The Economy May Never Recover!

[jdomaha]

Well thats the problem BrooklynBlue. The United States cannot keep going like it has been. We have to fundamentally change our ways from over consuming to producing. The consumption can't keep going forever, so eventually it will end one way or another. If we prolong this now, it will only be worse in the future.

People dont NEED new cars every year. People don't NEED 5 HDTV's in their homes. People don't need to own 2 houses. The debt has caught up to the American consumer and he has finally realized how fucking greedy and fiscally irresponsible he has been.

Lets get it over with. Let this consumption based economy fail and let the entrepreneurs turn it back into a production based economy which gave us this prosperous life in the first place.

Negative!

Needs don't drive an economy. Wants do.

People want new cars every year. People want 5 HDTVs. People want new computers. People want bigger homes. People want to eat out often. People want to pay other people to do things that they don't want to do.

The problem is when the people who want overextend themselves on credit. Even then, it's not a big deal. The people who lent those people money go bankrupt, banks go under and life goes on.

We're not letting the economy kill enough inefficiency. We're in a sinking boat built for 10, with 15 people in it. Do you keep bailing water, or do you push the 5 pasty-white, weak affiliate-marketer types out of the boat to let the fittest survive? Economies shouldn't be based on feelings. They should be based on what will work. Let the unfit businesses die off and let new, healthy ones take their place.

 

[BrooklynBlue]

fcreature - yes, you're absolutely right that the last 20-30 years in which we (including entrepreneurs) all over-leveraged ourselves with the cheap & easy credit that was practically shoved down our throats is coming back to bite us big time now that the bubble has popped.

But assuming a desired state of general economic equilibrium, supply must equal demand. An economy (or an individual entrepreneur) can (should) only produce as much as can be reasonably consumed.

So it's a symbiotic relationship. There is no production without consumption. And there is no consumption if there are no producers investing and creating jobs.

It's a circular relationship called the paradox of thrift, which is why once the death spiral begins, radical action is needed to get out of it. To spur production, we must force consumption, and the only viable large-scale source of that right now is the government.

So, we either drown in our own shit OR start making some shit sandwiches so we can eat.

edit: jdohama, you're right about letting the market work its magic by pruning out the bad firms, weak competitors, etc. But we're kind of past that right now. We have stepped past the normal & orderly creative destruction experienced in normal competitive markets and are now in wholesale destruction. Extreme scenarios call for extreme measures.

 

[jdomaha]

fcreature - yes, you're absolutely right that the last 20-30 years in which we (including entrepreneurs) all over-leveraged ourselves with the cheap & easy credit that was practically shoved down our throats is coming back to bite us big time now that the bubble has popped.

But assuming a desired state of general economic equilibrium, supply must equal demand. An economy (or an individual entrepreneur) can (should) only produce as much as can be reasonably consumed.

So it's a symbiotic relationship. There is no production without consumption. And there is no consumption if there are no producers investing and creating jobs.

It's a circular relationship called the paradox of thrift, which is why once the death spiral begins, radical action is needed to get out of it. To spur production, we must force consumption, and the only viable large-scale source of that right now is the government.

So, we either drown in our own shit OR start making some shit sandwiches so we can eat.

edit: jdohama, you're right about letting the market work its magic by pruning out the bad firms, weak competitors, etc. But we're kind of past that right now. We have stepped past the normal & orderly creative destruction experienced in normal competitive markets and are now in wholesale destruction. Extreme scenarios call for extreme measures.

Extreme measures would be (to the governing idiots) to let things fail. They don't want to take extreme measures. They just want to spend, spend, spend. It's not going to work. It's just shifting economic costs from one place to another. Eventually it will come back to bite us in the ass.

Of course we've stepped past regular activity. We're bordering on a depression. That goes without saying.

We're in for a lot of pain, especially in some sectors, but we aren't as near to wholesale destruction as you think. We need a bit more time to shake things out. Homes need to be brought down a bit. 3x average yearly salary should be where home prices sit at for a while. Maybe 2.5.

Clean out excess labor. Send illegals home. They're artificially dropping the low end of the salary pool. There are tons of unskilled workers out there, including teenagers, who can do the work if the pay is right. And if it's not right, then there's always technology to lower costs.

The US economy has been shifting economic burdens from some sectors to other sectors for too long. It needs to balance out.

 

[BrooklynBlue]

Immediately cut all corporate taxes on big business that has a significant US presence by 1/2. Follow this by tax incentives for growth.

Cutting corporate taxes won't matter if they aren't making a profit. Plus that is a low economic activity multiplier action from a stimulus perspective - see my prior post here.

Cut capital gains taxes by 75%.

Again, low return in economic activity compared to other measures.

Cut income taxes by 1/2 on those who make more than $75,000 a year, or couples who make more than $120,000.

Why the arbitrary cut-off? Besides, the marginal propensity to consume typically declines as income rises. So it would make more sense to cut for those < $75k. To put it simply, poor people spend every dollar that goes in their pocket. Rich people don't. We need forced spending, because that spurs private investment much more strongly than lower taxes on radically decreased revenue.

Give tax incentives for businesses to provide health care and other care for their employees that the government currently pays for. Then cut spending on those items.

So Medicare, the biggest non-defense budget item, can be replaced by employers getting tax breaks? Yeah, tell that to your 80-yo cataract-ridden grandmother.

 

[ratamiss]

I'm still stacking my papers...

... then again, all my investments are fucked for the moment, but, I'm not taking any money out of them for many many years.

word, the price of grills and stupid sun glasses have been down lately

 

[ratamiss]

So let me get this straight, the Obama haters are complaining that the stimulus plan will raise the national debt. They think a better solution is to cut taxes?
Am I missing something?

tax cuts = less revenue
less revenue = higher deficit

common fucking sense.

 

[jdomaha]

Cutting corporate taxes won't matter if they aren't making a profit. Plus that is a low economic activity multiplier action from a stimulus perspective - see my prior post here.

Again, low return in economic activity compared to other measures.

Why the arbitrary cut-off? Besides, the marginal propensity to consume typically declines as income rises. So it would make more sense to cut for those < $75k. To put it simply, poor people spend every dollar that goes in their pocket. Rich people don't. We need forced spending, because that spurs private investment much more strongly than lower taxes on radically decreased revenue.

So Medicare, the biggest non-defense budget item, can be replaced by employers getting tax breaks? Yeah, tell that to your 80-yo cataract-ridden grandmother.

Of course it won't matter if they're not making a profit. Let the corporations that can't manage to make a profit with a hugely beneficial tax system DIE DIE DIE. It WILL encourage investment and corporate health, if we can also manage to give penalties to companies (and directors) who continually take a short-term approach to things.

I am not worried about stimulus. I am worried about mid-to-long term. Stimulus spending isn't going to work. The people who are spending it, and writing the bills to decide what to spend on, ADMIT that they don't know what they're doing. They admit that they have no roadmap for this kind of thing and that what they're doing might not do a bit of good. Ben Nelson said as much today in an interview I was listening to.

Capital gains cuts encourage the business class and the wealthy to stay and try to grow their wealth here. How many affiliate marketers are talking about leaving the States once they hit a certain income level?

Wealthy folks spend more on things that spread the wealth around. They eat out more. They buy more services. They pay for medical care. They buy cars and don't default on them. They support charities. Give them more discretionary spending and they'll feel more "rich" and spend more.

I said that it might get tough. Gramma might have to go a little earlier than she would have before. Pillows are cheap.

 

[jdomaha]

So let me get this straight, the Obama haters are complaining that the stimulus plan will raise the national debt. They think a better solution is to cut taxes?
Am I missing something?

tax cuts = less revenue
less revenue = higher deficit

common fucking sense.

No, it isn't. It's exactly the opposite. Taxation stifles economic growth. If you want to steer people away from something, tax it. If you want to draw people in, drop taxes on it.

Targetted tax cuts mean the government gets a smaller percentage of the pie, but that the pie will be larger.

Cutting taxes on people who don't pay them in the first place does nothing.

 

[popeye]

So let me get this straight, the Obama haters are complaining that the stimulus plan will raise the national debt. They think a better solution is to cut taxes?
Am I missing something?

tax cuts = less revenue
less revenue = higher deficit

common fucking sense.

Cut taxes and allow the people to determine what we do with the left over cash. I trust the average American citizen with the cash over Barney Frank, Nancy Pelosi, Harry Reid etc.

 

[fcreature]

People want new cars every year. People want 5 HDTVs. People want new computers. People want bigger homes. People want to eat out often. People want to pay other people to do things that they don't want to do.

People want everything they can have. That doesn't change the fact that there are limited resources and people know that they can't have whatever they want. Why do you think people stopped buying all this shit? They've realized its not sustainable. I'm not saying that what you need is all you should buy, I'm just saying that the over consumption won't last and people are beginning to realize that they need to save. True wealth comes from savings and investment. Not spending.

Extreme measures would be (to the governing idiots) to let things fail. They don't want to take extreme measures. They just want to spend, spend, spend. It's not going to work. It's just shifting economic costs from one place to another. Eventually it will come back to bite us in the ass.

Agreed.

So let me get this straight, the Obama haters are complaining that the stimulus plan will raise the national debt. They think a better solution is to cut taxes?
Am I missing something?

tax cuts = less revenue
less revenue = higher deficit

common fucking sense.

Well, obviously if you cut taxes you should cut spending too. It doesn't take a fucking genius to figure that out. How about we cut taxes and cut out a couple of the massive government bureaucracies. Or how about we stop spending a trillion dollars a year on our global empire?

 

[ratamiss]

Cut taxes and allow the people to determine what we do with the left over cash. I trust the average American citizen with the cash over Barney Frank, Nancy Pelosi, Harry Reid etc.

Have you met the average American?!? They are fucking retarded. Although I do agree the democratic leadership is crap, just less crap than the republicans who have been in charge for the last 8 years. Its like choosing between getting shit on or pissed on.

 

[fcreature]

Have you met the average American?!? They are fucking retarded. Although I do agree the democratic leadership is crap, just less crap than the republicans who have been in charge for the last 8 years. Its like choosing between getting shit on or pissed on.

lol, you can't seriously be arguing that politicians know how to spend our money better than we do. Please tell me your kidding.

 

[BrooklynBlue]

Of course it won't matter if they're not making a profit. Let the corporations that can't manage to make a profit with a hugely beneficial tax system DIE DIE DIE. It WILL encourage investment and corporate health, if we can also manage to give penalties to companies (and directors) who continually take a short-term approach to things.

Companies are taxed on operating income. Cutting corporate taxes to 0% will never make a company with a net operating loss profitable, nor will 99% tax rates make a profitable one go under. You're not making sense.

In an environment like today, you can say it "WILL this" or it "WILL that", but no it won't. Very few industries are anywhere close to thinking about adding jobs en masse or making major capital investments because:
1. The corporate debt markets are completely fucked so there is limited or no ability to borrow at worthwhile rates.
2. Demand is drying up so they can't sell shit and the capital investments they made over the last however many years are not yielding positive ROI.
3. And the assets they already own are plummeting in value, causing all kinds of corporate finance problems that are beyond the scope of this discussion.

Which means, they hunker down, hoard cash, lay people off, slash costs and hope to weather the storm. THIS is what big companies are doing and will continue to do until aggregate demand recovers.

Give them a massive tax break in today's environment and they will use some to pay down debt and sit on most of the rest. Trust me or not, but I work in corporate strategy at a Fortune 100. I know how these guys think because they pay people like me to tell them how to think.

Wealthy folks spend more on things that spread the wealth around. They eat out more. They buy more services. They pay for medical care. They buy cars and don't default on them. They support charities. Give them more discretionary spending and they'll feel more "rich" and spend more.

That is just not true, at least it is less true than it is for less wealthy people. As stated above, past a critical threshold, people spend less of each new dollar they earn. This is the marginal propensity to consume and it is generally negatively correlated with increased income once you start getting in the top quartile of earners.

Basically you're preaching trickle-down/supply-side economics, which has no defensible basis in economic theory or empirical reality. The last 25 years have proven it doesn't work as claimed. Trickle-down is a political position, nothing more, nothing less.

I said that it might get tough. Gramma might have to go a little earlier than she would have before. Pillows are cheap.

Well, at least the truth comes out. We might as well fire up the ovens next. Plenty of poor people to keep us warm.

 

[HarveyJ]

Cut taxes and allow the people to determine what we do with the left over cash. I trust the average American citizen with the cash over Barney Frank, Nancy Pelosi, Harry Reid etc.

Believe it or not, I actually had a really well thought out post to put here, but that all crumpled when I tried to get some stats on the "average american", and Google threw this up as the first picture reference...

Now, we all know Google knows everything and is most wise... so do you really trust the economy to this guy?

 

[guerilla]

Malign government spending all you want, but it's frickin' economics 101 guys..

Actually, that is Keynesian economics, which was debunked in the 70s, the last major economic downturn.

It's amazing how economically ignorant people are.

No personal disrespect, but the rest of your post is rubbish.

 

[guerilla]

So let me get this straight, the Obama haters are complaining that the stimulus plan will raise the national debt. They think a better solution is to cut taxes?
Am I missing something?

Yes. Cut taxes and cut spending.

The only way to solve a credit crisis brought on by too much debt is savings. You can't solve debt and overconsumption by borrowing more to keep shopping.

In 1920, there was a depression that no one talks about. The first year was worse than the first year of the depression of 1929.

The government did nothing but cut taxes and cut government spending. The 20s were prosperous on a record scale.

If people have to trim their spending, and start paying off bills and save, why would it logically be any different for government?

Again, economic and historical ignorance abounds.

tax cuts = less revenue
less revenue = higher deficit

common fucking sense.

Yeah, common sense is that FDR's New Deal didn't worsen the depression. That Hoover did nothing (he had the first New Deal which FDR originally campaigned against). False + false.

That WWII solved the Depression. But the New Deal solved the Depression! Paradox! Liberal idiot conundrum! But wait! The Depression didn't actually end until 1946! Until WWII was over! When the troops came home, and all the New Dealer Keynesians swore the returning troops would create massive unemployment and restart the Depression!

Here is some economic insight you won't get anywhere else. GDP is just aggregate activity. It doesn't communicate quality, or productivity. Currently 70% of GDP is consumption, which is funded with debt. Is the US economy really growing in a healthy and sustainable manner?

No.

In WWII, people made tanks, bombs, bullets. GDP soared. This is called the Broken Window Fallacy. Look it up. You can create all sorts of economic activity doing destructive stuff like paying for bombs to blow up bridges in Iraq, and then pay to rebuild the bridges. Big deal, GDP went up. Food was fucking rationed during WWII when prosperity had supposedly returned.

Same thing with unemployment. All of the unemployment gains of the Great Society, LBJ's War on Poverty was from 60,000 prime working age young men being fed into the Vietnam meat grinder. Drop 60,000 men out of the unemployment rolls, and your economy is just great!

More bombs! More murder! It's great for business!

 

[guerilla]

Oh yeah, I'm a little drunk for the first time since New Years. So no hard feelings if I pissed anyone off.

But for crissakes people, don't fall for double think. You can't solve debt with debt. The only jobs the government can make, are ones that people in the private sector will have to pay for.

All Obama is doing, is stealing from the people who still have jobs, to provide government jobs and play central planner with the economy. Eventually, the private sector will collapse, and people will revolt (as Gerald Celente has suggested) or the American government will embrace total fascism and look like the 21st century model of Mussolini's Italy.

And I don't even totally dislike Obama. As dickhead, liar, murderers go, he's alright.

 

[fcreature]

Oh yeah, I'm a little drunk for the first time since New Years. So no hard feelings if I pissed anyone off.

But for crissakes people, don't fall for double think. You can't solve debt with debt. The only jobs the government can make, are ones that people in the private sector will have to pay for.

All Obama is doing, is stealing from the people who still have jobs, to provide government jobs and play central planner with the economy. Eventually, the private sector will collapse, and people will revolt (as Gerald Celente has suggested) or the American government will embrace total fascism and look like the 21st century model of Mussolini's Italy.

And I don't even totally dislike Obama. As dickhead, liar, murderers go, he's alright.

You argue pretty well while drunk + rep

 

[BrooklynBlue]

Actually, that is Keynesian economics, which was debunked in the 70s, the last major economic downturn.

You don't have to be a Keynesian to know what composes GDP. Ask Milton Friedman, ask Hayek, ask any anti-Keynesian, they will not disagree with that. They may disagree on what makes best economic or fiscal policy but they won't disagree with simple math and nor should you.

And "debunked" is an awfully strong word. Not gospel is definitely true. You can be both a Keynesian and a monetarist and still make sense. It just takes a willingness to use the right tool at the right place at the right time.

I won't disagree with your later comments re "quality" of GDP. Fair point. Is/was a lot of that activity "bad"/low value? Absolutely.

But things are falling apart regardless of what already happened. The question is not who to point fingers at but what to do about the consequences.

If the response is to accept the resulting crash and likely depression - grin and bear the pain that it would entail, well ok, I can intellectually accept that.

But if the response is supply-side tax cuts and this one-dimensional claim that all government spending is bad all of the time, it is neither sufficiently sophisticated nor pragmatic.

It's amazing how economically ignorant people are. No personal disrespect, but the rest of your post is rubbish.

No affront taken, but I must say, I am floored by your argumentation. :bowdown:

 

[allcelldeals]

The bottom line is this.. Do you believe that wealth is created/flows from the top->down or from the bottom-> up?
All wealth is created on the ground.. from the bottom.. and flows up.. maybe the majority of people are not going to get rich, but they can have decent lives, and hands to the wheel is where all wealth is created..
This top-down, trickle down theory shit is bankrupt.. greedy fuckers is all it is.. exploiters.. takers.. all of them should be publicly horsewhipped. All of you capitalist scum.
A hard days work would "kill hell" out of most of you.. what do you know.. nothing..

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Ummm yea ... What he said!

But seriously, Where I live shit has been going down hill for a while. I was lucky enough to get into AM and find WF for some good peeps for advice. But there are a lot of good people who want work but if you look in our paper there is nothing. I mean shit! I got a loan from my fam to help me get started, some people don't have that and don't have shit to get out of the whole. We have to start manufacturing shit again. A nation of consumers won't survive if we don't have anything to offer.