New Data Offer More Signs That Economy Is Weakening

Discussion in 'Politics, Religion, Social Issues' started by zimv20, Apr 28, 2005.

  1. zimv20 macrumors 601

    zimv20

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    #1
    link

     
  2. Desertrat macrumors newbie

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    #2
    Backing up a month or two, that 3.5% forecast was down from a 3.7% expectations.

    Factor that in with a more likely inflation rate around 5% instead of the offical rosy numbers, and you can guess why some folks last year were beginning to anticipate a period of stagflation.

    Tied in with Agora Publishing is a freebie daily email financial newsletter called "The Daily Reckoning". There's a lot of non-essential BS in it, but there are a bunch of numbers that don't get talked about on such as CNBC until six months to a year after some trend develops. Stuff like the numbers on bankruptcy filings and delinquencies in mortgage payments, as well as frou-frou debt over and above mortgage debt.

    Another fun read with much serious info is from the "Mogambo Guru". He's an investment advisor with a pretty good track record and a hilarious way of presenting scary information...He has a column each Monday in The Daily Reckoning.

    At the least, contrarian investors provide a balance to "The world is wonderful!" stuff that's the official line...

    'Rat
     
  3. IJ Reilly macrumors P6

    IJ Reilly

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    #3
    One of those folks was me, over a year ago. But I was also tying it to the runaway federal debt, the falling dollar and skyrocketing energy prices. So far this grim scenario is playing out with all the predictability of a B-movie. We could be headed for a major economic train wreck.
     
  4. yellow Moderator emeritus

    yellow

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    #4
    So what does all this mean? I am economically retarded.
     
  5. IJ Reilly macrumors P6

    IJ Reilly

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    Ah, Grasshopper... ;)

    Stagflation means a high rate of inflation (rapidly increasing consumer prices) accompanied by little or no growth in the economy. The Fed is forced to raise interest rates despite the weak economy in order to tamp down inflation, which causes a recession and other good stuff like widespread unemployment. The last time this happened was during the '70s and early '80s, and was driven primarily by the doubling of oil prices, twice during the '70s.

    Energy prices aren't as much of a factor today (at least not so far), but add to the mix a runway federal debt, which exerts upward pressure on interest rates, a falling dollar (which makes everything we buy from abroad more expensive) and a trade imbalance with the rest of the world of a magnitude which would have been unimaginable even a few years ago, and you're looking at a formula for economic disaster.
     
  6. yellow Moderator emeritus

    yellow

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    #6
    OK, thanks for the explaination..

    I remember waiting in line for gasoline with my parents in the late 70s.

    So, what kind of real impact on American society can this potentially have? Could this result (assuming the worst) in the USA slipping into neigh-3rd-world status? I suppose no matter what we'll pull out of it eventually.
     
  7. IJ Reilly macrumors P6

    IJ Reilly

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    Hard to say for certain, but the possibilities are grim. Wages are already struggling to keep pace with the relatively low rates of inflation we've enjoyed for the past number of years (unless you're a CEO, of course). At this point, even a sustained inflation rate of 5% would mean an erosion of real spending power -- IOW, downward mobility for many if not most Americans. We had nearly ten years of that regime during the '70s, and I don't think we ever really, fully recovered from it. In a way, we've been headed towards "third world" economic status ever since -- the stratification of incomes in the US is looking more and more like Brazil and less and less like Europe.
     
  8. mischief macrumors 68030

    mischief

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    #8
    I'm beginning to think that the money interests on the right are gambling on China imploding. There's entirely too many factors tied into China's system for co-incidence.

    There's also the disturbing conclusion that if China's Gvt. is to stay in power and avoid economic ruin they'll need to go to war with someone or incite a neighbor/ally into a war. The logical choices are: Korea Vs. Korea (75%), Taiwan (60%), India Vs. Pakistan (50%), Iran Vs. Israel (75% as also in the neocon agenda).
     
  9. Desertrat macrumors newbie

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    #9
    yellow, the levels of incomes of various groups is typically represented by a pyramid. In a "normal" situation, the sides are straight. A side view would be an isosceles triangle.

    Hokay. In some economies, there are a very few up at the top, and a whole bunch at the very bottom, with a small middle-economic-class in between. This skews those straight lines into concave curves. This is most common in central and south American countries. Rich folks and poor folks and few in the middle class.

    For many decades, the U.S. (and Britain and the rest of western Europe) had a large and very strong middle economic class making up the bulk of income earners. This is changing. The buying power, the disposable income of the middle class has not kept pace with the rises in costs of living. They are thus moving lower on the pyramid.

    A good example of the change is the white-collar recession of 1989-1991. People lost jobs paying $60K to $100K a year and found jobs paying $40K to $60K a year. Serious hickeys. The same sort of thing is occurring nowadays in those jobs which are outsourced. IT folks who once made, say, $100K a year are now picking poop with the chickens, replaced by a person in India or in theVirgin Islands who gets paid $20K for the same work.

    Couple these problems with our penchant against saving money toward that proverbial rainy day and with our love of fine wines and multitudes of choices in our clothes closets--and the way we buy cars that are far more fancy than mere utility would dictate. All these spending patterns add up to sending over $600 billion out of the country, every year. Then, add in that our federal deficit spending over and above the Iraq war is some $350 billion per year and you can see why we're in trouble. You just can't spend yourself into prosperity.

    The larger problem is that we're right at one-third of the world's economic activity. If we quit buying, lotsa folks start starving--which is only a mild exaggeration. Japan's economy is about 1/2 of the size of ours. That is, the total output of goods and services of all of the rest of the world is just equal to the US and Japan.

    Either Gary North or The Daily Reckoning quite recently claimed that only some 28% of the US economy has to do with some sort of manufacturing; some 44% is involved in dealings with money. Real estate lenders, stock brokers, mortgage brokers, insurance companies, all that sort of thing. These people are among the least needed in the event of any serious economic downturn--but they have home loans to meet payments, car payments, and all that sort of "normal" life.

    Better open a beer joint. In good times, folks drink 'cause they're happy. In bad times, they drink 'cause they're sad.

    'Rat
     
  10. Thomas Veil macrumors 68020

    Thomas Veil

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    Why not? Bush has already had his putsch. ;)
     
  11. StarbucksSam macrumors 65816

    StarbucksSam

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    I didn't need new data to tell me that. I just looked at who is in the White House and Congress.

    It's like when my mother turns on the radio to find out what the weather is outside. I tell her, "Mother, stick your head out the window and you can save yourself some time."
     
  12. Desertrat macrumors newbie

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    #12
    Doesn't matter who's in the White House or in Congress. They're not gonna be able to kiss the ouchie and make it all better.

    Until the national mood changes from spending to saving, the balance of payments deficits will continue--but such a change would put serious hickeys into our unemployment picture. With 2/3 of our economy depending on folks eating out and buying frou-frou, any serious reduction in piddling away one's disposable income would hurt all those employed in the frou-frou business.

    Until the feds and states and cities cut do-good spending, the federal and other deficits will continue--but too much of that spending is committed by law to programs; there's little discretionary money available. Raising taxes sounds good, but there's not that much money available, even from "the rich". Certainly, not enough to generate an additional $350 billion per year or thereabouts. (That's $350 billion over and above the military and Iraq costs.) Agreements like NAFTA and the WTO mean that tariffs are off the table--and we already know what such idiocies as Smoot/Hawley did.

    Worldwide comparisons of labor costs mean that the developed nations' labor forces are overpaid, and that's changing. The change is to the detriment of the developed nations, and I don't see what can be done. I hope somebody does, but I don't...

    If we raise interest rates to strengthen the dollar, that wipes out a lot of the recent buyers of houses. it also reduces exports. Not good. If we don't raise interest rates, the buying power of the dollar declines, raising both the costs of imports and the rate of inflation. Not good.

    It's hard enough just to try to identify the interrelationships of economic problems. Damfino about solutions...

    'Rat
     
  13. mactastic macrumors 68040

    mactastic

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    #13
    It does matter who's in the WH. The economy has been shown to be consistently better over the last century when a Democrat has led the country, and worse when a Republic has.
     
  14. mischief macrumors 68030

    mischief

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    #14
    Which, of course leads republican zealots to claim that there's a two to six year lag in policy impact on the economy, making Democratic prosperity their doing.

    *sarcasm* Tell you what: Let's just cut congress back to one week a year, leave the judiciary running full time line-item vetoing non-constitutional policy and cut executive power back a whole lot while we're at it. I'd love to see the most pointy-haired parts of government (IRS for example) replaced by decent software.

    Why the hell do we have the Legislature running effectively full time to come up with new and worse additions to existing poor policy? The Articles adressing these issues didn't say "Congress shall meet as many days of the year as neccessary to sell out completely.". It says (paraphrasing) "The legislature shall meet at least once a year.".
     
  15. Desertrat macrumors newbie

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    Mac, FDR certainly saw an increase in economic activity after almost a decade of doldrums during his reign. Kennedy did well. But LBJ's Guns'n'Butter gave us the Nixon/Ford/Carter years of inflation, with Carter's advisors (Bert Lance, et al) exacerbating a seriously bad problem.

    Clinton came in at a time when the economy had just turned around from the white-collar recession of 1990-ish, and the dot-com bubble certainly gave us Good Times. But that bubble blew out, to the tune of $8 trillion in losses in 2000.

    Now we have a housing bubble, at the same time as we're attempting to cope with outsourcing. Good times for those who bought houses ten or twenty years back; lousy for folks whose manufacturing or IT jobs don't exist anymore.

    The time-lag deal is real. The best example, I think, is that of the period of roughly 1972 into the end of the 1970s or the early 1980s in the way we changed from gas-hog cars to high mpg cars, and the way we went from 100-watt bulbs to 60s. Or, the energy efficiency of modern A/C units and refrigerators as compared to those of the 1960s and before.

    mischief, it's an old saw in Texas that, "No man's property is safe when the Legislature is in session." Our state constitution is interpreted to say that the Lege is to meet for 140 days, every two years. Many of us think we'd be better off if they met for two days, every 140 years.

    The feds give us wondrous things like the Patriot Act--and the TSA with its gropers in training. We have the DEA and the War On Some Drugs and the oh-so-intelligent concept of "Arrest the money". We have the Campaign Finance Reform act, with SCOTUS saying, "Screw the First Amendment."

    Folks wonder why I tend toward a mild amount of cynicism?

    :), 'Rat
     
  16. skunk macrumors G4

    skunk

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    #16
    http://news.bbc.co.uk/1/hi/business/4244925.stm

    Paints a cheerful picture, this bloke. :eek:
     
  17. zimv20 thread starter macrumors 601

    zimv20

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    #17
    seems it's all going according to plan.
     
  18. mactastic macrumors 68040

    mactastic

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    #18
    Yep... gettin' government down to the size where it can be drowned in a bathtub as Norquist would say.
     

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