The Economy

[Jigfishn10]

Good conversation all! I'm glad this thread got unlocked and progressed in a civil manner.

My new job and my now watered down biz has kept me away from the computer for a good portion of my day, so I don't have time to research topics like this anymore, but I have learned a lot from this thread.

Thank you.

[Hookemdown.]

Um, cool story, bro.

[tyrius.]

Before this gets blocked, everyone should read about the Federal reserve bank and it's lending practices. It's a private bank that lends money to the US govt, at interest,

And then remits that interest back to the federal gov't. Look up the Federal Reserve financial statements, they're online for anyone to see. You'll learn something new.

[tyrius.]

As for Grundlelove's misquote of Buffet, Buffet stated the percentage of his income paid in taxes is lower, not the amount. His rate of taxation is lower. See the link below.

He's also talking about marginal tax rate and not effective tax rate. The secretary may be paying a 30 some % marginal tax rate (that would be one WELL paid secretary though, single income in the 170's), but that person's effective rate is much lower. Also, if Buffet was so concerned about this injustice then he'd stop taking his income as capital gains and set it up so that it was actual income. He'd pay a MUCH higher effective rate then. Also, he's free to send in extra to the Fed. They aren't going to send it back unless you ask for it.

[SirSnookalot]

Not about the debt ceiling. I've read that a number of post offices may be closed. People are sending less mail due to email, social networking, text messaging and so on. Not to mention companies want you to go green, not because they are enviromentally aware it's because they want to save the postage. I've seen the spots on TV saying that the Post Office is funded by postage alone, not tax payer dollars, so I'll have to accept that.

Technology may good for some parts of business and our personal lives, but it puts people out of work adding to already unemployment problems.

[Fishing Rhino]

Include the government in those responsible for reduced mail volumes. Ever hear of direct deposit for SS, income tax refunds, etc.? Lots of jobs have been created and disappeared. The advent of the automobile put buggy whip manufacturers out of business, but also created jobs in another area of manufacturing. Assembly lines, automation and robots have likewise cost jobs. But they also resulted in more uniform and better products, at lower prices.

Ever hear this line? The new (fill in the blank) mall will bring hundreds or thousands of jobs to downtown Metropolis. While this is true, it does it at the expense of jobs in suburban malls/shopping centers. The availability of cheap labor and more business friendly regulations in the South cost tens of thousand of jobs in the textile industry beginning in the early 1900s. On the upside, it offered new opportunities in the South.

It's called competition, building a better mousetrap, or inventing something new. The economy like everything else in life is an evolving process. The difference today is that, like it or not, today it's a global economy. Emerging nations have expanding economies. The once dominant nations have shrinking economies. Equilibrium and stability are only fantasies when it comes to the economies of the world.

The politicians are largely to blame for the perception that we can have our cake and eat it too. None will dare tell the entire truth about the economy.

[Root beer]

Oh dear god. :lol:

[Root beer]

Include the government in those responsible for reduced mail volumes. Ever hear of direct deposit for SS, income tax refunds, etc.? Lots of jobs have been created and disappeared. The advent of the automobile put buggy whip manufacturers out of business, but also created jobs in another area of manufacturing. Assembly lines, automation and robots have likewise cost jobs. But they also resulted in more uniform and better products, at lower prices.

Ever hear this line? The new (fill in the blank) mall will bring hundreds or thousands of jobs to downtown Metropolis. While this is true, it does it at the expense of jobs in suburban malls/shopping centers. The availability of cheap labor and more business friendly regulations in the South cost tens of thousand of jobs in the textile industry beginning in the early 1900s. On the upside, it offered new opportunities in the South.

It's called competition, building a better mousetrap, or inventing something new. The economy like everything else in life is an evolving process. The difference today is that, like it or not, today it's a global economy. Emerging nations have expanding economies. The once dominant nations have shrinking economies. Equilibrium and stability are only fantasies when it comes to the economies of the world.

The politicians are largely to blame for the perception that we can have our cake and eat it too. None will dare tell the entire truth about the economy.

I don't think anyone knows the entire truth...Economy evolves, yes, but today there is a good amount of labors, unskilled workers, etc. We lose the core of our labor market overseas where they can hire more workers at cheaper price, and those jobs will never come back unless new laws make them come back. I can almost guaranteed you that someone in this country with no training nor education outside of secondary school has lost a job due to outsourcing. He then instead of accepting a job somewhere else where it's non-factory for lower wage, he rather collect on unemployment insurance and what not then he got discourage from searching for a job, thus, it's the reason why unemployment rate is around 9% rather than 20% or higher. (I'm just guessing about what actual percent rate would be without it being statistically skewed.) Lot of people's mentality is screwed up in this country. In my opinion. We got too greedy, or we feel we have to compare ourselves to others and feel too big take jobs for lower wages, etc. Screw it.

[Fishing Rhino]

I don't think anyone knows the entire truth...Economy evolves, yes, but today there is a good amount of labors, unskilled workers, etc. We lose the core of our labor market overseas where they can hire more workers at cheaper price, and those jobs will never come back unless new laws make them come back. I can almost guaranteed you that someone in this country with no training nor education outside of secondary school has lost a job due to outsourcing. He then instead of accepting a job somewhere else where it's non-factory for lower wage, he rather collect on unemployment insurance and what not then he got discourage from searching for a job, thus, it's the reason why unemployment rate is around 9% rather than 20% or higher. (I'm just guessing about what actual percent rate would be without it being statistically skewed.) Lot of people's mentality is screwed up in this country. In my opinion. We got too greedy, or we feel we have to compare ourselves to others and feel too big take jobs for lower wages, etc. Screw it.

That's one reason I mentioned the textile industry. Today, outsourcing is considered to be out of the country. But in the 1900s the "Textile Capital of the World", Fall River and other cities in this area lost those jobs to the South. Today, the South has lost them to overseas countries.

I've heard the argument others have made about passing laws for this and that which will force the companies to bring those jobs back here. If they do, who will buy the product they manufacture? The reason they moved was for survival, in order to be able to compete on even grounds with the cheap labor, low taxes, and less regulated industries in other countries.

Just about everything we buy, from clothing to electronics, to toys, sporting goods, etcl, will rise in prices dramatically. But first you have to deal with that thorny constitution which most likely would prevent the government from passing the laws you suggest. If it were possible to bring those jobs back here, and compete on the world market, why doesn't some entrepreneur do it?

You are onto something when you said, "we got too greedy". Much labor has priced itself out of work. The only labor that cannot be outsourced is something like construction which has to be done on site, health care, most of which must be provided close to home, education, which again must be provided locally, police, fire, etc.

[SirSnookalot]

I think Root Beer is right on. When a country like China can import their goods into the U.S. about a 2% tariff and in turn our exports are charged 25%, trade practices that must be changed. The tax code favors off shore manufacturing and the banking industry can make more money investing overseas than here,

The economy is only global because it's cheaper to do things offshore, we must make the economy revolve around our own people. Boeing is selling airplanes in China, the stipulation is that some of the parts be manufactured in china, increasing year by year. The Chinese goal, in time will learn the airplane manufacturing business and be on their own, then compete with Boeing. Modernization of their cities and infrastructure is putting us to shame,,,,,,,,,anyone question where the real brains are? They educate their young, we cut funding. We go for quick short term profits, they go for long term world domination. It's the story of the tortoise and the hare.

[South FLA]

Here is a good way to describe the U.S. debt to someone:

Imagine if you had a very attractive aunt that had very nice things (European cars, fine jewelery, huge 5k sq ft. house, extravagant vacations, maids, etc.) and only worked as a cashier at the local supermarket. One day while visiting you could not help but notice huge credit card bills from all the major creditors, local credit unions, mortgage companies and automobile finance companies stacked on her granite kitchen's counter-top. When you inquire her about it she says, "Oh darling you have so much to learn, I just make the minimum payments and sometimes a little more on time and have been doing it for years." She goes onto say "I have an excellent credit rating and have never been late!"

Nevertheless, you are still apprehensive about it because even with all the minimum payments "and a little more" the numbers still don't add up. Later that day you ask your father about how his sister's lifestyle and hesitantly he spills the beans and says "for years, being the beauty that she is, she has had Chinese, Japanese, and various other foreign and local lovers that would infuse her with cash and gifts, being smart your aunt would use the cash to pay the minimum on all the bills and sometimes "a little more" with the money she makes at the local supermarket. She has for the past 42 years been carrying on like this, but recently her age has caught up to her and some of lovers have become jilted and I am afraid they may ask for some loaned money and gifts back." "Unfortunately", you dad continues, "she has duped many of her lenders into security since she actually has paid her bills on time, little do they know that she is becoming cash starved and in little time she won't even be able to make the minimum interest payments on her bills if they don't raise her credit limits, which they have done since 1969. Nevertheless, your lovely aunt can get her financial house in order is she actually lives within her means and stops spending on luxury items, vacations, and moves into a smaller house."

Aunt=US Government

Foreign Lovers and Local Lovers=Treasury Bill Holders (We the People and Foreign Governments)

Banks and Creditors= Tax Payers (We the People)

Luxury Items, Fine Cars, Jewelry, House= Various branches of government and entitlement programs

Debt=What she owes to the various lenders and some lovers

Deficit= Difference between what she makes and what she owes, she has a cashiers' budget, but lives like a wealthy person (Lowering the deficit means NOTHING, lower the debt does)

So there you have it an explanation even us bass fisherman can understand.

Further reading straight from the horse's mouth:

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt

http://www.treasury.gov/initiatives/Documents/Debt%20Limit%20Myth%20v%20Fact%20FINAL.pdf

[Bassn Blvd]

Very nice.

Now can you please explain why the sky is blue? I'm sure my 3 year old will be asking such questions very soon and I would rather explain the debt problem. Thank you.

[SirSnookalot]

^^ excellent explanation, but this is the difference in comparing a "household" budget to that of the government.

Your Aunt is responsible to no one, the government is responsible to 300 million people to provide services, such as a military and many other programs we depend on and need.

.

When your Aunt dies all she 's done is left debt that no one is responsible for, the government hopefully will live forever.

Your Aunt lived like a millionaire, a good portion of the population lives on poverty.

If your Aunt needs a pay raise the amount is very limited, the govern can print money and raise taxes to create income. Government can change the tax code for additional revenue and help stimulate job growth. May not approve but government can bailout, for example Chrysler in 1979 and the latest to Chrysler and GM, both of whom are well on the road to recovery ( GM has taken back the title of #1 auto manufacturer).

This is the exact argument that a certain group of congressman have been trying to make, " we know how to manage a household, the same rules apply to managing the government"........it don't work that way, not when your dealing with international finance. Only the U.S. and Denmark even have a debt ceiling, and ours has been raised 78 times since it's *** in ww1. There has never been a debate over the debt ceilings, Reagan raised it 18 times with a total time of 10 minutes spent on the entire 18. The debt ceiling is only for money already spent, has really nothing to do with future expenditures.

I think South Fla did a masterful job of explanation.

[WdyCrankbait]

Bravo, Bravo, (golf clap!) Great job!

[Root beer]

If it were possible to bring those jobs back here, and compete on the world market, why doesn't some entrepreneur do it?

I think it has to do with the New Deal that was passed during the Great Depression.

The reason it's even harder to compete in the global market is because it's cheaper to buy elsewhere than from United States in term of exchange rate..Despite our dollars being devalued, we still have a high exchange rate for other countries to swap from local currency to our dollars in order to buy our goods. Has anyone ever wonder if our dollar got eroded so bad that other countries would shift from China to U.S. bearing regulation change because it would be cheaper to manufacture here than China? I once thought of that one night. lol. It would make a great book where the plot is the Federal Reserve intentionally eroding our dollars in an attempt to entice other countries to produce goods in the U.S. rather than China. Talk about an economic drama book turned into a movie!!

[Fishing Rhino]

Rhode Island town files for bankruptcy. Who says it cannot happen to government? When you cannot pay the bills, you cannot pay the bills. All this borrowing, and raising of the debt ceiling does is to move the inevitable further down the road. And, you will run out of countries that are willing to loan us money. Then what?

How many debts has the U.S. "forgiven" for countries who have borrowed from us in the past? Are we different in that regard from other countries?

Google United States forgives debt to get an inkling. The question is, will other countries forgive us our debts as we have forgiven our debtors?

http://www.reuters.com/article/2011/08/01/us-rhodeisland-centralfalls-idUSTRE7703ID20110801

[Catt]

I think Root Beer is right on. When a country like China can import their goods into the U.S. about a 2% tariff and in turn our exports are charged 25%, trade practices that must be changed. The tax code favors off shore manufacturing and the banking industry can make more money investing overseas than here,

The economy is only global because it's cheaper to do things offshore, we must make the economy revolve around our own people. Boeing is selling airplanes in China, the stipulation is that some of the parts be manufactured in china, increasing year by year. The Chinese goal, in time will learn the airplane manufacturing business and be on their own, then compete with Boeing. Modernization of their cities and infrastructure is putting us to shame,,,,,,,,,anyone question where the real brains are? They educate their young, we cut funding. We go for quick short term profits, they go for long term world domination. It's the story of the tortoise and the hare.

Not completely true!

Boeing has what is known as “first right of refusal”, in other words no one can build a Boeing part without first going to Boeing to see if they have the part in stock or if they want to build it. If Boeing does not have the part in stock and does not want to build a company can be given temporary permission to build one part only at a 35% cost of the original part paid to Boeing. I know this to be a fact since I worked 9 ½ years for Northrop/Grumman manufacturing Boeing parts for the J-Stars program.

I get sick and tired of people calling SS an entitlement, by definition an entitlement is: belief that one is deserving of or entitled to certain privileges. SS is not an entitlement; it is my money which has been stolen by my government under the pretense that they were “entitled” to it.

Had the government left SS alone it would be somewhere around the amount of our debt.

[Quillback]

Looks like they are going to sign a deal today to raise the debt ceiling. From what I've read it's disappointing, very little real spending reduction and it looks as it we'll have this debt ceiling issue again early next year unless Congress acts on additional spending cuts recommended by a yet to be created spending cut commission. Lat year we have recommendations for deficit reduction from a special commission set up by the Pres. Congress and the Pres. ignored the panel's recommendations. Now as part of this deal they're going to set up another panel to come up with a deficit reduction plan - This is nuts. What is going to happen is the can is kicked down the road, we'll face the same crap early next year. Washington is dysfunctional. It's sad to see our great country going downhill like this.

[Grey Wolf]

Looks like they are going to sign a deal today to raise the debt ceiling. From what I've read it's disappointing, very little real spending reduction and it looks as it we'll have this debt ceiling issue again early next year unless Congress acts on additional spending cuts recommended by a yet to be created spending cut commission. Lat year we have recommendations for deficit reduction from a special commission set up by the Pres. Congress and the Pres. ignored the panel's recommendations. Now as part of this deal they're going to set up another panel to come up with a deficit reduction plan - This is nuts. What is going to happen is the can is kicked down the road, we'll face the same crap early next year. Washington is dysfunctional. It's sad to see our great country going downhill like this.

Our political system is definately broke , too many bought-off politicians . Complete collapse is highly probable .

[K_Mac]

I agree that the system is broken, and a collapse is possible. There is much uncertainty in the world. This nation and this form of government is not perfect, yet I do not believe that we are doomed to fail. We've been through tough times before. While I am too old and cynical to have the optimism of Pollyanna, I still have faith in the system and the American people.

[Alpster]

All this geo-political, economic discussion is very interesting and I am very encouraged that at least most of our members here (which I believe are somewhat representative of the average American)are at least trying to remain well informed and are concerned with the issues. THIS IS A VERY GOOD THING!

With that said, the economy can be quickly boiled down to human nature. There are 2 rules 1.) You always get more of what you reward...and 2.) you always get less of what you punish.

As long as we punish small business, entrepreneurs, and the middle class workers with higher taxes and government regulation we should expect less productivity and revenue.

Conversely, as long as we reward able bodies who choose to abuse the systems and refuse to pull their weight and expect the government to take care of them, we should expect a larger drain on the economy.

The definition of insanity is "To keep doing the same things and expecting a different outcome".

You don't have to look very far to see what cradle to grave entitlements and nationalizing business has done in other countries. History has proved over and over again that societies always thrive when individuals are free and empowered and they fall into ruin when government is empowered and dominates. JMH $0.02.

Ronnie

Ronnie

[Jigfishn10]

I know on the surface this piece of legislature doesn't look great, but there is a provision to vote on a balanced budget amendment to the constitution (that's what I read anyway, I may be wrong on that).

Still not outta the woods just yet, we still have to wait and see what Moody's & S&P do to our credit rating.

[5bass]

as long as we reward able bodies who choose to abuse the systems and refuse to pull their weight and expect the government to take care of them, we should expect a larger drain on the economy.

Yep....and this is happening more and more each day.

[RoLo]

Today the senate passed the debt ceiling bill and the stock market headed south.

This is not surprising, given the fact that the stock market never reacts to the obvious,

and today's bill was already priced into the shares. Although today's bill passing was a foregone conclusion,

equity markets are equally focused on the current “international” monetary crisis (European banks).

Make no mistake about it, the US is merely one component in an outsourced global economy,

where no nation can proper in isolation without international Win-Win deals.

According to one TV talking head, stock prices tanked today due to the market's perception of a “double-dip” recession.

Well, the market certainly embarked on a false start, but I totally missed the business recovery that separates the dips.

Our economic recovery has been anemic at best and unemployment remains high. I think a better description

of our current scenario is the '2nd down-leg' of an ongoing recession.

Gloom and doom is the natural reaction, but every cloud has a silver lining and today's fiscal debacle is no exception.

Unique buying opportunities lie ahead, which is a question of 'When' rather than 'If'. We seen currencies like Argentina and Indonesia fall as much as 90%, and yet they're still out there.

As always, timing a trend-reversal

is a tightrope act, but economic bottoms historically coincide with a market event called "capitulation".

Capitulation is when bad news and futility dominate the news, and when the last standing bulls

launch a selling stampede. When bad news and pessimism reach a peak,

a recovery is usually in the offing, and after the sellside has been exhausted, buying is the only game left in town.

Roger

[Fishing Rhino]

Let's talk about jobs for a moment. Today, it's a popular pasttime to put the blame on the "initial" trade agreements. You know, NAFTA, GATT, etc. The fingers get pointed and they get the credit/blame for the outsourcing of jobs.

If you believe that, a history lesson is in order. Remember Ross Perot's ill fated independent run for the presidency and his famous line, "That giant sucking sound you hear is jobs leaving the country." He said that in regards to the effect the trade agreements would have on jobs in this country. Perot was a day late, and a dollar short with that line.

So, let's take a look at the history of job losses due to outsourcing. When was the last television set, calculator, tape recorder, stereo, etc., made in the US of A in any significant numbers. Electronics were headed out the door and gone decades before the trade agreements. The same for textiles, clothing, and shoes. Let's throw in furniture for good measure. Those are just off the top of my head. It's a long list, but the outsourcing of jobs and the onset of the global economy was underway decades before those despised free trade agreements.

I clearly remember the pundits saying we were shifting from a manufacturing based economy to a service based economy. The silly twits never gave a thought that manufacturing is the foundation for the economy and without manufacturing, and its jobs we hardly have any need for service industries.

The truth is this. With or without those trade agreements, the world was headed to a global economy, and jobs were headed overseas, for the cheap labor, lower taxes, and less stringent regulations. You and I may not like it, but that's the reality. There is no easy fix, though the politicians would like you to think they can do something about it.

Right now, they are in survival mode, trying to kick the "shhtuff" further down the road so it will hit the fan when they are gone, and the current crop of pols will take the brunt of the voters wrath. They are the ruling class, and they like it. Pulling the wool over others' eyes is their specialty. It seems folks may finally be wising up.

Term limits. An idea whose time came long ago.