The Economics Discussion Thread

http://news.yahoo.com/s/nm/20090214/ts_nm/us_gm_plan

If GM actually goes through with this, it just might save the company.

" By now everyone knows the sad tale of Bernard Madoff’s duped investors. They looked at their statements and thought they were rich. But then, one day, they discovered to their horror that their supposed wealth was a figment of someone else’s imagination.

Unfortunately, that’s a pretty good metaphor for what happened to America as a whole in the first decade of the 21st century.

Last week the Federal Reserve released the results of the latest Survey of Consumer Finances, a triennial report on the assets and liabilities of American households. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001.

At one level this should come as no surprise. For most of the last decade America was a nation of borrowers and spenders, not savers. The personal savings rate dropped from 9 percent in the 1980s to 5 percent in the 1990s, to just 0.6 percent from 2005 to 2007, and household debt grew much faster than personal income. Why should we have expected our net worth to go up?

Yet until very recently Americans believed they were getting richer, because they received statements saying that their houses and stock portfolios were appreciating in value faster than their debts were increasing. And if the belief of many Americans that they could count on capital gains forever sounds naïve, it’s worth remembering just how many influential voices — notably in right-leaning publications like The Wall Street Journal, Forbes and National Review — promoted that belief, and ridiculed those who worried about low savings and high levels of debt.

Then reality struck, and it turned out that the worriers had been right all along. The surge in asset values had been an illusion — but the surge in debt had been all too real.

So now we’re in trouble — deeper trouble, I think, than most people realize even now. And I’m not just talking about the dwindling band of forecasters who still insist that the economy will snap back any day now.

For this is a broad-based mess. Everyone talks about the problems of the banks, which are indeed in even worse shape than the rest of the system. But the banks aren’t the only players with too much debt and too few assets; the same description applies to the private sector as a whole.

And as the great American economist Irving Fisher pointed out in the 1930s, the things people and companies do when they realize they have too much debt tend to be self-defeating when everyone tries to do them at the same time. Attempts to sell assets and pay off debt deepen the plunge in asset prices, further reducing net worth. Attempts to save more translate into a collapse of consumer demand, deepening the economic slump.

Are policy makers ready to do what it takes to break this vicious circle? In principle, yes. Government officials understand the issue: we need to “contain what is a very damaging and potentially deflationary spiral,” says Lawrence Summers, a top Obama economic adviser.

In practice, however, the policies currently on offer don’t look adequate to the challenge. The fiscal stimulus plan, while it will certainly help, probably won’t do more than mitigate the economic side effects of debt deflation. And the much-awaited announcement of the bank rescue plan left everyone confused rather than reassured.

There’s hope that the bank rescue will eventually turn into something stronger. It has been interesting to watch the idea of temporary bank nationalization move from the fringe to mainstream acceptance, with even Republicans like Senator Lindsey Graham conceding that it may be necessary. But even if we eventually do what’s needed on the bank front, that will solve only part of the problem.

If you want to see what it really takes to boot the economy out of a debt trap, look at the large public works program, otherwise known as World War II, that ended the Great Depression. The war didn’t just lead to full employment. It also led to rapidly rising incomes and substantial inflation, all with virtually no borrowing by the private sector. By 1945 the government’s debt had soared, but the ratio of private-sector debt to G.D.P. was only half what it had been in 1940. And this low level of private debt helped set the stage for the great postwar boom.

Since nothing like that is on the table, or seems likely to get on the table any time soon, it will take years for families and firms to work off the debt they ran up so blithely. The odds are that the legacy of our time of illusion — our decade at Bernie’s — will be a long, painful slump."

Paul Krugman February 15, 2009

Edited by Slartibartfast - February 17 2009 at 06:37

So now that the stimulus has passed, and we're all going to be $400 richer, on average, over the next year, how are you going to spend that $400?

So I am watching the NBC Nightly News last night and Brian Williams is spouting off about every doom and gloom there is.  Stock market down 300 points.  Bailout bill going through.  GM and Chrysler asking for more money, etc., etc.  Then they change gears and go to the A-Rod story.  WHO CARES ABOUT THAT JAG-OFF!  The country (and world for that matter) are in the dumper and everyone is worried about whether he shot some drugs 5 years ago.  I love baseball but in light of things, how does this matter to anyone who is losing a home or a job?  Our priorities are so out of whack it is ludicrous.  And I am sure his second $250+ million contract will put some salve on his not going into the hall of fame.

I hope he never wins a series.  After the last one in 2000, I read a barf-making story in Sports Illustrated about how the Yankees wooed Mike Mussina away from Baltimore.  Obstensibly because they were more class.  Well, Mikey never won a series and he is gone.  Same with Giambi.  Now I am waiting for Matsui, Rodriguez and Damon to never win one.  Add Sabathia, Texiera and Burnett to the list now.  Take all the money and never win anything, that's my motto.  And charge all the jerk fans tons of money to go to your taxpayer supported abortion of a stadium.  Another economic injustice where the taxpayer foots the bill for fat cats.

One more thing.  Read a story about a Golman Sachs guy who turned down his yearly bonus yesterday.  What a saint.  I guess he will have to get by on the $67 million he made last year.  That's the figure the WSJ quoted, no joke.

johnobvious wrote: After the last one in 2000, I read a barf-making story in Sports Illustrated

I didn't know they covered barf making.


Edited by Slartibartfast - February 20 2009 at 14:12

The average U.S. rate on a 30-year, fixed mortgage fell this week as President Obama enacted an economic stimulus and pledged $275 billion to reduce foreclosures. 2/21

Group counters stimulus with Jesus in TV ad 2/22

Volcker: Crisis May be Even Worse than Depression 2/21

Message to Obama: No Risks for Taxpayers and Profits and Bonuses for the Mega-banks. Nationalize Them: If It's Our Risk, It's Our Profit. 2/21

Energy Costs Push Up Consumer Prices in January 2/21

Newly Poor Swell Lines at Food Banks Nationwide 2/20

Anti-stimulus governors protest, but ... 'Being against it doesn’t preclude taking the money' (so says S.C. Gov. Mark Sanford). They'll end up scarfing down stimulus funds like a hungry dieter presented with a box of Valentine chocolates. 2/21

Cruel, unnecessary irony: Jobless hit with bank fees on benefits 2/21

Nearly 5 million Americans drawing jobless benefits 2/21

Jobless Rolls Swell To More Than 6.5 Million, and that is the official numbers 2/20

Inflation not this low since 1955. At zero for the last 12-month period, it would become 'deflation' if prices dropped further. Last period of U.S. deflation was the 1930s. 2/21

Investigation: The oil money behind the anti-stimulus fight 2/21

If you found any of these links useful, check out buzzflash.com ...






Edited by Slartibartfast - February 23 2009 at 16:46

Edited by Slartibartfast - February 27 2009 at 11:47

Edited by Slartibartfast - March 10 2009 at 13:14

http://www.businesspundit.com/after-the-crisis-a-parody-of-15-corporate-logos/

After The Crisis: A Parody of 15 Corporate Logos

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The 2008 crash is probably the most serious economic crisis we have faced after the Great Depression. Stock markets from around the world fell as much as 20% in a single week, dozens of banks either failed or were rescued by government and private instutitions, and companies started laying off employees as a consequence of the reduced demand.

We know how we entered into the crisis, but we don’t how, when, or how we will be getting out of it. Considering that issue, we decided to our little bit to help cheer everyone up by redoing the logos of some renowned companies …. after the crisis.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bonus Logo

While Apple is probably one of the more stable companies in our economy, with a robust and diverse set of high-demand products… we just couldn’t resist this one.

Edited by Slartibartfast - March 23 2009 at 15:03

Well, the US finally did what it should have done in the first place by buying up $1 trillion of banks' toxic assets. Of course in an ideal world where we had to deal with this mess, the toxic assets would have been bought up way back in November.