United States Heading towards a Depression?

We can debate semantics all you want, it doesn't change what I wrote. A president appointing members is a problem especially when said presidents have a strong ulterior motive. By the way, when the did US become a democracy? I was under the impression you lived in a Republic.

 

Hey, take this test. After I took the test it said, "You're a proud member of the GOP, and you might even identify with the tea party movement. You're probably worried that if elected, Romney won't always act as conservative as he says he is." It's funny because I believe myself to be an independent. Not sure if this test is that accurate. Still, it's kind of interesting with 18 different questions.

 

I'm disappointed with my outcome. I'm supposedly "Romney all the way". Romney flip-flops all the time on gun rights, abortion, immigration and health-care policy. I don't think the author of the quiz actually knows what Romney believes, just the like the rest of us, since he panders to every audience.

If anyone really wants to know here are my answers:

 

I was looking at this thread. I was here when it started in Dec 2007. I commented early on.

Here is some info. The recession in the US officially started in Dec, 2007, when this thread was started. The official declaration of the recession was I believe the result of 2 quarters in a row of negative growth...ie losses in GDP. So basically things were going downhill nationwide by mid 2007....basically with the crash of the US housing markets.

The recession "officially" ended in JUNE 2009 Here is one source, written a year later. The recession was so deep and miserable and different that recovery has obviously been slow and perilous. We remain on shaky ground. Parts of Europe are back in recession. Meanwhile the world engines of fast economic growth from China to India to Brazil are all experiencing slower growth. We are nowhere nears deep lasting recovery.

The recession began in the real estate world and spread to the financial world. Residential real estate across the nation still sucks. The devastation was so amazing, widespread, deep, and entirely unprecedented in modern times that recovery has simply proceeded at a snails pace.

I like the complex comparative graphs in this article. One aspect of the economy that hasn't improved across the board are home prices. Real estate excesses drove the economy into the recession and at best "flat" real estate market continues to hamper overall growth.

The overall impact from real estate really crushed the majority of the population; the adjustable graph about net worth shows that the vast majority of the population lost amazing amounts of net worth...and it remains that way post end of the formal recession.

The chart is interesting. While overall loss of net worth is about 40% for all families, adjust the graph and it shows incredibly different perspectives. I looked at average incomes....and basically the families with top 10% of income have done remarkably well relative to the rest of the population.

A big reason is real estate. Hey, if you are earning $30K $50K, $100K, $200K a year...the biggest portion of your net worth is going to be in personal real estate--> your home (maybe homes). If you are earning $1 million/year plus...you have a lot of potential assets way beyond personal real estate. Hell...since the bottom of the recession....the stock market has seen remarkable recovery while real estate across the country has been stuck.

I was actively working in the commercial real estate markets for about 2 decades. I worked through the recession of the late 1980's early 1990's. It might have been a recession to the nation at large..but it was a depression in my industry. I worked in the greater DC markets, city and suburbs. I used to regularly publish info from this graph to speak about real estate issues. The one I portrayed is updated. Page 2 is the really interesting information. Its a picture of demand and supply....the thing that drives the economy. Its simply great data, and its hard to find anything with such great detailed historical perspective.

Fairfax County is, I believe, currently the 2nd largest suburban market for office space in the country. Its growth from 1980 is simply extraordinary. The huge explosion of space occurred from 1980 to 1991: Over 50 million square feet of newly built office space in that 11 year period. Basically all new financing was cut off in spring 1989...but buildings were being started before money was cut off...and they were completed.

Roughly between 1980 and 1991 roughly 52 million sq feet was built and about 40 million was leased and occupied. So there was amazing growth in supply (the new buildings) and demand (the occupied space)...but supply FAR FAR outstripped supply. It meant that the owners of that vacant space couldn't pay their lenders....and....that caused that recession.

If you further look at that graph you'll see that real construction in volume didn't really ramp up again until 1998. It was essentially cut off (save for buildings under construction with loans locked in) in 1989...and it didn't pick up again till 1998. That is a 9 year recovery period. And frankly, Fairfax County might well be the luckiest, best, suburban office market in the nation. If you read through that data there is 78 million more feet of office space (or 4 times as much) occupied than 30 years ago. (While its all sorts of tenants...nothing has fueled its growth like defense contractors--its the defense contractor capital of the world let alone the US.

So it took about 9 years for what is one of the most dynamic, continuously growing office markets in the nation to again experience significant growth. That is a lot of time...but it is a simple reflection...more than anything else of DEMAND AND SUPPLY.

And frankly the US housing markets still suck on that basis (demand and supply)...now a couple of years after the official end of the recession.

Frankly I'm convinced a lot of the slowness of the recovery from the recession is tied to real estate...and it will take years for recovery...despite any promises from any politician of any stripe.

But I'm a big believer in demand and supply. Its the core of real estate...and its the core of every small business my team operates now. I frankly have felt, from experience, that all the tax arguments are bull sh!t. When I was brokering actively in the 1980's and 90's in that explosive marketplace there were huge opportunities to make tons of deals. Tax rates were extraordinarily higher than they are now. With all those business opportunities entrepreneurial folks focused on growing businesses. Taxes didn't factor into any up front decisions. Taxes were an after thought to growth.

Frankly, if you are making money taxes are a great reflection of making money. If you aren't making squat money...you aren't paying taxes. (I've experienced both).

Demand and supply are always key.

To further add to the discussion large corporate profits took a hit in the recession than simply skyrocketed to new higher RECORD LEVELS post recession . They are doing damn great per this graph.

So big companies have fired folks, hoarded cash and profits....and the upper end of the population has weathered the recession extraordinarily well....but the bulk of Americans and smaller businesses have taken the biggest hits.

I'd focus on solving the demand and supply issues--not lower taxes for the well off and corporations.

 

Interesting post Earl. I doubt anyone thinks the wealthy should be exclusively selected for tax-cuts. Tax cuts across the board would be very beneficial especially to the lower-middle class who are the most affected by taxation seeing as the poor, at least here in the UK, receive a massive degree of welfare benefits.

I'm not sure which taxes you are referring to as being bullshit, but I can tell you I'd be a lot better off if there were no 20% VAT and ~60% petrol tax.

I agree supply and demand are more important for businesses, especially when most taxation is indirect taxes. However, wouldn't you agree that there is a correlation between demand and taxation to begin with?

Your post seems to take a position that growth is only a business issue and its ability to supply and receive demand. What about the base, the consumers? Surely relief at this level would increase demand, i.e. through tax cuts.

It's evident the government has thought this way by bottoming interest rates and printing more money in an effort to increase consumer credit and therefore spending and therefore demand. This didn't work of course as Keynesian economics never does; it's unsustainable in the long term and creates the artificial wealth we're now paying for.

I think one of the main reasons a recovery has been practically none existent is due to the loss of tangible industry. While we were high on bubbles we didn't notice our industries - the backbones of our nations; the natural wealth of our nations - slip passed us and through our borders. How can supply be met or demand accumulate if the population has fewer jobs? Especially when public spending cuts lay people off and the panic caused by the recession forces people to seek multiple jobs? It's like gasping for air and realising there's none left in the tank.

Even as a libertarian, I suppose, I know it's foolish to pull the rug from beneath the people with public spending cuts. The government, here at least, has done everything perfectly wrong to ensure the middle and lower classes feel the recession the hardest. Increase in taxation, encouraging business to go elsewhere and cut public employment? If I weren't naive I'd think the politicians were stupid...

First thing I'd do would be to nullify the debt supposedly owed to the global banks.

 

Brum: you are in britain, correct?

I don't know squat abt the british tax details. I know business, I know stuff abt the US, and admittedly I'm at the least left of center as anyone can see who reads my posts on domestic issues. I am a long established business guy; I was at the bottom of the totem pole, I had a lot of financial education, did that stuff, was a commercial real estate guy in a major market dealing with heavyweights and non heavyweights, and now operate small businesses. What I enjoy abt the small businesses are the business challenges and the competition: the competition being my ultimate definition of what fuels markets.

In my experience demand and supply are the biggest elements to business and economic success. China has become the worlds supplier of at least low grade manufacturing...and is an incredible rough tough competitor.....and it so happens its a state operated/state controlled/state managed economy with still tight controls on all the freer elements of its vast manufacturing and wealth creation.

China has been all about supply for the majority of the last 3 decades...and more recently it is fulfilling elements of demand to its huge population and its extraordinary economic growth.

But taxes...to me --> taxes are the after effects of economic productivity. Look, the US had far far far better economic activity in the 1990's than the 2000's even forgetting the brutal recession. It was significantly better in every category of growth across the board. Taxes were sh!tloads higher in the 1990's than in the 2000's. US tax cuts on individuals, corporate tax cuts, cuts on capital gains at the start of the 2000's....it didn't do sh!t relatively speaking and in the end (ie the recession)...what ended up being massive mis investment led to an incredible bubble of epic proportions affecting trillions of dollars.

The US would be better off if there had been some government type intervention that cut off or slowed funds into the residential real estate markets.

Frankly the signs were there, like the graph from Fairfax County from the 1980's. The simplest picture was that vacancy...or unmet supply get soaring. Frankly that robust county at its highest vacancy had far lower vacancy than most of the country. It went out of whack. When vacancy climbed above 10% which was around 1984 or so...supply should have been cut. But it wasn't.

I experienced insights into it. I speak with more experience, perspective, and knowledge now.

Frankly, screw the politics of the parties in the US. If I could I would remove all power from all the financial guys (ie the banks, the investment houses, etc.). They are the fee guys that end up making out no matter what occurs. (I was a fee guy). I think the fee guys screw up the big picture.

 

You make some very valuable points and I can tell you know what you're talking about regarding the real estate business and small businesses in general.

Things are quite different here. I think the reason why tax cuts don't seem to affect much in the US is because you're one of the lightly taxed people in the world. Compared to the rest of Europe our taxation isn't very heavy, but compared to the varying states we're very heavily taxed.

I agree completely that supply and demand are the main contributors to growth but when taxation is so high that it inhibits those on fixed incomes (the vast majority of people here) from spending it kills demand.

Take this strange scenario we have here: taxation was upped in order to "pay back the national debt". Inflation sharply increased and VAT increased from 17.5% to 20% meaning food goods in particular have become very expensive and higher taxes means we pay even more per litre for petrol (£1.31/litre in my area which equates to $9.53/gallon). This means that people are more inclined to save money, but what has the central bank done? Cut interest rates to 0.5%. Throw in the fact that we not longer have any real industry and people constantly complain about lack of skilled jobs it's no wonder we have no growth. If this isn't "the big squeeze" that Gerald Celente and Max Keiser have spoken of, I don't know what is.

When you have such a mess at the consumer/labour level supply and demand appear to be an after thought.

On the note of real estate you may be interested in having a read on its current state here. It's a buyers market at the moment and very few houses are being sold. A lot of people are having to reduce their house prices multiple times. I really do fear for the new generation, my generation, for the generation before us have dubbed us the "renting generation". There's practically no hope to get on the property ladder as banks are now too stringent on lending for mortgages. Those of us who stuck it through university and chose a skill in demand are luckier. I'm going back to university this year to complete a masters in hope of having that edge over other grads.

This is of course here in the UK. Seeing as you don't seem to have this I agree supply and demand is the main issue in the US.

 

The Middle Class Falls Further Behind
http://money.cnn.com/2012/08/22/news/economy/middle-class-pew/index.html

"The middle class is struggling to survive and shrinking before our eyes..."
"The report also found that the middle class is a much smaller part of the population than it used to be, while the poor and rich extremes of society are expanding."

"Who is to blame? The middle class blames Congress as the lead culprit for its demise, but blames itself least of all. While 62% of middle class respondents to the Pew survey blamed Congress for their worsening state, 54% blamed banks and financial institutions, 47% blamed corporations, 44% blamed the Bush administration, 39% blamed foreign competition and 34% blamed the Obama administration. Just 8% of all respondents blamed the man (or the woman) in the mirror. "

As far as raising taxes on the rich...

In the past I've financially helped out some friends. But in the beginning I was naive a couple of times. In two cases I didn't realize that good people I've known for years had developed substance abuse problems. The cash I gave them went mostly to fund their substance abuse. (in both cases when I offered to directly pay their bills instead the two were furious almost to the point of violence). The moral of this story is never give cash to someone with a substance abuse problem.

Congress has a spending abuse problem. And Dave Barry is right - congresspeople of both parties get re-elected for SPENDING money, nobody gets re-elected for saving money. If we raise taxes on the rich, Congress will spend it and nothing would change.. Now I'd be in favor of using those taxes to pay down the debt, but as far as I know no mechanism exists to do that.

That is all assuming that raising taxes on the rich will result in more tax revenue. It could very well result in taking in LESS tax revenue.

 

Amazing. Why doesn't the government just form up some brute squads and send them out into the neighborhoods to beat up poor people for any loose change they may have on their person.

There has been a long standing push for a VAT here in America, always by the left, and more recently by those on the right as well. It isn't always called a VAT by those on the right, but in Hermain Cain's 9-9-9 plan, one of the 9's was a brand new national sales tax. These types of taxes most directly impact the poor, who spend 100% of their money on consumption to survive. In places where the government provides or subsidizes all the necessities for the truly poor, like the US and the UK, these taxes still impact the middle class harder than the rich. I often find myself wondering if liberals believe in perpetual motion, because the concept of taxing the poor to create more government programs for the poor is not far off.

I can't imagine what effect a 20% VAT has on demand. I personally would buy a new car every year were it not for the 10% transaction cost created by the government. As a result, my car purchases happen every three to four years. That is a direct impact on demand created by the government. Some nitwits have talked about a tax on every stock trade. Can you imagine? They think it would help generate revenue which could be thrown at getting rid of poverty, when all it would do is help create more poverty.

Supposedly, you are suppose to go out and borrow that cheap money to start a business, or get an education. Of course all the money any middle income might have saved is immediately pissed away on the VAT, but for very wealthy people, I suppose it might have the desired effect. I would probably borrow the cheap money and invest it in a nation without a VAT.

This is true in America as well. In the residential housing market, one can buy houses for less than the cost of the materials in them, especially at the lower end. I've heard Detroit is no longer power the lights in whole sections of town where one can acquire a house for under $1000. There is talk of bulldozing the structures rather than maintaining them. Poorer neighborhoods in California have homes selling for 35k that would cost 80k to build, yet rent never dips below $600. It tells me you are spot on with your assessment that these people simply cannot get qualified for a mortgage that would have payments of under $100 a month, so they are left renting and paying $600. I'm in the process of acquiring a duplex in such a neighborhood as we speak, based on that very math.

Good luck with that. We have such a glut of university grads seeking employment here in the states, employers simply raised the bar and lowered the wages. Supply and demand back to bite again.

 

The Liberals (republicans) introduced a GST here (Australia) of 10% across the board. It definately hit the poor hard. I was running a business at the time and it did make life easier for me. Before we had GST (goods and services tax) we had a differing amount of tax for different stuff. I bought & sold computers which had 25% tax, luxury cars and ice cream were 40% whilst bread and milk were at 7%. The GST stripped the varying taxes putting a flat 10% on everything, which made it a lot easier to work out at tax time. There are recent suggestions this may rise to 15% but I don't believe that will happen whilst everything is skyrocketing around us, rent, food, utilities have markedly risen in the last 2 years here.

 

Believe it. California State sales taxes started out in 1933 at 2.5% and have been continually raised by Democrats and Republicans including Reagan and our current governor Moonbeam to exceed 8.25%. Businesses and household budgets grow and contract with the economy. Government grows when the economy is booming, and grows more quickly when the economy is struggling. Any candidate, Republican or DemocRAT who tells you he is going to shrink government is either uninformed or lying. I simply hold out hope they will grow the government less than the other candidate who makes no such claim.

 

Lots of chatter here lately... I think this kinda sums up what most people here are saying.

Keynesian Economics is a failure.

 

I make an educated guess that you have no idea what Keynesian Economics is and this is just something that you have heard.

 

o-nation this is an absurd generalization, typical of the recent rantings of the ever more extreme radical right wing. Its the representative of the radicalization of the extreme right to paint government this way. You, on the other hand, have supported big government when it was bush's war in Iraq and have pushed for big government to find, jail, and deport all illegal immigrants. Your call for deporting all illegal immigrants would cost an estimated $285 billion[/quote]. having made that claim. how would you pay for it??

This is also simply hogwash. When and how has it been brought into big open "long standing push". It simply hasn't been a part of major discussions. From the left the standard argument is that its a regressive tax. That makes it a deep basic problem on the left that means its scarcely considered. Occasionally, with the onset of ever increasing debts over the last 12 years it is brought up by a politician and it never goes anywhere. If any "party" is always talking about taxes...its the GOP. The GOP discusses taxes as if it has everything to do with everything in the economy. Its as if the most fundamental truism of economics was never invented.

As I was saying...there you have a guy who rose to the top of GOP popularity contests for a brief time period...being the most visible proponent of this issue. Nobody else comes close in terms of highlighting or promoting the concept. You have just given the evidence that this primarily closet issue...was in its latest iteration...highlighted by another Right Winger. You just contradicted your effort at propogandizing a topic that is simply untrue at its most basic premise.

you just proved my point. the issue doesn't get any traction on the left because it is an amazingly regressive tax.

Again another statement showing that this issue basically never gets traction on the left.

and thar she blows....obamanation creating another fantasy observation after twisting through an issue and completely misrepresenting it.

Good luck on the property deal, even though you are a truth twisting propagandist for the increasingly radical right wing.

 

Deport all immigrants? Please. Quote me. All nations use their immigration policies as a means to regulate economic conditions within their borders. I believe the discussion of Israel's immigration polices is taking place on another thread right now. Israel with unregulated immigration would cease to be Israel very quickly.

The US is no different. What we have right now is a completely uncontrolled mess which is costing the taxpayers quite a bit more than the $285 billion. Bring us your poor unwashed masses works great when you aren't planning on offering them all socialized services. I would be entirely happy with enforcing our existing immigration laws to the point work and social services are unobtainable by illegals, at which point most would self deport.

Put down the crack pipe. California has a Democratic governor with a Democratic controlled state congress and the GOP is the ONLY thing standing in the way of higher taxes across the board, including sales tax, property tax, and income tax. In fact, it wasn't that long ago that YOU were advocating for doing away with prop 13, which is the only thing that has kept the elderly from being tossed out into the street by the tax man. It isn't just bad tax policy, its immoral.

If you want to talk about fundamental truisms, here is one for you. Democrats do not give a flying fuck about the poor, unless you are talking about creating more poor people so they can have a larger voter base. I just got a note in the mail that another 10 minutes have been shaved off the school day for public schools. Why? So Teachers Unions can retain their outrageous pension plans at the cost of the people paying for their services. Teachers Unions, Police Unions, Govt. Employee Unions, Prison Guard Unions. These are the people who put Jerry Brown in office, and if Moonbeam has to pass another hike in an extremely regressive sales tax to keep these people happy, he is going to do it. He has already tried, but the 2/3 requirement for tax hikes allowed the few Republican obstructionists we have in office to block it from passing.

Thanks. With cash available at 2.75%, its like they are handing these things out for free.

I've actually come to forgive Michelle Bachman for her the biggest sticking point I had with her in the last month or so. Here was this so called Tea Party conservative, talking about smaller government, yet actively taking government subsidies for her farm property. It seemed hypocritical at the time, but no longer. The amount of low hanging government cheese is so staggering, she would be a fool not to take subsidies that were available to her, simply out of principal.

I am now in the same mode. I'm filing for a section 8 permit for my newly acquired duplex. Not only will my investment pay me nearly 20% per year, I'm going to get the federal government is going to guarantee that rate of return(they are already underwriting my free money loan). I'm also buying my wife a NEV (more commonly known as a street legal golf cart) to haul my kids to school. I had toyed with the idea before, but it felt somehow dirty to have the government pay for my ride. Now, the State of California has added cut rate electricity to the list of perks and considering the size of my monthly electric bill, it is simply too sweet to ignore(not to mention the golf carts have their own lane at the school eliminating a 20 minute wait).

Its beautiful. Hell, if it goes on long enough, I might even get used to it and start voting Democrat. Fuck the poor. Free government money for my housing rentals, free government money for my vehicle, free government money for my electricity. Maybe I can line up some of those sweet government contracts the frugal folks at the GSA oversee.

 

The past half dozen or so posts have contributed interesting subject matter into the debate and you come out with that? I'd expect this type of gibe in the playground. Why don't you enlighten us on how successful Keynesian economics has been thus far? Do you know Japan tried to solve their recession for a couple of decades with "quantitative easing" and other silliness, only to be luckily saved by the rocketing demand for technological goods?

Value Added Tax, in my opinion, is the worst form of taxation. Not only is the tax added to every stage of production and manufacture but also stings the consumer at the end with the massively increased price accumulated from the initial raw material plus the tax percentage itself!

You better believe it mate. They pushed the increase here from 17.5% to 20% a year or so ago, during the worst of the recession and while inflation hit everything and public jobs were slashed. Politicians couldn't care less.

Lol that's the reasoning behind the Swede's 25% VAT ... it's a "nice round number".

Earl, you criticise Obamanation for generalising then you go on to slander him as representing this supposed "radical" and "extreme right wing". You're naive if you disagree that the majority of "leftists" don't think they way he describes, they sure as hell do here. You're an exception, congratulations. Chill man.

 

Earl, I appreciate our little talks. They serve as a reminder to me of how woefully unprepared the left is to address it's blatant hypocrisy and lack of solutions. Legitimate concerns are met with hype and bullshit.

Your only response to my fact and profanity laced tirade is some idiotic talking point about how Paul Ryan has abandoned Christian teachings? Hell, you should have capped it off with an accusation of racism, like most liberals do when they have nothing to say, which is most of the time. Its like dealing with children. We have children running the country.

Here is a question for your beloved president. A ways back you pointed out to me your concerns about the loophole fund managers were using to shelter their income for fund management under the capital gains tax rate. Obama had two years with super majorities in both houses of congress and he did NOTHING about it. Why? A single piece of legislation could have been pushed through with ease in 2009 or 2010, and yet he did nothing. Why? Why?

 

Because he is a shitty leader. Even if you agree with his politics it is hard to think he has done all he could.

 

No truer words have been posted on DP.

I'd tweak it slightly to be: "we have children running the world".

Let's be honest, you must have something wrong with you to want to be a politician. Normal people, average man and woman on the street, don't get off on telling people how to live all day.