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| Is our economy going to self destruct and collapse?
Posted: 12/26/2005 4:15:31 PM | Tax cuts to the poor make A HUGE difference.
Tax cuts to the rich mean 50 cent won't be doing as many birthday parties for rich kids.
We do agree about governments in general though. 
That's our fault, not theirs, because we accept and allow it. | |
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| Is our economy going to self destruct and collapse?
Posted: 12/26/2005 6:37:39 PM | Regarding WorldCitizen patronizing response:
I was referring to the trade deficit. Your silly analogies involving fish are irrelevant. Indeed, I did not actually contradict you: it is obvious to everyone that the debt represents a shortfall of income as compared to expenditures. | |
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| Is our economy going to self destruct and collapse?
Posted: 12/26/2005 7:19:55 PM |
Your silly analogies involving fish are irrelevant
Regarding the trade deficit: Since so many Americans are moving their investments offshore for tax advantages, I don't believe things are nearly as bad as some would let on. the money is still going into american pockets, whether the company is in China, Vietnam, whatever...
Re: "fish"-Mergers and monopoly control and concentrating the ownership of big business into the hands of fewer and fewer is "irrelevant"?
Are unfriendly takeovers are also irrelevant?
How about big companies buying up competition and laying off their workers?
I strongly disagree. | |
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| Is our economy going to self destruct and collapse?
Posted: 12/26/2005 9:42:47 PM |
THE AMERICAN DREAM IS ALIVE AND WELL
Since the 1970s, most families have experienced a rapid growth in their income and wealth; the average family -- for the first time ever -- has a net worth of more than $100,000, say Stephen Moore and Lincoln Anderson (Wall Street Journal).
Research shows that Americans are experiencing an astonishing pace of upward income mobility, say Moore and Lincoln:
In 1967, only one in 25 families earned an income of $100,000 or more in real income; today, one in six do.
The percentage of families with an income of more than $75,000 a year has tripled from 9 to 27 percent.
The percentage of families with real incomes between $5,000 and $50,000 has been falling as more families move into higher income categories -- the figure has dropped by 19 percent since 1967.
This shows that upward mobility is the rule, not the exception, in America today, says Moore and Lincoln; therefore, the middle class is not shrinking, as previously thought, but is getting richer:
In 1967, the middle-class income range was between $28,000 and $39,500 a year, now that range is between $38,000 and $59,000 a year.
The upper-middle class is also richer; today, those falling within the 60th to 80th percentile in family income have an income range of between $55,000 and $88,000 a year, which is about $24,000 a year higher than 1967.
In 2004, the total net worth of Americans rose to $50 trillion and the median household income was estimated at $105,000; that's nearly double the median family-wealth level of 1983 and triple the level in 1962.
Furthermore, this rapid growth indicates that the American Dream, in which each generation achieves a higher living standard than their parents, is alive and well, says Moore and Lincoln.
Source: Stephen Moore and Lincoln Anderson, "Great American Dream Machine," Wall Street Journal, December 21, 2005.
http://www.ncpa.org/newdpd/dpdarticle.php?article_id=2693&PHPSESSID=c765391f78e5bbcb08306d1aff9417da | |
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| Is our economy going to self destruct and collapse?
Posted: 12/26/2005 10:46:04 PM |
Regarding the trade deficit: Since so many Americans are moving their investments offshore for tax advantages, I don't believe things are nearly as bad as some would let on. the money is still going into american pockets, whether the company is in China, Vietnam, whatever...
So, in net result, we do not contradict, which is what I just said. You're making no sense.
I was refering to the debt -- foreign debt held by sovereign nations and debt held by private individuals. I stated that that is a more significant danger to our economy than the trade deficit. I have no idea what you're disagreeing about. What hostile takeovers have to do with a shortfall of income is completely obscure. I think I will agree to leave this portion of the threat impenetrable. But, for the rest of all concerned, though trade deficits are arguably a problem, I haven't learned of a nation crippled by them. Debt, meanwhile can easily destroy a nation. To repeat a meme from Krugman, I think we're looking far, far too much like Argentina. | |
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| Is our economy going to self destruct and collapse?
Posted: 12/29/2005 12:54:12 AM | Dont worry about it Americans..your economy will be fine, ill say for the next 10 years, before you see major cut backs and tax hikes.
If i see it right with the production and consumption rate increasing every year your country will be needed for its corporations like wal mart and mcdonalds, which will bring your country money, its true you are suffering a decline partly because of the war, bringining in more expenitures from your revenue, and you account balance is declining as well as all international foreign investment is suffering. Doesnt mean you dont have domestic circulating money to create the strongest economy for the next 15 years, mark my words china will have more of an economy then the U.S and Canada by 2015-2020..put together. That doesnt mean you are going to be poor, you will still be needed for trade, but take heights will increase in all western nations by then to support such high human development programs.
What im trying to say is screw it live your life you'll be fine...... | |
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| Is our economy going to self destruct and collapse?
Posted: 12/29/2005 2:55:30 AM | OK first off if Liberals didn't try to crash our economy like some terrorist thugs all the time by complaining about American Big Business Maybe they wouldnt outsource jobs to some guy named BOB in india. Let them grow and quit trying to tax them for the environment, Oh no look they cut down a defenseless tree they have to replant one and pay a fee what am I to hug now???? or go on strike like them hippies in NY and cause chaos for the everyday working man and cost everyone money all because the UNION felt they were not getting the love they deserved.
Let wal mart grow into its SUPER potential. Let the energy companies tap into those areas you Libs wont allow because some stupid endangered elk live there. Quit suing miss chili finger liberal every time you think some EVIL corporation did you wrong. MAKES ME SICK. | |
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| Is our economy going to self destruct and collapse?
Posted: 12/29/2005 4:43:34 AM | My dear, your figures show that things are far worse then even I though. In 1967 Gasoline was $0.25 per gallon. Now it is $2.25 a gallon; nine times as much. In 1967 Gold was under $40 an oz. Now it is about $500 an oz. Over 12 times as much. In 1967 where I live it cost $12 a square foot to build a house. Now it is $85 a square foot. Seven times as much. In 1967 a Ford pickup cost $2,000. Now they are eight times as much. By any standard the dollar in is worth less than $0.20 based on 1967 purchasing power. So if the average income in 1967 was $28,000 to $38,500 in today's money it would take $140,000 to almost $200,000 to have the same standard of living. So if $38,000 to $59,000 is middle class, today's middle class earns less than a third in real spending power compared to the middle class in $1967.
Is it any wonder that nowadays both husband and wife work to make ends meet. In 1967 most wives didn't work. They didn't need to. With just the husband's salary the average family had a much better lifestyle than they do today with both husband and wife working.
We have lost our industrial base. We have gone from manufacturing to service. Since we are now producing very little wealth, our economy is already collaspsing. When the foreigners stop taking our worthless paper in exchange for they valuable goods, you will see just how bad the collapse will be. | |
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| Is our economy going to self destruct and collapse?
Posted: 12/29/2005 11:38:42 PM | If you're Milton Friedman, economist, you don't think so...
Gardels: The U.S. Treasury debt is held mainly by China, Japan and South Korea. Is the huge foreign balance of payments deficit a problem for the U.S. and world economy?
Friedman: I don’t think so. It may well be a statistical mirage. If you look at the balance sheet, the U.S. is heavily in debt. If you look at the income account — the amount of interest the U.S. pays abroad — it is almost exactly equal to the amount of interest that it receives from abroad. American assets held abroad are earning a higher rate of return than foreign assets held here.
That is understandable because what is most attractive about the U.S. to people and countries with wealth is that it can provide security, insurance really, against political instability. Nobody is afraid that the money they place in the U.S. is at risk of expropriation or of in some other way being taken away. For this safety, the wealth holders of the world are willing to accept a lower rate of return. U.S. assets abroad, in contrast, are riskier and thus yield a higher rate of return.
This explains why there is a rough balance in real terms. It is not clear there really is a debt. It looks like the imbalance concerns are misleading. It doesn’t worry me a bit that China and Japan hold so much U.S. debt. In a way, it seems foolish for them to do it because they get lower returns than they might elsewhere. But that is their business.
Gardels: By pegging their currencies to the dollar, haven’t China and Japan de facto established what is in essence “Bretton Woods II” — that is, a stable new currency regime among most of the world’s largest trading partners?
Friedman: Yes, for the moment, this is sort of true. But they are not really committed to it. The Chinese currency is starting to appreciate. The Japanese currency has moved quite a lot.
China’s productive system draws upon the other East Asian countries to a great extent. It buys from Japan and Korea and others. So, the volume of trade is much larger than the net amount being exported from China. China needs substantial reserves to finance all that.
Gardels: Does the large U.S. fiscal deficit worry you?
Friedman: Not at all. It is the spending that got us there that worries me. If the U.S. government spends 40 percent of the nation’s income, as it does through either borrowing or taxes, that income is not available for people to spend. The deficit is an indirect method of taxation. Of course, politicians prefer to borrow instead of tax because then someone down the road has to deal with the consequences.
If anything, at the moment, the large deficit has a positive effect of holding down further spending. In that sense, it is a good thing. But it is not a good thing if produced by more spending.
Gardels: China has registered tremendous growth since 1979 through what might be called a “market Leninist” model, or an “authoritarian free-market system” like the Pinochet government you advised in Chile. Can this model last?
Friedman: No. The same thing will happen in China that happened in Chile. Political freedom will ultimately break out of its shackles. Tiananmen Square was only the first episode. It is headed for a series of Tiananmen Squares. It cannot continue to develop privately and at the same time maintain their authoritarian character politically. They are headed for a clash. Sooner or later, one or the other will give.
If they don’t free up the political side, their economic growth will come to an end — while they are still at a very low level.
The situation is not all bleak. Personal freedom has grown greatly within China, and that will provoke ever more points of conflict between the individual and state. There is a new generation that is educated and travels abroad. They know firsthand the alternatives out there. So, the authoritarian character is softening somewhat.
Hong Kong is the bellwether. If the Chinese stick to their agreement to let Hong Kong go its own path, then China will also go that way. If they don’t, that is a very bad sign. I’m optimistic.{/quote]
Source: http://www.digitalnpq.org/articles/economic/36/12-01-2005/milton_friedman
Despite his Nobel Prize in Economic Sciences and my "deficit" in economics education, I certainly FEEL like we're in a handbasket headed for you-know-where.
~ Panda | |
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| Is our economy going to self destruct and collapse?
Posted: 12/30/2005 10:09:49 PM | There are simple facts that a WSJ op-ed cannot gloss over.
A huge deficit causes inflation. Inflation causes a reluctance from foreign investors- this in turn results in a weakened economy.
Tax cuts for the rich do not benefit the economy-
Economy.com a leading independant research group studied how different tax approaches would boost the economy compared to it's cost;
- A dollar spent extending unemployment benefits would increase GDP by $1.73
- A dollar tax cut for low-income individuals would produce $1.34
- A dollar tax cut for high-income individuals produces a 53 cent increase in GDP
Pure numbers says that delivering tax cuts to the rich only benefits the rich- doesn't help the economy, increase jobs, or help the 'little guy'.. as capitalist mongres like to imply.
xobella | |
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| Is our economy going to self destruct and collapse?
Posted: 12/31/2005 12:02:33 PM | Fed chairman worries aloud about impact of trade deficits-usa today
WASHINGTON (AP) — The persistence of bloated U.S. trade deficits over time can pose a risk to the U.S. economy, which thus far has proven resilient, Federal Reserve Chairman Alan Greenspan warned Friday. Policymakers must not get lulled into a sense of complacency, he said.
The broadest measure of trade, called the current account deficit, swelled to an all-time high of $166.2 billion in the second quarter of this year, the most recent period for which this information is available.
"Current account imbalances, per se, need not be a problem, but cumulative deficits ... raise more complex issues," Greenspan said in speech in Frankfurt, Germany. A copy of his remarks was distributed in Washington.
So far, foreigners are willing to lend the United States money to finance the current account imbalances, Greenspan pointed out. The worry, however, is that at some point foreigners might suddenly lose interest in holding dollar-denominated investments. That could cause foreigners to unload investments in U.S. stocks and bonds, sending their prices plunging and interest rates soaring.
The sliding value of the U.S. dollar has made some private economists more concerned about this potential risk.
"It seems persuasive that, given the size of the U.S. current account deficit, a diminished appetite for adding to dollar balances must occur at some point," Greenspan said. "But when, through what channels and from what level of the dollars? Regrettably, no answer to those questions in convincing," he said.
The U.S. dollar has been persistently weak against the euro — the currency used by 12 European countries. The dollar had dropped to a record low against the euro on Thursday before bouncing back. The dollar fell again after Greenspan's speech.
The dollar's slide has been good for U.S. manufacturers because it makes their goods less expensive in foreign markets. The corresponding rise of the euro makes European goods more expensive in foreign markets.
Greenspan, in his speech, did not specifically discuss the value of the dollar. Although he said that forecasting exchange rates "has a success rate no better than that of forecasting the outcome of a coin toss."
But if financial markets felt any lingering doubt that U.S. policymakers want the dollar to depreciate, Greenspan blew it out of the water, analysts say.
"Greenspan has said most of these things before, when he has had his back against the wall in Q & A (question and answer) sessions, but these are prepared remarks," said Greg Anderson, senior foreign exchange strategist with ABN AMRO bank in Chicago.
"It makes it clear that U.S. policymakers do not want to stand in the way of market adjustment that leads to a lower dollar. This really lays it out. It makes it clear that all of the policymakers in the U.S. are on the same page about it," Anderson added.
In his speech, Greenspan also didn't discuss the future course of interest rate policy in the United States.
Wanting to keep inflation from becoming a danger to the economy, Fed policymakers last week boosted short-term interest rates for a fourth time this year. The action left a key rate, called the federal funds rate, at 2%. The funds rate is the Fed primary tool for influencing economic activity.
With recent signs that inflation is heating up again after a long cool spell, economists believe the chances are increasing that the Fed will raise rates again at its last meeting of the year on Dec. 14.
President Bush says the best ways to handle the yawning trade deficits is to get other countries to remove trading barriers and open their markets to U.S. companies. Democrats, including John Kerry, Bush's former rival for the presidency, have blamed Bush's free-trade policies for the loss of U.S. jobs.
Greenspan said that although there's been evidence that "among developed countries, current account deficits, even large ones, have been diffused without significant consequences, we cannot become complacent."
Reducing the U.S. federal budget deficit, Greenspan said, would be an important action to boost U.S. savings. Continued flexibility in the U.S. economy also has been important in the economy's ability to absorb and rebound from economic shocks, he said.
In a question and answer period after his speech, Greenspan said central bank intervention in currency markets to support the dollar — such as through buying dollars to drive up its exchange rate — could have only a limited and short-term effect.
"Obviously we have looked at the issue of the impact of monetary authority intervention in the dollar for purposes of sustaining exchange rates quite closely, and our interest is obviously focused on its impact on exchange rates and interest rates," Greenspan said. "Our general conclusion is that the impact has been moderate, not especially large, but clearly visible."
Treasury Secretary John Snow, in comments earlier this week, appeared to rule out intervention, saying markets must set exchange rates. But private economists have said that other countries might be interested in taking action. | |
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| Is our economy going to self destruct and collapse?
Posted: 1/1/2006 6:02:50 PM | A little note, as someone mentioned the balanced budget agreement. Dems tried to pass one in the 90s but were shut down by Repubs and some Dems backing a Repub party line. Many Congresses, like the majority party today, like the idea of spending beyond their means. Not only does it let them be lazy, but they can follow the Norquist "starve the beast" ideology which says to deliberately overspend and run the government badly so people begin to believe government is bad and are forced, due to expenses and lack of quality, cut government funding and thus cut taxes.
Our economy has enough problems without deliberate stupidity for the sake of a malicious cause. | |
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rhusbr
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Joined: 10/30/2005
Msg: 39 | |
| Is our economy going to self destruct and collapse?
Posted: 1/2/2006 8:37:51 AM | The twin tower deficits will be problematic over the next 10 or 15 years. First, many policy options will not be available, if we keep up what we're doing. Control of long term interest rates are in the hands of foreign central banks, given the swelled borrowing of our goverment and private individuals. This reduces the Fed's ability to stimulate in the event of a recession. In addition, we have been in perpetual fiscal stimulous ever since the republicans passed the tax cuts 5 years ago, creating the structural deficit. Not only did the cuts not do as promiced, ie, pay for themselves, but all fiscal stimulation policy options will no longer available in the event of a recession. And recessions are part of the business cycle. They can't be averted, only moderated, and my first point, then, is that we'll have our hands tied when the next one hits unless changes are made now.
The catalysts: First, the trade deficit, caused by a give-away trade policy, reduces the value of the dollar, and long term lenders will be forced to increase interest rates. Second, the absolute amount of debt is creating financial risk, and this will push up interest rates. Third, energy is a major factor of production, and will lead to greater inflation. Forth, entitlements go negative cash flow in about 3 years, and this swells the budget deficit more. Fifth, as interest rates go up, interest on the debt swells the deficit more. Finally, the consumer in an economy, where 65% of gdp is consumption, is squeezed by interest rates and inflation, and pow, we go into recession.
Here's the ominous part: In part due to demographics and in part due to unavailable fiscal monetary policy responses (described above), some see the next recession as deep and long, worse than the one in Japan suffered for several years (due to demographics, as Japan historically pays for its government). Between 2008-10, the boomers begin retiring. Dent shows in his books that spending habits change dramatically upon retirement, and given the large number of boomers relative to the society, there will be a multi-year, reflexive wave of consumption decline, which will reinforce the ensuing recession. We'll not be able, as noted, to stimulate our economy out of it. Given the huge deficit and the things happening to make it worse (entitlements and interest on the debt), we'll actually have to increase taxes at some point or reduce entitlements (social security and medicare). The Fed will only be able to take down short term interest rates, while foreign central banks will demand higher returns.
As Ross Perot put it, "That's right folks, we're in deep voo-doo." Now we know why economics is called the "dismal science." The republicans, who control the government, need to institute immediate fiscal responsibility (which means increasing taxes or reducing spending now), and overhaul trade policy to protect American jobs, like other western nations. Labor economists have documented that real, ie, inflation adjusted, income has declined over the last several years. This occurs in the wakes of past recessions that displaced large groups of workers to lower paying jobs. My point: Given the extremes here and our point in time, Bush might become the next Herbert Hoover. We had deep voo-doo under Bush Sr and LBJ. Perhaps we should do as Bill Mahrw suggests: Pass a constitutional amendment barring Texans from being president. | |
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| Is our economy going to self destruct and collapse?
Posted: 1/3/2006 12:40:18 PM | Oh don't worry about the trade deficit, they off set that with black market drug sales, everyone knows that, the funds creep back into the economy don't worry.
I would be more concerned with the yawning US budgetary deficit, (aka Bush family slush fund in Iraq) If that doesn't get under control, hyper inflation becomes a very serious threat, and the words self-destruct and collapse will be probably rather accurate.
I personally think the powers that be know a crash is coming, they have resigned themselves to it, and are therefore spending the US economy into the inevitable; while kicking the theocratic regime that began the slide (disguised by low interest rates) in the balls for 9/11. I mean i don't have the numbers at hand, but I am sure if you look at it honestly in a lucid light, a lot of investment capital fled to China, Saudi Arabia, not to mention oil, gas and gold markets and so on after 9/11. This Iraq thing is payback, plain and simple, turn about being fair play and all I cannot say I really even blame them. One final burn off of as much hyrdocarbon as they can until the economy changes to being based on something else.
Who knows though, maybe the international price of oil and gas will stabilize and everything will turn out alright, hard to say for sure my crystal ball may be broken. | |
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rhusbr
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Joined: 10/30/2005
Msg: 41 | |
| Is our economy going to self destruct and collapse?
Posted: 1/3/2006 6:54:55 PM | In Fortune's 2006 investment guide, there is a long story on Rainwater, a legendary investor, who goes long in chaos. He expects to be spending big money soon. The article is well worth the news stand price.
Meanwhile, look at gold. It has doubled since W became president, and there are a lot of reasons for that. I call my gold investments, which have doubled in a couple of years, my Bush & Co. hedge. He has given away the farm. When this business cycle collapses, you will want to be in bonds. Rainwater thinks it will happen sooner than later. | |
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| Is our economy going to self destruct and collapse?
Posted: 2/4/2006 7:20:05 AM |
“Lenin was right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” (John Maynard Keynes, The Economic Consequences of the Peace, 1919)
I think that the economic risk facing the world at present is the realization that paper money has no intrinsic value. It is only backed up by governmental promises. After WWII the nations of the world agree to peg their currencies to the American dollar which in turn was pegged to US$35 for an ounce of gold.
That is no longer the case. Nixon closed the gold window back in 1971 and all the nations of the world have been running their printing presses (or modern-day equivalent thereof) at full tilt ever since.
This historical basis has put the US at an enormous economic advantage. Other countries are exporting goods and services to the US in exchange for paper money. Japan and to a lesser extent China are sitting on enormous piles of $US. What would ever happen if they decide to ever sell and flood the market?
The US is the only country I know of that actually publishes how much money is in circulation. Although that will no longer be the case shortly. Economagic.com has a good tool for showing the explosion of money supply in the US.
w w w.economagic.com/em-cgi/charter.exe/fedstl/m3sl
The price increase of most commodities today is largely attributed to a global rise in demand. While true, it should also be noted that the falling value of paper money is also contributing.
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| Is our economy going to self destruct and collapse?
Posted: 2/4/2006 7:25:31 AM | There's ALWAYS a threat that the economy will self-destruct and collapse. That's called the business cycle. It's also a day to day thing. The American and indeed WESTERN economy is a juggling trick that has to be kept going 24/7.... it's putting out prairie fires every single day. People depend on it because they HAVE TO and that's what keeps it going. The more people are involved, the less chance that someone will be able to cut it off from something it needs...It takes wars, shortages, research and development and even a certain level of tolerated poverty to keep the ship afloat.
But it's working.
Let's try to fix it so we're not so dependant upon war to keep it going. | |
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| Is our economy going to self destruct and collapse?
Posted: 2/4/2006 7:37:53 AM | I would argue that the business cycle is a result of paper money and manipulation of interest rates.
In an unhampered free market, the rate of interest would be equivalent to the perception of all market participants to the level of demand. If a preponderance of the perception is for an impending increase in demand for goods and services than new businesses will be perceived as less risky. Lenders will compete with one another to find borrowers and this in turn will lower the rate of interest charged. If the perception is that the market climate is difficult, lenders will be less willing to grant loans and higher interest rates will result.
In present times, The rate of interest is not determined via market forces, but is instead set by bureaucrats of the central banks. In the U.S. the rate is determined by a by the FOMC. From their interpretation of economic indicators they determine what they feel should be the interest rate for the entire country. If it is too high, entrepreneurs will be hesitant to start up new businesses. If it is too low, it will trigger the creation of unnecessary business for which there is only an apparent demand – an economic ‘boom’ is created.
This 'boom' is the misallocation of resources towards unprofitable businesses that appear only profitable because they are paying low interest on their borrowed venture capital. The artificially low interest rates encouraged these businesses to proliferate. These same business go into the red once the interest rates increase. People are laid off, stocks plummet and the consumer spends less ... result - a recession (or 'bust').
It should be noted that the FOMC does not necessarily have to be a morally corrupt council of board members with a hidden agenda of wanting to drive the overall economy into the ground as commonly portrayed by the media during times of economic hardship. Even if they are well-intentioned, the task they have is simply impossible because of the inherent uncertainty of acting upon economic indicators and the fact that no single interest is sufficient for a economy and country as large as the United States.
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| Is our economy going to self destruct and collapse?
Posted: 2/27/2006 9:55:40 AM | So, how are you doing? No, I mean really, how are you doing - you and your family?
Are you feeling prosperous, living the American dream?
Are you on course for a secure retirement and with smooth going as you sail off into the sunset?
American families saw their real incomes fall 2.3% from 2001, according to a Federal Reserve survey of consumer finances released 2/23/06.
Bush will, of course, blame these negative figures on "a recession we inherited," (Translation: Blame Clinton) and then "we were attacked on 9/11." (Translation: Blame the terrorists.)
I wonder how many years have to pass before those excuses ring as hollow as they are?
Simply put Bushenomics has been the most destructive set of economic policies to hit Americans since Herbert Hoover. No, wait. That understates the problem. Thanks to this administration we are all now stuck in a race between two looming catastrophes: an economic collapse or an ecological collapse. Who knows, it even might be a draw.
Oh sure, you say, "There he goes again! Mr. Repent The-End-is Near."
Well, you tell me. Let's just look at the gauges on our economic dashboard and see what they tell us. The study provides us with the most current readings.
"This is a tremendously detailed, comprehensive look at the American family's balance sheet and it ain't pretty," said Jared Bernstein, senior economist at the Economic Policy Institute. (Read study findings below, and Paying for Retirement (http://www.nytimes.com/2006/02/24/business/24wealth.html?n=Top%2fReference%2fTimes%20Topics%2fPeople%2fR%2fRich%2c%20Motoko&_r=2&adxnnl=1&oref=slogin&adxnnlx=1141062403-ZAETZs5rDebLjXsq5iPTWw) and Paying Employers not to end pensions (http://www.nytimes.com/2006/02/24/business/24retire.html).
All of which are among the reasons I continue to believe we are living in the final months of a fool's economic paradise -- (the fool, of course, being GWB and his merry band of trickle-down Moonies.)
The last time we teetered on such a precipice was at the end of the Reagan presidency. Conservatives like to point to the Reagan years as golden times, and for the wealthy and unscrupulous, they were. But Reaganomics, like Bushonomics, was fueled, not by genuine worker productivity and a healthy consumer spending, but hot money -- credit.
During the Reagan administration banks and savings and loans were deregulated and allowed to lend to anyone, even themselves. That fueled a building boom that was more often than not completely unrelated to housing demand.
Billions of dollars were pumped through the bank accounts of shady speculators and even shadier developers, for housing developments and commercial buildings for which there was no demand. Many of those developments went bankrupt and were later simply torn down.
You know how that story ended. While all the free and easy dough pumped up economic indicators, it nearly killed the thrift industry, with almost half the nation's thrifts going under. And, it left future taxpayers with a $500 billion hole to fill. (See Inside Job: The Looting of America's Savings and Loans by Stephen Pizzo & Mary Fricker & Paul Muolo)
And, like Bush's tax cuts, Reagan's tax cuts did not, as promised, increase real economic activity resulting higher tax revenues. They did just the opposite, they gutted the treasury, just as Bush's tax cuts have done today. (http://www.ctj.org/html/debt0603.htm)
How did we escape economic collapse after Reagan? Well, first his successor, George H. Bush, was left with no choice but to go back on his "watch my lips, no new taxes," pledge, and raise taxes. It was either that or start boarding up government buildings.
That cost Bush One the love and support of the usual suspects that benefit from tax cuts, corporations and the wealthy. And that cost him reelection.
But even the Bush H. tax increases proved a drop in the deficit bucket. So when Bill Clinton came to office he raised taxes on the wealthiest Americans and, by the time he left office eight years later, the US budget was in surplus.
Crisis averted.
Then Son of Bush and his team of economic Taliban arrived, and it was back to voodoo economics; the wrong tax cuts for the wrong people, deficits and profligate borrowing. Happy days were here again -- at least for those with the right connections, or the right lobbyist.
All that loose cash has done it again -- distorted traditional economic indicators. The needles point to "full" but family bank accounts remain empty. Here we go again.
Deborah Reed, an economist at the Pubic Policy Institute shares my sense of deja vu.
"The 1980s were marked by a similar paradox. The economy is growing but the profits of that are not being shared with workers. They're going to the CEOs and the people owning stock," she said.
It was just lucky for us that Reagan's term in office ended before his all his deficit chickens came home to roost at once. We are not likely to be as lucky. This time the perps have three more years at the till.
By the time the next President is sworn into office he/she may have to take a crash course in Franklin Roosevelt's first years in office.
But even if the next President is able to plug the holes in this ship of fools it might be too late. Worldwide disruptions in food, energy and human migration forced by global warming might well sink us anyway.
On the bright side - at least the water will be warm.
(PS: Memo to Red State voters: Thanks for nothin', you morons!)
Source: Stephen Pizzo: 'Where are the lifeboats on a ship of fools?'
Monday, February 27 @ 10 39 EST
Study findings:
Net worth grew 1.5% from 2001 to 2004 after rising 10.3% from 1998 to 2001, a survey finds.
From Bloomberg News
February 24 2006
Growth in U.S. family wealth slowed to a crawl from 2001 to 2004 and stock ownership fell as the economy emerged from the first recession in a decade, a Federal Reserve report indicated Thursday.
Median net worth, the difference between household assets and liabilities, rose 1.5% to $93,100 during the survey period, down from a 10.3% gain from 1998 to 2001, according to the report. Net worth fell for the bottom 40% of families.
"What we see is little change in the assets of the typical American household between 2001 and 2004, after substantial increases in the previous six years," said Stephen Brobeck of the Consumer Federation of America in Washington.
The survey of 4,000 households, which the Fed conducts every three years, reflected a post-recession economy that grew slowly, then gathered pace. Economic growth accelerated from 1.6% in 2002 to 4.2% in 2004, and a loss of 535,000 jobs in 2002 turned into a gain of more than 2 million positions in 2004.
The median net worth of the wealthiest 10% of families rose 4% to $924,100 in 2004 from $887,900 three years earlier, the report indicated. Net worth for the poorest 20% of families fell 11% to $7,500.
"The measured gains in wealth in the 2001-04 period pale in comparison with the much larger increase of the preceding three years," the report said.
The share of families that held stocks either directly or through a retirement plan fell to 49% in 2004 from a high of 52% three years earlier, the report indicated. The Standard & Poor's 500 index, which serves as a benchmark for many mutual funds, fell for three straight years from 2000 to 2002. The decline wiped out about $8 trillion in market value from March 2000 to March 2003. The index rebounded from 2003 to 2005, although it remains about 15% below its 2000 record.
The index of stocks rose 5.6% during the survey period.
Homeownership was an important factor in changes in net worth. The average home value rose 28.1% from 2001 to 2004, producing a dollar gain of $54,200. The portion of families that own a home rose to 69.1% in 2004, from 67.7% in 2001.
Homeowners saw their net worth rise about 1%, whereas the net worth of renters fell 22%.
"The strong appreciation of house values and a rise in the rate of homeownership produced a substantial gain in the value of holdings of residential real estate," the Fed said.
That wasn't enough to make families much wealthier.
"Net wealth hardly grew despite a substantial rise in house values," Brobeck said.
Homeowners had a median net worth of $184,400 in 2001 compared with $4,000 for those who didn't own homes.
Growth in income slowed along with net worth. Median income rose 1.6% to $43,200 from 2001 to 2004, down from a 9.5% gain from 1998 to 2001. | |
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| Is our economy going to self destruct and collapse?
Posted: 2/28/2006 9:55:05 AM | Boy, I am impressed with all of this exhaustive analysis. I dare not feign working knowledge of economics, particularly international economics and its effects on U.S. interests, but I do know basic facts, and they are humbling. My esteemed collegues above have stated them well.
I just want to point out some basic ideas here. One person asked the question, "are YOU doing better" than let's say, in 2001? The answer, sadly, is no. Not in my shoes...maybe someone else would answer a resounded yes! Depends on what side of the fence you're on....Even though I have continued to obtain raises since 1999, each paycheck is less and less in real dollars. Cost of living increases are not commensurate with my raises (and I haven't changed my lifestyle)....look at the price of housing relative to incomes!!!! Cell phones! Gas bill prices! Terrible....makes me want to sell drugs....no wonder what kids in the ghetto turn to it.........
So Hello....we'll need four incomes for every house soon!!!! (ignore for the moment that the picture shown of me is a cat). Additionally, I'm subjected to huge medical premiums for group coverage for my son and I. Lots of people (without knowing really what's going on) will blame this on greedy lawyers, a society filled with litigation (wouldn't you want to sue if you went into for a tonsilectomy but instead they removed your testicles?), and they usually get this from media that perpetuates the corporate domination of the working man. Corporate interests own America...the military...cigarrettes...schools...the almight dollar wins again.
I guess the question is, not from an economically exhaustive analysis, that I am thinking is.....is life better for the average Joe or for R.William Buckly, III.....yeah, it's not better for the small people...but for corporate executives, multi-nationals, trustees, large shareholders, that is, anybody who reaps gain of others' expense (banks, loan officers -- you too much credit card debt -- time to refinance -- suck out all your equity -- then, let's get changed bankruptcy laws -- force you to "revive" our housing market --Don't forget Halliburton, how easy we forget -- no bid contracts -- we taxpayers pay -- $3,000,000 for bridges to Alaska -- bridges to nowhere -- we taxpers foot the bill once again!!!!
informed electorate? I think not. I call this affirmative ignorance...we know what's going on but are too fat and lazy to get off our barcaloungers! Capitalism is not evil in theory but today's business culture is as ruthless as ever.
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ousu
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Joined: 6/2/2005
Msg: 48 | |
| Is our economy going to self destruct and collapse?
Posted: 2/28/2006 1:58:06 PM | | In my understanding the US has been practising pretty short-term policy in economics, basicly borrowing from the future. Already a year ago there were warnings from several central banks they consider stopping to support US dollar, aka keeping dollar reserves (China, Russia, for instance). Plus one problem (? correct if I am wrong?) is that American households are spending more than earning. My bet: the economy of the US will have a sharp slide in a couple of years. | |
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| Is our economy going to self destruct and collapse? [b]see: Roman Empire[/b]
Posted: 2/28/2006 8:39:29 PM | Ben Bernanke's maiden Congressional testimony as chairman of the Federal Reserve was, everyone agrees, superb. He didn't put a foot wrong on monetary or fiscal policy.
But Mr. Bernanke did stumble at one point. Responding to a question from Representative Barney Frank about income inequality, he declared that "the most important factor" in rising inequality "is the rising skill premium, the increased return to education."
That's a fundamental misreading of what's happening to American society. What we're seeing isn't the rise of a fairly broad class of knowledge workers. Instead, we're seeing the rise of a narrow oligarchy: income and wealth are becoming increasingly concentrated in the hands of a small, privileged elite.
I think of Mr. Bernanke's position, which one hears all the time, as the 80-20 fallacy. It's the notion that the winners in our increasingly unequal society are a fairly large group — that the 20 percent or so of American workers who have the skills to take advantage of new technology and globalization are pulling away from the 80 percent who don't have these skills.
The truth is quite different. Highly educated workers have done better than those with less education, but a college degree has hardly been a ticket to big income gains. The 2006 Economic Report of the President tells us that the real earnings of college graduates actually fell more than 5 percent between 2000 and 2004. Over the longer stretch from 1975 to 2004 the average earnings of college graduates rose, but by less than 1 percent per year.
So who are the winners from rising inequality? It's not the top 20 percent, or even the top 10 percent. The big gains have gone to a much smaller, much richer group than that.
A new research paper by Ian Dew-Becker and Robert Gordon of Northwestern University, "Where Did the Productivity Growth Go?," gives the details. Between 1972 and 2001 the wage and salary income of Americans at the 90th percentile of the income distribution rose only 34 percent, or about 1 percent per year. So being in the top 10 percent of the income distribution, like being a college graduate, wasn't a ticket to big income gains.
But income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent. No, that's not a misprint.
Just to give you a sense of who we're talking about: the nonpartisan Tax Policy Center estimates that this year the 99th percentile will correspond to an income of $402,306, and the 99.9th percentile to an income of $1,672,726. The center doesn't give a number for the 99.99th percentile, but it's probably well over $6 million a year.
Why would someone as smart and well informed as Mr. Bernanke get the nature of growing inequality wrong? Because the fallacy he fell into tends to dominate polite discussion about income trends, not because it's true, but because it's comforting. The notion that it's all about returns to education suggests that nobody is to blame for rising inequality, that it's just a case of supply and demand at work. And it also suggests that the way to mitigate inequality is to improve our educational system — and better education is a value to which just about every politician in America pays at least lip service.
The idea that we have a rising oligarchy is much more disturbing. It suggests that the growth of inequality may have as much to do with power relations as it does with market forces. Unfortunately, that's the real story.
Should we be worried about the increasingly oligarchic nature of American society? Yes, and not just because a rising economic tide has failed to lift most boats. Both history and modern experience tell us that highly unequal societies also tend to be highly corrupt. There's an arrow of causation that runs from diverging income trends to Jack Abramoff and the K Street project.
And I'm with Alan Greenspan, who — surprisingly, given his libertarian roots — has repeatedly warned that growing inequality poses a threat to "democratic society."
It may take some time before we muster the political will to counter that threat. But the first step toward doing something about inequality is to abandon the 80-20 fallacy. It's time to face up to the fact that rising inequality is driven by the giant income gains of a tiny elite, not the modest gains of college graduates.
Graduates Versus Oligarchs
By PAUL KRUGMAN
New York Times
Published: February 27, 2006 | |
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| Is our economy going to self destruct and collapse?
Posted: 3/1/2006 1:49:11 AM | | it's easy to figure..what do you drive? type of stereo make of clothing, appliances,forune beer, investment overbbroad, look around your padandtotal uo the assest you have bought? a number of say $ 50,000 has left your economy and goneeslwhere is it coming back???will this money be used to purchse u.s. assets and retun back the pofite to the U>s> ie sony play stionand x-box which courty benefits most from these sales?? | |
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