Democrats more patriotic than Republicans

What utter nonsense. Anyone in the business of buying and selling large capitol assets to and from the USA can tell you exactly when the recession began, when it gained momentum and when the economy was at its worst in North America. 2006 was the last good year, 2007 saw the beginning of economic slowdown, 2008 was a year like no other in recent history. All of my clients without exception stopped purchasing in unison by the end of 2008. 2009 was a brutal year, the only ones of my associates that remained in business did so by dipping into their own assets. Anyone remaining (60% contraction on both sides of the border) in that type of business in 2010 merely scraped by. By 2011 as my clients began issuing purchase orders again, new problems arose in financing. Clients with 15 and 20 years of good financials were being denied financing until they could show 2 consecutive years of good financials. The smoke is only begin to clear now.

If you think that the current US administration set all of this in motion, I want some of what it is you are smoking. To attempt to make a point by citing a rise in unemployment figures in recent years without even mentioning the last 6 years of financial turmoil is nothing more than a lie of omission.

There is no easy button, there is no quick fix for this type of economic mess. Without even addressing the effectiveness (or lack thereof) of recent stimulus packages, I cannot imagine where the North American economy would be without that kind of effort.

 

I find your post to be surprisingly fair. Obama is no more responsible for the economic crisis than Bush is. Clinton would be a better guy to blame and even that would be unfair. What we can atribute to each President is the debt they leave behind, and by that score card, Clinton was a rock star, Bush was a C student, and Obama is an abject failure.

One of my favorite lines from Obama went something like "Spending is stimulus", as he shovled hundreds of billions of dollars at his political supporters. It was enough to make Haliburton blush. If all spending is stimulus, how about cutting me a check for 50 bn. dollars. After all, spending is stimulus.

There can be no doubt Bush lost a lot of his base support when he came up with TARP, and I say that as someone who agrees with you that TARP was necessary. What I find most disturbing of all is that this president (Obama) has done nothing to deal with the root causes of why TARP was necessary, even though he makes political hay by demonizing "banksters" and American businessmen.

Lets face it. If today JP Morgan Chase or Goldman say they are going under, our government with Obama at the helm will float them WHATEVER amount of money they require to stay afloat. They have no choice, just like the debt ceiling hikes. The only people talking like adults about the root causes of these problems are the Tea Party. When the next debt ceiling hike comes around next year, we are going to see the same childish name calling of "Economic terrorists" as they try and get this government to do SOMETHING to get this mess under control.

 

Hm. Assuming you deal in the topic connected to your sig link it appears you are dealing with the manufacturing base of America and with the myriad of possibly large to medium to small manufacturers throughout. If so that describes an interesting look at backbone industrial activity and conditions for a core component of the economy.

Those years coincide with the housing market crash and predate the serious recession issues in late 2007 through late 2009/early 2010. I saw a mini part in 2 industries on a more consumer level. One smb with basically household items with price points from around $100 to about $4k saw credit for its buyers start to dry up in late 2007 and stay tight into late 2010. Its eased up now.

On a 2nd industry that is historically countercyclical we saw an incredible boom that ran from mid 2008 to mid 2010. Consumers are the public. That was nationwide.

On a personal basis and confirmed this with some friends. Late 2008 through 2010 saw tremendous tightening, rejection, withdrawal, of LOC's from all sorts of financial institutions, without any apparent changes from the holders' positions. Any LOC's that were maintained were only done via incredible back and forth negotiations let alone the longest standing impeccable relationships with the institutions.

The countercyclical industry saw a boom back around 2000/2001 also national. This boom was larger in scope in our experience. The LOC's weren't touched in 2000 and I had no contact with the industry serving the residential market ....though I doubt the owner saw that kind of shock as more recently.

 

I'm not disagreeing with anything you are saying either. You will notice that I did not address the thread topic (as a foreign citizen, I simply don't care), nor will I address any of the political infighting. What I do bring to the discussion is an objective view, I have no vote, it matters not to me which of the two major parties is in office. What does matter is that what is currently working in terms of economic stimulus does not get drowned out by a chorus of misinformed voices.

I've yet to see anyone mention what is working. Yes, unemployment numbers are dismal but where would they be if some of the current administration's tax incentives were not in place? For example, the small city I live in has lost about 12,000 jobs in the last 2 years (that I know of, the actual number is likely much higher) to tax incentives designed to repatriate jobs that were being done for American companies. Admittedly, only about 1,000 of those jobs were good middle class jobs while most of the rest were lower paying jobs but in tough times, work is work.

My only point here is that there is one undeniable truth about the economies of all free market countries. Economic cycles manifest and evolve in a timeline which is completely incongruent with political terms of office. . . that was really all I wanted to add to this thread.

 

You say it all in the above quote. Manufacturing suffered the greatest declines during that time period and was one of the biggest contributors (if not the biggest) to the rise in unemployment.

More or less, the timelines you describe parallels the timeline I described. Troubles in the housing and financial markets in that time period all served to create the perfect storm.

Over the last 30 years of doing business, large capitol expenditures have proven to be a good indicator and quite often a predictor of economic activity and to some degree employment numbers. In the past when a recession was imminent, our industry would simply buckle down, accumulate cash, lower inventories and ride it out. I've never seen a scenario where there were no buyers as was the case at the end of 2008. There was no riding it out, downsizing was the only option.

The link in my sig is more of an indication of what is left than what was. These days all of the action is in large scale liquidations, which to me is a sad commentary on the health of the North American economies.

 

Sure, but lets not throw the baby out with the bath water. We may not be able to blame any individual or administrationfor the crisis, but we can definitely assign blame for activities that make things worse and activities that make things better.

Obama was right, spending is stimulus, though some types of spending are a lot more stimulative than others. For instance creating whole new branches of the federal government as a jobs program is just idiotic. Throwing billions of dollars at new employee training programs in the middle of a recession is also a bad idea for the taxpayers and those wasting their time in such training. The only people who benefit from such programs are those running the training centers, who are coincidentally campaign contributors to the regime in power.

Its all well and good that Obama's supporters now have more money in their pockets to spend on luxury items and stimulate the economy, and it may be better than nothing at all, but it is essentially unfair. It is esssentially corruption, and the debt created by it does more long term damage than any short term benefit from circulating more cash in the economy.

I won't argue with the efficiency and effectiveness of tax incentives, but there are a lot of things Obama could have done differently that would have helped us through the slump of this economic cycle. Instead, he spent two years trying to get a new non-stimulative government entitlement through congress. Talk about taking your eye off the ball.

 

Gomeza: Thought I would present this graphical data; a data set on office development trends over the last 30 years in Fairfax County Virginia....I think it is currently the 2nd largest US suburban office market. Its interesting in that reading between the lines one sees the impact of severe economic conditions (I was a commercial RE broker in that area from abt 1980 to abt 2000)

http://www.fairfaxcountyeda.org/sites/default/files/publications/ye09rer.pdf

All the relevant info abt large scale economic data is on page 2. There is an interesting graph on page 9 showing just how erratic new construction is...even within one of the most dynamic/ virtually always growing markets in the nation.

(there are semiannual updates on this info...but they don't show the graph from page 9).

You have to read between the lines to see the economics. The vacancy rate defines the inverse of demand.

Even as demand skyrocketed in the 1980's supply clearly overshot that. By 1990 a few calculations shows that almost 55 million square feet were occupied as opposed to about 20 million in 1980. But Supply was 67.5 million.

Take that situation in 1 county in the US. Multiply it an enormous number of times to represent similar scenarios across the nation....and it led to a national commercial real estate implosion that started in late Spring 1989...and led to the recession of 1991.

You can see how it utterly "stopped new construction". Most of the construction of the mid 1990's were for buildings wherein a govt tenant preleased everything, or an occasional private tenant...or a building particularly built for a user/owner occupant.

It caused a nationwide recession but it was a depression in my industry. In fact for around a year there simply was virtually no liquidity anywhere. Then the feds (resolution trust) stepped in...swept up buildings and savings and loans and supplied the liquidity to get the industry back on its feet. It cost billions to do so.

Anyway you look at it...it took about 6 years for construction on a large scale to resume. And seriously this is one of the healthiest markets in the nation. Aggregate occupancy of space keeps growing!!!! Its astonishing.

But sucked out all liquidity and capital. The money just vanished. Similar to what you described.

If the feds hadn't stepped in with their cash...the crash would have been far longer and more severe. Fed liquidity made it possible to lease up buildings in 91, 92, 93, 94. They provided the money to build out interior space before a tenant occupied. That frankly kept economic activity within the industry working.

But in Spring 1989 I distinctly recall liquidity just whooshing out of the business. I lost 3 brokerage sales deals in a row....all abt ready to go to settlement. I was an investor in a building and had to pump in cash to make it work. Ooooof....what a painful period.

No buildings sold. Nothing. Values essentially went to zero. It was crisis up the kazoo.

A single politician doesn't solve anything...regardless of words. Time is essential to work its efforts ....and govt money is an enormous help in the midst of that type of crisis.

Don't know anything abt the machine tooling world...but from what I read it does reflect an underlying hint to overall factory and industrial activity...which in turn augurs hints about other economic elements further downstream.

Hope to heck buyers start sucking up that equipment and put it to use...even if its at prices that nowhere reflect pre crash values.

Which reminds me...It was roughly 2-3 (probably closer to 2) years after the 1989 crash when liquidity went bye bye...that I recall the first substantial office building being sold in the market...where the crash had occurred. I had looked at that deal pre-crash. It sold for $0.25 on the pre crash offer....and an enormous discount off of what it cost to build the building.

Deep deep recessions, let alone depressions and industries collapsing are no fun to say the least. Around 91 the motto was...."stay alive to '95." Frankly there wasn't a lot of political bs floating around and the reality was that whomever rode out the industry knew it was going to be a long haul to recovery.

Good Luck!!!

 

No argument here other than to say we are looking at these things in hindsight.

 

I remember that time, I was just starting my automation business while flipping real estate on the side. As I mentioned previously, large capitol expenditure slowdown can sometimes act as a predictor of economic activity. After an over heated economy and real estate market from 86-89 I could see the signs of slowdown which prompted me to liquidate the 3 properties I had invested in at the time. All 3 deals closed December 89 at the peak of a soon to recede market.

Where manufacturing is today in North America as opposed to where it was just 10 years ago is best described as a shambles. Recession is not the right word to describe it, a major shake up has taken place where all labor intensive applications have gravitated to cheaper labor markets. Though this trend has been going on for decades, at one time there were issues of product quality and a lack of servicing infrastructure stemming the tide. This is no longer true, the best machine tool builders for example are no longer the USA, Japan or Germany followed by some of the other European countries, now South Korea beats them all hands down for value versus price with Taiwan still near the top and China catching up quickly. Similar trends have taken place with just about all types of manufactured goods.

I cannot see a solution to these trends.

 

Thanks, that's interesting, I didn't know that. Can you tell me WHY the slowdown started in 2007? And WHY they stopped purchasing capital assets by the end of 2008? What did they see, what cased this behavior?

 

I experienced it differently. Huge overbuilding with supply way overstripping demand led to failed loans, hurting financial institutions...and a crash. I'm pretty sure I first experienced it spring 1989 in the DC region. Of course there had been a regional financial failure in the SWest US before that. Maybe the financial failure(s) took time to spread.

Maybe capitol slowdowns occurred from slowdowns in construction???

Now that is scary and something I have not been aware of. What abt US car sales going from 10 million at the bottom to 14 million now? Is that helping? Huge parts of that production are spread among myriads of manufacturers as I understand it.

Secondly I was under impression that low natural gas prices were helping boost manufacturing? true or not?

Now I've read that quality in tool building is a quality underlying issue for manufacturing. true or not. that trend would not bode well.

 

Every recession or economic slowdown is the result of its own unique set of circumstances. The recession we are currently struggling to come out of is no different in that regard but is unique in the number of cumulative factors that compounded the economic slowdown while adding to both its momentum and duration. First it must be said that economic slowdowns are inevitable, especially after periods of irrational spending exuberance by any given society. North American consumers in that respect are as complicit as all other parties in terms of being a factor contributing to the recession.

By the middle of the last decade, consumer debt was at an all time high with large segments of society struggling to service those debts. Meanwhile the same prevailing mentalities had crept into home ownership with lenders fueling an artificial boom by underwriting countless highly leveraged loans to poorly qualified prospective homeowners. That type of economic growth was unsustainable and as more and more financial institutions found themselves with enormous portfolios of failing loans, the dominoes began to fall. These problems began to surface initially across North America around 2007, picked up momentum throughout 2008 and 2009 with the fallout still taking place today.

In answer to your specific questions: North America found itself with all of the major engines to its economy (consumers, manufacturers, government and financial institutions) overspent and in hock up to their eyebrows all at the same time. Financial institutions began freezing credit, effectively halting all capitol expenditures, lines of credit were frozen, as were most types of consumer loans. In a very short time these financial woes escaped the borders of the USA and became global issues.

While this turmoil was taking place consumers and businesses alike, with both groups struggling with debt and uncertainty, adopted a wait and see attitude, postponing purchases as they attempted long overdue belt tightening. My rudimentary explanations of the myriad of complex issues and human failings aside which all interacted to cause the perfect economic storm, it must be evident that there is plenty of blame to go around.

Therefore it is as unfair to lay the blame entirely at the feet of the Bush administration as it is to suggest that the Obama administration has significantly made it worse. It may take another couple of years before we even see a noticeable positive momentum change.

 

Though we are referring to similar events within the same time period, we are actually speaking of 2 different scenarios. The real estate boom of the late 80's was uneven across North America. Some areas had enormous overcapacity while some regions suffered little in the way of decline. In the region I live for example; we did have overcapacity but not to any extreme. An overall economic slowdown with rising unemployment was as much the cause of the real estate market going soft as overcapacity.

I live in and do most of my business in the Northern Michigan, Southern Ontario corridor. Don't let anyone tell you that the US government automotive bailout was a mistake. Increased automotive production is an enormous positive for this region and as you say so much is outsourced to regional suppliers that the economic impact is far reaching.

I'm not sure how natural gas prices would have a great impact on manufacturing other than gas fired foundries and steel mills seeing some benefit as well as heating costs. As for your last question; it is important to make the distinction between machine tools and tools, which are two different things. The underlying issue for manufacturers is cost versus quality. Currently the best machine tools (of the type I deal in) which are built in North America are assembled not too far from you in Kentucky. The brand name is Mazak but they are prohibitively expensive.

 

It is unfair to lay the blame entirely at the feet of the Bush administration? Even largely would be an overreach. Bush was dealing with two crisis from the previous administration and loose fiscal policy which had a profound impact on the US economy. The destruction of the twin towers, and the crash of the dot.com bubble.

Also, the idea that it has not gotten significantly worse under Obama is debatable. That isn't to say that Obama is specifically to blame for making it significantly worse, but here the terms largely or mostly could arguably be applied. The economic cycle is playing its course with new factors such as the questionable future of the European and Chinese economies having their impact, but the single biggest question mark in the minds of the rating agencies right now is the political will of this country to deal with its debt problem. 6 trillion in new debt with a debt to GDP ratio over 100% in the last three years under Obama is an enormous concern. Refusal to even sit down and face the problem is an enormous concern.

Even today, if pressed, Obama's solution to the problem has only two parts. 1) Raise taxes on the rich. 2) Enjoy the dividends from reforms already put in place. There was an extensive interview with Mark Halprin and others on CSPAN that covered this. That is Obama's entire debt crisis plan. Thats it. Nothing more. There is not an analyst in the nation that will back the idea we can even get to a balanced budget by raising taxes only on the rich. We have a 1.5 Trillion dollar budget gap. There are going to need to be spending cuts. There are going to need to be eliminations of tax breaks. Simplification of the tax code would be a nice to have while they are at it. It is like Obama thinks closing his eyes is going to make it go away.

Another thing. Credit agencies threat of downgrade is one thing, but businesses have their eyes wide open on that debt. We are living in this air of uncertainty. It is like a giant game of musical chairs where we know the music is going to stop playing at some point with 95% of the chairs removed from the game. Some political action that goes toward the concept that either a) the music will keep playing for a long long time, or b) that the number of chairs that will be removed can be determined would go a long way to helping put this slump behind us.

I can get behind an auto bailout. I can't get behind the subversion of the due legal process, where the president put Unions ahead of bondholders in a managed bankruptcy. That is, once again, pure corruption.

 

Raising taxes on the rich creates more jobs imho. Most of the rich won't pay more tax anyway. There's a lot of clever accountants out there. Rather than pay tax they invest more into the business to end up not paying any more taxes, but employing a lot more people. They end up with a bigger business and make more money anyway, is the theory.

 

Raising taxes on the rich gets them to move their money elsewhere to avoid paying taxes. Yes. I can agree with that. The rich aren't stupid. They didn't become rich by being stupid. They will move their money to avoid paying taxes, but moving the money offshore does not employ more Americans. Tell me again how the rich avoiding the newly raised taxes helps with a debt crisis?

What is more important than the flaws in your logic is the obvious mathematical problem of being able to tax the rich enough to close the budget gap. If we took every dime the rich have, every last one, we could not close the budget gap for even a single year. Something else obviously needs to be done, and Obama won't even face the problem.

A very successful friend of mine once told me something that has stuck with me. In business, the answers to difficult problems are usually obvious. They are difficult because there is usually pain involved in the implementation.

If only we could get thin by stuffing our faces with pizza all day long. It seems Obama is a believer in such a miracle diet.

 

@Gomeza, um, I know all that. Thanks for the remedial economics lesson (DUH) but your answer is very broad strokes. You neglected to address my specific question.

I asked you what, specifically, were these companies looking at when they stopped purchasing capital assets by the end of 2008? If I was a CEO of a major company, what would I SEE, the same as all my peers, to get me to stop purchasing capital assets.

Because honestly, I can't find data to back up what you wrote and my business experience in 2008 is very different than yours. Did CEOs suddenly say, "Wow, gee, consumer debt is at an all-time high again, we better stop buying equipment"? WTF happened?

I asked you what, specifically, were these companies looking at when they stopped purchasing capital assets by the end of 2008? Or rather, before September/October 2008 when everything started going bad. Because my experience does not match your claims that purchasing of capital assets slowed in 2008 before the Wall Street meltdown.

 

Connect the dots for me. How does a tax increase create more jobs? This is not to say that a tax increase is not necessary or even justified but I fail to see the connection between jobs and increased taxes.

 

Please explain.

 

The way you pose the question and your remarks afterwards implies that all purchasing agents and company principles came to a unified determination not to purchase based on observations. It was more a case of a common experience. After over a year of declining work orders in manufacturing and a general sense of market slowdown, a number of stunning negative events took place, not the least of which was the collapse of Lehman Bros. This event added to a widespread collective loss of confidence and an extreme tightening of commercial loans . . . this article from that time explains the events quite well.

You shouldn't use such an accusatory tone when speaking of events that are so easily verifiable. You obviously do not work in commercial finance. You've got my take on what happened with capitol expenditures during that time period, now try finding a second opinion of someone who was working in industrial sales and finance at the time. They will tell you exactly the same thing as I have chronicled.