January 10, 2008
Recession and Interest
It is amazing how little interest there is in some kinds of bad news. There are some bad news issues voters apparently are just not interested in, preferring instead the glossy and uplifting candidate speeches doctored and pre-tested by high priced Public Relations firms. But, before the bad news, a non-partisan tip of the hat.
One has to wonder why persons of Candi Wolff's caliber are not running for President. Whether one likes or dislikes her role in working on GW Bush's behalf, she must be respected for her talents, accomplishments, and skills as a political goal realizer. Candi Wolff has left the White House, with the reputation of having been the single most important person in preventing this president from becoming the 'lame duck' his tenure would otherwise have dictated. Imagine what she could have accomplished with a capable president.
On to the bad news. The economic recession believed just months ago to be an improbable event, is likely already here. A majority of Wall St. prognosticators indicate we are now in, or will shortly be in, an economic recession. However, these same folks are confident it will be short lived and not very deep. Triggered by the sub-prime mortgage industry debacle, unemployment has risen, profits and investments have been lost by some of the world's largest financial institutions, and consumers are getting more anxious.
Some adroit economy analysts say responsible fiscal policy, meaning that implemented by the Congress and White House, would go a long to resolving the problem, but that such solutions are not in the offing due to the partisan stand off between the White House and Democrats and Republicans in Congress. A few are calling for political preemptive action on the looming credit card industry bubble and threat, but recognize such action is not likely in the current political environment. Therefore, the best they hope for is a monetary response by the Federal Reserve in the form of increased dollars made available through the banking system and lower interest rates to borrow those funds.
Slam dunk, many say, except for the prospect of inflation which may result, 12 to 18 months down the road, as interest rate cuts today fully filter through the economy. Some governors of the Federal Reserve are concerned that while overall inflation appears to be in check, the inflation in consumer staples, energy, food, education, and health care, pose a potential problem, which the overall inflation statistics may be masking. Inflation (rising costs for goods and services) eats away at worker and business earnings faster than wages and profits rise. These particular rising costs, except energy, are not affecting business, but, consumers. Too much loss of buying power by the consumer, as a result of rising prices, means consumers will cut back on purchases from businesses, which can lead to worker layoffs, which can lead to less consumer spending, and onward as a vicious cycle.
Which is why the Russel 2000 index drop early this week by 19% from its previous high in 2007 is a growing concern. The Russel 2000 index reflects investor confidence in in domestic companies which are generally smaller, and do not have international components to their business. This index therefore, is one reflection of the overall health of America's domestic and smaller businesses. A 19% drop in overall stock values in the last several months is creating a bit of a stir in the back rooms of Congress, Wall Street, White House, and Federal Reserve Committee. This is not what any of them want to see in an election year.
Historically, politicians are want to cut taxes to stimulate consumer activity with the freed up dollars, as a way of fighting recessions. But, with unprecedented year over year deficits for the last 6 years, and the addition of more than 3.67 trillion dollars to the national debt, cutting taxes has its opponents. Republicans will only go along with tax cuts which include those on business and the wealthiest Americans. Democrats will go along with only targeted tax cuts for working consumers. Neither side is willing to cut spending which would impact voters in an election year. This is the very definition of partisan grid lock.
Hence, the only recession and inflation fighting efforts will fall again exclusively on the Federal Reserve Committee and Banking system. (The very Federal Reserve system presidential candidate Ron Paul calls for eliminating.)
Which forms the crux of the debate over whether the Federal Reserve should lower interest rates, by how much, and how fast? Business advocates want rapid, steep, and sustained interest rate cuts placing a higher priority on the recession today than tomorrow's inflationary consequences. Consumer advocates are raising red flags over such a course of action due to the potential for even greater inflation down the road which could reignite another recession, in what is termed stagflation, or rising prices in a receding economy.
Stagflation is a virtual nightmare for both politicians and the Federal Reserve to deal with. The tools at their disposal can only improve one, or the other, of rising prices or slowing economic activity; but not both, and with the consequence of making the other worse. Put another way, raising interest rates fights inflation but, diminishes business activity and consumption. Lowering interest rates, fights slowing or stalled economic activity but, generally inflates consumer and business prices 12 to 18 months later. If prices rise faster than wage increases, the consumer, and the businesses that depend on consumer, must pull back on spending and business growth in an attempt to stay solvent.
The political 800 pound gorilla breathing down politician's necks is global interest rates and our national debt, however. Currently, global interest rates are at historical lows. Which has meant that the interest rate payable on our national debt of 9 + trillion dollars has also been low. But, it is clear that with the emergence of gigantic economic growth in places like India, China, and others, the competition for investment dollars to fund that growth is going to cause an inevitable shortage of investment dollars, and realignments as to where investment dollars go, which can in turn cause regional and global interest rates to rise.
CitiBank last week had to go on the open market to secure a loan of $1.5 billion to cover their losses from the sub-prime mortgage fallout. The best deal they could make was an 11% loan from a Middle Eastern lender. 11% for an enormous financial corporation in a low interest environment, is incredibly high. The United States paid $405.9 Billion tax payer dollars to lenders as interest on our national debt in the last fiscal year (2006). And that was at low interest rates. The national debt is still rising. And in the future, interest rates will rise as well.
The interest on our federal debt equals $2,761.22 for every wage earner in America (1). And that was for one year. On average, each American worker paid this amount received not a single dime of government service or benefit for their $2761.22. They did did not receive one inch of Interstate Highway repair, not one extra teacher for schools, not one extra dollar of Medicare benefits, nor did a single soldier receive a single meal, nor a single country receive any foreign aid, nor a single government worker receive a dime of raise, for that $2761.22 in federal taxes. For all the good it bought them, American workers would have been no worse off flushing $2761.22 down the toilet, except for the fact that government is still operational spending more than it taxes the public.
Interest on the national debt is the 3rd largest spending item in the Federal Budget with only social and military spending being greater. And this interest is paid every year, year after year, decade after decade, even generation after generation, amounting to trillions of dollars of taxation for American workers for which they receive no government services or benefits. The interest on the national debt is the greatest waste, fraud, and abuse of the public taxpayer, by far. And it constitutes the greatest theft and immoral act one generation can perpetrate upon the next by living it up and passing the cost for living it up on their children's taxes. As if the next generation won't have its own calamities, mistakes, and recessions to pay for.
Ultimately, it is the voter's own fault this occurs. You don't give someone else your money to manage and walk away saying do whatever you like with it. When you give your money to someone else to manage, you oversee how that money is being managed and withdraw the money or fire the person when they mismanage it. Congress has been mismanaging voter's money for decades. And yet, the voters continue to reelect between 92 and 98% of politicians in Congress.
The voters are not holding their Presidents and Congress's Senators and Representatives responsible for the handling and management of their money. Yet, these Congress politicians continue to vote themselves pay raises, cost adjustments, and perks for their immoral and negligent conduct. And voters vote to reelect them. This is not how our founding father's generation of voters would have voted for these Congress people today. They demanded accountability, prudence, and necessity to justify politician's spending of their hard earned and precious tax dollars.
Today, voters act as if they are all wealthy and can afford such waste of their money as a tip, or bet, on whose political party can best the others. We are among the wealthiest middle class in the world. But, less so today, than last year, and less so last year than 7 years ago. Continuing down this path will come to an abrupt end. And when it does, the bottom could fall out from under the middle class that literally could make beggars of 100 million or more of them. Like the naysayers of the Roaring '20's of the last century, some will say it hasn't happened in their lifetime, so it won't happen in the future. But, the Great Depression of the 1930's came anyway, despite the degreed and expert naysayers.
Is this one of your campaign issues in 2008 when it comes time to vote for your incumbent Congress person or presidential candidate? If not, you are either quite well off, have no children to worry about, or, unable to grasp the import of this article. And you would not be alone, as the incumbent reelection rate of more than 92% demonstrates.
(1) 405.9 billion divided by 147 million American workers.
Well, it isn’t too hard to see how the following might have a little something to do with inflation and the falling U.S. Dollar:
Yet, that doen’t deter the rosy predictions.
Haven’t you heard?
Everything is still rosy.
Everything is near historic norms.
Which forms the crux of the debate over whether the Federal Reserve should lower interest rates, by how much, and how fast? Business advocates want rapid, steep, and sustained interest rate cuts placing a higher priority on the recession today than tomorrow’s inflationary consequences. Consumer advocates are raising red flags over such a course of action due to the potential for even greater inflation down the road which could reignite another recession, in what is termed stagflation, or rising prices in a receding economy.Well have to pay the piper sooner or later.
We can delay the pain, but delaying will magnify the pain later.
Posted by: d.a.n at January 10, 2008 06:43 PMDavid:
I think it is important to note that after your post Bernanke made a substantial comment.
Here is where it can be read in completeness:
http://www.federalreserve.gov/newsevents/speech/bernanke20080110a.htm
A second major news event related to this issue is the Countrywide might be sold to bank of America. Here is the information on this subject:
I am struggling with the exact premise of your article. Maybe you could restate it?
For instance when Clinton said (or rather Carville) said “It’s the economy stupid” was the 1992 recession. The unemployment rate at that time was about 7.5% or just about 50% higher than today.
Did you “bury the lead?” in your article? Is your point in the last paragraph?
I would not agree with you that recession talk is the major driver. I would think income disparity is still the negative driver in the economy married to health care. If you are on the left wanting to pound the pulpit, it’s that the wealthy are having a party while there are millions of children without basic health care.
I’m not sure of your thesis.
Posted by: Craig Holmes at January 10, 2008 07:10 PMI would think income disparity is still the negative driver in the economy married to health care.That’s part of it.
The 30+ year disparity trend is too.
But it is a combination of MANY factors.
Also, as expected, unemployment is rising too.
Posted by: d.a.n at January 10, 2008 07:16 PMCraig, I watched Bernanke’s speech. The Fed is ready to act, which most take to mean they are willing to cut rates and pump in more liquidity. So?
What has BofA potentially bidding for CountryWide have to do with the economy? CountryWide’s losses are not diminished by the move. All that happens is B of A gets a bargain basement deal on a company which has already cost investors 100’s of millions. So your point in referencing is what?
Can’t see how you missed the rather thesis of the article if you read the whole article. There is a recession to be dealt with and 460 billion dollars in wasted American tax dollars unavailable to fight it, in an election year. And our political and fiscal systemics are contributing to more dire scenarios for the new generations of workers and taxpayers. I thought these points were rather obvious stated, and the thesis summed up at the end. Did you not read the whole article?
Well, David, for once I can agree with the general tone of this piece.
While you still snuck in references to the 29 crash and Depression, at least you weren’t declaring an imminent depression.
I’m not quite sure I agree with this assertion:
The economic recession believed just months ago to be an improbable event, is likely already here.
It isn’t news to me, nor was it seen as improbable by the economic forecasters I listen to.
It should be noted that due to quixotic nature of human beings, the business cycle will never be overcome, entirely.
Posted by: googlumpugus at January 10, 2008 09:31 PMWall street might not want to admit that we’re in a recession just yet, but it’s here. At least here in the South it is.
With the drought agricultural based businesses and farms are going under. This is causing rising unemployment as these businesses either cut back or go down the tubes.
Add to that the sub rate mortgage scam, stagnant wages, rising fuel cost, and the price of other good going up, folks just can’t afford to spend their money on things other than necessities. And even then some folks can’t afford them. They are having to choose what necessities are the most important.
This is putting a pinch on businesses like car dealers, theaters, restaurants, etc. If they aint making money they’re going to start laying off employees. And some will be forced to close down. Both will increase unemployment.
Heck, it almost sounds like a depression to me.
Heck, it almost sounds like a depression to me.
Indeed, it’s time to use Occam Razor, yet again.
Posted by: Philippe Houdoin at January 11, 2008 09:09 AMHeck, it almost sounds like a depression to me.Not yet.
But it is not far fetched.
If we stay on this course though, it is almost guaranteed. Recovery will be difficult with so much debt and government dysfunction.
The root problem is US; ALL of US.
Do we have the moral fiber to correct these many regressive/oppresive systems, growing in number and severity?
The problem is rampant, widespreasd fiscal and bankruptcy; a general lack of moral fiber, and rampant complacency and apathy.
Blaming politicians only will solve nothing.
Wallowing in the circular partisan warfare distracts from the solutions.
There will be consequences. The economy will be one of the first casualties. Rosy talk, and sticking our head in the sand only prolongs it. Red flags should be going up, but every next shoe that drops is trivialized by the so-called experts. Rememeber that many of these so-called experts have failed to forecast the seriousness of many growing problems, not to mention overlooking the seriousness of the combined effect of so many problems growing in number and severity.
The trivialization of these issues is becoming less convincing as more Americans become jobless, homeless, and hungry. But voters are culpable too. Must voters always wait until they are jobless, homeless, and hungry until they become less complacent and apathetic? That’s their choice. Repeatedly rewarding a corrupt, dysfuncational Do-Nothing Congress with 95%-to-99% re-election rates is their choice. Either way, the voters will get their education one way or another, and they will have the government that they deserve.
Posted by: d.a.n at January 11, 2008 11:02 AMOh hell, let’s just throw out the definition of “recession”, such as this one for the American Heritage Dictionary, which is drawn from the economic textbook definition I learned in Economics 101: An extended decline in general business activity, typically two consecutive quarters of falling real gross national product.
Now, I’ll admit it’s frustrating, but we haven’t had a REAL recession since the end of the Carter Administration. Sure, go on. If it will make you feel better just call this a “recession”. Better yet, make up a new, really bad sounding word. How about “Denuclitiation”? That has a dangerous sound to it and you can come up with your own definition that fits today’s economic reportage.
Anyway, I hope that helps you make people feel appropriately bad (for whatever your political purpose may be).
Posted by: Lee Jamison at January 11, 2008 11:06 AMRon:
This looks like a depression?
This December marked 51 consecutive months of job growth, a new record for our American economy.
So let me get this straight, our economy sets a new record of consitently adding jobs, and you are all pessimistic.
Folks we are in the sixth year of a recovery. Write this down, the risk of recession should be high as this is a long recovery. This is normal. It is normal for imbalances to rise over time.
I read many economist. They range from Bill Gross (CEO of Pimco funds) who says we are already in as recession to many who say we will avoid a recession.
Here is an excellent summary of what I am reading:
http://online.wsj.com/article/SB119990867859778525.html?mod=googlenews_wsj
All of that doomsday talk about the current business cycle is a bunch of crap.
What is real however is that normal business cycles effect elections. I don’t think the discussion about whether or not we are going to be in a recession is particulary relevant.
What is relevant is that ALL of the economists are expecting a slowdown in the economy. What does a slowdown mean? Most of the economist who are themselves republicans or predicting a Democratic president.
Economists are projecting.
1. A slowdown in the economy for sure, with a rising change of recession.
2. A democratic president.
What is interesting to me is that about 60% of economists believe we will avoid a recession and about 60% also believe the Democrats will take over the whitehouse.
Watch this point, this is interesting. Remember these economists are mostly Republican. Stating the above point in reverse, they believe the odds of a recession are roughly equal to the Republicans chances of winning in November.
In a final note. So what, we all saw what consensus meant in New Hampshire.
Craig
Yeah things might better in general for most the country. But we’re in the middle of a drought down here. This is putting pressures on our economy and causing unemployment as farms and agricultural businesses either cut back or go under. With less or no money these folks aren’t spending like they used too. This is causing other business to either cut back or go under. This is causing more unemployment. And less spending. And more layoffs.
I don’t know where ya live, but around here we don’t call this kind of economic activity a boom. It might not be a depression yet. But we sure aint doing much recovering around here right now.
Anyway, I hope that helps you make people feel appropriately bad (for whatever your political purpose may be).True. Things are not terrible … yet.
The real issue is the big picture and the path we are on.
So we can debate whether we are really in a recession or not, but the real issue is a large number of economic factors that show a high probability of a recession, and other factors that show recovery from a recession will be difficult.
How long can we crap in our own nest before the branch it all rests upon finally snaps?
The problems should not be exaggerated, but they should not be trivialized either.
Should we be trivializing the warning signs?
Should we be trivializing the potential/probability for a recession?
Shouldn’t we be cognizant that some states may already in recession?
There is most certainly potential for a recession, and recovery from it may be difficult with so much debt, liabilities, and dysfunction in Do-Nothing Congress (possibly the most damning factor).
That’s the important issue.
There’s the big picture.
Ignore the warning signs, stay on the same course we’re on now, continue rampant the spending, borrowing, money-printing, inflation, falling U.S. Dollar, pork-barrel, waste, regressive taxation, ignoring illegal immigration, massive trade deficits, massive entitlements liabilities, exploding and unaffordable healthcare costs (too many middlemen). etc.
As for political purpose, few really benefit from negative news. Especially if it is exaggerated. But we often hear and see the IN-PARTY and the CURRENT administration (whoever it may be at that time) try to always paint a rosy picture; one that is often more rosy than reality. Needless to say, it has affected the administrations’ credibility.
Anyway, I hope that helps you make people feel appropriately bad (for whatever your political purpose may be).Make people feel bad?
I’m sure some people really only have that goal in mind, and that may be true in some cases, but not this time, becaues there is inflation, and there is a real potential for recession, and with so much debt and other problems, there is a valid reason for concern.
There a number of real problems facing the nation. Voters have a good reason to be upset about this worsening trend.
However, it is also increasingly difficult to be very sympathetic with the majority of voters when they repeatedly reward irresponsible and corrupt politicians in the two party duopoly in Congress with very high re-election rates of 95% to 99%.
Posted by: d.a.n at January 11, 2008 12:53 PM
Don’t worry, be happy. Go shopping. Use that new credit card you got in the mail today.
Ron:
Yeah things might better in general for most the country. But we’re in the middle of a drought down here. This is putting pressures on our economy and causing unemployment as farms and agricultural businesses either cut back or go under. With less or no money these folks aren’t spending like they used too. This is causing other business to either cut back or go under. This is causing more unemployment. And less spending. And more layoffs. I don’t know where ya live, but around here we don’t call this kind of economic activity a boom. It might not be a depression yet. But we sure aint doing much recovering around here right now.
Wow things are different in different parts of the country. Here wheat farmers are enjoyed a great crop and a great price. $8 wheat!!
I was in a situation not unlike yours. I was a pastor in an oil town in the mid 1980’s. It was a depression, by any standard. Our church property dropped by 75%, housing dropped 1.5% a month for 18 months. 2/3rds or our congregation moved out of state. Now that is depressing!!!!
On a national level, I think the semantics of recession/slowdown are irrelevant for the campaign. The agreement is slowdown which will impact the election favoring democrats I assume.
Not that Democrats care about what I think, but if they did, I would have them look at their polling data from 10 months ago and see what was number 1, (iraq). By November this slowdown should be in the rearview mirror. However the health care issue and income disparity will still be with us.
In addition, although I’m not a doomsdayer on entitlements like David and Dan are, I still see them as problems that need to be addressed. They will still be here!!
Best wishes for your community as you struggle. In your area it looks like there is no semantics going on, you are clearly in a recession.
Posted by: Craig Holmes at January 11, 2008 01:02 PMCraig,
The current recovery has very weak. Job creation has been especially weak, the worst postwar recovery we have seen. It gets worse, because for most people, wages did not keep up with inflation.
The Bush administration and Republicans elected to ignore the concept of fiscal policy. Instead of raising taxes and cutting spending during the recovery, they continued cutting taxes & raising spending, which acted as a continual economic stimulus. Since the tax cuts and spending increases were not targeted towards stimulus, but instead towards wealth capture, corporations and the wealthiest did very well, but almost no one else saw the benefit. Worse, outsourcing continued to cripple the long term prospects for the US.
The Federal Reserve, fearing the coming recession, kept rates too low, too long. But what else could the Fed do? With an enormous national debt- the result of Republican policies- and an enormous federal deficit- the result of Republican policies & Bush policies- and an awful trade deficit, which just topped $60 billion for the month- the result of Republican policies- well, the Fed had no choice with its monetary policy.
Because of Republican policies, the nation’s economy has been damaged, and we don’t dare face another recession.
But the economic cycle is, of course, inevitable.
Other countries are unwilling to enable Republican policies anymore. The dollar is tanking, and we are all hearing a horrible tune in the background. The Bush economic program is a disaster. And it’s time to pay the piper.
d.a.n.
In every age the real cause of recession, depression, or “Denuclitiation” (to borrow my own non-word) is people who try to short-circuit the economic process by getting something (work product) for nothing (not producing a real work product). The housing “crisis”, for example, has been pushed forward by a bevy of housing speculators who bought thinking they could hold properties for a little while with minimal improvement and sell for a quick profit. This sort of get-rich-quick mentality saps the real productive strength of the economy and undermines the psychological underpinnings of the markets.
Posted by: Lee Jamison at January 11, 2008 01:19 PMPhx8:
But the economic cycle is, of course, inevitable. Other countries are unwilling to enable Republican policies anymore. The dollar is tanking, and we are all hearing a horrible tune in the background. The Bush economic program is a disaster. And it’s time to pay the piper.
You are way off base here. Hoovers program was a disaster. Routine slowdowns are just that.
The current recovery has very weak. Job creation has been especially weak, the worst postwar recovery we have seen. It gets worse, because for most people, wages did not keep up with inflation.
It has not been a weak recovery it’s been an uneven recovery. Corporate profits as a percentage of GDP are nearly at all time highs. Productivity increases have meant that we have not needed to hire as many people.
On a large scale looking at the nation at the big picture, this has been a fine recovery.
Where the problem lies is in the fact that there is a labor glut which has kept labor prices stagnant at best.
The unemployment rate, get this is lower right now than the average of the 70’s 80’ and yes the 1990’s. Unemployment is low.
This is not a terrible environment, it’s a normal one. It’s not George Bush’s fault. And the revovery is really not to his credit either.
Let me give you an example. Check out this quote:
WASHINGTON (MarketWatch) — The U.S. economy expanded at the fastest pace in four years during the third quarter, growing at a real annual rate of 4.9%, the Commerce Department said Thursday in making its second estimate of growth for the three-month period.
Finally, this is a long recovery. It is far longer than average.
So when you say an above average recovery from the point of view of,
1. Unemployement data
2. Corporate profit growth
3. Length of recovery
4. Low interest rates
Etc etc, and that the last quarter was strong growth (3rd) you are totally inaccurate in calling Bush’s policies a disaster.
I know that is a democratic perspective, but it’s just wrong.
What is correct, is that this has been an uneven recovery. It is a very fair argument that this economy has not lifted all boats. It has lifted America’s boat however. (Most recoveries do!!)
Posted by: Craig Holmes at January 11, 2008 01:58 PMCriag,
“Corporate profits as a percentage of GDP are nearly at all time highs.”
Yes, corporations have done fine. No question about that. And the wealthiest among us have done well, too.
But there has been no trickle down. The benefits of the recovery took the form of wealth capture, leaving everyone else, not just flat, but worse off- because everyone is holding the bag for the debts and deficits.
Job creation never kept up with population growth. Labor Pool participation numbers are unusually low. Personally, I think it is because a lot of people are off the radar of economists. But that’s just an unsubstiated opinion on my part.
A lot of people are missing from the unemployment numbers, yet we don’t see millions upon millions of unemployed.
There are no numbers on outsourcing. We all know it is happening, but no one can do anything more than guess.
The length of the recovery was prolonged by both fiscal and monetary policy: low interest rates, low taxes, and high spending. It looks like the Fed will keep doing the same with low rates, making the scary choice of stalling a downturn at the expense of the risk of inflation.
Has this recovery lifted America’s boat? No. Because “America” is not synonomous with large corporations, nor the welfare of the wealthiest among us.
Posted by: phx8 at January 11, 2008 02:34 PMphx8:
Nice response!! Really. It’s not filled with a bunch of political stuff.
The length of the recovery was prolonged by both fiscal and monetary policy: low interest rates, low taxes, and high spending. It looks like the Fed will keep doing the same with low rates, making the scary choice of stalling a downturn at the expense of the risk of inflation.
I disagree with you here. Deficit spending is now in the below normal range. Bush’s historically high deficit spending was early in his presidency when he was faced with a war and recession at the same time. The last several years we have had deficits in the “normal” range.
Debt as a percentage of GDP has stablized after rising earlier.
There are no numbers on outsourcing. We all know it is happening, but no one can do anything more than guess.
I can accept this as a point against both Bush and Clinton. Clinton did sign Nafta. I’m not sure you can blame Bush and call his policies a disaster when Nafta is in the Dem column.
phx8,
“But there has been no trickle down. The benefits of the recovery took the form of wealth capture, leaving everyone else, not just flat, but worse off- because everyone is holding the bag for the debts and deficits.”Actually this is just false. It has been masked by the effects of illegal immigration (the “labor glut” mentioned by Craig) The normal result of the increase in demand for services which would come from the rich having greater resources would be an increase in the value of simple labor. Instead, this demnand has been filled with imported labor and the usual recycling of income from spending and re-spending in the economy here has been eliminated by illegals sending much of their income home. Posted by: Lee Jamison at January 11, 2008 03:00 PM
Craig said: “I disagree with you here. Deficit spending is now in the below normal range.”
Disagree all you want, but one year’s deficit below a quarter trillion over the last 5 does indicate a below normal range, AT ALL.
You may want to rethink that assessment. Adding 3.65 trillion in deficits to the debt over 6 years is NOT in the below normal range. It is in fact, absolutely unprecedented in American deficit history as the most rapid growth in the national debt and deficits over such a short period of time.
One year’s lower deficit does not a trend make. Nor a very sound argument.
Posted by: David R. Remer at January 11, 2008 03:46 PMLee, phx8 actually has a valid and fundamental point. The Fed’s actions have but one primary objective: Encourage MORE borrowing and debt. There is no other primary objective in lowering interest rates and increasing lending liquidity.
Phx8 is quite correct to point out this very fundamental result of the Fed’s actions. Increase borrowing and therefore debt. It can be a good thing or bad, depending on who is doing the borrowing, for what purposes, and whether or not the borrowing allows wealth creation and distribution opportunities, or restricts future economic activity at a bad time due to excessive debt loading.
Posted by: David R. Remer at January 11, 2008 03:51 PMCraig said: “This December marked 51 consecutive months of job growth, a new record for our American economy.”
Doesn’t take much for you to celebrate, does it. Just some population growth. You do realize that employment growth SHOULD occur with population growth, right?
Now, if that some job and population growth were accompanied by real wage growth at all income levels, that would have been a record to celebrate. But, alas, that was not the case by a long shot.
Posted by: David R. Remer at January 11, 2008 03:57 PMLee, your resources are flawed. Bush inherited a real recession in his first presidency, a result of the tech bubble bursting. By the way, that definition you are using is one created by the media. It is not technically correct at all nor used by economic technicians at the CBO and GAO, Treasury, or Fed Reserve.
Perhaps a little homework is called for before making such elementary and inaccurate claims. The fact is, as Bernanke said yesterday, we are not likely to have all the evidence to determine if we are in a recession for about 6 months. That fact however, does not prevent Wall Street and investors and businesses and consumers reacting to current conditions, as Ron Brown is in his area.
Bernanke is acting as if a Recession is imminent in the absence of preemptory action by the Fed, despite the fact that as he said, they will not know if this is a recession or not for 6 months or more.
For those not willing to wait around for 6 months to know whether this is a recession or not, and that is the majority of analysts, businesses, and business leaders, it is prudent to act as if a recession is either here or on the horizon and act accordingly and preemptively, for blatantly obvious reasons.
Posted by: David R. Remer at January 11, 2008 04:09 PM“the usual recycling of income from spending and re-spending in the economy here has been eliminated by illegals sending much of their income home.”
Lee Jamison,
I guess AMEX ought to quit issuing credit to those darn illegals:
Is illegal immigration a problem? Yes, but sheesh!
December retail sales were disappointing, consumer confidence is in the toilet, the dollar is falling ………… blame the illegals!!!!!!!!!!!!!
If we’d do away with the minimum wage that would probably help too, eh?
Posted by: KansasDem at January 11, 2008 04:24 PMDavid:
Disagree all you want, but one year’s deficit below a quarter trillion over the last 5 does indicate a below normal range, AT ALL.
2004 and 2005 were pretty high deficits the rest were pretty routine.
You may want to rethink that assessment. Adding 3.65 trillion in deficits to the debt over 6 years is NOT in the below normal range. It is in fact, absolutely unprecedented in American deficit history as the most rapid growth in the national debt and deficits over such a short period of time
It is rare to have a war and recession at the same time to battle.
This did raise the debt as a percent of GDP by a few points.
Lee Jamison wrote: d.a.n. In every age the real cause of recession, depression, or “Denuclitiation” (to borrow my own non-word) is people who try to short-circuit the economic process by getting something (work product) for nothing (not producing a real work product). The housing “crisis”, for example, has been pushed forward by a bevy of housing speculators …Yes, most of our problems are rooted in wide-spread greed and laziness.
However, our problems, growing in number and severity, are not merely due to a housing “crisis” alone.
Remember the reasons for the Great Depression?
Same thing.
There are MANY problems, which are all various manifestations of un-checked greed …
- One blames it on illegal immigration.
- One blames it on speculation.
- One blames it on National Debt.
- One blames it on foreclosures and the mortgage/housing crisis.
- One blames it on regressive taxation.
- One blames it on corprcisy, out-sourcing, and selling-out American workers at ever turn.
- One blames it on spending and borrowing.
- One blames it on inflation (a U.S. Dollar from 1950 is now worth than 11 cents).
- One blames it on excessive money printing.
- One blames it on failed trickle-down.
- One blames it on a dysfunctional, FOR-SALE, increasingly plutocratic government.
- One blames it on two wars in Iraq and Afghanistan.
- One blames it on legal plunder, eminent domain abuse, a constitutional crisis, and warfare on the middle-income-class.
- Many blame this or that on a number of different things.
And those of US that know it have a duty to help others understand it.
Too many of US are too complacent, apathetic, lazy, brainwashed, and/or delusional (preferring to wallow in the distracting and circular partisan-warfare, preferring to blindly pull the party-lever; abdicating our responsibility to vote responsibly to the two-party duopoly who loves to fuel the partisan warfare, pit voters against each other, and despicably pit American citizens and illegal aliens against each other for profits from cheap labor and pandering for votes).
Government will not become more responsible and accountable until the voters do too.
That won’t ever happen by repeatedly rewarding irresponsible, corrupt, bought-and-paid-for, incumbent politicians in Do-Nothing Congress with 95%-to-99% re-election rates.
There is one consolation.
There is a built-in self-correction mechanism.
However, there’s a down side.
Often, things can’t get better until they get much worse.
- QUESTION: When will we get on a better path ?
- ANSWER: When the path we are now on finally becomes too painful.
That may take another decade or so.
And when it unravels (and it most likely will eventually), it will take a long time to repair.
Some don’t think we have anything to worry about.
We may or may not be in a recession now, but it is hard to say we have nothing to worry about.
There is a gathering storm, and the problem is US.
An economic melt-down is not far-fetched.
Our education is already in the pipeline.
Either way, we will get our education, and we will have the government that we deserve.
David:
Bernanke is acting as if a Recession is imminent in the absence of preemptory action by the Fed, despite the fact that as he said, they will not know if this is a recession or not for 6 months or more.
Bernanke is acting as if the risk of slowdown/recession is greater than the risk of inflation.
From the readings of other Fed officials they are not certain a recession in on the way.
I do agree with you inpart. Semantics. There is univeral agreement that a slowdown is coming. That would be expected with the recent robust economy. (Over 4% gdp in third quarter)
Posted by: Craig Holmes at January 11, 2008 04:45 PMCraig,
To me, the point is not so much that we may be enterting a recession. Economies run in cycles. Stuff happens. That part is not a matter of partisanship. The point is that we’re entering this downturn in a very vulnerable position.
For example, servicing the national debt now consumes 9% of the federal budget.
Another drop in interest rates will tank the dollar even further, which results in commodity fueled inflation.
These are examples of penalties which are paid by all Americans, not just corporations or the very wealthy. And to get a little political for a moment, that is why I detest the Bush administration so deeply- one reason, anyway- because so much effort has been made to extend a helping hand to those who least need the help.
Foreign investors will not allow the US to inflate its way out of the national debt, which is funded by inflation-vulnerable bonds. We have to keep them investing in US debt, so at some point, the real rate of return of bonds will have to exceed inflation to make it attractive to foreign investors.
Posted by: phx8 at January 11, 2008 05:29 PM
phx8:
For example, servicing the national debt now consumes 9% of the federal budget.
Interest expense reached 3% of gdp in the 1980’s and stayed there for about 15 years. Since the federal economy is about .20 times gdp that equates to about 15% of the federal budget back then. We have really benefited from a prolonged period of low interest rates.
The nine percent is not unusual.
There is not a direct correlation between lower interest rates and the value of the dollar. It is more closely related to real gdp growth prospects. Lowering interest rates can result in and increase in the dollar.
There is also not a direct correlation between a drop in the dollar and inflation. It does have a modest effect.
Posted by: Craig Holmes at January 11, 2008 07:07 PMOther than that and this, everything is rosy!
Posted by: d.a.n at January 11, 2008 07:30 PMThe point is that we’re entering this downturn in a very vulnerable position.Yep. But talk like that will earn the “Chicken-Little” award of the year. Posted by: d.a.n at January 11, 2008 07:42 PM
The nine percent is not unusual.
But it is irresponsible and foolish to continue wasting money in paying interest when we don’t have to.
Posted by: Rhinehold at January 12, 2008 01:04 AMRegarding interest, look at the potential cost (in interest alone) for the $9.2 Trillion National Debt.
If we stopped borrowing and printing an extra $1 billion per day, and started paying down the debt by about $1.2 Billion per day, it would only take 153 years to pay of the $9.2 Trillion National Debt.
Look at the Accumulative Finance Charge of $53 Trillion dollars.
And the reason we’d have to pay back at least $1.2 Billion per day is because if it is any lower, the debt continues to grow.
With rampant outsourcing, jobs leaving the country in droves, global competition, huge trade deficits, and an irresponsible, FOR-SALE Congress that sells out its own citizens on a daily basis, what are the chances of the federal government ever getting a handle on the debt?
Look out. If you think inflation is bad now, it can get a lot worse.
The danger now is that one of the only options left is to print more money. Especially with all the candidates promising this and that (more huge spending and growing the severely bloated federal government ever larger), and bribing the voters with their own tax dollars.
Other than that, everything is rosy, and someone will be along soon to tell you all the wonderful things about inflation.
Posted by: d.a.n at January 12, 2008 12:28 PMCraig, said: “That would be expected with the recent robust economy. “
There was nothing expected about this recession/slow down. It was triggered by the sub-prime mortgage meltdown. Had that been mitigated when others and I began writing about it in 2006, this slow down could have been averted entirely or at least diminished greatly, through fiscal and legislative measures.
But, no. Congress refused to pay attention and as usual, is relying on the Fed to bail them out. One of these times they will find out the Fed’s efforts either not available or ineffective.
Posted by: David R. Remer at January 12, 2008 01:42 PM“But it is irresponsible and foolish to continue wasting money in paying interest when we don’t have to.”
Rhinehold,
I was really hoping someone else would ask you to explain more, but since they didn’t, I will.
How do we not have to?
Posted by: KansasDem at January 12, 2008 07:06 PMYou mean, how do we pay down on the debt we have incurred over the years while we have been in a generally prosperous period so that if we do have issues we can respond to them adequately?
Simple, don’t spend as much as we take in…
Does that seem impossible? If so, if we can’t seem to do it now while we are generally prosperous, then we might as well just swear fealty to China now and get it over with…
Posted by: Rhinehold at January 12, 2008 11:43 PMDavid:
There was nothing expected about this recession/slow down. It was triggered by the sub-prime mortgage meltdown. Had that been mitigated when others and I began writing about it in 2006, this slow down could have been averted entirely or at least diminished greatly, through fiscal and legislative measures.
Of course this is expected. This is the sixth year of a recovery. It is normal for recoveries to get fragile. It’s like a tightrope act with the “rope” getting steeper and steeper until the tightrope walker finally falls only to start again.
Growth cycles are normal. This is normal. It is pretty easy to show that after periods of above trend growth, periods of below trend growth ensue.
We are fine. No worries.
The problem arrises when people “expect” trends to continue indefintely. Stability brings instability because in stable environments investors “assume” more and more risk, which of course creates instability.
Posted by: Craig Holmes at January 14, 2008 02:32 PMDavid:
I above I should have said:
The problem arrises when people “expect” short term trends to continue indefintely.
I should have added “short term”.
So what are you predicting for 2009?
Posted by: Craig Holmes at January 14, 2008 02:48 PMCraig
I doubt that the local conditions here will have much of an impact on the way most folks around here vote in Nov. Unless they want to blame the current bunch in office for an act of God.
But I do think that they will be looking at the national economy (though I doubt it’ll have much impact in Nov unless we’re in a recession by then.), Iraq, health care (a lot seem to favor national health care), border security, and illegal immigration in Nov. These will have the most impact on how folks vote.
David
Local economic conditions over national conditions are more important to most folks as they have the greatest impact on them. If things aint going good locally folks don’t seem to much care if the rest of the nation is enjoying a boom. That boom somewhere else aint helping them much if any at all locally.
So yeah I’m reacting to the conditions in my area. There the ones that have the greatest impact on me. The factory might depend on national economic conditions. But I’m selling it to my son and son-in-law. We sold the convenient store a year ago. The feed and supply store is the only business I have left. And if it makes a profit or not depends on how the local economy is doing. All my customer there are from a four county area. And if they can’t pay their bills because of local economic conditions the store aint gonna do very good.
But I’m also looking at the national economic conditions. What I see is a general slow down in the national economy. Most likely part of the natural trend of things. And while I’m not ready to say that the nation is in a recession we’re going through one down here. And until we get out of this drought I don’t have a whole heap optimism for our local economy getting much better sense our it’s based about 90% on agriculture.
Unless the politicians make the economy an issue in the campaign I doubt if it will have much impact on the national elections. That is unless the country is in a recession or worse by then.
Craig, I read from your reply that excessive greed and excesses are inherent to our economic cycles and thus require cyclical corrections.
The sub-prime trigger for this correction was neither unavoidable nor intrinsic to economic cycles. A point you seem to be side-stepping.
If one buys conservative economic theory of today, then we have created a Frankenstein monster which is beyond our control and lives and acts according to its own rules, not those humans. As your comment implies.
If on the other hand, one accepts the premise that what humans create, humans can manage for their own long term benefit and preservation of the speicies, then one has to reject the notion that economic cycles of bubble and correction are inevitable, which dislocate massive amounts of capital resources and causes tremendous suffering and anxiety for untold millions of people.
It is the fulcrum of the philosophical debate between the right and left on economics. Adam Smith’s invisible hand works appropriately and for human’s benefit ONLY if the government, society, and its people abide by his Theory of Moral Sentiments. A book by Adam Smith very, very few conservatives have ever read or owned. Which of course, leads them to their grotesquely harmful modern theories of supply side economics, even when it is demand that is lacking. And their misguided trickle down economics, even when future profitabilty is threatened by political backlash (today) or loss of consumption (1930’s), which is the foundation of profitability. And their humanity threatening globally interdependent markets which literally are creating a house of cards of the future, in which but one card at the base need bend and the whole world economy tumbles, causing unprecedented privations for a billion or more of people.
Simple truth and wisdom of the ages like the food you pick, grow, and harvest yourself is the safest and best, is lost in conservative economic theory. Another is, the best defense is a barrier not easily or quickly trespassed allowing time for interdiction and prevention from invasion. Lost on the economic conservatives who seek open borders to cheap import labor, along side their more liberal Democrats who seek open borders for greater political power in future elections.
Posted by: David R. Remer at January 14, 2008 04:55 PMRon Brown, you seem to be describing a classic case for voters in your region needing to vote out their incumbents in both the State and National Congress.
Unless you live in one of those regions in which the majority don’t believe government should meddle in economic affairs, in which case, it is the business owners themselves responsible for their plight.
Either the people in your region want state, interstate, and federal help in dealing with your regional economic recession, or you don’t. But, you can’t rationally ask for help from the government and at the same time clamor for smaller less intrusive government in local economic affairs. Where are the entrepreneurs seeding clouds in your area to bring rain, or the seawater desalination plants and pumping infrastructure to insure against future droughts in your area? Or, is the risk/profit ratio to high for private enterprise, requiring a federal response and assistance. And if your area is entitled expect federal assistance for your region’s people, what is wrong with other people in other regions also expecting assistance?
Posted by: David R. Remer at January 14, 2008 05:05 PMDavid:
Craig, I read from your reply that excessive greed and excesses are inherent to our economic cycles and thus require cyclical corrections.The sub-prime trigger for this correction was neither unavoidable nor intrinsic to economic cycles. A point you seem to be side-stepping.
I don’t mean to sidestep. If the sub-prime issue was not there, another would take it’s place eventually.
Your first sentence above I agree with completely. Stability always leads to to instability.
I think there is a reason you think I am sidestepping so I will try to clear that up. I am speaking more of theory, and you are more specifically addressing subprime mortgages.
We do learn. On a broad view, greed does lead to excess which leads to cyclical downturns. That always has happened, and I believe you and I will not see the end of it. However, cycles are lengthening. Both Reagan and Clinton set new records for longerst business expansion. I would theorize that as we face more and more “problems” we record solutions. Gradually we are able to overcome a higher majority of them. In fact this may be why economist today are debating whether or not we are in a recession instead of how deep our recession is. Prior knowledge may be helping to contain this issue into a slowdown instead of a recession.
In terms of the right verses left arguments you make I am not so sure.
Conservative politics (when done in theory correctly not as Bush has done), should achieve higher long term growth rates with a higher standard of deviation because of a lower safety net. Liberal politics should achieve a lower over all growth rate in the economy and a lower standard of deviation.
I would offer current Europe as an example of Liberal politics, and pre Rosevelt USA as one of conservative. politics. Europe grows slower but has a much better safety net. Pre-Rosevelt USA had a higher growth rate that we do now but also had many depressions and deep recessions. It is up to the people to vote in or dial in our comfort level. If I have my economics hat on, I can look at the three or more systems without judgment, on the other hand if I choose to where a polictical hat, actually as a moderate, I sort of like things as they are in terms of government involvement in economics. It looks like a pretty good blend.
Posted by: Craig Holmes at January 14, 2008 05:36 PMDavid
We sure as the sun comes up in the morning need to vote ALL incumbents, local, state, and federal out around here. So far as I can tell none of them has even made any attempt to get any kind of financial relief for those needing it.
The city government says it’s up to the county. The county is saying it’s up to the state. And the state aint doing a thing. Our Congressman and both Senators haven’t even been around to talk to the farmers to find out what they need. And aint returning calls.
I called Sonny Pardue’s (Govenor) office to ask what the state was going to do to help the local farmers and try to explain their plight to him. All I got was the run around and was told that the whole state was effected by the drought and we needed to be patient. Meantime Sonny is making sure that Metro Atlanta is geting all the money it needs to buy water. But says the state can’t afford to bail out every farmer. Maybe not. But why the hell aint he asking Bush for help? Reckon the money’s going where the votes are.
Yeah we need a good house cleaning alright.
Some cloud seeding has been attempted with very little or no results. This is very expensive and unless it can break the drought (which so far it hasn’t) it can leave folks in worse shape than they already are.
As far as I know there aren’t any disalination plants in Gerogia. And if there are, all the water is either being used locally or going to Atlanta. There were some folks a few years ago that were talking about building 3 or 4 plants along the coast. But no one in the state government was for the idea, “We got plenty of water in our lakes and rivers.”, so I don’t think any got built.
Craig said: “I don’t mean to sidestep. If the sub-prime issue was not there, another would take it’s place eventually.”
Not here and now. And if prophylactic Congressional action was capable of preventing the sub-prime bubble, why would it not be capable of prophylactic action with other bubbles that might begin to swell in the future?
Craig said: “Stability always leads to to instability”.
Where is that written in stone? Stability is by definition stable, and stability achieved by dynamic balancing is perpetually stable. Or, perpetually by human standards of a lifetime. The gasoline internal combustion engine has been a stable form of human transportation for 75 years now. That’s stable by human standards, despite the fact, that we must now move to a new energy standard for transportation.
The growth and development of disease control was stable for more than 60 years, until population densities and distributions and mobility now pose new challenges to the entire science of disease control.
Dynamically balanced economics which maintains stability is possible. But, because economics encompasses a great many other factors which may change over time, vigilance, anticipation, and prophylactic action by the powers in control of the nation’s economics is required. A herculean task, I agree, but, possible if certain other factors can be reined into stability like population growth, and population distribution and mobility.
Anarchy is ultimate liberty, but, very unhealthy for longevity. At the other end of the spectrum, society is all about social engineering by design or happenstance, which may limit choices and options for the greater good, but, can increase peace, prosperity, and reliably protected liberty though more limited than in anarchy.
Personally, I don’t want anyone attempting designed social engineering until the powers in control of the design are directly answerable to the people who will be subject the design’s limitations. That is why America is desperately in need of serious political reform toward that end.
The alternative is social engineering by happenstance, which isn’t playing out too well as the unfunded mandates, unfair and unequal taxation, and chasmic disparity in earned incomes attest.
CountryWide’s CEO may be forced out of his job for his role in growing and busting this sub-prime mortgage bubble, and yet, if forced out he will receive a 101 million dollar going away present. That kind of earned income disparity should bring American voters to the polls with their hearts and minds filled with revolution. Will it? Perhaps in greater numbers than in 2006, but, in America that classic saying is prevalent as to have to become a truism, “Ignorance is Bliss”.
Ron Brown, that is a very sad but, growing scenario in regions of the U.S. Michigan has been suffering severely as a result of the declining competitiveness of the auto industries with foreign manufacturing, marketing, advertising and quality.
I bought a used Cadillac in apparent excellent condition. Within 20,000 miles of driving, it literally became money pit and piece of junk, for which GM would no longer provide parts. Planned obsolescence, a failed American brainstorm and guiding principle of America’s auto industry sanctioned and protected by Republican governors like George Romney, and Democratic governors like Blanchard and Granholm.
If Michigan’s governors and president’s like Jimmy Carter had not worked so hard to protect the autonomy and lobbyist power of the Big 3, the Big 3 would very likely have responded appropriately to Japanese invasion and competition. Government was never intended to bail out private enterprise, but, to optimize the environment for enterprise to take place, for the benefit of all in the society.
Nevada, Arizona, and S. California have been struggling with water issues for decades. It’s a simple enough proposition. Calculate the water available, (doable), calculate the human population that water will support and what conservation measures are needed to optimize that number, and limit population numbers accordingly. Deserts afterall, as many an Arab tribe will attest, can only support a limited population. Even with technological advances and conservation, its still limited.
But, our citizens and politicians act as if there are no limits. Las Vegas being a primary example. Isn’t this a situation calling for responsible leadership at the local, state, and federal level? Sure seems like it to me. So, where is the demand from the people for such leadership and their resounding defeat at the polls of the incumbents who allowed such hardships to befall the people under their watch?
Americans are so very, very bad at democracy; the irony is hilarious in between those moments when so many are suffering.
I know that you are doing your part, Ron. For certainly education of children is the safeguard against such perpetuation of mediocrity in the next generation. And I again tip my hat in respect to your perseverance in running for the School Board and taking a very active role in the politics of your region.
Posted by: David R. Remer at January 14, 2008 08:49 PMThe mixing of macro economics, micro economics and physics with economics is a bit confusing in this thread. But I’m sure it will all make sense after a couple of martini’s and a joint.
Posted by: googlumpugus at January 14, 2008 08:54 PMCraig said: “Conservative politics (when done in theory correctly not as Bush has done), should achieve higher long term growth rates with a higher standard of deviation because of a lower safety net.”
Therein lies the seeds of destruction of conservative politics. The notion, now adopted by far too many liberals I might add, that perpetual economic growth is possible in a finite world, is preposterously false and one of the greatest delusions of modern thought.
It is this horribly erroneous belief system that has wrought mankind’s contributions to the global climate crisis, and created a world populated by nearly half of humanity living in poverty, hunger, ethnic conflicts, and other violence as a moment to moment fear in everyday life.
GDP growth at any cost is the cornerstone of conservative politics. And now constitutes the greatest threat to our globe now that it has been adopted by the Chinese, Indians, Malaysians, and S. Americans, not to mention Europe and Russia.
And in total abandonment of the revelations and wisdom of the 1950’s and 1960’s centered on conservation, preservation, homeostasis, and balance. We have even made commercial profit GDP growth out of ever increasing refuse and waste. Not enough to halt the the growing stockpiles of refuse and waste, but, hey, at least we are profiting it, even if our grandchildren will have to wade through it to go anywhere.
One day a prophet shall arrive who shall have the opportunity, wisdom and charisma to call convincingly upon all consumers to make the 1st day of each month a boycott day on consumption. And the people shall revel in this new wisdom that less can actually create more, less consumption, less waste, less anxiety, less energy, less taxes, and more savings, more leisure time, and more freedom to pursue activities other than consumption and working for the activity. And the people shall be pleased, and the business world will attack consumers upon which they feed, targeting them advertising and marketing to instill guilt and subconscious pain.
And the consumers shall, in retaliation, invoke the 1st and 15th of each month as boycott day, and the politicians shall declare the people the enemy of the state. The people shall then declare the 1st Monday of each week a boycott day, and the government will pass laws against the people arresting those who do not shop on Mondays, convicting them, fining them, even imprisoning them as insurrectionists.
And the people shall rise as a Tsunami upon the sea on election day, and vote out all politicians, in all offices of government, and install their own to those offices, and begin anew, with hope, wisdom, and balance as the cornerstones of their new society. And the era of human history governed by endless greedy effort to achieve perpetual GDP growth, shall fade into textbooks referenced in the footnotes as the second Dark Ages of human history.
Posted by: David R. Remer at January 14, 2008 09:18 PMgooglumpus, quite right. Society and nationhood are multi-sensory multi-dimensional and multi-disciplinary activities, requiring one to expand one’s mind to encompass its complexity and diversity and potential for harmony and balance. Where is T. Leary when you need him? Oh, yeah, the government got to him, outlawed him and his product. But, hay, at least pot’s back as a decriminalized substance in more states. See what a little harmony and balance and patience with absurdity can produce?
Posted by: David R. Remer at January 14, 2008 09:24 PMDavid:
Therein lies the seeds of destruction of conservative politics. The notion, now adopted by far too many liberals I might add, that perpetual economic growth is possible in a finite world, is preposterously false and one of the greatest delusions of modern thought.
Well since it has been true since say the 1500’s with the enlightenment I suppose long term economic growth is based on a pretty good premise. The premise is built on two principles, productivity increases (increases in knowledge) and population growth.
If you can figure out a way to stop improvements in knowledge and the free flow of information, you can stop economic growth.
Craig said: “Stability always leads to to instability”.Where is that written in stone?
It is written in the stone of human history. My earliest knowledge of this concept is in the Bible. My latest is in this mornings newspaper.
When people are comfortable, they are comfortable with more and more risk, which
leads to instability.
stability brings instability.
Not here and now. And if prophylactic Congressional action was capable of preventing the sub-prime bubble, why would it not be capable of prophylactic action with other bubbles that might begin to swell in the future?
Because bubbles are only obvious to all after the fact. Example 1, Greenspan’s use of the words “irrational exuberance”, was correct but several years early.
GDP growth at any cost is the cornerstone of conservative politics.
That is just plain BS.
Posted by: Craig Holmes at January 15, 2008 12:06 PMCraig,
GDP growth at any cost is the cornerstone of conservative politics.
“That is just plain BS.”
One only need listen to each and every Republican candidate for state or federal non-judicial office to hear them recite this cornerstone of conservative politics. Take off your ear muffs and give an empirical listen to the conservative candidates.
Posted by: David R. Remer at January 15, 2008 03:42 PMCraig said: “Well since it has been true since say the 1500’s with the enlightenment I suppose long term economic growth is based on a pretty good premise.”
There you go again, dismissing the myriad of changes to the world and the human species that make our current circumstance UNIQUE from that period of the 1500’s to the present. Remember, I am talking finite resources. Our resources appeared infinite until just the last 20 years or so. Now, it is a whole different context the billions of humans face, than when there numbers were less than 1 billion.
You continue to make that fatal flaw of argument to assume that the past is a guarantor of the future. If that were true, the world would still be flat, rectangular, with oceanic waterfalls at its four edges. Rome would still be master of the known world. The past is no guarantor of the future.
High Jumpers have been breaking world records for more than 50 years. Does that mean they will continue to do so infinitely gravity remaining what it is? The premise of your argument is patently false.
Posted by: David R. Remer at January 15, 2008 03:51 PMDavid:
There you go again, dismissing the myriad of changes to the world and the human species that make our current circumstance UNIQUE from that period of the 1500’s to the present. Remember, I am talking finite resources. Our resources appeared infinite until just the last 20 years or so. Now, it is a whole different context the billions of humans face, than when there numbers were less than 1 billion.
We can go back more than 20 years.
Here is 40 years ago:
The Population Bomb (1968) is a book written by Paul R. Ehrlich. A best-selling work, it predicted disaster for humanity due to overpopulation and the “population explosion”. The book predicted that “in the 1970s and 1980s hundreds of millions of people will starve to death”, that nothing can be done to avoid mass famine greater than any in the history, and radical action is needed to limit the overpopulation.
Here is your argument in 1798 form:
I think I may fairly make two postulata. First, That food is necessary to the existence of man. Secondly, That the passion between the sexes is necessary and will remain nearly in its present state. These two laws, ever since we have had any knowledge of mankind, appear to have been fixed laws of our nature, and, as we have not hitherto seen any alteration in them, we have no right to conclude that they will ever cease to be what they now are, without an immediate act of power in that Being who first arranged the system of the universe, and for the advantage of his creatures, still executes, according to fixed laws, all its various operations. … Assuming then my postulata as granted, I say, that the power of population is indefinitely greater than the power in the earth to produce subsistence for man. Population, when unchecked, increases in a geometrical ratio.– Malthus 1798, Chapter 1, online
Throughout history many have made the same arguments you are making. They are good arguments. Each time in history when faced with finite resouces new ones have been created.
It will sure be fun to watch as the world creates new energy sourses.
Posted by: Craig Holmes at January 15, 2008 06:44 PMDavid:
High Jumpers have been breaking world records for more than 50 years. Does that mean they will continue to do so infinitely gravity remaining what it is? The premise of your argument is patently false.
Yes. However the law of dimishing returns teaches us that the margins will be less and less and high jumpers get closer and closer the the limit of human potential.
Human bodies have limits which is why we started riding horses. Horses have limits which is why we started riding trains. Trains have limits which is why we started flying. Flying has limits which is why we will start to do something else yet to be invented.
Posted by: Craig Holmes at January 15, 2008 06:48 PMCraig said: “The book predicted that “in the 1970s and 1980s hundreds of millions of people will starve to death””
Tens of millions have starved to death since the 1970’s. You want to quibble over the prediction of a 20 year vs. 40 year span. The man was right. We don’t have the economic or distribution systems to accommodate the world’s hungry.
There are still having trouble feeding the 100,000 refugees in one concentration camp in Darfur.
Disregarding the biblical references, Malthus said: “I say, that the power of population is indefinitely greater than the power in the earth to produce subsistence for man.”
He is being proved correct and has been proved correct for the last 75 years. In our own wealthiest nation, we have millions who go hungry each year for a myriad of reason, not the least of which is distribution systems to feed the hungry. Multiply this by a factor of 1000 for the rest of the world. Malthus was correct. We are overpopulating our production, distribution, and political systems to the point that all humans cannot and do not maintain subsistence living on this planet at this very moment.
Then he says: “Population, when unchecked, increases in a geometrical ratio.”
That is an empirically demonstratable truth. The experiment has been done with rats and fruit flies. He is quite correct. Of course, in the natural world there are checks, which is precisely what he argues about human population, and those checks come in the form of starvation, disease, lack of distribution and financial systems for health care, water, and food delivery to those in need.
Amazing that you can read Malthus and fail to match current day news with his predictions, inaccurate only in their estimate of time frame of 20 years vs. 40. Or, is it that your comments must engage in a state of ignorance and denial regarding news events that demonstrate that Malthus was correct in order to defend the limitations of their conservative defense arguments?
Posted by: David R. Remer at January 15, 2008 07:22 PMTechnology did not prevent Chernobyl, Craig, nor Katrina, nor the loss of life and injury from the Ca. earthquake, nor the Tsunami that hit Indonesia, nor the war ravages upon 100’s of thousands in the Sudan, nor the high infant mortality rate in third world countries, all examples of population density creating massive loss of life and injury for failures of the species to act preventively to catastrophe and disaster visited upon its massive numbers and densities.
Don’t talk to me of energy, talk to me of global climate change that could check human species numbers out of existence by the 10’s of millions in a scant few decades, and show me evidence that we are capable of preventing the effects to be caused by our own contributions to it.
Don’t give me pie in the sky experimental projects that give people hope. Give me proven technology to mitigate global warming today. The Hydrogen fuel cell technology has been invented, but, American cars will never be fueled by them, precisely because of the lack of will and profit and borrowing of the gas station owners and government to install hydrogen pumps in gas stations for 1 out of 20 vehicles which may pull up for the hydrogen. The profit losses would be too great, and the political will to raise the national debt to cover their installation and subsidize the losses is also too great.
Technology has answered many needs, but, will never answer them all, especially global human population needs which cannot be fulfilled even if technology were available, because of the limitations of the political, financial, and philosophical regimes which won’t support those technological answers.
It’s a multi-dimensional challenge that overpopulation creates, across not just technological capacity, but, also across dimensions and limitations of time, economic and financial, distribution and labor capital, political, and philosophical systems. You cannot hope to win your argument Craig, as I just demonstrated with the Hydrogen fuel cell, by approaching the challenges of overpopulation with such a simple and singular variabled approach.
The overpopulation challenges are vastly more complicated and multi-dimensional than that spanning the intersections of time, money, will, knowledge, politics, and the ever rising points of no return that will be bypassed in heading off massive losses and grotesque inhumanities caused overpopulation. Yes, there will be checks on unlimited growth, and that was Malthus’ central point.
Those checks can be voluntary and orderly optimizing quality of life or involuntary, natural, and inhumane causing complete absence of quality of life and losses of life itself in most inhumane and unplanned fashion, brought about by ignorance, denial, greed, and resistance to change that may cost those who have accumulated so much.
Posted by: David R. Remer at January 15, 2008 07:46 PMCraign Holmes wrote: Yes. However the law of dimishing returns teaches us that the margins will be less and less and high jumpers get closer and closer the the limit of human potential.
Craign Holmes wrote: Human bodies have limits which is why we started riding horses. Horses have limits which is why we started riding trains. Trains have limits which is why we started flying. Flying has limits which is why we will start to do something else yet to be invented.You acknowledge limits, and then contend that limits can be overcome.
Yes, we’d better hope technology can save us.
Because a tiny planet with 6.7 Billion people, and the world population growing by 211,000 per day (77 million per year, 8791 per hour; 147 per minute; 2.44 per second) has limits.
As resources (e.g. oil; land; food) become more stressed, there will be trouble.
Already, there are only 5.46 acres of land per person.
But not all of it is arable (farmable).
There is only 1.15 acres of arable land per person.
By 2039, at the current population growth rate, the world population could grow to 9.1 Billion, and only 0.84 acres of arable land per person.
Even if the current population growth rate fell by 50%, the world population could grow to 7.9 Billion, and only 0.97 acres of arable land per person.
Already, China (1.3 Billion) and India (1.1 Billion) have 2.4 Billion people (35.8% of the world population).
Already, we see these nations competing for resources (e.g. oil), rampant pollution, and other societal problems.
Yes. we’d better hope technology can save us.
Especially on ways to produce more food with less and less land.
Is it a wise gamble?
Same thing with global warming.
Is it a wise gamble to be so confident that we will solve the problem in time?
With what history shows us, and human attitudes, and the rate of progress versus the rate of population growth, there appears to be valid reasons for concern.
Wars are started over such things (e.g. land, resources, oil, etc.).
Wars and poverty in suffering nations also puts pressures on other nations, and produces cheap labor pools that others exploit.
Illegal employers in some nations (e.g. the U.S.) do everything they can, and violate every law they can, to import cheap labor.
Some are so despicable that they (snake heads, coyotes, etc.) smuggle human cargo (some victims of slave labor and other nefarious activities) into the country.
The result is more societal chaos, as plutocratic politicians despicably pit citizens and illegal aliens against each other.
Despite the death by wars, no war ever put a dent in the growth of the world population.
In fact, the only time the world human population decreased significantly was during The Bubonic Plague (started about late 1320s).
The population of China dropped by 35 million (from 125 million to 90 million).
Europe’s population (every country we affected) dropped by 25 million in only 5 years (dropped from 75 million in 1347 to 50 million in 1352).
Total world-wide deaths were estimated around 75 million.
At any rate, it looks as though the recession started mid-to-late 2007.
All of the data isn’t in yet, but there were decreases in sales and spending November and December 2007.
Unemployment is rising (now 5.0%; up from lowest value for 2007 of 4.4$; rose by 474,000 to 7.7 million in December, 2007).
More borrowing, spending, and money printing may delay it, or soften it, but it will probably create a larger bubble that will burst later. Eventually, we won’t be able to borrow or print enough money to solve our problems.
Posted by: d.a.n at January 16, 2008 12:50 PMDavid:
I am short on time today and will answer your good response in more detail later.
Here are three quick responses:
1. There is a huge difference between hundreds of millions and tens of millions. tens of millions is less than one percent of the population.
Craig said: “The book predicted that “in the 1970s and 1980s hundreds of millions of people will starve to death””Tens of millions have starved to death since the 1970’s. You want to quibble over the prediction of a 20 year vs. 40 year span. The man was right. We don’t have the economic or distribution systems to accommodate the world’s hungry.
2. Malthus wrote over 200 years ago. (1798)
Amazing that you can read Malthus and fail to match current day news with his predictions, inaccurate only in their estimate of time frame of 20 years vs. 40.
3. Obesity is a far higher health concern than starvation among the poor in the united states.
Obesity issues among the poor indicate that the hunger issue is not as great as you assume. Obesity and starvation do not work well together when in the same group. (The poor) obviously the issue is not supply but rather distribution.
He is being proved correct and has been proved correct for the last 75 years. In our own wealthiest nation, we have millions who go hungry each year for a myriad of reason, not the least of which is distribution systems to feed the hungry.
Craig, why are you talking the U.S. when your Malthus argument was world population? Which means you must discuss world resources, starvation, premature death, illness, etc. So, the U.S. is wealthy. Malthus never said their wouldn’t be a small percentage who wouldn’t wealth it over everyone else, now did he? He was discussing world population and his prediction that resources would fail to support that population was dead on right. It is in the news constantly, if you get read past the front pages.
Posted by: David R. Remer at January 16, 2008 04:19 PMDavid:
Craig, why are you talking the U.S. when your Malthus argument was world population?
Because you did.
In our own wealthiest nation, we have millions who go hungry each year for a myriad of reason, not the least of which is distribution systems to feed the hungry.
I was responding your your bringing our country into the discussion of Malthus.
Posted by: Craig Holmes at January 16, 2008 04:30 PMDan:
You acknowledge limits, and then contend that limits can be overcome.
Yes. Man can only move so fast on his own feet. That is why he got on a horse.
Posted by: Craig Holmes at January 16, 2008 04:32 PMDan:
At any rate, it looks as though the recession started mid-to-late 2007.
The economy grew at a rate of 4.0% in the third quarter. That was very healthy.
Most economists (60% or so) believe that there will be no recession. No one knows if we are in a recession at this time. If we are in a recession at the earliest it would be “late 2007”.
Craig Holmes,
Oh right.
GDP grew.
The rich got richer.
Nevermind that most Americans are not benefiting as well from it.
Other than that, and the wealthiest 1% of the population that owned 20% of all wealth in 1980 now own 40% of all wealth (never worse since the Great Depression), everything is rosy!
Dan:
I was mearly correcting your point that we entered a recession in 2007. I just read the beige book from the federal reserve. It says that growth was modest in mid november - december.
No recession yet. You may get your wish though in 2008!!
Posted by: Craig Holmes at January 16, 2008 05:45 PMOK. You have your definition of recession (2 quarters of negative GDP growth?).
But there are some states that are already in recession.
Unemployment rose to 5.0%.
$9.2 Trillion National Debt is still growing fast.
I also think there’s something fishy about the governments reporting on inflation, GDP, and unemployment. After all, they lie about lots of things, and some CPI inflation numbers don’t even include the cost of gasoline.
So, when are we going to change course?
For several years, many factors have worsened.
Taxation is more regressive than ever.
People are working harder for less.
We may be making a living, but not a life.
We added to our possessions, but not to our values.
We’ve added years to life, but not life to years.
HealthCare is becoming an oxy-moron, when medical mistakes are killing 195,000 per year.
Our politicians are selling us out daily.
Like the Titanic, we may not change course in time.
That’s not mere pessimism.
It is based on many things that have worsened in the last 30 years.
What’s inflation?
Have you seen the U.S. Dollar lately?
It’s actually getting pretty ridiculous.
Craig Holmes wrote: No recession yet. You may get your wish though in 2008!!I am not wishing for a recession or depression, but if it makes you feel good to believe that, go right ahead.
What I, and David R. Remer, and many want is fiscal sanity.
The fiscal path we are on now is not sane.
Or do you think we are?
I don’t. The path we are on now will guarantee an economic meltdown within a decade. Not just a recession, but worse.
Even if we get on the right course soon, there’s still a lot of pain and misery already in the pipeline. There will be consequences for many decades for so much debt and erosion of the Constitution.
Posted by: d.a.n at January 16, 2008 06:12 PMCraig said: “It says that growth was modest in mid november - december.”
You still don’t appear to know the definition of ‘recession’, despite your failed attempts to argue about it.
Consecutive growth declines constitute a recession. The GDP may have been modest in Nov. and Dec. but, if it was declining in rate from Sept. Oct. the economy was RECEDING! I have quoted the official definition in a preceding thread. It is not as the media simplies it, 2 quarters of consecutive decline in GDP growth. It is the period between the most recent high rate of GDP growth and the bottom rate of GDP growth before leveling off and growing again.
The organization responsible for assessing whether there was a recession or not is where Bernanke came from and as he himself recently said, it takes 6 months for all the data to come in before they can determine if a recession was underway 6 months previously.
But, whether or not there is a recession nationally, there certainly are recessions underway regionally, some of them sustained for years as in Michigan. For those Americans, it doesn’t matter if you call it a rut, declination, or foulup, it feels the same; hard to find a job, escalating prices and stagnant wages, and losses by the unemployed, through no fault of their own.
Posted by: David R. Remer at January 16, 2008 07:11 PMCraig, can’t you take a comment in context. My reference to the U.S. was to demonstrate the best of circumstances in the world. Nearly everywhere else in the world, it is far, far worse. That was the contextual point being made.
Not that Malthus was talking about the U.S. as your comment implied referring to obesity where you introduce the U.S.: “Obesity is a far higher health concern than starvation among the poor in the united states.”
And let me educate you on another fallacious point you made. An obese person can die of starvation even while they are gaining weight. Starvation does not have to include weight loss. I can feed a child rice from birth 8 times a day and that child will both become obese and die of starvation of the necessary proteins, minerals, and vitamins to sustain life.
“starvation - a state of extreme hunger resulting from lack of essential nutrients over a prolonged period”. An obese person can starve. People have died in the winter wilderness of starvation even though they ate game meat every day. It is called protein poisoning. Game meat has no fat, and some fat is required to sustain life, especially on a pure protein diet.
Posted by: David R. Remer at January 16, 2008 07:13 PMCraig, can’t you take a comment in context …Sure … hold on … let me take of my rose colored glasses.
Ahhhhh … Oh my … !
Posted by: d.a.n at January 16, 2008 07:30 PMDavid R. Remer wrote:Craig said: “It says that growth was modest in mid november - december.”You still don’t appear to know the definition of ‘recession’, despite your failed attempts to argue about it.
Consecutive growth declines constitute a recession. The GDP may have been modest in Nov. and Dec. but, if it was declining in rate from Sept. Oct. the economy was RECEDING! I have quoted the official definition in a preceding thread. It is not as the media simplies it, 2 quarters of consecutive decline in GDP growth. It is the period between the most recent high rate of GDP growth and the bottom rate of GDP growth before leveling off and growing again.
That’s right. Thanks for that correction. He almost fooled me. It is defined as a decline (negative rate; not necessarily a negative amount).
And, does GDP growth really show the entire picture, when median household incomes are falling? (not to mention increasing workers per household for the last 30 years), taxes are regressive, Americans are being sold-out and pitted against illegal aliens for profits and votes, etc., etc., etc. ?
Looking at GDP only is cherry-picking the data, when there are a large number of other factors that have been worsening for 30 years.
Posted by: d.a.n at January 17, 2008 09:31 AMDavid:
You still don’t appear to know the definition of ‘recession’, despite your failed attempts to argue about it.
Definition
A period of general economic decline; specifically, a decline in GDP for two or more consecutive quarters.
Posted by: Craig Holmes at January 17, 2008 11:55 AMDavid:
Craig, can’t you take a comment in context. My reference to the U.S. was to demonstrate the best of circumstances in the world. Nearly everywhere else in the world, it is far, far worse. That was the contextual point being madeI will concede all of that to you without even reading it.
My point is that you and Dan’s viewpoint have been around for a very long time. They are not new.
I can go to Malthus. I can even go back further if you want but the point remains, you believe the finite resourses of our planet are going to undermine our economy. In short term analysis there will be times when you are correct. Necessity is the mother of invention. (Necessity being short term lack). On the long term there is for all practical purposes infinite resourses.
We will discover and learn to use them, as necessity dictates.
As Greenspan says, productivty has been increasing at about 2% a year for a very long time. He believes that is close to the limit of humanities ability to learn. There is really no reason to think this will change since knowledge learned is hard to discard.
David:
The GDP may have been modest in Nov. and Dec. but, if it was declining in rate from Sept. Oct. the economy was RECEDING! I have quoted the official definition in a preceding thread. It is not as the media simplies it, 2 quarters of consecutive decline in GDP growth. It is the period between the most recent high rate of GDP growth and the bottom rate of GDP growth before leveling off and growing again.
Assuming there is negative growth somewhere.
Craig Holmes wrote: My point is that you and d.a.n’s viewpoint have been around for a very long time. They are not new.Craig, Again, you think things are “fine” (perhaps even “great”) based on your recent comments:
Craig Holmes wrote: America as a whole has never been this rich, and it’s getting richer all the time. It’s a great time to be an AmericanSure, if you are the 1 in 10 people that own 70% of all wealth in the U.S.
Things may look good for some people and those that cherry-pick a few statistics, but the big picture indicates something different for most Americans.
Things are NOT getting better for most Americans.
These 10 things have been getting worse. NOT better.
So your comment above is highly debatable.
So, the definition of recession is decline for two quarters. Is that a decline in the Real GDP, or a decline in the rate?
Either way, again, whose receiving the majority of that GDP, when median household incomes are falling?
Also, don’t forget that productivity has increased too, but not median household incomes.
I still don’t see how you can paint a rosy picture out of the big picture, but I really wish I could too.
Posted by: d.a.n at January 17, 2008 01:50 PM… and ignore the massive debt being piled up, inflation, the falling U.S. dollar, rising unemployment, decreasing median incomes, worsening weatlh disparity, regressive taxation, illegal immigration, constiutional violations, rampant eminent domain abuse (legal plunder), voter fraud, corruption, and two wars in Iraq and Afghanistan.
Posted by: d.a.n at January 17, 2008 01:57 PM
Dan:
Craig, Again, you think things are “fine” (perhaps even “great”) based on your recent comments:
It is a great time to be an American isn’t it. Longevity has never been higher. America as a whole has never been richer, and you can’t point to a place you would rather live. The Dan index tells me that this is the best place in the world to live.
Craig Holmes wrote: It is a great time to be an American isn’t it.Sure, if you are the 1 in 10 people that own 70% of all wealth in the U.S.
Craig Holmes wrote: Longevity has never been higher.A couple of years. Big deal. Is that the best you can do?
How about the 195,000 people killed every year in the U.S. by medical mistakes?
How about 7 wars in the last 90 years? (some that were unnecessary wars)?
How about increasingly unaffordable healthcare. It’s just as well, since it is increasingly dangerous.
Craig Holmes wrote: America as a whole has never been richer,Sure, if you are the 1 in 10 people that own 70% of all wealth in the U.S.
Craig Holmes wrote: … and you can’t point to a place you would rat