United States Heading towards a Depression?

Well, see, this is what all the economists are saying. I see them saying this on CNN, FOX, Bloomberg, etc. It's the usual answer, and for the past 40 years whenever we've had a recession, this answer has been the right one.

However, at this time in history, for the very first time in history, I'm not sure that this applies. In my own business - semiconductors - the internet and related technologies has reduced the need for headcount and in certain departments has reduced headcount by two-thirds. Certainly the headcount of salespeople in most consumer segments has been reduced. I'm worried that by this time next year unemployment will have steadied at 7%, and unless the Government starts to pay down the national debt like China and the G20 have told them to do, it's going to stay there.

 

LOL. It is interesting that you see the trees but not the forest. That is exactly what I was talking about and how computers and technology will accelerate Capitalism problems instead of removing it as you were claiming.

 

WS: While Obama fiddles, the economy burns.

Considering this is the deepest recession since the Great Depression and how much the new gov't has needed to allocate for its demise the numbers actually are pointing more positively each day - not fiddling but sound objectives for the longterm recovery should be in praise for the Administration not negativity as usual.

November is looking better and better.....from everywhere!

 

...except where people learn from history. I will not quote the old proverb...



Where is that guy who always complains about me ?

 

That's the same idiotic argument that said factory automation would kill capitalism. Capitalism is merely the reflection of voluntary human relationships in the economic sphere.

That is extraordinarily poor quality analysis. That only applies in a closed economy, where the consumers and the producers are part of the same nation. In this situation, the consumers are in the United States and the producers are in China. Consumer spending hurts the U.S. economy and helps the Chinese economy. To help the U.S. economy, massive private savings is necessary -- and savings is the exact opposite of consumer spending.

 

Savings are important but I believe it is more a remedy for inflation than crawling out of a recession.

China is the United States - The trade deficit has been non stop since the late 60s, where it is made is not necessarily where the money is deposited.

 

I've stayed away from this thread for a while but this is another simple example of how the extremist right wing utterly distorts basic business to the core.

After the worst financial crisis in 70 years, brought about by an excess of extremist right wing thinking, practises, and non-practices one would think the world would be banish these idiots.

All business decisions on investment are based on two simple basics: Demand. is it there or not.

The American economy is weak. Demand is spotty. We have parts of the economy that are years away from recovery thereby dampening overall growth in every aspect of the economy.

If you could fairly predict that business demand was going to grow/soar by 25%/year....businesses would be ramping up like crazy. Screw everything else. You want to get your piece of the pie better and before the competition. Last one in loses.

Demand sucks. Its the end result of this devastating recession that ripped the wealth out of the US, devastated home prices, caused about a 20-25% loss in all value/wealth and is having a lingering effect.

By example: Total US new vehicle sales are running somewhere in the 11 million range this year. They were in the 10 million range last year (all manufacturers, all vehicles(cars, trucks, etc). Before the recession hit they were running in the 16 million/year range every year from 2000-2007. At about $25,000/vehicle with 5 million less vehicles sold....that is a loss in $125 billion in transactions in the US from. Average prices could be closer to $30,000. We are experiencing a 1/3 shrinking of that part of the economy.

New home sales are currently running at an annual rate of 276,000/year (lowest total since 1963). From 1983-2007 there were more than 600,000 new homes sold per year. At an average sales value of about $200,000 per home (lowest level since early 2000's due to the housing recession) that is a loss of over $60 billion in transactions. That is all a result of the shrinking of demand; simply a function of the recession and how it ripped the guts out of the Ameican economy.

Magnify these effects in dozens of other industries and you see the effect of the recession.

Of course the political right wing will attack this.

So read through the comments from real business people with real substantial businesses here

Its all about demand. Those are real business people with millions and billions of dollars of sales, tens of thousands of employees....or you can listen to Will (I ran away to Asia and do a lot of cutting and pasting) Spencer

While the right wing political agenda people are busy inventing a reworked political reality...there is a real world out there and it has nothing to do with their political agenda.

 

Earlpearl, welcome back to this thread. It makes me sad when you stay away too long.

First off, I want to comment that, yet again, I agree with about 90% of your post. Yes demand is down. Yes that lack of demand is one of the major reasons hiring remains slow. Of course I have to discard all the partisan hackery, and the gross oversimplification of the problem, but in principal, I absolutely agree.

Of course we had the "Stimulus" which was supposed to create demand. Unfortunately, the stimulus money went to government payrolls, unions, and special interests of the Democratic party, rather than something that would have actually created demand like payroll tax breaks for hiring. I would say a trillion dollars of new government spending on something that had almost no effect on the private sector not only failed to stimulate. It did severe damage to our economy.

Another thing, regarding the real estate business you mentioned, which is unquestionably the black hole sucking the life out of our economy. Most analysts are saying things will not get better until the real estate market settles down. Again, I would allege that Obama artificially propping up the market by giving away taxpayer money did more harm than good. Now that the perks are gone, prices are dropping once more. Perhaps if the government stays out of the way, the market will be allowed to hit a level that will create real demand.

Are you saying small business people are not "real" business people? As a leftist, don't you find it odd to be denigrating small business people in favor of big business? There are a good number of those "real" business people that I wish would go the way of the Democratic party this November.

 

It is just amazing what those idiots are trying to get away with and haven't a conscious among them - and back with the same pathetic rhetoric and people actually giving them the time of day.

This country does not deserve the reprieve given it, the Obama Administration - or after labour day Sept. 6th the beginning of the fall elections, sanity will finally come to the forefront and put an end to the present reactionary fiasco that is gripping the country and is again leading it in the direction of irreversible chaos.

 

Savings are what creates real investment. Savings are a major component of the "capital" in "capitalism."

If you had a job, it would be partially because of capital. That capital is provided by investors. Those investors create capital by spending less than they earn -- by saving.

Artificially low interest rates discourage saving. This is one major part of why Americans don't save and why America has become a consumer nation, completely dependent upon suppliers like China. Americans are spending more wealth that they are creating, burning through the savings of past generations and loading debt onto future generations.

Consumer spending by Americans benefits the economy of China. It has a negative effect on the economic health of the United States.

 

LOL. Little Willy (I ran away to Asia and do a lot of cutting and pasting) Spencer probably couldn´t find anything to cut &paste and posted something that anyone with a knowledge of economy subjects can only laugh about.

 

That it will. A repeat of 94' is on the way!

 

Well, gworld, you're responding as if I'm making a theoretical observation. I'm not citing theory, I'm explaining a direct, real-world observation that is close to me. You can talk about forests and trees if you want to, but metaphors are no match for direct experience.

gworld, if you push theory aside, if you have DIRECT KNOWLEDGE of a real-world situation that you can share with us?

@earlpearl - Yes, the same as O, I agree with 90% of your post. Interesting, I've been watching The Ascent of Money on PBS and they characterize capitalism as a system "based on debt". That really struck me because I'm involved with a startup company and much of our conversations involve VC money and debt. It's giving me a real upset stomach - if I want to pursue my dream, I have to give my dream away to the VCs in return for them letting me manage it.

 

In one company which produces electronic products, today the production is higher that 6 years ago while the number of employees has decreased to 20% of previous level. The factory is in California. Is this enough of real-world situation for you?

 

Efficiency does not cause unemployment; efficiency lowers costs and raises profits -- thereby enhancing competitiveness and creating new markets.

Lack of competitiveness due to the weight of government bureaucracy and taxes -- that causes the lack of competitiveness which creates unemployment.

 

In a communist society it creates lower paying jobs. Everyone is still employed, except there are 3 or more people doing the job of one person. In the end it makes things even more inefficient. You find yourself compelled to work slower in an effort to make room for another opening.

A prime example would be circa 1980's USSR. A typical check out line at the grocery store consisted of 4 people. One person to hand the items to the checker. One person to ring you up. One person to hand those items to the bagger. And one person to bag. As time went on there'd be another person to hand that bag off to you. They kept unemployment down. Everyone had a job. However each person continually shared in an ever declining income and lowered level of efficiency as a result. (BTW, I should also mention that the "checker" used an abacus to calculate the total - no joke!!!)

On the flip side, automation typically results in a higher efficiency, and lower demand on labor. This results in a shift from laborer to something else. Not necessarily unemployment. An increase in production can often result in an increase in employment in other areas with regard to distribution, procurement and sales/support.

 

@Corwin: you are the expert on chips, not me, but I follow it and everything I've seen over decades and based on some people I knew in the industry is that it is hugely based on demand and supply. I read that demand should soar world wide in 2010 and 2011 but I also know there are lots of specialties...and its better to be selling the "best" than some second rate crap. Hope you are a selling a "best" and there is a lot of demand for its specialty.

Debt is huge. For those that don't realize it; it permeates the entire world at an enormous level.

In 2008 when the financial institutions were failing and emergency legislation was in the works, consider the following:

LIBOR; the interbank borrowing rate; saw its shortest term rates soar by 2% points in the midst of the crisis. The first effort at legislation to install money into the banking system failed. Immediately thereafter the DOW dropped by its largest one day drop in value ever and still to this day.

Less commented upon was that short term LIBOR increased by 2% points. How big and important is LIBOR. Estimates are that worldwide there is up to $300 trillion in borrowings based on LIBOR. In the US if you borrowed for a house, auto loan, private education loan, had a corporate loan, etc. Much of which is based on floating LIBOR rates, you would have been paying 2 points higher on your debt.

That only would have crushed the entire world financial system. Within a short time period a second effort at passing a "bailout for banks" passed. LIBOR returned to its historical basis. Interest rates did not soar.

So much for the monkeys who claim a financial bailout was a bad idea. The second effort at legislation passed quickly thereafter. The political monkeys screaming in the wind about the dangers of a gvt bailing out the financial system were shown to be idiots.

Debt is a big part of ongoing business. VC's want lots of control for their money. Best bet is to always go after lots of VC's and if you have a hot product maybe you can leverage a better deal wherein you give more limited control.

I forget where I saw it but there is an interesting story about investment money chasing Facebook. It was a hot product. Lots of sources chased it for a while. Since it was so hot Zuckerman (whatever his name is) got far better terms than were inititally offered.

Sometimes those VC terms are negotiable based on leverage....but you have to create the leverage.

 

Definitely. Efficiency creates economic surplus, which attracts competition like flies to honey. This results in lower costs, which raises the standard of living for consumers. Those consumers are able to purchase other goods and services, which brings business to a wide variety of additional vendors.

In a free market economy, improved efficiency raises the standard of living and creates wealth. Only in a totalitarian economy does improved efficiency lead to reduced employment.

Primitive people who do not understand basic economics often see economics as a zero-sum game, where a fixed number of people are fighting over a fixed amount of wealth. Nothing could be further from the truth. The simple truth is that economic activity creates wealth.

 

I'm happy to hear you want to discard partisan hackery

Well so much for eliminating political partisan hackery. It took you all of 1 sentence to jump right back into the partisan hackery game. LOL

Its not $1 trillion in spending. The stimulus bill of 2009 was $757 billion. As of 8/20/2010 exactly $505 billion had been spent or distributed. Not all of the distributed money has been spent. In other words to date about 1/2 of $1 trillion has been injected into the economy via the stimulus bill. So much for facts, huh?

And you claim its caused severe damage to the economy??? What??? What about the recession? Did you forget that? What a crock of sh!t. Its created some stimulus, spending, jobs, etc. It, like the Bush stimulus of 2008 has had a small impact in the face of the largest financial disaster since the great depression of the 1930's. When you take the outright impact of 2 elements of the economy I referenced above; About $125 billion reduction in new car sales/production and over $60 billion in loss of new home production...then multiply those losses by hundreds if not thousands of sectors of the economy....the stimuli have been relatively small efforts in the face of the greatest financial disaster of modern times.

The real estate disaster is enormous. Unprecedented in modern times. Its unbelievably bad because the bubble that preceded it was unbelievably out of the extreme on the upside and supported by millions of terrible loans that never should have been made.

Wish there were easy solutions.

Want to see how a real estate recession works? check out this link: http://www.fairfaxcountyeda.org/sites/default/files/publications/ye09rer.pdf

The top of page two shows the development history of Fairfax County, Va with regard to office space. Over 90 million square feet were built in 30 years (a helluva lot). The bottom of page 2 is key. It compares demand and supply. Ooooh those incredibly growing vacancy rates point to recessions. How interesting.

Realize this rare data set is representative of much of the US, showing a particular jurisdiction with impeccable records, and one with a lot of development.

Page 9 shows exactly how development proceded, year to year. While the county added 3 million square feet/year development is incredibly jagged. It has peaks and valleys.

The years between 1992 and 1998 show that recovery from a real estate recession took about 6-7 years before demand and supply hit a point where new development could occur again.

Now while the complainers from the Far Right scream about every day activities....its going to take years to move out of the residential real estate mess caused by this great recession.

The administration can take its steps....nothing can be done, Extremists from the right can claim everything that the administration is doomsday. Its simply going to take years. years.

I'm a small business person. I didn't say that. Oh I know what just occurred. O_Nation jumped right back into partisan political hackery. So much for pledging to refrain from that tactic. BTW: I don't call myself a leftist.

Oh yeah...more poltical partisan hackery from the Right Wing.

Lets see the following people with reasonable credentials currently don't believe in the commentary and thought processes of the Current Right Wing. They all think that the Bush tax cuts need to eliminated because of the debt crisis. I guess you would call all of them leftists:

David Stockman: Former Reagan head of the Office of Management and Budget; and point man and mouth piece for the Reagan tax revolution. He thinks current Republican Right Wing policy has destroyed the American economy.

Paul O'Neill: Former Bush II Treasury Secretary and a guy who led Alcoa to record profits. he thinks the Bush tax cuts should end.

Alan Greenspan: Former fed chairman and a guy who once studied at the foot of Ayn Rand.

I guess those guys are also leftists since they don't agree with your philosophy. Besides being leftists in your book, their toenail clippings have more knowledge about the economy than the current extremist version of the Right Wing.

BTW: BEing a small business person I speak to small business operators all the time. I hear a lot of the same thing. Business is down; demand is down. Its the same thing as the big business guys.

 

Yes, and there still is an easy solution.

Dismantle Freddie and Fannie.