Many Now predicting Double-Dip Recession

[bamacre]

I'd much rather Congress find fiscal responsibility with our foreign policy instead of unemployment benefits. How many unemployed people could we help with nearly a trillion dollars per year?

 

[theeedude]

The market is finally starting to price in the real risk of a party using the filibuster to willfully sabotage economic recovery for its own political interest. That is why we have seen a major retreat in stock valuations. The damage has already been done, but the longer this continues, the more risk will be discounted in the stock prices, and even worse, company forecasts for consumer confidence and spending. This is going to result in companies bracing for a major economic contraction and cutting employment. So Republicans either already have or are very close to undermining the chances of this country's economic recovery.

 

[First]

Neither party has that much party to do that much damage seasamp. Equity is priced-in based very largely on private sector growth and small business hires. Ending unemployment at this point in time would be awful and undeniably destructive economically, but not only has it no chance of happening, but the economy would be able to take it in all likelihood. Cutting off unemployment is a much better idea during a boom when it affects far fewer people and when the private sector isn't so weak. By then we'll be able to collect more revenue via high receipts, hopefully taxing the right people instead of the poor and middle class excessively, and getting the debt back under control as a result. What's weird (er, stupid) is attempting to significantly bring down the debt while also simultaneously rejecting direct monetary/fiscal injections during a recession, a particularly bad one at that. It's mostly politics and ignorance, which are dangerous, but they eventually get crowded out over time much like the initial angst over fluoride in drinking water or getting off the gold standard.

 

[theeedude]

Neither party has that much party to do that much damage seasamp.

That's what some said about GOP from 2000-2008.

Equity is priced-in based very largely on private sector growth and small business hires. Ending unemployment at this point in time would be awful and undeniably destructive economically, but not only has it no chance of happening, but the economy would be able to take it in all likelihood.

When a party has staked it's future on benefiting politically from a poor economy, and has the power of filibuster to make it happen, there is a very real chance of that happening, and that chance is being priced in. The economy will "take it" by contracting. It's common sense, if you see your neighbor go broke with no job and no unemployment, your house value collapsing because neighbors are forced to sell theirs on the cheap, you are going to be less eager to spend, and more likely to hold off on making purchases, which will result in economic contraction and more unemployment.

Cutting off unemployment is a much better idea during a boom when it affects far fewer people and when the private sector isn't so weak. By then we'll be able to collect more revenue via high receipts, hopefully taxing the right people instead of the poor and middle class excessively, and getting the debt back under control as a result. What's weird (er, stupid) is attempting to significantly bring down the debt while also simultaneously rejecting direct monetary/fiscal injections during a recession, a particularly bad one at that. It's mostly politics and ignorance, which are dangerous, but they eventually get crowded out over time much like the initial angst over fluoride in drinking water or getting off the gold standard.

Eventually is a long time. Yes, eventually the economy will collapse enough that the only way is up, but it's better to do what is necessary to avoid this eventuality. Blocking unemployment insurance extension is doing the exact opposite, making such a collapse more likely. Before recently it was pretty much a given that these benefits would be extended during high unemployment, now after the Republican filibuster, it is not, so the market valuations are adjusting to reflect this new risk to the economy.

 

[First]

seasamp, you're exaggerating the impact of ending unemployment, temporarily at that. Republicans know it'll pass, they're doing what's politically intelligent until the very last moment they can. There's no way unemployment will end and the GOP is well aware of this reality. The market temporarily pricing that in only means something in the very short-term (months), not the long-term (years). Unemployment benefits aren't on the minds of a good 80% of those transacting on the NYSE on a daily basis anyway, and while there's no way to prove that, you can certainly poll it.

 

[theeedude]

seasamp, you're exaggerating the impact of ending unemployment, temporarily at that. Republicans know it'll pass, they're doing what's politically intelligent until the very last moment they can. There's no way unemployment will end and the GOP is well aware of this reality. The market temporarily pricing that in only means something in the very short-term (months), not the long-term (years). Unemployment benefits aren't on the minds of a good 80% of those transacting on the NYSE on a daily basis anyway, and while there's no way to prove that, you can certainly poll it.

Government inaction and austerity is very much on the minds of traders and investors. The recovery is based on companies hiring and investing in anticipation of future demand. The future profits of companies being traded depend on consumer demand, and a broke consumer doesn't buy much. GOP has the power of filibuster to end unemployment extensions, and it feels that a weaker economy will create anti-incumbent sentiment that will help it in November. There is both the incentive and the means for them to make this happen. I don't see how you can say "there is no way unemployment will end" with 100% confidence. There is a real risk, and that risk is being priced in.

 

[WhipperSnapper]

There's nothing double-dip about this. It's just one continuous depression. Or, rather, it's a permanent structural change and not a temporary recession at all as Global Labor Arbitrage transforms the U.S. into a third world economy.

 

[StageLeft]

The market is finally starting to price in the real risk of a party using the filibuster to willfully sabotage economic recovery for its own political interest. That is why we have seen a major retreat in stock valuations. The damage has already been done, but the longer this continues, the more risk will be discounted in the stock prices, and even worse, company forecasts for consumer confidence and spending. This is going to result in companies bracing for a major economic contraction and cutting employment. So Republicans either already have or are very close to undermining the chances of this country's economic recovery.

LOL, I'll give you this: your partisanship loyalty is virtually second to none. Instead of admitting that the government never really had a hold on recovery to begin with, its stimulus was a patch of insufficient strength, you simply blame it on the minority party instead.

 

[beginner99]

For me as outsider and only indirectly impacted (if US economy is bad, the whole world feels it) it look very simple. Playing world police is not for free. Imagine all that money put into productive use at home...
Bush just failed. The cost of the Iraq war is probably already higher than all the money US can ever get out of the oil there. Bush = fail.

Apart from that the whole living on credit thing can't just work forever. It's also fairly easy as I've heard to just move and don't pay any debts and you will never be found or held accountable. And even if, you can't pay back the debt anyway.
You don't have to be a wiz at anything to see that the system will fail sooner or later.

 

[Craig234]

Bush just failed. The cost of the Iraq war is probably already higher than all the money US can ever get out of the oil there. Bush = fail.

A moral problem with this logic is that it can justify bad things for greed.

So if there's a country with 10 million people and gold and you send in the troops, kill all the people, and take a lot of gold that is very profitable, that's 'ok'.

We need better protections for peace and people with weaker military power.

The system of 'the citizens of the nation who profits vote whether they are ok with taking other people's things or not' is not too good for justice.

 

[BoberFett]

The system of 'the citizens of the nation who profits vote whether they are ok with taking other people's things or not' is not too good for justice.

Irony... meter... peaking... alarms...

You do realize of course that you just described how taxes work in a democracy, right?

 

[dahunan]

I'd much rather Congress find fiscal responsibility with our foreign policy instead of unemployment benefits. How many unemployed people could we help with nearly a trillion dollars per year?

Shh... don't expose the invisible theft... The controllers want us to squabble and hate each other ...

If we only knew how much was stolen from us we could feed every hungry child or educate every one in this nation if we stopped the corporate tax havens and kickbacks and such

 

[bobdole369]

I was just a few days ago thinking this same thing. Now I'm fairly far left, but I did not agree at all with the democrats way of handling the money. I didn't think the "stimulus" did enough, it did something, but I think now it might just have been delaying the inevitable.

 

[theeedude]

LOL, I'll give you this: your partisanship loyalty is virtually second to none. Instead of admitting that the government never really had a hold on recovery to begin with, its stimulus was a patch of insufficient strength, you simply blame it on the minority party instead.

What are you talking about? I do admit that the stimulus was of insufficient strength, and we are going to need a second one. Is the minority party going to let that pass without filibustering it? If not, then it IS to blame.

 

[spittledip]

I'd much rather Congress find fiscal responsibility with our foreign policy instead of unemployment benefits. How many unemployed people could we help with nearly a trillion dollars per year?

The problem is what do we do about all the people who are out of work? How do they survive without any income?

 

[werepossum]

I would agree that some of the business failures are due to lack of capital, but i wouldn't peg it at 90%+. Many businesses are just poorly managed or a poor fit in their local economy.

I don't see how tax breaks create demand; demand for what? labor?.

Lets say you run a diner/bank/whatever. You are going to hire as many people as you need to get the job done... How does a 1/2/5/10% tax cut actually influence you to hire more people rather than pocket the difference? I think it is a fallacy that tax cuts somehow create jobs.

This is a very simple and easily demonstrated relationship. Virtually every business has a need for more employees - someone to do marketing, someone to wash dishes, whatever. Almost every business would like another pair of hands and/or another mind if cost was no object. Virtually every business has a desire to expand, to grow and be larger, by offering more inventory or additional services (i.e. choices for buyers) or additional locations or whatever - the point being that almost everyone who starts a business wants that business to prosper and grow. Comparatively few businesses have facilities that leave nothing to be desired. In business as in all life, compromises are necessary between what would be ideal or desirable, and what is affordable.

There are several ways to fund those new hires, new inventory, or new facilities. One is from savings. This is a common source during good times, but not so much during bad times because earnings are down and future earnings are uncertain. (This is particularly true right now because of the looming threat of Cap and Tax, regulatory reform, tax increases.) Another common source of funding for expansion is the loan. The downside to this is that the loan has to be paid back, and with uncertain future earnings and future government-imposed costs this is seen as very risky. Also, commercial credit right now is extremely difficult to get. Companies that are more than half a century old and have not failed to produce a profit every year of the recession are finding that to get a loan for a project they are forced to fund 40%, 50%, or even more of the project through cash reserves.

The third major source of funding expansion is the tax cut. This has several advantages. It is self-funding, so if the business hires a new employee and the economy worsens (at least for this company) the employee can be laid off at small cost, without the cost of a loan to be paid back. The new hire or expansion can thus be taken at less risk. It is more flexible, since there are not loan conditions to be satisfied. Thus the company can introduce a new product or service line and then if it takes off as expected, hire more people to service that new product or service. And it can often be done without a hit to profit (or in this economy, payroll.)

There are advantages to tax cuts beyond new hiring as well. A tax cut may make a company viable by reducing its costs; by preventing the company from folding, all its employees remain employed. A tax cut may help a company afford new capital equipment - new computers, a new truck, new lighting or HVAC - that directly spurs economic activity in other companies and helps employment that way. Tax cuts also have the advantage of cost over stimulus funds - it costs much less overhead to simply cut tax rates (requiring government workers' time as well as private companies' accountants) than to craft stimulus law rules, apply for stimulus funds, check and award those applications, do the paperwork required to show compliance with the rules of the stimulus, and check that paperwork. The less time and money consumed in overhead and compliance, the more time and money available for those goods and services society recognizes as wealth. Stimulus money is a net wealth drain to society, with the hope that it will stimulate the economy back into normal mode. An across-the-board tax cut is a net wealth booster to society. The only exception to this is when the Fed manipulates tax rates (in the name of controlling inflation) to strangle growth, which is why tax cuts in good times may no longer pay for themselves through added growth.

 

[daishi5]

A moral problem with this logic is that it can justify bad things for greed.

So if there's a country with 10 million people and gold and you send in the troops, kill all the people, and take a lot of gold that is very profitable, that's 'ok'.

We need better protections for peace and people with weaker military power.

The system of 'the citizens of the nation who profits vote whether they are ok with taking other people's things or not' is not too good for justice.

Would it have been ok if Bush stole 10 million in gold and distributed it to the poor to prevent wealth concentration?

 

[dmcowen674]

The problem is what do we do about all the people who are out of work?

They can move to countries more suitable for them.

 

[dmcowen674]

There's nothing double-dip about this. It's just one continuous depression. Or, rather, it's a permanent structural change and not a temporary recession at all as Global Labor Arbitrage transforms the U.S. into a third world economy.

Bingo

Exactly what I said way back 8 years ago.

Can't believe how long it took for people to finally see what I saw coming at us so long ago.

Why did you all believe that nut Bush and his buddy McCain that "The Economy is Strong"?

 

[BlahBlahYouToo]

Wild to see you guys posting things I said in the middle of the Bush Regime would happen and you guys said it would never happen.

Of course with Bush out you guys blame Obama for Bush's disaster.

Must kill you guys that I was right for so many years ahead.

Actually, Pete Schiff believes it started with Clinton and really picked up with Greenspan's policies.

 

[Acanthus]

This is a very simple and easily demonstrated relationship. Virtually every business has a need for more employees - someone to do marketing, someone to wash dishes, whatever. Almost every business would like another pair of hands and/or another mind if cost was no object. Virtually every business has a desire to expand, to grow and be larger, by offering more inventory or additional services (i.e. choices for buyers) or additional locations or whatever - the point being that almost everyone who starts a business wants that business to prosper and grow. Comparatively few businesses have facilities that leave nothing to be desired. In business as in all life, compromises are necessary between what would be ideal or desirable, and what is affordable.

There are several ways to fund those new hires, new inventory, or new facilities. One is from savings. This is a common source during good times, but not so much during bad times because earnings are down and future earnings are uncertain. (This is particularly true right now because of the looming threat of Cap and Tax, regulatory reform, tax increases.) Another common source of funding for expansion is the loan. The downside to this is that the loan has to be paid back, and with uncertain future earnings and future government-imposed costs this is seen as very risky. Also, commercial credit right now is extremely difficult to get. Companies that are more than half a century old and have not failed to produce a profit every year of the recession are finding that to get a loan for a project they are forced to fund 40%, 50%, or even more of the project through cash reserves.

The third major source of funding expansion is the tax cut. This has several advantages. It is self-funding, so if the business hires a new employee and the economy worsens (at least for this company) the employee can be laid off at small cost, without the cost of a loan to be paid back. The new hire or expansion can thus be taken at less risk. It is more flexible, since there are not loan conditions to be satisfied. Thus the company can introduce a new product or service line and then if it takes off as expected, hire more people to service that new product or service. And it can often be done without a hit to profit (or in this economy, payroll.)

There are advantages to tax cuts beyond new hiring as well. A tax cut may make a company viable by reducing its costs; by preventing the company from folding, all its employees remain employed. A tax cut may help a company afford new capital equipment - new computers, a new truck, new lighting or HVAC - that directly spurs economic activity in other companies and helps employment that way. Tax cuts also have the advantage of cost over stimulus funds - it costs much less overhead to simply cut tax rates (requiring government workers' time as well as private companies' accountants) than to craft stimulus law rules, apply for stimulus funds, check and award those applications, do the paperwork required to show compliance with the rules of the stimulus, and check that paperwork. The less time and money consumed in overhead and compliance, the more time and money available for those goods and services society recognizes as wealth. Stimulus money is a net wealth drain to society, with the hope that it will stimulate the economy back into normal mode. An across-the-board tax cut is a net wealth booster to society. The only exception to this is when the Fed manipulates tax rates (in the name of controlling inflation) to strangle growth, which is why tax cuts in good times may no longer pay for themselves through added growth.

Show me statistics that back up this theory.

This is a very long winded version of Regeanomics.

 

[Fern]

I would agree that some of the business failures are due to lack of capital, but i wouldn't peg it at 90%+. Many businesses are just poorly managed or a poor fit in their local economy.

I don't see how tax breaks create demand; demand for what? labor?.

Lets say you run a diner/bank/whatever. You are going to hire as many people as you need to get the job done... How does a 1/2/5/10% tax cut actually influence you to hire more people rather than pocket the difference? I think it is a fallacy that tax cuts somehow create jobs.

No, no, nope. We're not on the 'same sheet of music' here.

Cutting taxes for that specific business does not create demand. Cutting taxes broadly, however, puts more money into the hands of that business' customers and/or potentioal customers thereby increasing demand for it's product/services.

To follow through with your example, in the last stimulous the government decided to be the one spending the money (under a tax cut people would be the ones spending the money). As far as i can see, the bulk of the infrastructure money spent to stimulate the economy went to repavig projects. So, only if that "diner/bank/whatever" had customers from the repaving industry would it see any stimulous/increased demand itself. (I won't mention 'trickle down)

Fern

 

[Throckmorton]

No, no, nope. We're not on the 'same sheet of music' here.

Cutting taxes for that specific business does not create demand. Cutting taxes broadly, however, puts more money into the hands of that business' customers and/or potentioal customers thereby increasing demand for it's product/services.

To follow through with your example, in the last stimulous the government decided to be the one spending the money (under a tax cut people would be the ones spending the money). As far as i can see, the bulk of the infrastructure money spent to stimulate the economy went to repavig projects. So, only if that "diner/bank/whatever" had customers from the repaving industry would it see any stimulous/increased demand itself. (I won't mention 'trickle down)

Fern

So does extending unemployment benefits

 

[Throckmorton]

LOL, I'll give you this: your partisanship loyalty is virtually second to none. Instead of admitting that the government never really had a hold on recovery to begin with, its stimulus was a patch of insufficient strength, you simply blame it on the minority party instead.

Huh? I know you're Canadian so maybe you're not really that familiar with the political system... The reason the stimulus wasn't bigger was because of Republicans.

 

[Fern]

So does extending unemployment benefits

But a very poor one.

Under the theory that borrowing (which the fed gov must do to finance unemployment) for give-aways like unemployment is the kind of stimulous necessary we might as well just borrow even more and hand it out.

But isn't that got us into trouble in the first place?

Look, would you rather take out a loan to pay for a $100K vacation, or for a $100K investment (gold, stocks, real estate etc)?

All things being even, which loan is more likely to get paid back? Of course the answer is obvious.

Creating private sector jobs creates more GDP. The private sector job must make enough money to pay for itself plus some profit. Once the gov money is expend initially the private sector job keeps going on it's own. It's like an economic 'energizer bunny'. It must only be funded once and will generate GDP/profit which returns revenue to gov via taxes.

Unemployment and money for government jobs is completely different. they generate no GDP/profit. Once the initial money runs out it must be funded again. That's the big problem with stimulous and these proposals for additional funding. They do not address the core problem - we need increased GDP to pull ourselves out of the recession.

IMO, unemployment is better viewed as welfare/humanitarian assistance to help cushion the blow for those harmed by the recession. But it is not the answer to lift us out of depression. If the current model of viewing unemployment/gov job funding as stimulous is continued (without an in GDP) the inevitable result is bankruptcy.

Fern