Monday, August 29, 2011

The Source of Our Economic Malaise II

I have been writing that the cause of our economic malaise has been over-stimulation of the economy.  Since posting The Source of Our Economic Malaise, the Washington Post published the following article: "Consumer fears put economy on the brink". A more appropriate title would have been the "Failure of Supply Side Economics.

Below are comments made by the readers of the article that tend to support my assertion that we over-consumed and now we have to under-consume for a variety of reasons.

etronsen wrote: "People used their homes like ATMs. ...  We are now paying the price for that profligacy."
gainsworth wrote: "Its hard to spend what you don't have. The massive consumer credit fueled by the housing bubble artificially inflated consumption in for the past 10 years. Now that the piggy bank is empty and you no longer have a job, its kind of hard to keep buying. It is going to take ten years for people to get out of debt, rebuild some savings, instead of living on credit, and only then will the economy start to recover in a meaningful manner. Hopefully, it will be through manufacturing, infra-structure building and upgrades etc. and not pure consumerism.
Cossackathon wrote: "For years I've heard economists bemoan the fact that the US public did not save enough. Well, we started to save more, now that's a problem, as well."
HGF78 wrote: "Oh good, we are back to blaming the American Consumer. Let us look at the real causes of people not spending. Jobs have been shipped offshore (Chinese workers cannot drive the American economy) and no pay increases for years for those left with a job. Now add in increasing costs for gas, insurance, food and clothes. I think the problem is not people spending but the fact they have nothing left to spend with after paying for the basics. The corporate cost cutting model is destroying the US economy. They need to stop worshiping at the alter of increasing quarterly profits." (fixed spelling errors)
PennyWisetheClown wrote: "Corporate America wanted it both ways they wanted America as the premier consumer society and they wanted outsourced cheap labor. ...  Problem to stay consumers America needs the jobs to support that lifestyle--something the bean counters neglected to add into their equation and America today is the result."
Iconclass wrote:  "As being unemployed for about one year out of two during the great recession, I payed off my debt I incurred during that time for food. Do you really think I am going to go out and buy a new living room set made overseas so I can bolster the bottom line of the marketers and investors of these factories? ... I repair what I have. God granted me with an awesome mechanical aptitude to do this. I work when I am asked to, putting off family obligations, personal life, etc.. I live below my means, made sure one weeks check covers a mortgage. My car is ten years old and well maintained with a manual transmission. ...  All extra money I have goes to pay off my debt, a mortgage, which I foresee to do in five years." (fixed spelling errors)

Wednesday, August 17, 2011

The Source of Our Economic Malaise

I suppose it occasionally does not hurt to support my CasualObservations with some punditry.  I have been writing that the cause of our economic malaise has been over-stimulation of the economy.  We can actually blame Bush for this.  Regretfully Obama wants to outdo Bush with even greater stimulus, which I have been arguing is wrong.  I have periodically mentioned that both Fox News and CNBC mention over-stimulation, but they never seem get around to linking it to the failure of Obama to stimulate the economy.  Very frustrating. This time I made a point to get a link to this CNBC interview with Stephen Roach of Morgan Stanley.  Here is a link to a CNBC video Global Recession: Begins & Ends With U.S.?. The interview starts 50 seconds into the video.

The short synopsis, Mr. Roach states: "That's what the markets are telling you right now, David. It all starts with the American consumer. The biggest piece of the U.S. economy by a large margin. [???] biggest consumer in the world. Here's one number that will say it all. over the past 14 quarters, from 2008 q-1 to the second quarter of 2011 average analyzed growth in U.S. consumer spending in real terms 0.2%. never before has the biggest consumer in the world, the American consumer, been this weak for this long and that feeds everywhere, not just in driving jobs in America, but driving external demand for export-led economies in Europe and Asia. and without the American consumer, the global economy's in trouble.  ...  consumers got hammered in a crisis largely because they overspent, they borrowed more than they ever should've. They squandered their [savings] and now they're facing record high unemployment and underemployment, weak income growth. the consumer's going to be in a hole for many years to come." (emphasis added)

My apologies if the cutting an pasting above is crappy.  The CNBC transcript was difficult to read.

Tuesday, August 16, 2011

Ron Paul Ignored - Too Bad

Great video by Jon Stewart on the Daily Show. Demonstrates how the media massages who they talk about and who they don't.  Ron Paul is being purposely being ignored by the mainstream media. Please watch.

I don't agree with everything Ron Paul says, but he is ideologically consistent. On Freedom Watch (Fox News) today - Ron Paul and Ralph Nader were identified as being the most ideologically consistent and honest persons running for office.

Social Media is Your Friend

As a child of the internet guinea-pig generation, I have a moderate data trail that --although not particularly embarrassing-- I wish I had some way to erase. These days I know a little bit better, and have a supply of pseudonyms in use. The knowledge that once my data is out there is a constant reminder that, no matter what the fine print that no one reads next to the "I Accept" button might say, nothing belongs to me once it is posted on the internet. Social Media (Twitter, Facebook, MySpace, LinkedIn, and so forth) has created a space where far too many people let their guard down. By "Friending" or "Grouping" or "Following" other users, it creates a sense of privacy and control over your internet self that is misleading at best.
In reality it is a system in which you use what amounts to an interactive email platform to talk to people you already talk to in Real Life and people you met briefly at a party but weren't interested in enough to get a phone number. In exchange the platform overlords use what they know about you (because you have succumbed to the very human narcissism that is creating a profile) and your friends and your location and your registered Likes in order to decide which ads to put on your screen. Then, when the third parties got involved and started making games and trivia and secret questions your friends can answer about you? Suddenly there are gift cards on sale at VoldeMart for online games in which you pay real money for virtual objects that can be endlessly replicated.
I still post pictures on media sites. I blog inconsistently, and I micro-blog, and I post updates and one-liners to a collection of friends and acquaintances and lesser-known randoms and people from work who are only there out of a sense of obligation. There are upsides, such as the old teachers and childhood friends I wouldn't otherwise have any contact with. But why do I need it? I don't fit in their lives anymore and reading about theirs is interesting but irrelevant. It's like following a reality star, albeit one I once knew in real life and who is unlikely to crash a premiere. Every once in awhile I realize that even with my lame attempts at internet self-preservation in place, I am only digging myself deeper into the hole of lost data.
I had friends who weren't on any media. They had email, maybe one fake profile on the internet they never used. I was jealous of their anonymity. Who has that kind of restraint? One by one they fell prey. I can find them all online now.
My point? I'm not sure. I'm as guilty as everyone else. Maybe my point is to talk to your kids, early and often, now that we know the dangers of the internet. Not just about the perverts and the RIAA, but also that every piece of themselves that they place online is a piece they will never get back. Remember that there are endless ways to mine data now and they are only the beginning of an entire generation trained to operate with one foot in the internet at all times. Check your social media privacy settings as often as you can, and if you want to be the first to play with a promising new site, don't let them know who you really are. Does this sound like a cut & paste chain letter you would expect to find on some obscure friend's status message? Maybe. It's late and I'm probably being verbose with my conspiracies. Unfortunately it's true. Don't be scared to use the internet for your own advantage, just be premeditated and know that the internet is using you right back. In the future, the only thing you can own is what you don't put on the internet.

Sunday, August 14, 2011

Misleading Deficit Reduction

Once again the media fails to disclose that so-called deficit reduction really hides the fact that the deficit spending will continue to increase our total debt.  All that is being proposed is to spend slightly less than originally proposed, not to cut spending.  Note the misleading headline: In tandem: Reducing the deficit to raise debt ceiling. (emphasis added) Below is a Washington Post graph.

The Economist graph from the Cato Institute

Of particular note, I liked the comment by Mr Edward of the CATO Institute:
Wait a minute, those bars are rising! Spending isn’t being cut at all.  The “cuts” in the deal are only cuts from the CBO “baseline,” which is a Washington construct of ever-rising spending. And even these “cuts” from the baseline include $156 billion of interest savings, which are imaginary because the underlying cuts are imaginary...
The federal government will still run a deficit of $1 trillion next year. This deal will “cut” the 2012 budget of $3.6 trillion by just $22 billion, or less than 1 percent.
When will we ever see a graph from the Obama administration showing the claimed [deficit reduction] to demonstrate that the above graphs are somehow "wrong".  Probably when hell freezes over.

PS: Fixed text in brackets/