The general consensus I'm getting is that things aren't good, but aren't as bad as people fear either. The 'experts' think if we go into recession its not going to be a repeat of 2008-09. Remember then banks were on the verge of callapse where as now they're sitting on trillions. Also big businesses were out of cash to. This time they sould be able to ride out a slowdown with out the employment carnage of fall and winter 08-09. But then there's still the question of what's going to happen to the millions still out of work from 2008 as well as the various Federal, state and local governments workers being let go.

 

Agreed for the US. I think the real concern is coming out of Europe this time around. If Italy or Spain start having a Greece moment than the ripple effect becomes the concern. I think a lot of the stock market sell off right now is more European focused than US data focused.

 

Time wise I think the 'battle' over Spain and Italy will be a lengthy, drawn out event. Even longer than Greece or Portugal. I don't see this as an overnight collapse or an overnight fix. There is a lot of volatility coming for the world markets and economy over the next year or two. (With potential wild swings in both directions.)

 

I think big business is letting us know their concern over the potential for long drawn out volatility, through their hording of cash.

But then there's still the question of what's going to happen to the millions still out of work from 2008 as well as the various Federal, state and local governments workers being let go.

 

They'll have to compete in the private sector.

 

True, that goes without saying but the thing is if we have 1 million open positions and 7 million applicants what about the balance?

 

I know the President was trying to get taxes raised with this most recent showdown, but is there a way we could offer tax incentives to businesses that hire those that are out of work and make money back from the income taxes those newly hired people will be paying?

Paul Krugman on why we are not really in a recovery:

 

The Wrong Worries

 

In particular, when employment falls as much as it did from 2007 to 2009, you need a lot of job growth to make up the lost ground. And that just hasn’t happened.

 

Consider one crucial measure, the ratio of employment to population. In June 2007, around 63 percent of adults were employed. In June 2009, the official end of the recession, that number was down to 59.4. As of June 2011, two years into the alleged recovery, the number was: 58.2.

 

These may sound like dry statistics, but they reflect a truly terrible reality. Not only are vast numbers of Americans unemployed or underemployed, for the first time since the Great Depression many American workers are facing the prospect of very-long-term — maybe permanent — unemployment. 

But then there's still the question of what's going to happen to the millions still out of work from 2008 as well as the various Federal, state and local governments workers being let go.

 

They'll have to compete in the private sector.

 

True, that goes without saying but the thing is if we have 1 million open positions and 7 million applicants what about the balance?

 

I know the President was trying to get taxes raised with this most recent showdown, but is there a way we could offer tax incentives to businesses that hire those that are out of work and make money back from the income taxes those newly hired people will be paying?

 

I think we've already tried things like that, with anemic results.  It simply doesn't make sense for most employers.  If you don't really need the extra help, then having part of the carrying cost of the employee subsidized still means that you're out money.  If you were sort of on the verge of needing an extra worker but weren't quite all the way there, then your better bet is to create a part-time position with lower pay and benefits, and then bump that person up to full-time if business picks up later (and if they're a good worker and you want to acquire their services full-time, of course).

 

And, of course, the regulatory burdens of hiring (even before ObamaCare) are heavy, which makes employers resist hiring as long as possible even when they do admit that they're going to need additional hands at some point.

True, that goes without saying but the thing is if we have 1 million open positions and 7 million applicants what about the balance?

 

It means that this is a very competetive job market.  Which might be a good arguement for lowering the minimum wage, or not having one at all.

 

 

 

 

 

 

The minimum wage is not the most significant burden to most employers.  ObamaCare will increase the costs of hiring by significantly more, for example (and its economic effects will be felt even before it takes effect, since businesses look to the future in making business decisions); health care costs for all employees costs significantly more than any rational estimate of the difference between $7.25/hr and whatever the true market wage is in most currently minimum-wage professions ($6.25?  $5.75?  Not enough to make a huge difference).  Indeed, many places that one might guess you'd find a lot of minimum-wage workers, you actually see wages currently above the minimum, suggesting that the minimum wage isn't much of a regulatory burden.

Paul Krugman on why we are not really in a recovery:

 

The Wrong Worries

 

In particular, when employment falls as much as it did from 2007 to 2009, you need a lot of job growth to make up the lost ground. And that just hasn’t happened.

 

Consider one crucial measure, the ratio of employment to population. In June 2007, around 63 percent of adults were employed. In June 2009, the official end of the recession, that number was down to 59.4. As of June 2011, two years into the alleged recovery, the number was: 58.2.

 

These may sound like dry statistics, but they reflect a truly terrible reality. Not only are vast numbers of Americans unemployed or underemployed, for the first time since the Great Depression many American workers are facing the prospect of very-long-term — maybe permanent — unemployment. 

 

I don't agree with Krugman too often, but he is right to point out that declining labor participation is a devastating trend that shows no sign of stopping. The unemployment rate is the little picture. The labor participation rate is the big picture. It looks like we're heading towards a 50% labor participation rate.

 

*Here's the whole article:

http://www.nytimes.com/2011/08/05/opinion/the-wrong-worries.html

"Every time I hear today about the rising dollar hurting corporate earnings I chortle just a bit.  If I hadn't paid this thread any attention I wouldn't have this laughter in my life"

 

I don't understand your response.

 

Back in 2007 or 2008 when the initial "US Recession?"  thread was still debating IF we were going to have a recession, the argument against a recession was that corporate earnings were holding up and companies had money.  But if you looked at those profit releases, most talked about the large gains on the repatriation of profits due to "increasingly favorable exchange rates".  In other words, the companies were able to maintain profits heading into and during the first part of the recession in large part due to gains on the falling dollar.

 

Unfortunately, the preceeding threads to this one are not readily available so I can't point to the numerous quarterly press releases that highlighted the large percent of company profits that came from "favorable exchange rates" during the quarter.

 

And then there is the old arguement that the falling dollar helps exports, and we have well documented that manufacturing help up relatively well during the recession (even if mfg employment did not).  I'm not the strongest proponent of this arguement, but I'm sure there is some small shread of trueth in it.

 

updated at 3:30pm today....

 

from Jim Jubak's discussion of world economic growth...

 

http://money.msn.com/investment-advice/10-go-go-stocks-for-a-no-grow-world-jubak.aspx

 

"Growth around the world?

What country (or countries) will pull the global economic train if the U.S. can't?

 

Japan? Puh-leeze. The Organisation for Economic Co-operation and Development put Japan's economy in another recession last time it did a survey, with the economy shrinking an additional 0.9% in 2011.

 

Europe? Well, the last time the OECD did its projections, it forecast 2% growth for the countries in the eurozone. But that was before the second Greek rescue package proved a bust in building confidence and before European exporters, the region's strongest economies, reported slowing growth due to more-expensive currencies. ..... "

You can add China to the list as countries that are dealing with internal fiscal and economic problems of their own that aren't as widely reported in America as America's own troubles are (understandably).

 

Also, I think that the whole premise that there should be one country "pulling the global economic train" is a bit of a stretch.  We'd rather have more engines than more cabooses.  Not only is pulling the train solo going to be an increasingly impossible task for any one country, but in a globalized economy, the focus on countries in the first place may be misplaced.  Is Hasbro really an American company?  (Look at how many of their toys are made in China.)  Is Honda really a Japanese one?  (How many of their cars were manufactured in the U.S.?)

Im not sure how you can make a 2 trillion dollar error, but it has happened. US credit rating downgraded for the first time ever.

Here is another wrinkle, showing how totally amoral we have become when it comes to unemployment:

 

Employers Wont Hire the Unemployed

 

...so being unemployed means you might as well have big scarlet letter tattoed on your forhead....L....for LOSER. 

 

I'm sure this is all hunky-dory for defenders of the status-quo.

 

 

I've seen a fair amount of this in the legal profession, actually, including (perhaps even especially) at the highest-tier firms in NYC, DC, and other major cities.  There were unprecedented amounts of layoffs during the trough of the recession, and now that it's been a couple of years since early 2009 when things were at their worst, anyone who hasn't gotten back in by now is going to have a seriously difficult time of it at this point, even if they have glowing credentials from top tier law schools.  Firms would often actually rather take chances on freshly-minted J.D.'s from the class of 2011 than older ones (classes of 2007-2009) who have the black mark of a layoff in their work history now.

@Graymare, I think what you're suggesting is already happening, and I believe a further downshift will be taking place. Maybe the picture of people living in apartments isn't the right one, but I believe people really changing their shopping and dining and buying habits to more mimic the depression will come forward, with different priorities than people have now. I can see people going without heat for months at a time before giving up their phones and internet and cable. I see an increase in stealing and other petty crime, and more revenge type crime against people who appear to be rich, like the poor people at the end of my Mom's block who live in an apartment and keep stealing display items out of neighbors' yards or leaving junk in people's yards like empty cig cartons or whatever. Just passive-aggressive stuff as the division between the haves and have nots becomes a gaping yaw. More people stealing from wal-mart. More people skipping college, etc.

I wonder when the protests will start, I mean even israelis arel starting to march

I strongly doubt that people will be giving up their phones and Internet (though perhaps the two will merge).  People giving up the cable TV would not be the end of the world (and I also don't see much of that happening).

 

As for the increase in crime, lots of people predicted that back in 2008 when the economy started to tank, but we really haven't seen it.  That doesn't mean that it couldn't happen, but the asserted link between economic stress and crime hasn't exactly accumulated much empirical evidence in recent years.  Social factors appear significantly more dominant, and those can be found in good times and bad.  And, much as it's unsavory to venture far down this road, there are more and more studies suggesting (always with mountains of hedging and caveats) that there are a fair number of genetic factors as well--that book by Bryan Caplan I mentioned earlier noted that.

Somebody needs his diaper changed and a warm bottle. This kind of stuff just makes us look like a spoiled kid throwing a fit. Our debt and debt obligations clearly are more than we can ever hope to pay. So we got downgraded. I am sure the brass at S&P are going to take a lot of heat now and in the future for this action. Here is a thought for Timmy boy, maybe we deserved the downgrade?

 

Geithner keeps heat on S&P

Treasury chief slams rating agency, decides to stay in his post

 

“S&P has shown really terrible judgment and they’ve handled themselves very poorly,” Geithner said in an interview with NBC/CNBC.

 

“And they’ve shown a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement,” Geithner said."

http://www.marketwatch.com/story/geithner-to-stay-on-as-us-treasury-chief-2011-08-07-1556320

 

To bad the old thread isn't still available. This statement is very eerily like the statement(s) made after Lehman Brother's collapsed. I have read in the last few days that European banks are not willing to lend to each other creating another liquidity 'freeze up'. Look for several 'liquidity' easing events over the next few weeks. This will probably settle the markets, at least for a little while.

 

G20: Committed to take coordinated initiatives

 

"HONG KONG (MarketWatch) -- Finance ministers and central bank governors at the Group of 20 industrialized and developing nations on Monday said they were committed to take "all necessary initiatives in a coordinated way" to support financial stability and to foster stronger economic growth. Without detailing specifics, the G20 officials said they will remain in close contact and "cooperate as necessary" in the coming weeks to ensure stability and liquidity in the financial markets. The statement comes amid fears of economic fallout from Standard & Poor's downgrade of U.S. credit ratings and ongoing worries over the euro zone debt crisis. The Group of Seven developed nations had also said Sunday that it was ready to respond as needed to take coordinated action, including to ensure liquidity and support financial market functioning and economic growth."

http://www.marketwatch.com/story/g20-committed-to-take-coordinated-initiatives-2011-08-08-345560

I thought this was interesting too:

 

By Annie Lowrey

Slate.com

updated 8/7/2011 1:14:51 PM ET 2011-08-07T17:14:51

Font: +-When he was Fed chairman and had access to the best economic data and minds on the globe, Alan Greenspan famously liked to forecast the direction of the economy by studying sales of men's underwear. Even during the best of times, underwear purchases remain pretty flat, he noted. (What dude who has just gotten a raise thinks: "Ah yes! I'll upgrade my entire collection of briefs now!") Only during the worst of times — when people are really, really cutting back — do boxer and brief purchases drop off.

 

http://www.msnbc.msn.com/id/44036265/ns/slate_com/

 

 

I've seen a fair amount of this in the legal profession, actually, including (perhaps even especially) at the highest-tier firms in NYC, DC, and other major cities.  There were unprecedented amounts of layoffs during the trough of the recession, and now that it's been a couple of years since early 2009 when things were at their worst, anyone who hasn't gotten back in by now is going to have a seriously difficult time of it at this point, even if they have glowing credentials from top tier law schools.  Firms would often actually rather take chances on freshly-minted J.D.'s from the class of 2011 than older ones (classes of 2007-2009) who have the black mark of a layoff in their work history now.

 

Companies that are doing this are really shooting themselves in the foot. There is a lot of top-notch talent available for cheap right now. A good resume/portfolio with real world results is more valuable than a recent grad with no experience. Obviously, each situation is different. There is a huge difference between someone who voluntarily left a job compared to someone who was fired/laid off/forced to resign/etc. In terms of terminations, mass layoffs and liquidations are less damning than a small layoff. If it's a small layoff, that typically says the candidate wasn't a high performer. But these days, it's just nuts to make blanket statements like "we won't hire anyone unemployed." There are so many things wrong with this from a business perspective:

 

1. Unemployed candidates are many times just as talented and qualified as the employed (especially when talking educated people with private sector professional experience).

2. They're cheaper than the employed since you have to pay employed people a premium to leave their current jobs.

3. They're readily available. They can move into a new job on the spot. If it's an immediate need, this is a big deal.

 

It's best if employers look at the big picture (resume, work portfolio), not the little picture of a gap that can be caused for all sorts of reasons. A good employer will probe the reasons and come to their own conclusions after meeting the candidate.

 

Also, this is highly industry-specific. You tend to see "unemployed automatically disqualified" in industries with lower rates of churn. The thinking goes that if you lose your job in a business that is stable, that is worse than losing your job in a business that is volatile. In industries where sky high turnover is a fact of life, resume gaps don't carry the same weight (especially if the candidate was freelancing or figured out other ways to make money). One thing I have seen bite people in the ass is volunteering. Some employers view that as "couldn't figure out a way to make money" or "bleeding heart." I think the volunteer advice in the media is coming from a very elitist perspective. Most people can't afford to work for free (and working for free usually has hidden costs like gasoline, car repairs, and car insurance). There is also a growing number of people who are starting to look down on it, particularly in the case of college grads. The attitude is "if they were good enough to have someone pay them, they wouldn't be volunteering." They also tend to view them as aimless and not ambitious. "The ambitious figure out ways to make money even if there aren't jobs available to them."

 

In Toledo, where unemployment doesn't carry a stigma anymore, I'm seeing the opposite discrimination in job listings!

 

"Candidate must be immediately available at all hours and weekends. We will not work around other jobs." So this unemployment discrimination is something that exists in certain industries in certain cities (healthier cities). In places like Detroit and Toledo, it's assumed everyone has resume gaps. Even auto engineers go through the layoff cycles. It really does depend on where you live and what you do.

Somebody needs his diaper changed and a warm bottle. This kind of stuff just makes us look like a spoiled kid throwing a fit. Our debt and debt obligations clearly are more than we can ever hope to pay. So we got downgraded. I am sure the brass at S&P are going to take a lot of heat now and in the future for this action. Here is a thought for Timmy boy, maybe we deserved the downgrade?

 

Geithner keeps heat on S&P

Treasury chief slams rating agency, decides to stay in his post

 

“S&P has shown really terrible judgment and they’ve handled themselves very poorly,” Geithner said in an interview with NBC/CNBC.

 

“And they’ve shown a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement,” Geithner said."

http://www.marketwatch.com/story/geithner-to-stay-on-as-us-treasury-chief-2011-08-07-1556320

 

 

Are suggesting Warren Buffet should also chill out? Or the European Central Bank? Or CEOs of U.S. investment houses on Bloomberg and CNBC this morning who chided S&P too?

 

S&P was reactionary and panicky, just like the stock market is being today. The underlying fundamentals of the economy are stable. Not robust, but not decrepit either.

Somebody needs his diaper changed and a warm bottle. This kind of stuff just makes us look like a spoiled kid throwing a fit. Our debt and debt obligations clearly are more than we can ever hope to pay. So we got downgraded. I am sure the brass at S&P are going to take a lot of heat now and in the future for this action. Here is a thought for Timmy boy, maybe we deserved the downgrade?

 

Geithner keeps heat on S&P

Treasury chief slams rating agency, decides to stay in his post

 

“S&P has shown really terrible judgment and they’ve handled themselves very poorly,” Geithner said in an interview with NBC/CNBC.

 

“And they’ve shown a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement,” Geithner said."

http://www.marketwatch.com/story/geithner-to-stay-on-as-us-treasury-chief-2011-08-07-1556320

 

 

Are suggesting Warren Buffet should also chill out? Or the European Central Bank? Or CEOs of U.S. investment houses on Bloomberg and CNBC this morning who chided S&P too?

 

S&P was reactionary and panicky, just like the stock market is being today. The underlying fundamentals of the economy are stable. Not robust, but not decrepit either.

 

Everyone has the right to their opinion. I personally don't believe our governments underlying fundamentals are stable enough to warrent a AAA rating. Not when we are spending more than $1 trillion+ more than what we take in each year. As far as some of those people, Warren Buffet received billions from the taxpayer bailouts for wall street (posted in this thread many pages ago), ECB is moving closer and closer to the edge of either losing members or falling apart, so both of them have a lot to lose. I can find a lot of main stream articles saying that S&P was right on the money with this move.

 

U.S. income: $2,381,000,000,000

Federal budget: $3,552,000,000,000

New debt: $ 1,171,000,000,000

National debt: $14,078,000,000,000

Recent budget cut: $ 38,500,000,000

http://en.wikipedia.org/wiki/2010_United_States_federal_budget#Total_receipts

 

I saw this put another way today, as a family's budget.

 

Family income: $23,810

Family budget: $35,520

New debt per year: $11,710

Credit card debt: $140,780

Recent budget cut: $385

^Second all that, ragerunner. The fundamentals of our economy are not strong. They are weak and based on money printing mania that will have consequences. Our debt has gotten out of control, and the last battle to reduce it showed deep dysfunctions in Congress that could sink the whole ship.

 

Edit: The jobs numbers are a big and growing problem. Only 58% of working-age adults are currently working. The labor participation rate spells trouble for the future. Americans are losing their independence. The consumer market is shrinking, not growing. And the housing crisis is still underway. Prices will continue to fall in most markets. Housing is the largest asset most Americans own, and entire families are taking a bath. There are a lot of structural problems in our economy that quantitative easing did nothing to fix (just made extremely high levels of inflation all the more likely in the event of a real recovery). We dug the hole six feet deeper, but only climbed six inches.

 

That's why the government can't keep throwing money at the problem and expect any results. It's crushing the private sector. The reason most companies aren't hiring is because they fear much higher taxes in the future due to the national debt. You will see them continue to stand on the sidelines until debt is dramatically reduced. It could be years, if not a decade before there is a real recovery. The can of worms can be kicked no further.

C-Dawg - the last part of the last sentence of your post was the reason for the downgrade, regardless of how you feel about S&P's decision..... which the other top two ratings agencies obviously don't agree with.  And given how giddy some people sound about this, I don't expect it to change.  The dysfunction in the Capital Bldg, intentional or not, is very damaging.

It depends on what other alternatives to the debt deal we got one contemplates.

 

Given that S&P stated that was looking for $4 trillion in cuts over 10 years and only got $2 trillion, it would have called its own words into question if it didn't act on the failure of the debt deal to meet the agency's standards.  On the other hand, if the tea party Republicans had never made a significant issue out of the debt ceiling and Obama had gotten a "clean" debt-increase bill with no prospective spending reductions at all, we might well have seen that downgrade anyway, even if it had sailed through in the fashion of previous debt ceiling increases.

 

There were superior alternatives, of course.  Many people quietly support Simpson-Bowles, for example.  However, there were many worse options out there--including the option of simply giving a no-strings-attached increase in the debt ceiling, which would have been the definition of "functional" government not long ago.  Given that definition, a little dysfunction might not be an entirely bad thing.

^Second all that, ragerunner. The fundamentals of our economy are not strong. They are weak and based on money printing mania that will have consequences. Our debt has gotten out of control, and the last battle to reduce it showed deep dysfunctions in Congress that could wink the whole ship.

 

The fundamentals of our economy are strong. The fundamentals of our government are not. I realize these are not always inseparable, but most everyone in the U.S. has a job, a home, nice stuff, etc. and, based on last week's report, the U.S. has increasing number of these.

 

The difference with a family budget is that they can cut costs more easily than they can raise revenue. With a functional government, it can do both. A dysfunctional government can, at most, only do one.

S&P Downgrades Fannie and Freddie Credit Ratings, Other Agencies Tied to U.S. Debt

 

"Standard & Poor's downgraded the credit ratings of mortgage giants Fannie Mae and Freddie Mac Monday, expanding on its decision to downgrade U.S. debt in a market-roiling set of announcements."

 

Read more: http://www.foxnews.com/politics/2011/08/08/sp-downgrades-fannie-freddie-credit-ratings/#ixzz1USLfTla0

 

Why? Because they are losing billions every month and its not getting better.

 

Fannie Mae to ask US Treasury for $5bn

 

"Along with Freddie Mac, Fannie, which received nearly $100bn from the Treasury to stay afloat during the financial crisis, owns or guarantees about half of all mortgages in the US - nearly 31m home loans worth more than $5 trillion. Along with other federal agencies, they backed nearly 90pc of new mortgages over the past year.

 

In the second quarter ended June 30, Fannie Mae lost $5.18bn, or 90 cents per share. That compares with a loss of $3.13bn, or 55 cents per share, a year earlier."

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8684094/Fannie-Mae-to-ask-US-Treasury-for-5bn.html

 

Personally,

 

I thought the US rating should have been down-graded at the time of the 2001 Bush tax cuts.

 

But in reality, the debt rating of the US government is irrelevant because we are the only nation to produce government bonds in such quantity, and the world financial markets need those bonds.  The alternatives are no better, so regardless of the rating, the US debt is about as good as it gets out there (of those entities producing large volumes of bonds).

 

I guess it's like being the best student in a class.  Doesn't matter if your report card says "A" or "C", all others are below you.

I saw this put another way today, as a family's budget.

 

Family income: $23,810

Family budget: $35,520

New debt per year: $11,710

Credit card debt: $140,780

Recent budget cut: $385

 

Except it's not a family budget, it's a national government budget. They aren't the same. This is what people refuse to accept from fucking NOBEL PRIZE WINNERS like Paul Krugman.

 

Here's the real analogy:

 

A family has a business that makes $140,000 a year (GDP). They currently elect to take home $23,810 to cover a household budget of $35,520. They could take home more, but dad left a chunk of the money in the business account so he could buy a $10,000 teak conference table. He now wonders why this hasn't increased his business income. Mom wonders, too, but is increasingly angry at the fact that they keep using the credit card to pay for household expenses, so one month she threatens to not pay the credit card bill.

But, the 'family business' doesn't have access to the full GDP. They currently only have access to $2.3 trillion of the $14 trillion GDP. That would be like saying that family business A has the right to all the other income of all the other businesses in town, thus they have no financial issues.

 

You are correct if the FEDs decide to take all of Apple's money and Googles money, and Boeings money, etc. Then the FEDs are no long in a financial hole.

 

So are you expecting a notice (if not massive) tax increase in the near future in an effort to capture more of the GDP?

Personally,

 

I thought the US rating should have been down-graded at the time of the 2001 Bush tax cuts.

 

At the time, they were set to expire in 10 years, and we were doing a reasonable job recovering from the tech bubble collapse.  The mortgage bubble hadn't really inflated yet, either, much less popped.  We hadn't gotten into Afghanistan, much less Iraq (or Libya), at that time, either.

 

I don't think that those tax cuts were a good idea, of course, but that doesn't mean that I'd have seen a ratings downgrade as warranted then.

 

But in reality, the debt rating of the US government is irrelevant because we are the only nation to produce government bonds in such quantity, and the world financial markets need those bonds.  The alternatives are no better, so regardless of the rating, the US debt is about as good as it gets out there (of those entities producing large volumes of bonds).

 

There is some truth to this.  However, some of those bonds are being bought (ironically) with money pumped into the economy by the bailout (and through normal borrowing from the Fed's discount window, which has existed for a long time).  Yes, the banks took money from the Federal Reserve and then loaned it to the U.S. Treasury for a higher interest rate.  This interest rate arbitrage is a ridiculous giveaway to Wall Street.

 

Beyond that issue, we really shouldn't be offering such an easy flight from risk.  The social utility of the financial markets is premised upon them allocating capital to productive enterprises.  The government may have outstanding credit (notwithstanding the downgrade, AA+ is still a heck of a lot better than most debtors), but its enterprises are seldom productive; its credit is good because it has the power to tax.  Ask yourself this: Where would that $14 trillion of capital have gone if it hadn't gone into U.S. Treasuries?  If the federal government had restrained its appetites, do you really think all of that money would simply be sitting in cash doing nothing?  I somehow doubt it.  A significant portion of that capital would have gone into the more productive private sector, which is the real source of growth, sustainable jobs, and increases in living standards.  Yes, some would have been lost, because private sector investment is riskier, but a good deal more would also have been created, too--the net for the country would almost certainly have been positive.  Moreover, even if the nominal figures for wealth and income were unchanged or even slightly smaller, it wouldn't have mattered much in real terms because the numbers would have been built on less leverage--meaning that the wealth and income numbers would be healthier, and the currency would be stronger.  We wouldn't be going through painful deleveraging now because we wouldn't have overleveraged in the first place.

 

(I analogize it to a bicycle ride (or run).  A ride with net elevation gain of zero still takes a much harsher toll on one's body if there are wild swings in elevation along the way than if the ride is perfectly flat the entire time.)

 

I guess it's like being the best student in a class.  Doesn't matter if your report card says "A" or "C", all others are below you.

 

It still matters if you can read, write, and do arithmetic, even if everyone else in the class is also lousy at it.

But, the 'family business' doesn't have access to the full GDP. They currently only have access to $2.3 trillion of the $14 trillion GDP. That would be like saying that family business A has the right to all the other income of all the other businesses in town, thus they have no financial issues.

 

More accurately: If the family takes all $140,000 out of the family business, then that means not paying its workers, its suppliers, its utilities, its contractors, or its taxes.  Therefore, the workers stop showing up, its suppliers stop supplying (meaning that its workers couldn't sell anything even if they showed up and worked for free), its utilities get cut off, no one fixes the plumbing or mows the law, and the government comes and puts the store on the next tax auction.

 

Remember, GDP is a measure of revenue, not profit.  A business with $5 billion in revenue and a profit of $0 is considered to have added $5 billion to GDP.  To make the analogy work, therefore, you have to think of the $140,000 as a revenue figure, not a profit figure.

Civvik - You forgot that they also gave each of their managers a significant temporary raise, figuring that those expenses would be recouped and more throigh increased profits directly attributable to those raises.  And they also have concluded that doing anything but making those raises permanent would have a crippling businesseffect, despite the lack of increased profits to date.  Now they are wondering why their business is going broke while their managers are all driving brand new Bentley's

But, the 'family business' doesn't have access to the full GDP. They currently only have access to $2.3 trillion of the $14 trillion GDP. That would be like saying that family business A has the right to all the other income of all the other businesses in town, thus they have no financial issues.

 

You're totally missing what I'm saying. The family's business IS the United States economy. This analogy doesn't make sense to people who have heard their whole lives that private and public sector activity is fundamentally different.

But, the 'family business' doesn't have access to the full GDP. They currently only have access to $2.3 trillion of the $14 trillion GDP. That would be like saying that family business A has the right to all the other income of all the other businesses in town, thus they have no financial issues.

 

You're totally missing what I'm saying. The family's business IS the United States economy. This analogy doesn't make sense to people who have heard their whole lives that private and public sector activity is fundamentally different.

 

The 'family business' is the US government. Not all the US businesses and their incomes.

 

The real difference with the simplified examples was two main things:

 

- the ability to print money

- and the ability to collect and raise taxes.

Raise taxes and cut back on wasteful spending! This is what all this boils down to. That's the easy answer, but then it's how would you get that legislation through the current congress?

 

Both sides (dems & republicans) need to get it together and stop acting childish.

Remember that most of these figures are projected across a 10-year budget window, simply because that's how the government has decided to talk about budgets.  History is not planning on ending within the next 10 years (certain religious fundamentalists' claims to the contrary notwithstanding).  Without controlling the cost trajectory of our entitlement programs, we're never going to get the budget under control.

 

That means restructuring the big entitlement programs to move the risk of increases in costs off the government and onto the entitled.  I'm sure many other ideas will be tried and failed before a critical mass of people acknowledges that reality, but there will be no escaping it.

Who exactly are you including in 'the entitled'?  Would that include the military veteran?  The schitzophrenic homeless guy?  The autistic child?  Or are we just talking about the not-so-single mother on welfare with the premium cable package?

First and foremost, retirees.  Social Security and Medicare are two of the three 800-pound gorillas in the room.  Medicaid is the third.

But, the 'family business' doesn't have access to the full GDP. They currently only have access to $2.3 trillion of the $14 trillion GDP. That would be like saying that family business A has the right to all the other income of all the other businesses in town, thus they have no financial issues.

 

You're totally missing what I'm saying. The family's business IS the United States economy. This analogy doesn't make sense to people who have heard their whole lives that private and public sector activity is fundamentally different.

 

The 'family business' is the US government. Not all the US businesses and their incomes.

 

The real difference with the simplified examples was two main things:

 

- the ability to print money

- and the ability to collect and raise taxes.

 

Dude you are totally on your own tangent now. You didn't even listen to what I said lol.

Who exactly are you including in 'the entitled'?  Would that include the military veteran?  The schitzophrenic homeless guy?  The autistic child?  Or are we just talking about the not-so-single mother on welfare with the premium cable package?

 

I agree with Gramarye on this, if only because it is inescapable. Yes, those are all the entitled. But so are plenty of other people, I think by "entitlement programs" he's referring to Medicare, Medicaid, etc.

I would agree with that too.  But, as was part of his previous point, too many people assume you can fix the problem by simply taking the welfare check away from the inner city recipients.  People are also drastically underestimating the true, long-term cost of war..... particulalrly with all the increased use of explosives and  advances we have made in protective gear that turns what would have been dead soldiers into life-long dependents. 

All true.  But I think I've been fairly consistent about identifying the entitlements for the elderly as a larger drain than the entitlements for the urban poor (and that's even assuming that 100% of Medicaid, food stamps, etc. goes to the urban poor, which is not the case).

 

On a completely separate note under this topic: Notwithstanding the debt deal that will add trillions more to the debt, the plunge in the stock market, and the downgrading of America's credit rating ...

 

... the dollar has increased in value against the euro so far today. :-\

But, the 'family business' doesn't have access to the full GDP. They currently only have access to $2.3 trillion of the $14 trillion GDP. That would be like saying that family business A has the right to all the other income of all the other businesses in town, thus they have no financial issues.

 

More accurately: If the family takes all $140,000 out of the family business, then that means not paying its workers, its suppliers, its utilities, its contractors, or its taxes.  Therefore, the workers stop showing up, its suppliers stop supplying (meaning that its workers couldn't sell anything even if they showed up and worked for free), its utilities get cut off, no one fixes the plumbing or mows the law, and the government comes and puts the store on the next tax auction.

 

Remember, GDP is a measure of revenue, not profit.  A business with $5 billion in revenue and a profit of $0 is considered to have added $5 billion to GDP.  To make the analogy work, therefore, you have to think of the $140,000 as a revenue figure, not a profit figure.

 

This is one of those beautiful, truly beautiful, conservative debating tricks that really has no equal comeback: Stating an obvious fact that everyone already understood (profit versus revenue). By stating a totally obvious fact as an elucidation, you have inserted a kernel of doubt into all observers that...well...maybe I didn't know what profit was until you just told me.

 

But all you've really done is totally ignored the actual debate, which is how much of the business's revenue we divert to the family budget to ultimately sustain the business.

 

^^It's highly possible the market is reacting more to the European issues than it is to the downgrade, so I don't find that so surprising.  The compulsive need of the financial press to offer speculative, superficial explanations of aggregate market behavior is often a bit absurd.

 

Political rhetoric is often interesting wholly apart from the policy debate, but "entitlement reform" is really such an excellent, clinical, harmless-sounding goal.  Much more easily salable then "pushing some of the elderly into poverty" and "reducing the amount of medical care provided to the elderly", even if the latter, in particular, doesn't necessarily translate into reduced quality of life.

But, the 'family business' doesn't have access to the full GDP. They currently only have access to $2.3 trillion of the $14 trillion GDP. That would be like saying that family business A has the right to all the other income of all the other businesses in town, thus they have no financial issues.

 

More accurately: If the family takes all $140,000 out of the family business, then that means not paying its workers, its suppliers, its utilities, its contractors, or its taxes.  Therefore, the workers stop showing up, its suppliers stop supplying (meaning that its workers couldn't sell anything even if they showed up and worked for free), its utilities get cut off, no one fixes the plumbing or mows the law, and the government comes and puts the store on the next tax auction.

 

Remember, GDP is a measure of revenue, not profit.  A business with $5 billion in revenue and a profit of $0 is considered to have added $5 billion to GDP.  To make the analogy work, therefore, you have to think of the $140,000 as a revenue figure, not a profit figure.

 

This is one of those beautiful, truly beautiful, conservative debating tricks that really has no equal comeback: Stating an obvious fact that everyone already understood (profit versus revenue). By stating a totally obvious fact as an elucidation, you have inserted a kernel of doubt into all observers that...well...maybe I didn't know what profit was until you just told me.

 

But all you've really done is totally ignored the actual debate, which is how much of the business's revenue we divert to the family budget to ultimately sustain the business.

 

Whether or not you knew what it was, you set up an analogy that confused the two.  You've compounded it with that last sentence, too: How much of the business's revenue we divert to the family budget to ultimately sustain the business?  That's a nonsensical question.  Every dollar diverted from the business to the family is for the benefit of the family, not the business.  The question should be how much of the business's revenue we refrain from diverting to the family budget, in order to leave enough money in the business for it to remain viable.

 

And, of course, the government does not own society the way the family might own the business.  The family has every right to take as much out of the business as it can; that was the reason the family started the business in the first place, one assumes.  The same relationship does not exist between the government and the rest of society.  The government is not our owner; it is our agent.  Its goal should not be to get as much money from us as possible without completely destroying the private sector.

But, the 'family business' doesn't have access to the full GDP. They currently only have access to $2.3 trillion of the $14 trillion GDP. That would be like saying that family business A has the right to all the other income of all the other businesses in town, thus they have no financial issues.

 

You're totally missing what I'm saying. The family's business IS the United States economy. This analogy doesn't make sense to people who have heard their whole lives that private and public sector activity is fundamentally different.

 

The 'family business' is the US government. Not all the US businesses and their incomes.

 

The real difference with the simplified examples was two main things:

 

- the ability to print money

- and the ability to collect and raise taxes.

 

Dude you are totally on your own tangent now. You didn't even listen to what I said lol.

 

If you say so. Just stating that the 'family business' in example is not the US economy.

That's under the false assumption that the government is somehow alien from the people. The government is the people. The question of whether or not it has the power to control us is ridiculous: It does! The real question is by how much! We should feel comfortable molding its authority and using it to serve whatever purpose we deem it most fit to serve. What if it was truly most fit to serve the purpose of, say, health insurance?

 

The real false dichotomy is that of bad government versus good private sector. The actual discussion should be bad government versus good government, and bad private sector versus good private sector. Because the discussion should ultimately be about good versus bad, independent of the mechanisms. Compounding that pursuit is what is dangerous.

 

The family's business and household budgets are ultimately the same thing, just different ways of describing their activity.

Obama Voices Confidence in U.S. Credit, Blames 'Gridlock' for Downgrade

 

Read more: http://www.foxnews.com/politics/2011/08/08/sp-downgrades-fannie-freddie-credit-ratings/#ixzz1USvsQ1KB

 

I have been careful not to turn this thread into a political discussion. I am not a Republican or a Democrat. I think the reality of the situation (through all these different posts on this thread and much more) is both parties follow the direction of Wall Street. Back in 2008 the companies that became insolvent do to poor business decisions needed to go down. Instead we stepped in (FEDs and US Government) and transfered their bad debt onto the taxpayers. This didn't remove the bad debt it just moved it to a different location and now that debt load is weighing on the new 'owner'.

The assumption that "the government is the people" is the false one, and the notion that its authority can be "used to serve whatever purpose we [royal "we"] deem it most fit to serve" is expressly contradicted by the text and structure of the Constitution.  You are correct that the real question to ask is how much control over our lives we should cede to it, but that discussion must be based on the knowledge that the government is a being unto itself, with different incentives than the private sector (and than the vast majority of individual citizens).

 

Even the family's budgets and household budgets are not truly the same thing (and if you treat them as such, you are exposing yourself to serious legal risks), but as I already noted, even those budgets are more connected than Americans' personal checking accounts and the U.S. Treasury.  The argument that the household (government) and business (GDP) budgets are ultimately the same thing proves far too much: it would validate a complete command economy in which the government took control of 100% of GDP, i.e., Soviet-style communism.

 

Of course there are better and worse government programs and better and worse private enterprises.  However, comparisons between the two are perfectly justified as well, and indeed, are absolutely necessary.

That's under the false assumption that the government is somehow alien from the people. The government is the people. The question of whether or not it has the power to control us is ridiculous: It does! The real question is by how much! We should feel comfortable molding its authority and using it to serve whatever purpose we deem it most fit to serve. What if it was truly most fit to serve the purpose of, say, health insurance?

 

The real false dichotomy is that of bad government versus good private sector. The actual discussion should be bad government versus good government, and bad private sector versus good private sector. Because the discussion should ultimately be about good versus bad, independent of the mechanisms. Compounding that pursuit is what is dangerous.

 

The family's business and household budgets are ultimately the same thing, just different ways of describing their activity.

 

This discussion is a MASSIVE one that has been touched on in this thread off and on. Its one of the those discussion that would be a challenge to have on forum site. Just setting the bases of the discussion (good vs bad) would be huge in itself. But, in my opinion I think we are starting to see what happens when 'bad' government and 'bad' private sector gets together. (under what I think is bad) This doesn't mean I think all is bad on either side, but there is enough of it going on that its starting to cause some serious structural issues.