The Elephant in the Room

[Pale Blue Dot]

With all of the talk about Ann Coulter, Haditha, Zarqawi, the Gay Marriage Amendment, the Estate tax, voting fraud in CA, and a variety of other issues, there is very little mention of the one topic that effects all of us. In fact, it will effect all of us for many, many years to come.

The economy is tanking. And there is nothing any of us can do to stop it.

Alarmist? Maybe. But look at the stock market over the past several weeks. The sudden bearishness is important for many reasons, among them:

1. The brokers and traders on Wall Street have been the ones to most readily "drink the Kool-aid". There are, by and large, right-wingers, devoted to wealth and its acquisition. They have been willing to overlook any bad news about the economy. They don't seem to be able to do that anymore.

2. There is nothing on the horizon to reverse this trend. Gas prices may dip slightly, but they will never again go below $2.50/gallon. In fact, many think that the prices will go much higher. The rise in fuel prices is beginning to effect consumer spending (take it from someone on the front lines).

3. While I have never believed in the trickle-down theory when it comes to an increase in wealth, I do believe it applies to a decrease in wealth. A lot of paper wealth was lost in the stock market during the past several weeks. This will make wealthy individuals and corporations less likely to spend money on all but necessities. Is "labor", for instance, a necessity for a major corporation that must cut costs? I doubt it.

There was a book released in the late '80s called The Great Depression of 1990. I have seen the book mocked on the pages of DU, and with obvious reasons. The book's basic premise was that in 1986, the disparity of wealth distribution had reached a level not seen since before the Great Depression of the '20's. I read the book at the time, and I thought the author's idea was convincing.

So what went wrong? Why was there no depression in 1990?

What the author failed to foresee was the tech boom of the late 80s/early 90s followed by the housing boom of the late 90s/early 2000's.

Now both are over, and the wealth disparity is even worse. And I ask you, what's on the horizon to rescue us this time?

Private and public debt are at massive historic highs. How are we going to pay for this? Both debts have been getting much worse even as the economy has been good. What's going to happen as it begins to contract? Am I wrong to see a downward spiral with no end?

There are many more problems. Our service-based economy. Our over-reliance on fossil fuels. Our government. The fact that almost nobody sees a downturn coming, or has planned for it.

I welcome those who disagree with me. The extent of my economics training was a couple of courses in college. It seems to me, however, that common sense would dictate to anyone un-paralyzed by fear that a crash is coming. We are seeing the beginning of it now. And, if I'm right, nothing, nothing can be done to stop it.

Have a great weekend! :scared:

[lonestarnot]

1. With a pile of crap in each corner.

[BeFree]

2. The US, I am told...

... is too big to be allowed to fail.

But we are too big to keep going as we have. So a downward turn, at least, is in order. Get out from under big personal debt. Make sure you have control over your income and outgo. And hang on, it's gonna be a heck of a ride.

[originalpckelly]

3. The bigger they are, the harder they fall. (n/t)

[pretzel4gore]

4. maybe this is why we must rule the world

and especially the resources, and the abilities of humankind (to militarily or technically resist us)(??)

[Pale Blue Dot]

5. This is another problem that I didn't add to the OP

In the past, we've gotten ourselves out of tough economic spots by engaging in wars. The problem is, this time, we're already in one, and our military is stretched too thin to legitimately wage more war in such a way that would help the ecomony.

[paparush]

6. That is to say, our military is stretched too thin until the DRAFT starts.

[lonestarnot]

7. Can you spell D-R-A-F-T or do you just feel one?

[InkAddict]

8. I'm convinced that some American families were

purposely selected out for extinction during 41s tenure--been traveling the slippery slope downward ever since. IT and HIM studies/jobs here.

Greed via India/China's low-wage and H1B poor-immigrants party for the former and healthcare conscience/principles on the latter to blame. We didn't have loans for our education, self-paid, but employers were encouraged with tax-abatement and plain old cash to hire those who reaped a crash-course "free education" through our taxes--is it any wonder most things are clusterF**Ked now!

From punch cards to the we-need-you-only-for-6-weeks-handy-dandy project manager
From clerk to credential and back!

N.O.L.A was another unsought GOP great boomer/generational genocidal opportunity for the GOP, but you don't look Mother Natures gift horse in the mouth, now. (Evil laugh)

Home and apartment for sale or rent - rooms (at kids') to let 50 cents and light-to-moderate housekeeping.
No home, no food, no pets - COMING NEXT WEEK!
Think I'll get some cigarettes! (slow suicide, indeed)

NOT KIDDING!

[tanyev]

9. Of course it hurts....

http://www.evolvefish.com/fish/new.html

[Warpy]

10. The crash didn't happen in the 90s for a few reasons

In the first place, Clinton got in and raised taxes on the richest, thus raising revenues and taking the pressure off the money supply. INterest rates were allowed to fall to very low levels, and startup money was available for (ta da) the home computer and web industries to get started. Yes, there was a dotcom bubble. HOwever, had Clinton's policies been followed, that would have been a very temporary fall in the NASDAQ that wouldn't have affected the Dow.

Low interest rates spurred a buying spree in real estate, something else that buoyed the economy.

Credit was easy and the credit card companies were seemingly a bottomless purse for people whose wages weren't keeping pace with inflation. That also propped up the consumer economy.

In the late 90s and early 00s, refinancing houses that had appreciated along with real domestic inflation to pay off credit card debt so that people could start over again added still more to the consumer economy.

Well, folks, all the bills are starting to come due and we've seemingly exported most of the good paychecks. Our system is now utterly unsustainable. Most families are drowning in debt and credit card companies are getting nervous about that, jacking up interest rates on any pretext to recoup what they can as quickly as they can. Wages are in the toilet and since the dollar has fallen so far against other world currencies, everything we used to make but now must import is getting more expensive.

The good news is that we've been in this shape before and found reasonably wise leadership to guide us out of it. The bad news is that you can't kill bad ideas, and the ultra wealthy will always be there biding their time, wanting only to reinstitute the same failing policies we have now, killing the goose that laid the golden eggs just to get the eggs out of her.

"The Great Depression of 1990" may still prove to be prophetic. The author is only bagged because he got the date wrong.

[neoblues]

11. I Think You're Right...

Even an undergraduate degree in economics, unless one takes pains to practice, study and keep informed of current professional/academic economic theory and events, amounts to much--and even then it's somewhat limited. Alas, even those with careers as professional economists aren't sure what's happening, much less what's going to happen. Most have, at least to some degree, a better idea than the rest of us and a few of them really do make some excellent sense, but in no way is it an exact science (many would argue it's more of an 'Art' than a 'Science'; but it's trying for the latter). That said, and being modestly more informed than the average person, I have to agree with you.

If I was to have to predict the future of our economy, I'd have to say that it looks bad. I suspect we're going to see an outright collapse; more devastating in some ways than any we've seen before--people today don't have the kinds of survival skills they did in the past. We don't know how to do things for ourselves. Short of a massive transfer of wealth from the wealthy to the rest of us, I wouldn't be surprised to see tens of thousands of Americans literally starving--in a country that is best described as the breadbasket of the world, which would just make such an occurrence all the more egregious. To be fair, though, some very intelligent economists think the worst that would happen is higher unemployment, inflation and a long, draining period of economic stagnation. I actually don't entirely disagree with them either, I just think that such an outcome is likely to follow a serious collapse and a period of much worse than normal times--along the lines of the Great Depression. Indeed, many of the efforts used to address the symptoms and help restore the country will once again be used to help alleviate this next one.

The proposition that there will be some truly terrible times, including starving people, was assuming that there isn't a political/social upheaval that actually does transfer the existing wealth of the country in such a way that the vast majority of people are helped. As a nation, no matter how bad our economic position in the world becomes, we can produce everything we need to live well. All we have to have is the political will to do so. When we have truly suffered, the people's willpower will return. Our government, by that time, may well see the direction the wind is blowing and accomodate the people as needed with the proper taxes on the wealthy, social programs to feed, clothe, house, educate and provide medical care to the tens of millions of poor and destitute, as well as new public works programs to begin restoring the country's infrastructure. If not, we'll face even harder times before the government is brought in line with the people. How that's accomplished will be anybody's guess, but it's likely not going to be easy or pleasant; every several generations, it seems, the people have to pay for their freedoms.

If we truly want our government to live up to it's promise, we have to make some big changes and remake it in it's own image. To make those ideals we pay lip service bear fruit in the real world won't be easy. Human corruption is attracted by wealth. Where there's wealth, there's greed and where there's greed, there's the lust for power and more wealth. America has great wealth and has likewise been infested with great corruption--it's not new, but the very image we've tried to lay claim to--that of the land of opportunity, home of the free, etc., has produced a situation in which the obvious corruption, oppression as well as the gigantic and growing wealth-gap and economic disparity (not to mention the blatant efforts to eradicate even basic "opportunity" for many) are contradictory. They cannot be reconciled. When crisis occurs, we'll have to decide "do we want what we've believed America stands for" or the unjust, criminal enterprise it's become (though, as noted before, it's not new; perhaps it's our sensibilities or awareness that's new).

If we give the right people, mostly common people, the capital needed to innovate, I believe that we can rapidly change our economic outlook; change from a stagnant economy to a robust, growing one. It's just that there is no model by which to do so and under capitalism as it exists, the very capital that's needed, would, under no circumstances be 'given' to the right people. "Taking" it in order to give it just isn't an option under our current political/economic system in all but the most imaginative circumstances. Such a thing would almost sure require another, revolutionary, leap forward. Not socialism as we know it. Not capitalism as we know it, but something new. Are we prepared for something new? Not really. Would the 'powers that be' be prepared to give up their infinitely unequal share of power and wealth? Not in your wildest dreams and we should expect that they'd react with all available resources (up to and including violence if required) against even the suggestion of such. Is there any chance that we'd lead the world into a such new economic order? It's likely that if such a new way is possible, the evolution would occur first in an established modern economy, especially one facing the next crisis first. We're likely to be the first into such a crisis, and as a nation, we have a history of being the first to evolve into the 'next' level (as evidenced by the very birth of our nation and many of it's qualities such as separation of church and state; of course, that was a long time ago--but there's still a progressive component to the American culture (as well as a large, unattractive Conservative/Fundamentalist bent--which is the biggest obstacle to any such advancement here)). Who knows. One thing is sure, Capitalism, while possibly the most successful organizational scheme so far is seriously flawed and inherently evolves to the state of extreme disparity of wealth and corporatism that we've witnessed. It has also 'come of age' though we don't know what it's normal life-span is or may be, but it very well may be ready to either morph into total oppression of humanity for centuries--or come crashing down as people rebel. So long as most people have enough to get by, though, it's likely to be invulnerable. Whatever it takes, we at least need to modify it's current state--and it, it seems, feels the same about us. In the end, though, "Crisis", as painful as it may be, may just be our best hope for a bright future.

[many a good man]

18. Well said! Its all about political will

As a nation we still possess many positive aspects on which to build a prosperous economy. Fortunately (!) we have been so horribly mismanaged over the past 25 years (especially the past six) that even the slightest effort to govern competently will have a big positive effect. The greatest bang for the buck will come from addressing our twin deficits and the distribution of wealth.

Following WWII we had a huge competitive advantage over the rest of the world because the other great powers lay in ruins and their former colonies were undeveloped. It was only natural that over time this advantage would diminish as the rest of the world recovered. The rest of the world is now catching up and Europe is passing us.

I think TPTB recognize this and see that there are two possible outcomes: 1) further cannibalize this country (and others) and create the biggest banana republic imaginable; or 2) confiscate the wealth of the top 5% and restribute it to rebuild the economy. They are pursuing option 1 as long as they can get away with it. Only when the majority has the political will to insist on number 2 will that course be taken. Number 2, by the way, is the path most European social democracies have pursued.

The biggest question mark is will leaders step to the fore and lead us on this new path voluntarily and deliberately, or will we have to wait for immense social upheaval to force the hand of government?

It used to be said that "what was good for GM was good for America." Having grown up in the industrial heartland in the sixties and seventies I could see how that was true. Unfortunately, now, with globalization, that connection is no longer there. Now WE HAVE TO demand policies that benefit all of society, not just the rich and powerful.

[neoblues]

20. Incisive, Discerning and...

Clearly Expressed! I fully agree.

[CanSocDem]

22. I used to agree....

...with the sentiment behind this:

"...It's likely that if such a new way is possible, the evolution would occur first in an established modern economy, especially one facing the next crisis first. We're likely to be the first into such a crisis, and as a nation, we have a history of being the first to evolve into the 'next' level..."

Until I started hearing about Argentina from places other than the MSM.

Naomi Klein has written some great stuff and produced a film about the workers takeover of the factories.
http://www.nologo.org/

"...On December 19 and 20, 2001, when Argentines poured into the streets banging pots and pans and told their politicians "Que se vayan todos," everyone must go, few would have predicted the current elections would come down to this: a choice between two symbols of the regime that bankrupted the country. Back then, Argentines could have been forgiven for believing that they were starting a democratic revolution, one that forced out President Fernando de la Rua and churned through three more presidents in twelve days."

---------------

"With all of their institutions in crisis, hundreds of thousands of Argentines went back to democracy's first principles: neighbors met on street corners and formed hundreds of popular assemblies. They created trading clubs, health clinics and community kitchens. Close to 200 abandoned factories were taken over by their workers and run as democratic cooperatives. Everywhere you looked, people were voting."

My point is that there are models for democratizing runaway capitalism...even in Jesusland where it looks formidable with its religious underpinnings.

[melnjones]

12. My way of preparing...

I'm concerned most of all that so few are realizing this, especially among the lower class that will be hit the hardest when the "fit hits the shan."

Another concern I have...and don't think I'm a crazy...Bird flu. Not that I think it's going to hit TOMORROW and we're all gonna die, but what IS concerning is that NO ONE is taking ANY precautions on an individual level. My house has been the only house I know of so far doing anything. Yes, I'm stockpiling food and household items. I figure, bird flu or not, crisis is going to hit eventually- natural disaster/economy/pandemic/*insert crisis here*. We are not a society that plans ahead. The food I'm stockpiling is there in case any of the above happen, or in case I find myself without a job, OR, in case any of these things happen to others around me. It's a lot easier to help someone else out in a crisis if it's not suddenly taking money right out of my bank account. Huricane hits? Everyone near but not in the affected area can take half their food stockpile, load it in a neighbor's truck, and drive it to a shelter in an affected area. By the way, if we DO get a pandemic and have utter chaos (which is what would/will happen), the response from the administration will be that they WARNED US to take these measures. It's our fault we didn't listen, and not much they can do to fix it.

Other stuff I'm doing...Here's the problem. I have very limited income. The ONLY way to save up financially is to do it a little at a time. So...all my pennies go into one jar. Just for the heck of it. Other change goes in a jar and when full is put in my savings specifically for my next car. Mine is old, will eventually die, and it eats gas like there's no tomorrow. When I walk my dog I pick up aluminum cans as I go. You don't get a ton from recycling, but it's free money and it adds up. In another place I'm putting back $1 at a time for emergencies. When I get a gas card from my grandma, I use all but $5 and stash the card in my glovebox. Am I panicking? No. I just want to be prepared and if I don't do a little at a time it will never happen. This is the kind of stuff we need to be modeling and encouraging others to do, especially those who are low income, because I think you're absolutely right that we have scary times ahead. When those with the least will be those most affected, the only thing they can do is prepare a little at a time.

So what's the verdict...am I nuts?

[Pale Blue Dot]

13. Isn't anyone going to fight me on this?

Now I'm getting more frightened.

[G2099]

15. Fight you!!!

Hell, I recommended yours for one the the great post. Mine is the 3rd vote.

[G2099]

14. The Dollar Vs. Manufacturers—Can Only One Survive?

Yuan appreciation could lead to two possible scenarios, both of which would probably be bad for America’s economy.

First, it could lead to import price inflation. Products at Wal-Mart or similar businesses that import most of their goods from overseas would theoretically become instantaneously more expensive—probably not 40 percent more expensive, since foreign manufacturers could “eat” some price increases by cutting their own costs and profit margins, but costs of imported products within the U.S. would go up. While hurting consumers, it would theoretically help American manufacturers whose products would become more cost competitive with foreign-made goods.

It also means that the U.S.’s creditors, particularly China, will continue to accumulate and control more of America’s debt—and that is what is at the core of America’s problems. America has become a debtor nation that relies on the kindness of foreign nations to support the dollar and finance the spending and standard of living U.S. citizens demand. As America accumulates debt overseas, it transfers its power over the dollar as well. Increasingly, countries like China and Japan, to which America owes billions of dollars, will be able to influence the value of the dollar.

http://www.thetrumpet.com/index.php?page=article&id=2237

[area51]

16. k&r

This economy has been sick for so long; witness the lack of job creation.

Aren't a lot of the "jobs created" being claimed by this admin on paper only; they're guesstimates that jobs were actually created?

[ariellyn]

17. The same downturn has been predicted since Bush took office

I recall reading in the book, "It's the Economy Stupid", that financiers said the market dropped everytime Bush opened his (stupid) mouth. I personally stayed out of the market from 2000 to 2002 as a result. But the market didn't tank and I lost out.

I'm not sure whether the volatility and changes in the market are permanent and signs of doom, or the result of deliberate machinations by the Fed to slow down the economy. Inflation from the housing bubble and from gas prices and all associated products is the reason for all the interest rate increases.

So, hearing that the economy is slowing down is not alarming but to be expected.

What signs are there that the slowdown is other than normal?

[Imajika]

19. The answer is none...

"What signs are there that the slowdown is other than normal?"

I see no particular sign that the US economy is any danger.

A mild slowdown, if that even occurs, is a normal part of our economic cycle.

You get this "the economy is going to hell in a handbasket" stuff all the time on DU.

Dollar drops, were doomed! Dollar rises, no discussion of the dollar till it drops again.

Inflation rate increases, were doomed to inflationary hell! Inflation rate dips, were in a deflationary spiral of DOOM!

Unemployment ticks up, were marching into another Great Depression! Unemployment rate drops, no word on unemployment till it goes back up (or flat out denial followed by moans about the numbers being cooked).

The truth is, tree sloth that he is, even Bush would have a hard time mucking up the most dynamic, powerful economic engine on the face of the earth.

Compare our economy to most of Western Europe and you will find that we are in far better shape. Look at the German and French economies and be glad your living right here in the USA.

Note 1: Don't take any economic prediction seriously from anyone who believes Fidel Castro is a good economic steward for his nation. Laughable as it is, there really are quite a number of people that haven't gotten the memo about socialist, command economies being complete and utter failures. There are still those who want to give it another go.

Note 2: A lot of folks who make the "US economy is DOOMED!" predictions simply don't leave the echo chamber enough. Hang around with nothing but people who believe the moon is made of green cheese, and eventually you might start believing it.

[Pale Blue Dot]

21. A few points

On your notes: Where in my OP did I mention anything about Fidel Castro or the Cuban economy? Nowhere. Nor have I ever. I think your slip is showing.

You say those that make these predictions "don't leave the echo chamber". But where in your post have you directly addressed any of my concerns? Your argument is that my prediction is incorrect because we have "the most dynamic, powerful economic engine on the face of the earth" That is exactly what I hear all day long in the echo chamber. Beyond hubris, however, where is the evidence? Saying it is so does not make it so.

I would love to see you address my specific concerns. Our massive levels of public and private debt. Fuel prices that are only likely to rise. And people like you, who believe that nothing could ever stop our glorious, miraculous economy.

[Imajika]

23. My post...

....was a response to ariellyn, not to you.

I thought we already debated this topic at some point previously? You've posted similiar stuff about the US economy careening towards collapse before right? I might have you mixed up with another forum member I suppose.

Anyway, in this case, my original post on this thread wasn't a response to your points.

I have to make some effort to get some errands and whatnot done today, but I will try to log back in and reply to your orignal post later.

Cheers.

[many a good man]

24. I have to agree with Imajika

The world economy is centered around US dollar hegemony and the US consumer market. Other countries accept this reality and bear with it. They know that any attempt to alter it would cause a long period of economic dislocation that is socially unacceptable. Therefore they have to accept reality and work around the edges. And pray for some competent leadership from the US.

Europe and Asia could knock us off the pedestal in an instant, but both need our markets and China/Japan don't want to see the billions of USD in their central bank vaults become worthless.

While things are clearly getting worse, and they will get worse, don't look for any doomsday soon (at least one that isn't related to weather/climate).

Its true that the fundamentals of our economy are deteriorating badly, but only a global crash will push us off the edge. What we need is some competent leadership and we can slowly get back in better condition. We have to start working toward some long term goals that are required to sustain growth, save the planet, and save the people.

[mnhtnbb]

25. We have an MIT trained PhD economist friend, now retired

who is VERY cautious about the economy. He turned out to be right when he got out of the stock market in early 2000.

Quote from a late April e-mail with him:

I do think dollar will stay weak as long as the war Iraq continues, oil prices remain high and the Chinese pursue a vigorous export policy with an undervalued currency. All this adds up to current account deficits will probably not get very much smaller any time soon.
Am still wary of getting back into the US stock market in a major way, since price-earnings ratios are still quite high relative to historic norms. The future is bound to contain some nasty surprises. Gold? Swiss bank accounts, anyone?


I'd been nervous for some time about our exposure to equities. When the market started it's downturn in mid-May, I sold all my individual equities, but kept my mutual funds (which historically had a good track record of holding value in downturns). I'm now 50% cash, 25% mutual funds (some international), 25% bond funds. I'm thinking of putting 2/3 of the cash in 3 mo CD's which will generate interest about double what you get in money market. My husband is out of the market entirely--he's in TIPS.

We are building a place in Panama that may become our retirement home after 2008 when our son graduates high school. We are thinking seriously of selling our house in Chapel Hill then, and renting an apartment so our son would still be eligible for in-state tuition at the UNC system. Whether we move permanently to Panama or split our time between here/there probably remains to be seen as the economy/political landscape changes. We are thinking it would be good to get the equity out of this house so that if it became advisable to leave the US, we wouldn't be leaving a pile of dough behind.

Not very comforting to think about, yet my husband and I are operating under the idea of planning for the worst and hoping for the best.

[norml]

26. Fortunately the invention of the Infinite Energy Box, in the Fall of 2009

changed everything.

[Name removed]

27. Deleted message

Message removed by moderator. Click here to review the message board rules.

[checks-n-balances]

29. HUH??? How many of us immediately thought of killing someone?

Your post doesn't make sense to me, or perhaps you think I'm a jerk too because I agree with the person who originated this thread.

If you disagree so vehemently with the messenger because there IS something that can be done, why not offer a concrete suggestion to all of us instead of calling other DUers insulting names?

[Name removed]

30. Deleted message

Message removed by moderator. Click here to review the message board rules.

[butterfly77]

28. No. you are not wrong ...

for the past few months bush has been sending out his spin doctors to talk up the economy as though the people don't know what is going on. They have been fixing the numbers and lying and that is the purpose to destroy us as they claim to be spreading democracy around the world while destroying ours.