The Sham Recovery

[AllentownJake]

Are we finally in a recovery? Who's "we," kemosabe? Big global companies, Wall Street, and high-income Americans who hold their savings in financial instruments are clearly doing better. As to the rest of us -- small businesses along Main Streets, and middle and lower-income Americans -- forget it.

Business cheerleaders naturally want to emphasize the positive. They assume the economy runs on optimism and that if average consumers think the economy is getting better, they'll empty their wallets more readily and -- presto! -- the economy will get better. The cheerleaders fail to understand that regardless of how people feel, they won't spend if they don't have the money.

The US economy grew at a 5.9 percent annual rate in the fourth quarter of 2009. That sounds good until you realize GDP figures are badly distorted by structural changes in the economy. For example, part of the increase is due to rising health care costs. When WellPoint ratchets up premiums, that enlarges the GDP. But you'd have to be out of your mind to consider this evidence of a recovery.

Part of the perceived growth in GDP is due to rising government expenditures. But this is smoke and mirrors. The stimulus is reaching its peak and will be smaller in months to come. And a bigger federal debt eventually has to be repaid.

http://www.huffingtonpost.com/robert-reich/the-sham-recovery_b_497439.html

I wonder what things would look like if Robert Reich was sitting in the Treasury department right now.

Robert Reich under the bus in 3---2----1

[MineralMan]

1. Are you leading the cheers for economic collapse?

Optimism also drives economics in this country, but in a good way. Pessimism acts differently.

There's no denying that the economy has a lot of problems, but I'm still encouraging optimism. A collapse isn't going to help anyone.

[AllentownJake]

3. Robert Reich isn't exactly a dumb man

or a right winger. Why do you think he would write such a piece.

I didn't write this, the former Sec. of Labor did.

Maybe you should take up your argument on optimism with him.

[AllentownJake]

4. What Robert is saying btw which went way over your head

Is you can be as optimistic as you want, if consumers don't have money, they don't spend.

Robert has looked at the data, and has determined that most Americans are broke.

[DemocratSinceBirth]

6. I Don't Think We Are Facing A Collapse

But I think we will have a lost decade, quite like the Japanese had in the 90's. I predict slow growth and historically high and unacceptable rates of unemployment.

By 012 the unemployment rate will be closer to 10% than 5%.

[sendero]

8. Please....

... you be optimistic (stupid unless you can truly afford to) and I'll be realistic.

We are looking at years of dysfunction here, at best.

[AllentownJake]

11. It appears the happy thoughts crowd

that told us we needed to support the war or it would fail and we would be to blame says we need to be optimistic.

If I think something is a bad idea and said so, why the hell would I be optimistic about the results.

[DemocratSinceBirth]

12. I Think The Collapse Scenario Is A Bit Far Fetched

The US is too big to fail. What I see is permanent economic weakness and historically high rates of unemployment, like in the seventies.

I don't blame Obama but if this economy remains mediocre a plurality or majority of the voters will.

[AllentownJake]

13. I actually think we are in worse shape than anyone really knows

but I've been wrong before :shrug:

[DemocratSinceBirth]

14. Just A Garden Variety Crappy Economy

With unemployment linger in the 8-10% range and real unemployment hovering the 12-15% range.

Like the early and mid seventies.

[AllentownJake]

15. Same cause

I believe this is all tied to energy.

[DemocratSinceBirth]

17. Think It's All Tied To The Collapse Of The Real Estate Industry And Banking Which Work Hand In Hand

However I can't believe oil is $83.00 a barrel in a crappy economy like this. As soon as the economy picks up momentum that momentum will be choked off by high energy place.

This macroeconomic stuff is for the big boys. I just want my fiancee to be able to find a decent f---ing job and for my business to improve enough to pay our bills.

[AllentownJake]

23. China and India

Didn't slow down a beat, in fact China is having problems with inflation right now because they overdid their response to our problems.

I have a belief that the subprime crisis would have been minor if not for $4.50 a gallon gasoline in 2008.

[BigErnMcCracken]

52. Yes

I have said all along that the giant leap in oil prices did far more damage than many think. I have friends in the banking business who would sit there and explain to me why the real estate situation was the problem - I just said to them that I UNDERSTOOD. However, the high price of fuel was simply choking many people who had stable jobs and/or businesses to death.

I have to commute just under 40 miles one way. I think you can imagine the hell that played with my personal economics when the cost of just getting to my desk in the morning jumped by 100% and stayed there. It was brutal. About a year later, you could almost feel the impact finally starting to hit home with a lot of people. There was simply not that disposable income anymore and people had used up their personal buffers for credit cards etc.

[northernlights]

26. China's demand for oil rose by 28% last year

US is not the center of the universe, is not the only oil consumer, and is not too big to fail.

Believe $83/barrel and expect the price to rise. I was going to wait until this summer when heating oil typically drops to bottom price of the year to fill my heating oil tank, but when I read the China numbers yesterday, I changed my mind.

[northernlights]

33. except in the 70s, we were 40 years away from

peak oil and also the global climate change tipping point.

Now we're backed into a corner and staring down both barrels of the gun.

[northernlights]

40. a few more minor differences between now and the 70s

The 70s was still a manufacturing-based economy.

Now is a "service" and "consumer" based economy for the "little people" and a "bubble economy" for those that matter. Where the only job growth is in low-end, dead-end jobs where you can't earn a living wage. And are forced to live of cheap shit imported from China or the newest slave-state. While the wealthy spend their time at the casino called Wall St. where they artifically inflate the cost of luxury items, such as basic food and heating oil, so as to milk even more out of the poor.

The 70s still hadn't seen the revolving credit card or home equity loans. Rich people had "charge cards" for their favored department stores. Poor people bought on "layaway" where you paid a little each week and took the item home after it was paid for.

Now, after 2 decades of credit being handed out like candy...or really more like the corner dealer handing out free horse to his "friends," most people are up to their eyebrows in debt which they may not be able to pay off in their lifetimes. The only reason personal debt is dropping is because of the rise in defaults.

The 70s are as much like now as the Mary Tyler Moore and Lou Grants shows are like reality tv. They really couldn't be any more different.

[DemocratSinceBirth]

45. The Bottom Line Remains The Same

Slow growth and high unemplyment.

[northernlights]

46. the bottom lines are totally different

70s were slow growth and high unemployment

10s are false growth and long-term high unemployment


Another key difference between now and the 70s is the magnitude of difference between the wealthiest and poorest of the country, not to mention between the highest and lowest paid employees in most companies.

There is nothing left to fuel growth in the economy. It's not that the fundamentals of the current economy are bad. It's that the foundation is gone.

[Urban Prairie]

49. +1

[Mojorabbit]

48. I think this is different from the 70's

Back then you could still find some construction type jobs etc. Heck, I laid sod while going to nursing school in the late 70's and also worked in child care. Almost everyone I know in the construction business or in tangent businesses are either out of work or barely hanging on and they are in their 50's and not likely to find another line of work. I am watching my nieces and nephews try and find employment while attending college and there is nothing out there. Florida does have a high unemployment rate which might skew things.
Anecdotal, but still.

[sendero]

25. Certainly..

.. if by "anyone" you mean the vast majority of Americans, well of course you are right.

We're one unexpected event from a real crisis. Banks are still broke (don't let those phony assed "profits" fool you) and the assets they mostly hold, real estate, isn't going to be better soon.

But I suspect we can and will muddle along kicking the can for quite some time. After all, in the midst of the worse unemployment in decades our stock market is soaring!

[AllentownJake]

29. I could be wrong

but I would not be in the stock market right now. The sucker money is back in.

[sendero]

61. I'm done with the stock market...

...permanently. It is no longer "investing" it is a rigged casino.

[northernlights]

30. oh, don't worry about the banks. they have a new plan

Their latest plan is to dump their toxic assets onto public pension plans, and Geithner et al is helping them.

I kid you not. Government workers are about to be thrown under the bus.

[AllentownJake]

32. I was wondering how long it would take them to get to that big pot of money

I saw that the other day, and all I could say is this has really bad idea written all over it.

[sendero]

62. Believe me..

.. I believe you. The Obama admin is also busy trying to find a way to tap your 401K money.

[sendero]

24. I pretty much agree..

... except with the 70s comparison. We're already way worse than the 70s and damn close to the 30s. We'll get to the 30s before it's over, but I don't think there will be a general collapse.

If there is, it will be damned ugly.

[Subdivisions]

57. It's the same people as it was in '07 and '08, telling us, that were

warning of the impending crisis, that we were being pessimistic and were cheering doom and gloom. Yet, the financial crisis came upon us anyway. They were wrong then, and they are wrong again. A perfect track record, so far.

[RexS]

56. Your words won't make the stock market collapse, that is silly.

Why do people on this board think posts about the bad economy are from people who want bad things to happen to America? Kinda sounds stinky to me.

The economy sucks, rant on or off idk.

[Raineyb]

58. Optimism where there's no grounds for it is merely stupidity.

And when the underlining problems aren't fixed and bubbles are reinflated there's no grounds for optimism. I'm a realist. They haven't fixed a damn thing and I cannot pretend that all is good when the underlying structure is screwed up.

[inna]

59. LOL, what an idiotic question.

[girl gone mad]

64. That was Bush's brilliant economic strategy, too...

Catapult the propaganda. Whatever you do, don't admit that there are real problems and definitely don't address them, just keep extending and pretending.

"Subprime is contained!"

"The ownership society is upon us!"

"Green jobs are coming!"

:eyes:

[jody]

2. QUOTE So what happens when the stimulus is over and the Fed begins to tighten again?

Where will demand come from to get Main Street back, create jobs, raise middle class wages? Not from big businesses. Certainly not from Wall Street. Not from exports. Not from government.

So, where? That question is the big unknown hanging over the U.S. economy. Until there's an answer, an economic "recovery" for anyone other than big corporations, Wall Street, and the wealthy is a mirage.
END QUOTE

Reich is right and most voters know that.

[ThomWV]

7. The multiplier effect of the 1st job creation then fuels continued employment - you ever read Keynes

Let me explain something to you, in economics nothing ever happens with finality, everything is part of a dynamic system. So it it has little meaning to ask 'what happens when this or that ends' with the expectation that there is just one effect and like a fire-cracker, once its fired it is over with. In economics effects linger and are multifaceted.

So, to answer your question directly. The Government hires a man for a short time. During that time he is paid. During that time he spends. His spending is income for others and so it creates opportunities for others to work, and in their turn spend. And so the circle is begun with one job resulting in more than one job, and by the time the original short term government job is over the general economy has been stimulated and if done properly there is enough new activity created in the economy to now employ the fellow the Government originally hired.

And the cycle goes on ...

[AllentownJake]

9. I think Robert Reich

Is well aware of Keynsian economic theory. He seems to be saying, it isn't working right now.

That multiplier effect doesn't really work when you have a "liquidity trap" as Keynse would call it.

Or as I prefer, a broke banking system, which is what the Austrians would call it.

[marmar]

10. But I think Keynes envisioned an economy that wasn't so weighted toward financialization, debt....

.... and services. What happens when the dynamic system is structurally damaged?

[AllentownJake]

35. Keynse said a lot of things

Selectively quoting Keynse on the left has become as popular as selectively quoting Adam Smith on the right. You know, the parts of Smith where he rails against corporations and banking, you don't here much of that do you?

[jody]

16. Yes I've read Keynes and many economist view his writings with disdain. Perhaps you need to drink

deeper from the Pierian spring.

[AllentownJake]

21. Keynse works

When the politicians have the discipline to do the other part of his theory...pay off your debts in good times.

[whattheidonot]

37. tax the rich

tax the rich to the benefit of all including the rich. the rich now rule like never before and are blinded by greed. Globalization has made it a new playing field. these guys rule the government so we mostly hear their argument.
more and more wealth goes into the hands of the very rich as technology makes the process of attaining and protecting wealth more efficient. there are less jobs but more profit. governments at some point are going to have to create an idle middle class to keep things going without bubbles to hide behind. Globalization is about efficiency. once it is efficient prices will be lower, unemployment will be higher or wages will be lower. the market wants it this way.

[girl gone mad]

65. Even Keynes wasn't a Keynesian toward the latter part of his career.

Keynes is to Neo-lib New Democrats as Jesus is to Right-wing Christians. Neo-libs love to toss Keynes's name around and they have some rudimentary understanding of his theories. However, they certainly aren't practitioners of his economic philosophy in any form that would be recognizable to the man himself.

[jody]

66. Apparently you've read Keynes writings with insight.

:hi:

[bvar22]

38. The problem with your model is....

Wal-Mart (Big Boxes) have destroyed small businesses across the nation.
A dollar spent in Wal-Mart (or other Big Boxes) does NOT circulate in the local economy, but is immediately removed and stuffed back into the corporate coffers.

It completely short circuits the "circle" of opportunity you described above.

[Greyhound]

43. If the churn is great enough to overcome the trend.

In this way short-term deflation is actually better than inflation for economic recovery (unless of course you are already rich), the effect of the man's employment is amplified as his dollars go further.

[marmar]

5. Es la verdad.

K&R. :kick:

[NJmaverick]

18. Your position is like someone watching a cook boil water

you see the pot of water on the stove and the flame underneath. You see the steam coming off the top and the small bubbles forming on the inside of the pot. So you loudly and boldly proclaim

YOU ARE A FAILURE THE WATER ISN'T BOILING! YOU CAN'T BOIL WATER!


The cook tries to reason with you. She shows you all the signs that the water is about to boil. However dismiss all of it and declare the pot isn't boiling and you have no idea how to boil water.

[DemocratSinceBirth]

19. I Think The OP Overstates The Case/ There Will No Second Great Depression.

But we face a decade of historically slow growth and high unemployment. That's what most of the models I see indicate.

[depakid]

27. Watch what happens when petrol prices rise

Kinda the elephant in the room that no one wants to talk about.

[Fire1]

53. It's starting already. n/t

[AllentownJake]

20. Argue with Robert Reich the former DEMOCRATIC Dept of Labor Sec.

Don't argue with me. I did not write this.

Do you wish to refute any of Mr. Reich's assertions?

If not please sell stupid somewhere else.

[DemocratSinceBirth]

22. Even The CBO Predicts A Mediocre, Read Crappy Econnomy

~

[hayu_lol]

28. Thanks Jake for standing firm...

we are, by the way, in a major depression and we will be in this for a goodly number of years...perhaps as many as 20. We are existing right now with jobs that push paper instead of manufacturing jobs--jobs that take raw materials, turn them into something useful that people must have, and that creates new wealth. Paperpushing just creates more paperpushing.

Our true unemployment figures are all conjecture. Particularly painful for those who remain unemployed.

Theories are fine...but the reality is that this nation is broke.

[cutlassmama]

55. Agreed. Great Depression II.

[SOS]

60. A new term: "contained depression"

Only trillions in taxpayer money thrown at the Wall Street thieves has kept things barely functional.
Consumer confidence hit a 42-year low this week.

"David Levy of the Jerome Levy Forecasting Center, warned this week that the United States was in a period of “contained depression,”
a transitional stage of debt reduction and asset deflation that will last “at least several years and perhaps a decade.”

http://www.nytimes.com/2010/03/13/business/economy/13charts.html

[KG]

31. they never have any real refutations, just the usual 'that's BS, doomer!'

used to be funny, now it's just sad.

[Name removed]

34. Deleted message

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

[laughingliberal]

42. Much easier to stay 'on message' if you never really say anything

Is this not the tactic we have watched from the right for many years, now? Labeling and dismissing opposing voices with bumper sticker talking points have been standard fare for Republicans since Reagan.

[Name removed]

44. Deleted message

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

[cornermouse]

36. k & r

[bvar22]

39. Don't worry.

The Giant Invisible Hand will Save Us.

Look at all the baseball players!

[Tierra_y_Libertad]

41. A consumer economy without consumers isn't a candidate for "recovery".

Nor is running the country into debt in lost wars and corporate bailouts a sign of "recovery".

[northernlights]

47. but haven't you noticed?

the stock market and GDP are up. And the rate of job loss has slowed. So the economy *must* be recovering. :sarcasm:

[Odin2005]

50. FACT: stock prices go UP when a company LAYS OFF workers.

What is wrong with is picture?

[laughingliberal]

51. kicking for excellence and some excellent discussion. nt

[suffragette]

54. Looks like those who received massive amounts of public money

are doing better while the public isn't.

In other terms, those who recklessly punched holes in the ships were bailed out by those in smaller boats alongside and are happily motoring off to sunny climes while the smaller boats and those who did the bailing are being tossed around or overturned by their wake.

Oh, and they keep all the flotation devices to themselves, too.

[L0oniX]

63. Everything is closing up here.