in equity prices > that reflects neither company fundamentals nor > appropriate risk premiums. Bernanke’s definitely impacting the economy. Obviously he doesn’t have complete control but the amount of money he’s throwing has to have some influence. I agree 100% about the fiat inflation, and while it’s a “bad thing” generally speaking, it might be the “best” choice we have. That is, all the choices we have suck, but this one sucks the least. (Look at how extended housing market deflation has crippled Japanese growth since the late 80s.) Without QE*, it is possible we’d be in worse shape than we are now. If the housing market bubble popped violently, that could have been worse than gradually deflating the market in a fairly controlled manner like we’re doing now.
Bernanke told us how he intended to fix this economy, but it has failed. He said lower rates due to QEx would lead to refinancings, which would put more money in peoples’s pockets, which they would spend because risk assets were higher(wealth effect) and inflation would be rising moderately at around 2%. Such spending would spur aggregate demand leading to job creation etc., leading to the economy jump starting itself out of its coma. FAIL. To think after years of Federal Reserve induced bubbles and dislocation that the Fed would be able to solve our problems now is ridiculous. It is correct that QEx has kicked the can down the road and boosted equity values, but at what costs? We now have an economy that will be unable to function unless more easy money and Fed induced credit is unleashed. Instead of leaving things alone and letting the market clear itslef, the Fed has simpy increased the risks in the system, which will lead to more pain down the road. The Fed is the largest hedge fund in the world and it won’t survive.
equity_analyst Wrote: ------------------------------------------------------- > > The Fed is the largest hedge fund in the world and > it won’t survive. The world won’t survive? That’s a little dire. JK, actually good points. I agree with Justin that high inflation may be the least bad option.
brain_wash_your_face Wrote: ------------------------------------------------------- > equity_analyst Wrote: > -------------------------------------------------- > ----- > > > > The Fed is the largest hedge fund in the world > and > > it won’t survive. > > The world won’t survive? That’s a little dire. > > > JK, actually good points. I agree with Justin > that high inflation may be the least bad option. Sorry, but a prepositional phrase can never contain the subject of a sentence.
I was looking at your sentence and it does have a potentially ambiguous modifier. (But I think most people understood what you intended). “It” refers to sentence, the object of a preposition, whereas “I” is the subject of the first clause. Anyway, I’m not attacking your grammar. I’m just writing because I think grammar can be interesting.
equity_analyst Wrote: ------------------------------------------------------- > > Sorry, but a prepositional phrase can never > contain the subject of a sentence. Come on, don’t be a prisoner in the grammar box! I compose most reports in the style of E.E. Cummings. On calls people spend as much time discussing my style as the content.
@equity_analyst, I hope you’re not a CFA; if so they must be having a fire-sale over at CFAI. All joking aside, there are many things the government can do to “fix the economy” but we have to take the long term approach; here are some ideas: 1. Get Uncle Sam’s Checkbook in order: Decrease debt and cut spending in all areas (Defense, International aid, etc.) 2. Reform social security, medicaid, medicare 3. Get rid of corp. tax loopholes and with the additional revenue do two things (a. decrease corp. tax rates and b. increase the minimum wage) 4. Create a two tiered corp. tax system (Tier 1 (lowest corp. tax group) - companies who hire over 70% of there employees in the USA, Tier 2 (higher corp. tax group) - less than 70% of workforce in the U.S.) or similar incentives to force companies to hire within the U.S. 5. Create new lending requirements for all the banks that have not fully repaid TARP, to force these banks to start lending (cough, cough, Citibank) 6. Create an alliance group with Universities and local colleges to retool the jobless. Those who are jobless would get a free seat, where an extra seat is available(ever enroll in a class with the capacity for 20 people but there are only 10 people in the class? Let’s fill those seats with the jobless), for high employment training programs (nursing, IT, etc.). Also, have Universities, colleges, & high schools to foster incubation programs that are seeding grounds for new small businesses.
^ Good thoughts. I also noticed that many of the things you suggested are actually government correcting its own mistakes. So it reminds me of Reagan’s famous quote in his 1981 inaugural adress: “…government is not the solution to our problem. Government is the problem.”
Zesty Wrote: ------------------------------------------------------- > 1. Get Uncle Sam’s Checkbook in order: > Decrease debt and cut spending in all areas > (Defense, International aid, etc.) Cutting government spending, especially defense (because it’s so large and generally stays at home), will be quite bad for the economy. I’m not saying spending doesn’t need to be cut, but people who say we can cut trillions of dollars in spending with no effect on the economy are smoking something. The idea that are a more reformed, smaller government will strength the global fiscal view of the US is bunk - what’s the 10 year at again?
NakedPuts Wrote: ------------------------------------------------------- > Cutting government spending, especially defense > (because it’s so large and generally stays at > home), will be quite bad for the economy. I’m not > saying spending doesn’t need to be cut, but people > who say we can cut trillions of dollars in > spending with no effect on the economy are smoking > something. The idea that are a more reformed, > smaller government will strength the global fiscal > view of the US is bunk - what’s the 10 year at > again? in the short term, the cuts would be deflationary, sure. in the long term, the current rate of spending is unsustainable.
justin88 Wrote: ------------------------------------------------------- > NakedPuts Wrote: > -------------------------------------------------- > ----- > > Cutting government spending, especially defense > > (because it’s so large and generally stays at > > home), will be quite bad for the economy. I’m > not > > saying spending doesn’t need to be cut, but > people > > who say we can cut trillions of dollars in > > spending with no effect on the economy are > smoking > > something. The idea that are a more reformed, > > smaller government will strength the global > fiscal > > view of the US is bunk - what’s the 10 year at > > again? > > in the short term, the cuts would be deflationary, > sure. in the long term, the current rate of > spending is unsustainable. Why, exactly? Any rate of spending is sustainable if it’s supported by the correct revenue stream.
NakedPuts Wrote: ------------------------------------------------------- > Why, exactly? Any rate of spending is sustainable > if it’s supported by the correct revenue stream. What’s a “correct revenue stream”? Hopefully you’re not going to argue that the current rate of spending is supported by revenue.
justin88 Wrote: ------------------------------------------------------- > NakedPuts Wrote: > -------------------------------------------------- > ----- > > Why, exactly? Any rate of spending is > sustainable > > if it’s supported by the correct revenue > stream. > > What’s a “correct revenue stream”? > > Hopefully you’re not going to argue that the > current rate of spending is supported by revenue. “Correct” was just a mannerism that points out you can’t look at spending in a vacuum. It’s not support by our current revenue stream. Fortunately, both spending and revenue are adjustable.