United States Heading towards a Depression?

For the Republicans waiting for their Depression they have another milestone to hide from, the Dow closing above 11000. Too bad the Democrats have ruined their party.
.........

BRUm: Why should Obama have to do anything in Iraqi? At any rate it is over - there will be no going back and it accomplished nothing compared to having isolated the situation before the war and working for the same solution as per the present.

The issue is having gone to war for no reason, predicated on falsely disseminated information for political posturing by Republicans.

 

@Helvetti: Good points. Lets address them one at a time.

Short term, that may be true, according to Mr. Keynes. It most definitely does more harm than good over the long term, and we are on year number four. Another thing is that not all government spending is equal. You cant just take all the money and give it to a few people(your political supporters for instance) and have it stimulate the economy. Another thing to consider is that money "redistributed" by the government comes with a very high brokerage fee, and the broker gets to write his own rules. Tax breaks are a much more efficient way of flooding money into the market if that is really your stated goal. When you look at bloated government salaries and pensions, at all levels, I suspect even Mr. Keynes would be disgusted.

Keeping our interest rates artificially low is not without it's own side effects. For me, the jury is out on the rightness or wrongness of this activity, mostly because I don't know enough about it to be able to give you an informed opinion as to the net effect on the US economy and the wealth/poverty effect on US citizens.

You are mixing government spending. Most of the "too big to fail" bailouts happened under Bush, in the first $350 billion dollars of TARP funds. I think I agree that the consequences of allowing them to fail would have been worse than bailing them out, but one would think legislation would have been passed following the bailouts to prevent them from literally forcing the US Gov to bail them out in the future. IMO, every firm that took bailout funds should have been broken up. Too big to fail = Too big to exist in your current format.

Lets also keep in mind that the bailout money represents a small portion of the money spent by the Obama admin on "Stimulus". The lion's share was sent to businesses and State governments that support Democratic causes. Bloated state salaries were propped up for an extra year or so, until the stimulus ran out(now), and they face the same cuts anyway. Why incur a trillion dollars of debt in the public sector for cuts you are going to have to make anyway? Its just stupid. Another thing. Public sector spending does very little to stimulate the economy. The public sector does not produce ANYTHING.

Terrific point. When you hand $350 billion to a small group of "too big to fail" companies, while letting the the ones "small enough to fail" to collapse(some actually forced out of business by tighter regulation), what you end up with a spree of consolidation on government money. The fat cats get even fatter by absorbing, or feeding on the carcasses of their former competition. Instead of too big to fail companies getting broken up, the net result was they got even bigger, representing an even larger systemic risk to our economy, and wielding even more power in Washington.

This is true. So most of the small handful of financial services companies that received government money are doing quite well compared to their lowest values when the DOW was at 7k not long ago. Mind you, this is not so true of companies like GM or the State governments and Democratic special interests being given money. That money is likely gone forever, but in fairness, so is the money handed to Citibank who returned the money with interest. Mark my words, that money will NEVER make it back to the coffers. Obama has already publicly mentioned a few ways he is considering spending the repaid TARP money. Like I said, its good when you are both the broker, and the agency that regulates the broker.

 

What causes economies to grow?

• Reducing taxes
• Reducing government debt
• Reducing government bureaucracy
• Reducing barriers to market entry (i.e. regulation)
• Reducing the cost of compliance with government edicts to improve international competitiveness

The main cause of America's economic malaise is government intervention. The solution is not more government intervention.

 

Very simply put, the Administration has responded to the conditions inherited and has curtailed the largest recession since the 1930s and has passed landmark legislation that will be beneficial for generations to come.

 

Exact Opposite Of Reality

 

Even if you believe things appear to be "better", using to some very dubious and debatable statistics, this is all just a big bubble and with all bubbles there comes a time to *pop*. It seems no president thinks long term, rather "oh shit things look bad, I don't want my name tarnished in the history books, so I'll put things off a bit... here's a trillion dollars...". It's like throwing a ticking bomb to the next president, hoping it'll go off when he's in power, when in fact all this delaying of the inevitable is just going to make the end result a lot worse.

 

If we let bad companies fail, we clear room for new companies to enter the market.

On the other hand, if we prop up bad companies to keep them from failing, we:

• Keep the bad business practices which causes those companies to fail in place.
• Create a moral hazard by rewarding poor behavior.
• Burden the taxpayers (and their descendants) with the cost of supporting unprofitable ventures.
• Encourage reckless behavior by removing the natural consequences of that behavior.
• Promote a business culture where competitiveness is considered unimportant.
• Encourage bribery of public officials to tap into taxpayer dollars.
• Punish well-run companies by forcing them to compete against poorly-run companies which are supported by taxpayer dollars.

 

When it is the philosophies and principles of the politicians that is responsible for the meltdown in the economy it should not be the public that suffers the consequences but the politicians as evident with the election of Obama for President.

The Democratic Administration has addressed the issues and should be rewarded accordingly.

 

But you are suffering the consequences! Who do you think is going to have to pay back all the debt he has racked up!?

Will, I completely agree.

 

So... why do we owe more money now, than we did before the hopey changey thing started ? Do you know what is going on ? Do you know that every time they print up another billion, another trillion that it is a LOAN that has to be paid back with INTEREST ? Do you think it is just free money ?

 

The solutions to the recession caused by the previous Administration were necessary to prevent a greater disaster, a Depression.

The silver lining for everyone is the remedies have been accomplished at low interest rates for an otherwise untenable situation.

What Republicans fail to understand is the outcome of the previous Administration was a forgone conclusion - that now threatens to repeat itself by the same politicians and skewed philosophies that avoided their proper dismissal as disguised by their very failures.

 

As far as I'm concerned, we are no wheres near a depression, and we're barely even in a recession. The Stock Market closed pretty high on Friday -- above 11,000. There ARE jobs available. You've just got to go for them. And having a college degree will definitely help. My family racks in a little over $200,000 a year -- and we're doing completely fine. My dad had a 3% pay cut -- but that's not much really. We also own a family business which is doing fine -- possibly even better. But I do live near Washington, DC., so maybe it's different when you get a little aways out of the district.

 

Make your mind up. One minute you say the public isn't suffering, despite the increased debt and massive job losses, then you accept that the public is suffering, just it's necessary to avoid a depression - which, mind you, a lot of economists claim is underway.

btks, that's great your family is doing well. It's just a shame tens of thousands of others aren't. If you don't believe things are bad, you have your heard firmly up your own anus.

 

My family is doing just fine right now as well, though admittedly I made a lot more money in 2000 and 2007. That said, I have a LOT of friends whose businesses have been decimated by this recession. A fair number of these guys are in their 40s and 50s are with high school diplomas who started their own businesses and are/were top talent in their fields of specialty. I know one in particular who is considering working union, something he would never have done in his life, because the unions seem to be the only people in his field with work.

While I think its just ducky that people like you and I can skate our way through a financial crisis and actually accelerate our pace of asset accumulation due to falling real estate prices, your post gives the impression that the big chunk of the middle class that just got handed their demotion papers to lower-middle class status should just suck it up. Let them eat cake.

Do you think the ocean of formerly middle class people who gathered at the Lincoln memorial steps to protest an out of control Federal Government would tell the story of our economy the same way you just did? You think their presence there is just an accident? You think the results of this election, whatever they may be, are going to make them magically go away? I've got news for you. Their numbers will only grow until a high school educated American (70% of the American population) is once again able to pull in the kind of income your family "racks in" by operating their own business. I think both you and I agree that will not be anytime in the next two years, if ever. I haven't seen any polling on this, but on an anecdotal basis, I can tell you that 99% of those people are gun owners. That is the statistic that any thinking person should find truly alarming.

 

You all made some good points, lets address them one at a time

Aha!! So you want tax breaks? And what will you do with your newly increased real income? Buy China made goods? Maybe Mexican tomatoes? Perhaps Indian rice? Are you going to spend any of it on goods made in your country? And will reducing taxes not increase the revenue deficit and thus government debt? And most of the money would go to other countries.

Now leaving corruption aside (when governments spend so much its only "normal"), the government directs that money into industries that need it, and create assets which can repay the debts later. When money is given to states I guess most of it goes into infrastructure creation, social services etc. - In short to people and businesses that need it and it stays within the country and creates an asset to balance the liability.

Tax breaks is equivalent to handing out printed money in Times square. Refer to first para for explanation.

This is the problem with most well-off Americans, always want more.

Maybe. But Maybe it'd be used for something for which more money would have been otherwise printed? Or something which would have been otherwise paid off from Tax or other revenue receipts? The reality is that the money is coming back, with a return and its is either preventing the debt from increasing further or saving tax money which would lead to a revenue surplus paying some of the debt.

This is so silly. Did you learn nothing from the recession? Do you really not realize the side-effects of leaving businesses unregulated? Perhaps if all the stringent laws and regulation introduced under the current administration had been there to regulate banks lending to people unworthy of credit, this thread wouldn't have existed. I guess you all like to believe that we live in some kind of Utopian world where all businesses behave responsibly and morally. Sorry to burst your bubble but thats not true. Businesses in general are only concerned with profits and are very irresponsible, thus need to be regulated.

Does someone with a pre-existing condition getting insurance at realistic premium mean anything to you? Does socialized healthcare for those who cant afford it mean anything to you? Perhaps not. Let the businesses decide

What interest? 0.25%? I'm not sure what the exact rate is but I guess it'd be somewhere around that.

 

@Helvetti: You all made some good points, lets address them one at a time

Where possible, I do buy American (I own two Fords). Its hard to buy a piece of consumer electronics made here in America, though that is not exactly something within the control of my consumer decision making. On a food basis, most of what I buy is not only from America, it is grown locally. Its not so much that I am conscious of my carbon footprint, and the carbon cost of importing food, but more attributable to the fact that locally grown food is fresher, tastes better, and is more affordable. I have no doubt that some of the god awful bleached and processed rice that my family consumes comes from overseas, but again, just trying to keep the pounds off, I try and keep bad carbs out of my diet. The fact I get to support the illegal alien population that grows my local food is a bonus.

Are you sure you aren't a Democrat posing as an Indian? This is exactly the type of generalist argument the Democrats make all the time. Reducing taxes within reason encourages business activity. Increased business activity equals higher GDP. Higher GDP equals more tax revenue, even if the tax rate is lower. Most of the information I've seen shows diminishing returns on cutting taxes once you get below 10%, but right now our stated rates on top earners are around 39%.

Another thing: Our current tax system disproportionately taxes the poor by means of excise taxes. We pay a phone bill, we pay a variety of excise taxes + sales tax @10%. We pay for an cable or electric bill, same story. We pay for gas or food, same story. Poor people spend 100% of their income on consumption, just to survive. The fact they don't pay federal taxes is really beside the point, in consideration of all the other taxes they pay on a daily basis.

Once you arrive at the middle class, you get to pay another 20% to the federal government. For the rich, survival consumption is such a small portion of their income, those excises taxes mostly disappear on a percentage basis, leaving them with the small task of hiring a good accountant and financial adviser to make sure the rest of their money is taxed as little as possible.

Anyway, this is all beside the point. The Federal, State, and Local governments need to be able to do within a budget that is a percentage of GDP. Historically, the Federal government alone has taken about 17-19% of that pot. State and Local governments are coming close to matching that number. Maybe its just me, but an efficient government seems like it should be able to survive on less, but our government is most definitely expanding, and by necessity, will be asking for more. Whatever you think of the tax code, bloated government is the root cause of the problem, and needs to be addressed.

By law, only a small portion of our Federal debt can be sold abroad. I know we pay a lot of lip service to how China owns all our debt. It makes good election year talk.

Redistribution of wealth... check. Government picking winners and losers.... check. Don't get me wrong, an economy without regulation would quickly turn to a "lord of the flies" type existence, but I have a hard time seeing how you "leave corruption aside". Its why the founding fathers saw a vigilant and armed populous as an absolutely necessary check on the government.

Ok, now that is just a ridiculous statement. Give money to the government to stimulate domestic businesses? C'mon man.

Actually, handing out money in times square rewards people for being in times square. Tax breaks encourage people to earn/pay others money

Greed is good!

More silly reasoning. IF the money is repaid and goes back to the coffers(pay down the debt), then Obama will have done what both he and I have said he will not. Spending the money for ANY OTHER REASON is misappropriation of funds, though it will never be prosecuted as such. That money was borrowed from the US taxpayers for the sole purpose of bailing out our financial institutions and preventing a depression. If the money is repaid, it should be repaid to the US taxpayers. If Obama wants to borrow money from the US taxpayers to help prop up the Democrat's failing election bids in 2010 and 2012, let him ask for it himself, instead of letting George W. Bush ask for it under the guise of a bank bailout. It is fraud being perpetrated against the American people.

 

Read My Lips -- ( you will like that one, eh Breeze ? ) More Debt Does Not Equal Lesser Debt. Say it until you understand it... "More Debt Does Not Equal Lesser Debt... More Debt Does Not Equal Lesser Debt ...."

 

What is .25% of one trillion... or just one of those other (anti)bailouts ?

 

My family also only buys American cars. We should put money into the American Economy and not throw out money towards foreign countries. Look at how many people are buying the Toyota Prius. Hopefully, the Chevrolet Volt will sell-more than the Prius. It's more expensive -- but you get the money back on taxes, so in general, they are the same price. Same goes for anyone buying a BMW, Mercedes, Lexus, etc. If you want luxury, buy a Lincoln or Cadillac -- and put money into the american economy. The good thing is that the Cadillac Escalade is pretty popular among us "Americans", but a lot of people can't afford its $1500 a month car payment.

Which also brings me to another point... why do we call ourselves Americans? We do not own the whole continent of North America. There's Canada, Mexico, etc... they are also American. I remember when I went to Costa Rica, the people there would ask where your from and I'd say Americano. And they'd be like, so what, I'm american also...

 

Source

Its a masterpiece. The comments section under the article was even funnier.
Bud - Retired posts:

Don't ask me. Why do we call bison buffalo, or native americans indians? You get a name and it sticks. In fairness to ourselves we put the word into the name of our country, unlike Canada, Mexico, or Costa Rica. The Costa Ricans are pretty prideful about it. Just say Norte Americano, and they will understand what you are talking about without complaint.