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In keeping with my acronym titled threads I want to spin off my T.R.E.S.O.B.A thread which is dealing with the economic state of Black America. In this thread I would like to have a deep discussion about the real state of the U.S. economy. I thought a good way to start this discussion would be to present a film that I saw once on CNN called I.O.U.S.A. which I don't know if anyone else here saw it but... it does a great job breaking down the debt time bomb hovering over this country and the impact it's going to have. I would like for those who believe that this current 'stimulus' will work to after viewing this clip express if they still feel this way and why...


http://www.youtube.com/watch?v=O_TjBNjc9Bo
"In a world where lies have become accepted as fact..The truth when finally heard burns like a flame of fire" "It is irrational to want that which is not God's will, so attune thyself with thy inner Nature and live happily."
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This is where the US needs to get to as a nation in order to become solvent as a nation: Think of this as being like the range your cholestoral, blood pressure, weight, glucose and other metrics need to be for your body to be in good health:

A.) Balanced Federal Budget by General accounting rules used in Business, which takes into account the unfunded liabilities of Medicaid and Social Security. This can only manifest through a massive, and I do mean massive, increase in taxes and or reduction in government spending. Either scenario will result in a major drop in GDP. Assuming those entitlement systems are not scraped (political suicde...so not likely).

B.) A balancing of the nation’s current account (otherwise known at balance of trade). We need to equalize trade so that the difference between imports and exports are not skewed. The US has lost the comparative advantage in many sectors or industries as a result of our higher wages (standard of living made possible by good paying jobs). This trade deficit will likely only be reduced significantly when equilibrium is created between US wages and global wages. What this really means is that US wages must take a big reduction going forward as a trend, which, by the way, makes it harder to achieve item “A”.

C.) The savings rate of Americans needs to rise from .05% to about 10%.

D.) Interest rates set by the FED need to be at least 8% in the long run, but need to be at least 15% in the short run to control the inflation that is about to be released from the trillions injected into our economy to stimulate growth. Higher interest rates would also promote Item C, as hyper inflation discourages savings.

E.) Homes need to continue to decline to the level where people with a median income can afford a median priced home at 25% of their net pay (monthly mortgage).

F.) The Stock Market should be around 6,000 based upon Price/Earnings ratios and dividend yields. Of ccourse...this is based upon this point in time.....the fate of companies may improve or worsen which could change P/E ratios and yields positively or negatively. However, at this point in time....6,000 is about its present real worth.

These are just a few of the major things that the US needs to do as our economies problem right now is insolvency. These metrics are what are necessary for a healthy economy, in regards to balance sheets and stabilization. The problem is that you cannot get to those numbers without a massive reduction in our economy. Our economy is economically obese and unhealthy. It’s a culture where status is associated with size…..so the bigger we are the more stature we have. It’s a sign of status. However, it’s mostly fat and not muscle and the nation’s heart, arteries and vital organs are under tremendous stress from the weight. The only solution is to get rid of the fat and slim down to a size that does not stress our vital organs and health. It would be like one of us going to the doctor and the doctor telling us that we need to lose 150 lbs or we won’t live very much longer. However, the hunger pains, a side effect of the SOLUTION, are a price we are not willing to bear. Instead, counter intuitively, we seek to return to the same diet that caused our obesity. We see the problem as being THE HUNGER and not the OBESITY. Consequently, we try to treat the side effects of the solution (which is reduced consumption...ie..hunger), with more of the problem (food), because it makes us feel better in the short run. That is what the government is doing....because by reducing your hunger pains in the short run....it keeps them in power. Politicians, except for the party out of power....has a vested interest in our obesity.....lest we go hungry and vote them out of office.
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Peace...


quote:
A.) Balanced Federal Budget by General accounting rules used in Business, which takes into account the unfunded liabilities of Medicaid and Social Security. This can only manifest through a massive, and I do mean massive, increase in taxes and or reduction in government spending. Either scenario will result in a major drop in GDP.


Not only will it result in a drop in GDP, any attempt at a massive across the board tax increase will result in a civil war in this country. The political ideology and approaches to solving this countries dillema are shifting further and further apart. There are many who see the TARP funding and the Stimulus Bills as a huge liability waiting to happen. This is probably a good idea in theory, but it is totally unworkable in the present climate.

quote:
B.) A balancing of the nation’s current account (otherwise known at balance of trade). We need to equalize trade so that the difference between imports and exports are not skewed. The US has lost the comparative advantage in many sectors or industries as a result of our higher wages (standard of living made possible by good paying jobs). This trade deficit will likely only be reduced significantly when equilibrium is created between US wages and global wages. What this really means is that US wages must take a big reduction going forward as a trend, which, by the way, makes it harder to achieve item “A”.


Exactly..Man do you know how many people would try to off someone who talking about reducing the wages of the working class, while increasing their taxes?

The trade deficit is irreparable..There is no way to close this gap. The only way would be to suspend trade and require more domestic trading. But..This too is far fetched..

quote:
C.) The savings rate of Americans needs to rise from .05% to about 10%.


This probably wouldnt hurt, however, I would advise that they quicly convert any savings they have into gold. You cannot trust the value of the dollar on any given day.

quote:
E.) Homes need to continue to decline to the level where people with a median income can afford a median priced home at 25% of their net pay (monthly mortgage).


This is happening, however, how do you think this would impact those who are already in jumbo loans? If I owe $600k on my home, and the value goes down to $300k or less, why would I continue to pay?

If those in large loans begin to think like this and forsake thier credit to save their money over the long run, we will see a protracted collapse in the banking and real estate industry.

quote:
F.) The Stock Market should be around 6,000 based upon Price/Earnings ratios and dividend yields

These are just a few of the major things that the US needs to do as our economies problem right now is insolvency. These metrics are what are necessary for a healthy economy, in regards to balance sheets and stabilization. The problem is that you cannot get to those numbers without a massive reduction in our economy. Our economy is economically obese and unhealthy. It’s a culture where status is associated with size…..so the bigger we are the more stature we have. It’s a sign of status. However, it’s mostly fat and not muscle and the nation’s heart, arteries and vital organs are under tremendous stress from the weight. The only solution is to get rid of the fat and slim down to a size that does not stress our vital organs and health. It would be like one of us going to the doctor and the doctor telling us that we need to lose 150 lbs or we won’t live very much longer. However, the hunger pains, a side effect of the SOLUTION, are a price we are not willing to bear. Instead, counter intuitively, we seek to return to the same diet that caused our obesity. We see the problem as being THE HUNGER and not the OBESITY. Consequently, we try to treat the side effects of the solution (which is hunger), with more of the problem (food), because it makes us feel better in the short run.



I know this, you cannot force an obese person onto a diet without having a serious fight on your hand. Food is an addiction just as a life style is an addiction. People, many of them, would be willing to die before they see thier social status substantially diminished. I see many people leaving the USA for other economys which can sustain the lifestyle they are used to. I think we are at the dawn of a very significant shift in where people live on this planet...No one is going to willfully go lean, not unless that are forced to..


Whirling Moat
quote:
Originally posted by Whirling Moat:
Peace...


quote:
A.) Balanced Federal Budget by General accounting rules used in Business, which takes into account the unfunded liabilities of Medicaid and Social Security. This can only manifest through a massive, and I do mean massive, increase in taxes and or reduction in government spending. Either scenario will result in a major drop in GDP.


Not only will it result in a drop in GDP, any attempt at a massive across the board tax increase will result in a civil war in this country. The political ideology and approaches to solving this countries dillema are shifting further and further apart. There are many who see the TARP funding and the Stimulus Bills as a huge liability waiting to happen. This is probably a good idea in theory, but it is totally unworkable in the present climate.

quote:
B.) A balancing of the nation’s current account (otherwise known at balance of trade). We need to equalize trade so that the difference between imports and exports are not skewed. The US has lost the comparative advantage in many sectors or industries as a result of our higher wages (standard of living made possible by good paying jobs). This trade deficit will likely only be reduced significantly when equilibrium is created between US wages and global wages. What this really means is that US wages must take a big reduction going forward as a trend, which, by the way, makes it harder to achieve item “A”.


Exactly..Man do you know how many people would try to off someone who talking about reducing the wages of the working class, while increasing their taxes?

The trade deficit is irreparable..There is no way to close this gap. The only way would be to suspend trade and require more domestic trading. But..This too is far fetched..

quote:
C.) The savings rate of Americans needs to rise from .05% to about 10%.


This probably wouldnt hurt, however, I would advise that they quicly convert any savings they have into gold. You cannot trust the value of the dollar on any given day.

quote:
E.) Homes need to continue to decline to the level where people with a median income can afford a median priced home at 25% of their net pay (monthly mortgage).


This is happening, however, how do you think this would impact those who are already in jumbo loans? If I owe $600k on my home, and the value goes down to $300k or less, why would I continue to pay?

If those in large loans begin to think like this and forsake thier credit to save their money over the long run, we will see a protracted collapse in the banking and real estate industry.

quote:
F.) The Stock Market should be around 6,000 based upon Price/Earnings ratios and dividend yields

These are just a few of the major things that the US needs to do as our economies problem right now is insolvency. These metrics are what are necessary for a healthy economy, in regards to balance sheets and stabilization. The problem is that you cannot get to those numbers without a massive reduction in our economy. Our economy is economically obese and unhealthy. It’s a culture where status is associated with size…..so the bigger we are the more stature we have. It’s a sign of status. However, it’s mostly fat and not muscle and the nation’s heart, arteries and vital organs are under tremendous stress from the weight. The only solution is to get rid of the fat and slim down to a size that does not stress our vital organs and health. It would be like one of us going to the doctor and the doctor telling us that we need to lose 150 lbs or we won’t live very much longer. However, the hunger pains, a side effect of the SOLUTION, are a price we are not willing to bear. Instead, counter intuitively, we seek to return to the same diet that caused our obesity. We see the problem as being THE HUNGER and not the OBESITY. Consequently, we try to treat the side effects of the solution (which is hunger), with more of the problem (food), because it makes us feel better in the short run.



I know this, you cannot force an obese person onto a diet without having a serious fight on your hand. Food is an addiction just as a life style is an addiction. People, many of them, would be willing to die before they see thier social status substantially diminished. I see many people leaving the USA for other economys which can sustain the lifestyle they are used to. I think we are at the dawn of a very significant shift in where people live on this planet...No one is going to willfully go lean, not unless that are forced to..


Whirling Moat


You make an EXCELLENT point about savings in the FORM of GOLD (or silver). I have been urging people to buy gold, if they can, for the last 4 or 5 years. When I started recommending it….it was in the upper 200’s per ounce and now it’s near 1,000. That said, once the dust settles, a 10% savings rate, in the absence of hyper inflation, is healthier for individuals and for investment dollars (Loans). However, you are dead on target about the impact of savings in a hyperinflationary environment. You are also absolutely correct about the impact of housing depreciation and upside down mortgages. That is the HUNGER pains that I used in analogy. There is no painless transition to a healthy equilibrium. Pain is a side effect of the solution.

We are descending as a nation. It’s the natural lifecycle of our system. Our only choice now is whether we gradually descend or do we crash. The more we try to artificially prop up our altitude…..the less likely we will be able to glide in for a landing.
You've made some very key points here Noah and I want to expand on them a bit as follows....


quote:
Originally posted by Noah The African:
This is where the US needs to get to as a nation in order to become solvent as a nation: Think of this as being like the range your cholestoral, blood pressure, weight, glucose and other metrics need to be for your body to be in good health:


A.)Balanced Federal Budget by General accounting rules used in Business, which takes into account the unfunded liabilities of Medicaid and Social Security. This can only manifest through a massive, and I do mean massive, increase in taxes and or reduction in government spending. Either scenario will result in a major drop in GDP. Assuming those entitlement systems are not scraped (political suicde...so not likely).


You are correct that the unfunded liabilities need to be considered accurately...did you notice in the video what the actual deficit looks like without the current SS surplus? Once the baby boomers start taking out more than they are putting in over the next 8 years...things are going to cascade down hill there pretty quick.

Personally, I feel metrics like GDP and GNP should be done away with as they are flawed methods by which to gauge the TRUE economy.

The only thing that GDP measures is the value of good's and services PRODUCED within a country it has nothing to do with a nations income....Let me give you an example which I've used before but is worth repeating... say you are working at a fast food restaurant and you happen to flip 1000 burgers a week now if each burger sells for $1.00 that means you've produced $1,000 worth of burgers for the week. In other words this is your GDP however that does not mean you will be taking home $1,000 in your pay check... your ACTUAL pay or your NET INCOME may really be minimum wage. It would be erroneous to base your living expenses on the $1,000 of production you've made..yet this is what people do all the time when they compare U.S. GDP (which is currently 13.8 trillion) to it's expenses. The Federal government does not receive that much money in a year it's more like 2 trillion and it spends about 2.5 trillion (which is why it's running a deficit) the only way it get's money is through taxes or borrowing and currently it's swimming in the RED to the tune of 50 trillion +.



B. A balancing of the nation’s current account (otherwise known at balance of trade). We need to equalize trade so that the difference between imports and exports are not skewed. The US has lost the comparative advantage in many sectors or industries as a result of our higher wages (standard of living made possible by good paying jobs). This trade deficit will likely only be reduced significantly when equilibrium is created between US wages and global wages. What this really means is that US wages must take a big reduction going forward as a trend, which, by the way, makes it harder to achieve item “A”.

Balancing the nation’s current account deficit is a great goal to have...however, implementing this would be all but impossible or "irreparable" as WM stated. This is in large part due to the fact that the U.S. simply does not produce many products that the world wants or needs that can't be produced better and cheaper elsewhere.

C.) The savings rate of Americans needs to rise from .05% to about 10%.

Savings is also a wonderful goal to have...but in an economy in which over 70% of it's growth is dependent on consumer spending each incremental rise in the saving rate would have a direct negative impact on overall economic growth. So the only way to break this conundrum would be (as I stated before) the U.S. becoming an economy that is based a PRODUCTION and not CONSUMPTION.

D.) Interest rates set by the FED need to be at least 8% in the long run, but need to be at least 15% in the short run to control the inflation that is about to be released from the trillions injected into our economy to stimulate growth. Higher interest rates would also promote Item C, as hyper inflation discourages savings.

I agree with you that the injection of trillions into this economy will have an inflationary effect...however, I differ with you that the 'FED' is the one who should deal with it...if this country wanted to solve a big chunk of it's problems it would get rid of the Federal Reserve System and put the control of the money supply back into the hands of the people via a representative government not a PRIVATELY CONTROLLED central bank...which is all the Federal Reserve Bank is.

E) Homes need to continue to decline to the level where people with a median income can afford a median priced home at 25% of their net pay (monthly mortgage).

I believe that homes will continue to decline regardless...the issue is will 'median income' stabilize to the point where these houses will be affordable to people....or will incomes fall at rates similar to the decline in home values.

F.) The Stock Market should be around 6,000 based upon Price/Earnings ratios and dividend yields. Of ccourse...this is based upon this point in time.....the fate of companies may improve or worsen which could change P/E ratios and yields positively or negatively. However, at this point in time....6,000 is about its present real worth.


Wow, you're a lot more conservative than me with respect to this market I believe 6000 is quite generous...Personally, I think it should be and will go a lot lower than that...especially when some of the companies making up the Dow Jones industrial average are trading at MANY times their earnings. Even companies that managed to turn a profit like HEWLETT PACKARD and HOME DEPOT are trading at 10 TIMES their earnings....much less financials like CITIGROUP who are in the RED.

I like what you go on to say with regard to comparing the U.S. economy with Obesity...the only problem now though is that the true damage has already been done and the patient has already suffered a major heart attack...now people are just scrambling trying to perform CPR. Anyway, I'm glad you decided to step back in and comment in this thread I like your perspectives and I feel that you and Whirling Moat started this thread off with the strong commentary that I was looking for.
quote:
Exactly..Man do you know how many people would try to off someone who talking about reducing the wages of the working class, while increasing their taxes?


WM

This is why a tax increase should be done at the marginal rate. Marginal rates don't kick in until you hit that $ threshold, thus the middle class wouldn't be negatively affected at all. The only issues in this climate (where I agree with you) is that it would have to be sold to the people who have no idea about basic economic principals.

quote:
The US has lost the comparative advantage in many sectors or industries as a result of our higher wages (standard of living made possible by good paying jobs). This trade deficit will likely only be reduced significantly when equilibrium is created between US wages and global wages. What this really means is that US wages must take a big reduction going forward as a trend, which, by the way, makes it harder to achieve item “A”.


Im not trying to pick a fight, but that is INSANE!!!

You cannot stabilize wages against 6+ Billion and have a stable economy anywhere no matter what the standard of living is.
People….when I say that this is where America needs to get……I am not saying that it is feasible, but rather that such calibrations would represent a “balanced” state of our economy.

LD, I agree that GDP is a flawed measure, but for different reasons. My problem with GDP is that it measures the size of the economy, but not the health of the economy. We have one of the largest prison industrial complexes, as a percentage of our GDP, in the world. A large part of our GDP is dealing with Military expenditures. Another large segment is health care, the drug industry and the like. In other words, if people were a lot healthier and society was a lot less violent…..it would hurt our GDP. We have evolved as an economy to capitalize on social problems and sickness to the degree that it would be a conflict of interest, to the economy, to resolve these things because there are too many people profiting and employed from them. Obviously this is not a sustainable model. You cannot have your growth industries predicated on social negatives because it will encourage the expansion of negatives to create more profits. Disease is much less likely to be cured when there is so much profit in drugs and treatment. Violence and crime is needed to support the prison industrial complex. Poverty is needed to promote social work and agencies...ect. Wars are needed to promote the military industrial complex. Our GDP is padded with to many negatives.

In regards to the trade deficit, again, my goal was to state were we should be theoretically, not what is feasible at this point in time. Theoretically, if wages in the US were much lower, there would be no arbitrage and hence incentive for moving production overseas. The arbitrage is what makes it a good business decision for many companies. In the absence of arbitrage, production in the US starts increasing again. When production in the US increase, and US consumers are willing to buy what is produced, then imports will decline and the trade deficit will shrink. So it is theoretically possible, based upon the laws of supply and demand, the balance trade through the equalization of global wages in a global market.

Again, my point about savings being 10% is based upon where we should be as a nation. I am NOT saying that a savings rate of 10% will make the economy better in the short run. I think people are confusing my reasoning to be the reasoning that will return our economy back to the GDP and employment levels of the past. No. That is incorrect. To get to the numbers I suggest as representing a healthy equilibrium would mean a shedding of at least 20% of GDP. This is why I used the analogy of Obesity. We cannot get to these good readings without losing excess weight which is fat. What people seem to be looking for is “HOW CAN I STAY FAT and not be in poor health”. I am simply playing the role of an economic physician telling a patient what their blood pressure, heart rate, cholesterol and the like SHOULD be like in order to make the economy healthier. However, the problem that I run into is that some patients associate health with size and hence since my recommendation to lose weight AS A SOLUTION……does not make sense to them. The contraction of our economy is not the PROBLEM…..it’s the SOLUTION. It’s shedding the pounds……but people keep wanting to know how we can get the pounds back. It’s a classic disconnect. This comment is not directed at anyone in particular….but most people’s line of reasoning sees the solution (contracting economy) as the problem, when its actually the FIX to get the nation to the healthy numbers that I talked about.

I agree with you, LD, about the FED being a problem. Had it limited its role to primarily dealing with inflation, it would not be so bad. It has usurped its role in the economy. Its role is not to stimulate economic activity, the stock market or to influence consumer confidence. Its role should be t o ensure the proper amount of currency in the system. Obviously it’s got many different things going on, but I am not sure that it would be any better, in the long run, if the FED were not charged with this vital monetary task. Human fallibility is the downfall of any system and if this task is transferred to a PURE government entity, I am not confident that they would do any better of a job in the long run.
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quote:
You make an EXCELLENT point about savings in the FORM of GOLD (or silver). I have been urging people to buy gold, if they can, for the last 4 or 5 years. When I started recommending it….it was in the upper 200’s per ounce and now it’s near 1,000.


My turn to be contrarian Wink

How is holding savings in gold or silver any different than purchasing into a Madoff/Stanford fund? The gain is only on paper.

If one really believed that the economy is in such dire straits, would'nt the more prudent strategy be to spend all income on survival stores and place any savings into un/semi-developed land, either in the wooded everglades [Florida/Louisiana/South Carolina] or the mountainous Northwest [Wyoming/Oregon/Washington, or maybe N. Dakota]. Places with natural sources of potable water and game to hunt?
quote:
Originally posted by Kweli4Real:
quote:
You make an EXCELLENT point about savings in the FORM of GOLD (or silver). I have been urging people to buy gold, if they can, for the last 4 or 5 years. When I started recommending it….it was in the upper 200’s per ounce and now it’s near 1,000.


My turn to be contrarian Wink

How is holding savings in gold or silver any different than purchasing into a Madoff/Stanford fund? The gain is only on paper.

If one really believed that the economy is in such dire straits, would'nt the more prudent strategy be to spend all income on survival stores and place any savings into un/semi-developed land, either in the wooded everglades [Florida/Louisiana/South Carolina] or the mountainous Northwest [Wyoming/Oregon/Washington, or maybe N. Dakota]. Places with natural sources of potable water and game to hunt?


I would recommend taking delivery and not gold funds. Take delivery and place in safe deposit boxes. Of course, gold is not liquid like currency. It’s a means of protecting wealth that you don’t currently need to use in daily transactions. Gold is counter cyclical and always has been, for hundreds of years. The problem with Gold, however, is that government might confiscate it as they did in the past. There is no such thing as a sure thing. The best thing, in my opinion, is Land. You cannot eat gold but in really bad times you can grow food on land. However, if you don’t pay the land tax….the government will confiscate that as well.

You make a false dichotomy. Even during the Great Depression…..everyone was not in dire straits. The economy can collapse but that does not mean that one needs to be in the woods. About 6 years ago I left a good paying IT position at one of the five largest banks for less pay at a Public entity that is counter cyclical. I also, long ago, converted my investments to gold. We already own land and I have accumulated water and freeze dried foods, as well a weapons and ammo. It would be foolish of me to quit my job and move onto the land, dig a bunker and wait for all hell to break lose. That would be irresponsible. The prudent things to do is simply put the pieces in place and ONLY use them when you are FORCED by circumstance to do so. If the circumstance never manifest……you want to resume your life as was. That is why you have to hedge.

PS...what I am confident of, but not happy about, is that the US will see a radical reduction in its overall standard of living....over then next several years. We can gradually descend to that point or we can crash. A gradual descent will cause a lot less social unrest than a crash. A crash is the worst case scenarior. So the thing that I am less sure about is our landing....not the fact that we are going to land.
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[QUOTE]Originally posted by Noah The African:
People….when I say that this is where America needs to get……I am not saying that it is feasible, but rather that such calibrations would represent a “balanced” state of our economy.

LD, I agree that GDP is a flawed measure, but for different reasons. My problem with GDP is that it measures the size of the economy, but not the health of the economy. We have one of the largest prison industrial complexes, as a percentage of our GDP, in the world. A large part of our GDP is dealing with Military expenditures. Another large segment is health care, the drug industry and the like. In other words, if people were a lot healthier and society was a lot less violent…..it would hurt our GDP. We have evolved as an economy to capitalize on social problems and sickness to the degree that it would be a conflict of interest, to the economy, to resolve these things because there are too many people profiting and employed from them. Obviously this is not a sustainable model. You cannot have your growth industries predicated on social negatives because it will encourage the expansion of negatives to create more profits. Disease is much less likely to be cured when there is so much profit in drugs and treatment. Violence and crime is needed to support the prison industrial complex. Poverty is needed to promote social work and agencies...ect. Wars are needed to promote the military industrial complex. Our GDP is padded with to many negatives.

You are correct in your assessment of the fact that the U.S. economy is dependent on social ills and vices...however, there is no way to extract this symbiotic relationship in a capitalistic society such as this. The very nature of capitalism is being able to build industry around just about anything with little regard to the moral ramifications of it. Slavery is a fundamental example of this... the whole concept of subjugating and commodifying both animate and inanimate objects into sellable products was perfected here because of our enslavement. The only way to change this phenomenon which is endemic to this economy is to replace it with a new system...is that what you are suggesting?


In regards to the trade deficit, again, my goal was to state were we should be theoretically, not what is feasible at this point in time. Theoretically, if wages in the US were much lower, there would be no arbitrage and hence incentive for moving production overseas. The arbitrage is what makes it a good business decision for many companies. In the absence of arbitrage, production in the US starts increasing again. When production in the US increase, and US consumers are willing to buy what is produced, then imports will decline and the trade deficit will shrink. So it is theoretically possible, based upon the laws of supply and demand, the balance trade through the equalization of global wages in a global market.

Yes I understand the concept of theoretical analysis...however do you have any concepts of how this might play out practically?

Again, my point about savings being 10% is based upon where we should be as a nation. I am NOT saying that a savings rate of 10% will make the economy better in the short run. I think people are confusing my reasoning to be the reasoning that will return our economy back to the GDP and employment levels of the past. No. That is incorrect. To get to the numbers I suggest as representing a healthy equilibrium would mean a shedding of at least 20% of GDP. This is why I used the analogy of Obesity. We cannot get to these good readings without losing excess weight which is fat. What people seem to be looking for is “HOW CAN I STAY FAT and not be in poor health”. I am simply playing the role of an economic physician telling a patient what their blood pressure, heart rate, cholesterol and the like SHOULD be like in order to make the economy healthier. However, the problem that I run into is that some patients associate health with size and hence since my recommendation to lose weight AS A SOLUTION……does not make sense to them. The contraction of our economy is not the PROBLEM…..it’s the SOLUTION. It’s shedding the pounds……but people keep wanting to know how we can get the pounds back. It’s a classic disconnect. This comment is not directed at anyone in particular….but most people’s line of reasoning sees the solution (contracting economy) as the problem, when its actually the FIX to get the nation to the healthy numbers that I talked about.

I agree with you here and I've mentioned similar things in the past the U.S. is definitely over bloated...too many companies offer leisure services that only appeal to luxuries and LITERAL obesity also...(I mean how many different burger chains do you REALLY need?) This is what I mean by a service based economy the U.S. currently makes only what it WANTS i.e., pleasure based products and services and imports what it NEEDS...this is a dangerous position to be in.

I agree with you, LD, about the FED being a problem. Had it limited its role to primarily dealing with inflation, it would not be so bad. It has usurped its role in the economy. Its role is not to stimulate economic activity, the stock market or to influence consumer confidence. Its role should be t o ensure the proper amount of currency in the system. Obviously it’s got many different things going on, but I am not sure that it would be any better, in the long run, if the FED were not charged with this vital monetary task. Human fallibility is the downfall of any system and if this task is transferred to a PURE government entity, I am not confident that they would do any better of a job in the long run.

While it's true that Human fallibility is always a potential problem..however there are ways to mitigate it's effect such as having real controls and limits in the system. When I said having control of the money supply be in the hands of the people via a representative government I meant a system of checks and balances...The elected officials jobs and titles would be tied DIRECTLY to their monetary decisions and performance. If they did not perform well they could be ejected from such positions...currently what control does the citizenry have over the FED and it's policy...NONE...they are completely at its mercy. There is also no cap on the amount of money the FED can produce since it's no longer adhering to a GOLD STANDARD for example.

This puts people at risk of the inflation you talked about earlier. Sure we can assume that the FED will always do whats right for the economy... but what checks and balances are there that people can utilize in case it doesn't?
:werd: that is why we need to do nothing, and let housing come back to earth. (20,000 not 100,000) let the dollar rebound and become the new gold standard, deal with the depression and get on with the recovery.

Things are overpriced, let them come back to reality. All these politicians say they fight for the people, but if they really cared, housing would be around 60,000 milk would be .35 cents. The government subsidizing these things screws more people in the long run. Let the price reflect what us people can afford, not what the rich determine what we can afford. The bailouts of the banks is so wrong, the bailouts of the automotive industry is so wrong. Every time the government steps in they take money from one group and give it to another. We are more efficient then them, stop giving them power over us.
As far as jobs, the trade deficit and the like…..I think it is already playing out. The Unions in the US are being busted; median wages are declining as a result of competition under globalization. This is why the illegal immigrants were allowed in. They work for the lower wages and help bid down wages. Once wages and Unions are sufficiently weak in America, the benefit of off shoring production for cheaper wages is reduced. The trade deficit will then start to reduce....depending on the value of the dollar. Of course, Oil imports is a big part of our trade deficit....but my comments are directed more towards trade related to durable goods.

I agree that the checks and balances are needed….but there should have been checks and balances on Freddie and Fannie Mae. Government is subject to the manipulation of lobbyist interest and power…..hence….I do not see government having the checks and balances to control the monetary policy any better. I think that the problem is largely the FIAT system and not having a standard that the money supply is based upon. I think the temptation to create money out of the air, to stimulate economic activity, is too great…..regardless whether it is the FED or the Government creating the fiat currency.

Sorry LD ….I just got around to reading your reply.
quote:
Originally posted by Noah The African:
As far as jobs, the trade deficit and the like…..I think it is already playing out. The Unions in the US are being busted; median wages are declining as a result of competition under globalization. This is why the illegal immigrants were allowed in. They work for the lower wages and help bid down wages. Once wages and Unions are sufficiently weak in America, the benefit of off shoring production for cheaper wages is reduced. The trade deficit will then start to reduce....depending on the value of the dollar. Of course, Oil imports is a big part of our trade deficit....but my comments are directed more towards trade related to durable goods.


It sounds to me like you are saying that before America's trade deficit can be reversed it must basically reach third world status with regard to wages and other production costs...Are you sure that this is the most viable solution America has to balance the trade deficit?... If so this country is in really bad shape.

quote:
Originally posted by Noah The African:
I agree that the checks and balances are needed….but there should have been checks and balances on Freddie and Fannie Mae. Government is subject to the manipulation of lobbyist interest and power…..hence….I do not see government having the checks and balances to control the monetary policy any better. I think that the problem is largely the FIAT system and not having a standard that the money supply is based upon. I think the temptation to create money out of the air, to stimulate economic activity, is too great…..regardless whether it is the FED or the Government creating the fiat currency.


The FIAT system came about and flourished primarily because of the disconnect between the FED and the Government... now you must note that when I say Government I'm speaking about one that is truly representing the will of the people...not this current lobbyist saturated mockery of a representative Government that we are dealing with today. If there were true checks and balances built into the system that took the best interest of people into account the FIAT system would be curtailed since ultimately it will destroy the nations currency in order to remove civil liberty...if ordinary people had a true say so they would not want this to happen...However, with a cabal of power hungry international bankers at it's helm (like the Federal reserve system) then you have a guarantee that it WILL happen.

quote:
Originally posted by Noah The African:
Sorry LD ….I just got around to reading your reply.


No problem...I've been focused elsewhere myself but I'm just about finished with that and I will be getting back to focusing on these critical issues that our people need to learn more about.
quote:
Originally posted by LieDecrypter:
quote:
Originally posted by Noah The African:
As far as jobs, the trade deficit and the like…..I think it is already playing out. The Unions in the US are being busted; median wages are declining as a result of competition under globalization. This is why the illegal immigrants were allowed in. They work for the lower wages and help bid down wages. Once wages and Unions are sufficiently weak in America, the benefit of off shoring production for cheaper wages is reduced. The trade deficit will then start to reduce....depending on the value of the dollar. Of course, Oil imports is a big part of our trade deficit....but my comments are directed more towards trade related to durable goods.


It sounds to me like you are saying that before America's trade deficit can be reversed it must basically reach third world status with regard to wages and other production costs...Are you sure that this is the most viable solution America has to balance the trade deficit?... If so this country is in really bad shape.

quote:
Originally posted by Noah The African:
I agree that the checks and balances are needed….but there should have been checks and balances on Freddie and Fannie Mae. Government is subject to the manipulation of lobbyist interest and power…..hence….I do not see government having the checks and balances to control the monetary policy any better. I think that the problem is largely the FIAT system and not having a standard that the money supply is based upon. I think the temptation to create money out of the air, to stimulate economic activity, is too great…..regardless whether it is the FED or the Government creating the fiat currency.


The FIAT system came about and flourished primarily because of the disconnect between the FED and the Government... now you must note that when I say Government I'm speaking about one that is truly representing the will of the people...not this current lobbyist saturated mockery of a representative Government that we are dealing with today. If there were true checks and balances built into the system that took the best interest of people into account the FIAT system would be curtailed since ultimately it will destroy the nations currency in order to remove civil liberty...if ordinary people had a true say so they would not want this to happen...However, with a cabal of power hungry international bankers at it's helm (like the Federal reserve system) then you have a guarantee that it WILL happen.

quote:
Originally posted by Noah The African:
Sorry LD ….I just got around to reading your reply.


No problem...I've been focused elsewhere myself but I'm just about finished with that and I will be getting back to focusing on these critical issues that our people need to learn more about.


Yes....but my fear is that our people are too caught up in the politics of left and right to take it seriously. Everything has to be looked at from a political prism and from the prism of a black president now.....which prevents many from taking an honest look. When information is presented....it often gets interpreted, by our people, politically. "look what the Republicans did" "Democrats ideas will work better", "Obama will not be a failure on the economy". Many of our people fundementally believe that Republican policay caused our economic troubles. Hence, they have more of a sense of security and hope from a democratic adminstration. That scares me because the economic theories that I have learned does not point to Republican policies as being the problem. They may not prepare for whats coming based upon the false comfort of the Democratic party and from Obama.


Our people are not taking an OBJECTIVE look at what is happening because they are caught is this political tug of war between left and right, which, in my opnion, has never really been black folks war. Our tug of war has been between black and white....not left and right. The economic problems are beyond left vs white or black vs white.
quote:
Originally posted by Noah The African:
Yes....but my fear is that our people are too caught up in the politics of left and right to take it seriously. Everything has to be looked at from a political prism and from the prism of a black president now.....which prevents many from taking an honest look. When information is presented....it often gets interpreted, by our people, politically. "look what the Republicans did" "Democrats ideas will work better", "Obama will not be a failure on the economy". Many of our people fundementally believe that Republican policay caused our economic troubles. Hence, they have more of a sense of security and hope from a democratic adminstration. That scares me because the economic theories that I have learned does not point to Republican policies as being the problem. They may not prepare for whats coming based upon the false comfort of the Democratic party and from Obama.


Our people are not taking an OBJECTIVE look at what is happening because they are caught is this political tug of war between left and right, which, in my opnion, has never really been black folks war. Our tug of war has been between black and white....not left and right. The economic problems are beyond left vs white or black vs white.


I agree however the only way in which Blacks will begin to think differently is if it becomes abundantly apparent that we don't have a true stake in the situation as a COLLECTIVE and that our socio-economic viability should be viewed through the prism of our OWN best interest INDEPENDENT of this white power structure...of which both the Republican and Democratic parties are merely conduits and preservers of said power structure.

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