Economic REALITY thread

[Paulie]

I still choose for my children not to have to foot the bill for a bunch of idiotic mistakes made by their generational predecessors.

You want government spending of this magnitude because you can't stomach a correction that should be YOUR responsibility. You'd rather kick that can down the road to our children.

The good news is that our children and grandchildren won't be paying for our mistakes.

The bad news is that WE will be paying for our mistakes.

Taxes and inflation, my man. I don't see how either one is avoidable at this point, absent some kind of miraculous epiphany in congress.

 

[Polk]

I still choose for my children not to have to foot the bill for a bunch of idiotic mistakes made by their generational predecessors.

You want government spending of this magnitude because you can't stomach a correction that should be YOUR responsibility. You'd rather kick that can down the road to our children.

The good news is that our children and grandchildren won't be paying for our mistakes.

The bad news is that WE will be paying for our mistakes.

Taxes and inflation, my man. I don't see how either one is avoidable at this point, absent some kind of miraculous epiphany in congress.

Fears of inflation are way, way overblown.

 

[william the wie]

Quite true sovereign default will intervene first.

 

[Polk]

Quite true sovereign default will intervene first.

That's a fear that's even more overblown.

 

[Toro]

Quite true sovereign default will intervene first.

That's a fear that's even more overblown.

Why? Greece is on the verge of default, Dubai had to be bailed out by Abu Dhabi, Lithuania and Ireland have had to make extremely deep cuts to their budgets, and the world's governments have transferred the liabilities of their financial sectors to their own balance sheets.

And gold sits near an all-time high.

 

[georgephillip]

Could the world's reserve currency experience sovereign default?

 

[Toro]

Could the world's reserve currency experience sovereign default?

Sure. Why not?

 

[antagon]

I think Paulie's choice of words, "no effect in the first quarter" was not what he was trying to convey. Of course government had an effect, its just that it didn't contribute to economic growth.

There is no doubt in my mind that the government actions at the beginning of the recession mitigated the recession, in two ways. First, the actions of the Fed and the Treasury to backstop the financial system avoided a repeat of the Great Depression. Second, the automatic stabilizers built into the budget cushioned the decline. The former was more important than the latter IMHO.

The fact that government didn't contribute to Q1 growth is a positive as it shows that the private sector is beginning to recover. There are still serious problems in the economy, however, and we are liable to have subpar growth for some time, maybe even slip back into recession.

i think that the selection of the first quarter 2010 to base an argument against government spending is a method widely called spin, toro. paulie mentioned it because a spinstar economist based his editorial on it.

i'd agree that the fed's action was most crucial to the recovery, but looking at targeted spending, from the cash for clunkers to the extension of unemployment benefits, tangible contirbutions to the demand base were contributed by the government. shoring up this base helped to prevent further reactions to low consumer demand: increased layoffs and downsizing, weariness among investors, etc.

the objective is not to set the economy back to peak performance exclusively on the government's bill, but the intention is to veer it off a collision course with depression. hard to say if what we've recovered so far might stick, or if some of the lagging effects and future hurdles may drag us back below par growth. nevertheless, it is crystal clear some folks don't understand how the government can and has played a roll in our recovery (or decline) and are quick to snap up spin laid for simpletons such as paulie has. end of the day: i wouldn't post any swiss cheese like that kudlow garbage, unless for a joke.

Well we all have our economic ideologies. Even your point makes a great case for cancelling any additional "stimulus" spending from the government from here on out.

I still choose for my children not to have to foot the bill for a bunch of idiotic mistakes made by their generational predecessors.

You want government spending of this magnitude because you can't stomach a correction that should be YOUR responsibility. You'd rather kick that can down the road to our children.

i only make a case that the right tool for the job is used. if the private sector has all the tools at hand, maybe the economy can float the recovery on it's own, entirely. wobbly at the knees as it is, it is not indicated that a half billion of austerity would benefit today's economy or our kid's any more than a half-billion of stimulus. that i make a case for halting any further stimulus arbitrarily might be another stretched conclusion.

as for stomach and responsibility, i've not defaulted on any credit and have paid a couple hundred grand in taxes the last ten years. i dont feel responsible for any of this bullshit. i have backed the dollar with my investment of time and money, and contributed above the average to the produce which puts the US atop world economies. the government and institutions like the fed have a responsibility and the wherewithal to steward the economy, overall. when shit goes haywire, i expect ass and elbows on their behalf to shore it up. history has indicated disaster for foreign and domesic economies where governments failed to meet the responsibility to plug the dike in times of recession. there's a massive correction if you haven't noticed, paulie. we've escaped depression thus far. are we responsible for enduring that?

as for chicken little and the fate of my kids, the debt undertaken to pull off WWII certainly didn't put a damper on the baby-boomer's odds for success. i'll inform my kids that their lot will be one of their own making, independent of the weather or the economy, thanks.

 

[Big Fitz]

Here is some economic reality..... Defaults and Foreclosures are at a record high.....Sorry folks, the truth is often bitter.

Yup. Lost my job a week and a half ago, though I've got to tough it through next week. I won't make my mortgage on unemployment.

I'm sorry to hear that Kath.

I'm an advocate for cutting loose the teachers who aren't producing and just sucking the government payroll dry, but I have no doubt that you're a good teacher who got the short end of the stick.

I wish you well in the future. Keep your head up.

My regular work ends next week early. Then I have to figure out how to pay the bills till August when work returns for me. Damn seasonal layoffs.

I think the last in first out union policy for teachers is crap. More useful to do first in first out. Get rid of the old dead wood that's lost their love for teaching long ago and are just counting days till retirement and dreams of an overpriced pension that will eventually ruin the economy.

 

[Polk]

Quite true sovereign default will intervene first.

That's a fear that's even more overblown.

Why? Greece is on the verge of default, Dubai had to be bailed out by Abu Dhabi, Lithuania and Ireland have had to make extremely deep cuts to their budgets, and the world's governments have transferred the liabilities of their financial sectors to their own balance sheets.

And gold sits near an all-time high.

Because you know as well as I do that the American economy is significantly larger than those of Greece, Ireland, Lithuania, and the UAE, and that gives us significantly more room to maneuver. I'm not saying we don't need to get our debt under control, only that some of the claims made about it are significantly overblown.

 

[Polk]

Could the world's reserve currency experience sovereign default?

Yes.

 

[Big Fitz]

That's a fear that's even more overblown.

Why? Greece is on the verge of default, Dubai had to be bailed out by Abu Dhabi, Lithuania and Ireland have had to make extremely deep cuts to their budgets, and the world's governments have transferred the liabilities of their financial sectors to their own balance sheets.

And gold sits near an all-time high.

Because you know as well as I do that the American economy is significantly larger than those of Greece, Ireland, Lithuania, and the UAE, and that gives us significantly more room to maneuver. I'm not saying we don't need to get our debt under control, only that some of the claims made about it are significantly overblown.

We do still have some "sea room" left to maneuver, that's true. But we're taking on water fast and the bilge pumps are failing too. I think we'll be lucky to not have collapsed by this time next year at the rate we're going. This of course hinges on whether or not war breaks out in Korea, If the Euro fails and the election... but time and circumstances are not on our side without a radical spending and budgetary course correction.

 

[antagon]

Why? Greece is on the verge of default, Dubai had to be bailed out by Abu Dhabi, Lithuania and Ireland have had to make extremely deep cuts to their budgets, and the world's governments have transferred the liabilities of their financial sectors to their own balance sheets.

And gold sits near an all-time high.

Because you know as well as I do that the American economy is significantly larger than those of Greece, Ireland, Lithuania, and the UAE, and that gives us significantly more room to maneuver. I'm not saying we don't need to get our debt under control, only that some of the claims made about it are significantly overblown.

We do still have some "sea room" left to maneuver, that's true. But we're taking on water fast and the bilge pumps are failing too. I think we'll be lucky to not have collapsed by this time next year at the rate we're going. This of course hinges on whether or not war breaks out in Korea, If the Euro fails and the election... but time and circumstances are not on our side without a radical spending and budgetary course correction.

so what is you imminent collapse prognosis, fitz?

 

[Toro]

That's a fear that's even more overblown.

Why? Greece is on the verge of default, Dubai had to be bailed out by Abu Dhabi, Lithuania and Ireland have had to make extremely deep cuts to their budgets, and the world's governments have transferred the liabilities of their financial sectors to their own balance sheets.

And gold sits near an all-time high.

Because you know as well as I do that the American economy is significantly larger than those of Greece, Ireland, Lithuania, and the UAE, and that gives us significantly more room to maneuver. I'm not saying we don't need to get our debt under control, only that some of the claims made about it are significantly overblown.

The question is not whether or not America is going to default. The question is what is the probability of a default?

I do not believe that the US is going to default, but I believe that the market is underpricing the risk of a default. If the market thinks the odds are 5%, then I think it is higher, maybe 15%. That still means that I don't think the US will default but it is higher than most people believe.

The reason is simply because the math does not work. We already have a high amount of debt, we have accelerating liabilities in social security and medicare, and we are piling on more liabilities with this administration. Either taxes have to go up significantly and/or spending and entitlements have to be slashed drastically.

Having seen similar crises in other countries - and I mean developed countries, such as New Zealand, Canada and the UK - what must first happen is that the country must be pushed to the brink, and a realization and consensus that something must be done must come to the populace. America is nowhere near that point. If that consensus never comes, America will default on its debt.

I am optimistic that Americans will eventually come to that consensus, but I am less optimistic than I was a few years ago. People are becoming more, not less ideologically strident. That is a recipe for failure. I am not an American. I always assumed that I would eventually become an American citizen, but after watching the political dialogue over the past few years, I am now for the first time reconsidering nationalization. As a Canadian, I am not taxed on my worldwide income. Americans are. If a consensus is not reached, then bad things are going to happen in this country, and it may be best that I re-locate to the Caymans or Bermuda to avoid the financial chaos that could ensue. I don't think that will happen, but I am now considering that it may.

 

[Big Fitz]

Because you know as well as I do that the American economy is significantly larger than those of Greece, Ireland, Lithuania, and the UAE, and that gives us significantly more room to maneuver. I'm not saying we don't need to get our debt under control, only that some of the claims made about it are significantly overblown.

We do still have some "sea room" left to maneuver, that's true. But we're taking on water fast and the bilge pumps are failing too. I think we'll be lucky to not have collapsed by this time next year at the rate we're going. This of course hinges on whether or not war breaks out in Korea, If the Euro fails and the election... but time and circumstances are not on our side without a radical spending and budgetary course correction.

so what is you imminent collapse prognosis, fitz?

I really wish I knew more in which to give an accurate prognosis, but right now, it'd be firing from the hip to say anything. I know that at the current rate of spending, the rapid increase in the deficit spending cap, the talk about down grading US Bonds in the near future, long term planning is not a good idea and to get my money, if I had any, into the most safe investments possible till I see a total change of fiscal policy in this nation.

I hear Australia's doing pretty darn well right now.

 

[antagon]

We do still have some "sea room" left to maneuver, that's true. But we're taking on water fast and the bilge pumps are failing too. I think we'll be lucky to not have collapsed by this time next year at the rate we're going. This of course hinges on whether or not war breaks out in Korea, If the Euro fails and the election... but time and circumstances are not on our side without a radical spending and budgetary course correction.

so what is you imminent collapse prognosis, fitz?

I really wish I knew more in which to give an accurate prognosis, but right now, it'd be firing from the hip to say anything. I know that at the current rate of spending, the rapid increase in the deficit spending cap, the talk about down grading US Bonds in the near future, long term planning is not a good idea and to get my money, if I had any, into the most safe investments possible till I see a total change of fiscal policy in this nation.

I hear Australia's doing pretty darn well right now.

the credit rating is the make or break as i see it, too. the repercussions for that slipping are pretty catastrophic. i would imagine that that is business for 2012, and would be evoked by our still being stagnated with year-on growth below our projections, below 3 points, particularly if we are alone in those issues.

in the end, isn't the rating relative? if we keep our chin ahead of the pack we should be alright. a good republican showing in november, at least filibuster power, and some better economic news indicating we made it through the summer without dipping again, and things look up, too. that is the direction the country and economy is going, even as indicated by the stats on this gloom board.

depending on how you invest your time and money, there are far better long-term outlooks than short-term, it seems. that is, i hope.

 

[Zander]

Stocks are down over 10% in the last 30 days...
Stocks turn sharply lower in late trading - Yahoo! Finance

NEW YORK (AP) -- Stocks took another late-day dive Tuesday after the government said it was starting criminal and civil investigations into the Gulf of Mexico oil spill.

The Dow Jones industrial average dropped almost 113 points. Its plunge came shortly before the close and minutes after Attorney General Eric Holder made the announcement. Stocks in energy companies and oil service providers tumbled on the news, and other stocks followed.

Holder would not say which companies or individuals might be under investigation. But investors quickly dumped stocks across the energy industry. BP PLC, which operated the rig that caused the spill, fell almost 15 percent. Anadarko Petroleum Corp., which has a stake in the rig that exploded, tumbled nearly 20 percent. Oil services company Halliburton Inc. fell almost 15 percent.

Analysts have said the oil spill has been among the many issues nagging at investors in recent weeks. Among the fears in the market is the potential economic hit from the spill. But Tuesday's announcement raised the possibility that oil companies might have to pay out huge amounts in fines, or see their operations hampered by a government investigation.

"Right now it's headline risk that's killing us in this market," said Ken Kamen, president of Mercadien Asset Management in Hamilton, N.J. He said the question marks that pop up when news breaks are making traders think it's safer to just retreat.

"When you just get over third-degree burns you don't go too near that stove. Last year is not too far out of peoples' minds," Kamen said, referring to the market's slide in 2008 and early 2009.

 

[Big Fitz]

so what is you imminent collapse prognosis, fitz?

I really wish I knew more in which to give an accurate prognosis, but right now, it'd be firing from the hip to say anything. I know that at the current rate of spending, the rapid increase in the deficit spending cap, the talk about down grading US Bonds in the near future, long term planning is not a good idea and to get my money, if I had any, into the most safe investments possible till I see a total change of fiscal policy in this nation.

I hear Australia's doing pretty darn well right now.

the credit rating is the make or break as i see it, too. the repercussions for that slipping are pretty catastrophic. i would imagine that that is business for 2012, and would be evoked by our still being stagnated with year-on growth below our projections, below 3 points, particularly if we are alone in those issues.

in the end, isn't the rating relative? if we keep our chin ahead of the pack we should be alright. a good republican showing in november, at least filibuster power, and some better economic news indicating we made it through the summer without dipping again, and things look up, too. that is the direction the country and economy is going, even as indicated by the stats on this gloom board.

depending on how you invest your time and money, there are far better long-term outlooks than short-term, it seems. that is, i hope.

Yeah, you and I seem to be reading out of the same book.

Where we seem to differ is our confidence on keeping our chin out in front of the pack. I think with what this administration is doing, unless we have a total backlash and repeal of about every law an program passed since P-BO took power, we are not going to do it. But if we do, our chances improve dramatically.

 

[antagon]

yeah, we do differ there, fitz. i dont see the massive economic drag that some have associated with the current policies as anything that will pan out to more than political thrashing. what makes me confident about our chin ahead of the pack is that it appears to be ahead now through a variety of measures, and we have more going for us in the race. asian economies are turning flatter if not upside-down, as are some which are dragging on the EU.

considering that, if some of those variable could be added: balanced government, no solo double-dip, etc, we will be ok. it is hard for our economy to recover as sluggishly as the EU. more all-or-nothing than that.

i really doubt any political change will empower anyone to reverse the current political agenda. the probability of that is less than the chance of asian or euro economies bulling past the US in a global recovery. that's not good odds. it would require 'utter collapse' in mid 2012 to offer opposition politics the capital to affect that, as i see it, and that is not likely at all. this will only come about with a downgrade of our credit - and that will damage moody's credibility in equal measure to the US. republicans may have to turn to an agenda other than the economy to gain way.

 

[william the wie]

yeah, we do differ there, fitz. i dont see the massive economic drag that some have associated with the current policies as anything that will pan out to more than political thrashing. what makes me confident about our chin ahead of the pack is that it appears to be ahead now through a variety of measures, and we have more going for us in the race. asian economies are turning flatter if not upside-down, as are some which are dragging on the EU.

considering that, if some of those variable could be added: balanced government, no solo double-dip, etc, we will be ok. it is hard for our economy to recover as sluggishly as the EU. more all-or-nothing than that.

i really doubt any political change will empower anyone to reverse the current political agenda. the probability of that is less than the chance of asian or euro economies bulling past the US in a global recovery. that's not good odds. it would require 'utter collapse' in mid 2012 to offer opposition politics the capital to affect that, as i see it, and that is not likely at all. this will only come about with a downgrade of our credit - and that will damage moody's credibility in equal measure to the US. republicans may have to turn to an agenda other than the economy to gain way.

A significant solo double dip is unlikely but the Far East and/or EU pushing the US into double dip is highly and increasingly likely.