Can a capitalist economy grow in any meaningful way if society doesn't spend at least a little frivalously? The impression I get is that a saving society, one that tries to make shit last as long as possible before replacing and doesn't get caught up in consumption competition...those economies are fucked.
I'm assuming this is wrong but maybe Stacks or someone else can explain why.
Countries that have a high savings rate have more money to invest which injects a more sustainable amount of money into the economy than consumption spending.
Can a capitalist economy grow in any meaningful way if society doesn't spend at least a little frivalously? The impression I get is that a saving society, one that tries to make shit last as long as possible before replacing and doesn't get caught up in consumption competition...those economies are fucked.
I'm assuming this is wrong but maybe Stacks or someone else can explain why.
Countries that have a high savings rate have more money to invest which injects a more sustainable amount of money into the economy than consumption spending.
Some countries had very high savings rates and based their economies upon exports. Of course, now that the world has gone into recession these economies are trying to re-think their startegies because their export markets have collapsed.
I think China followed that model. Their real estate market also collapsed like America's so a lot of the people that saved all this money and put it into homes have lost a bundle. The government is trying to force down housing prices to get more domestic spending, but that has screwed the people that already bought homes because some have lost 1/2 or more of their investment in a house.
Shit was massively overvalued and used as collateral for more virtual debt. Apparently the world has lost 40% of it's total wealth in the last 15 months. Most of that has to be popped virtual financial bubbles, full of rainbows, blown by unicorns.
No ayo.
First thing seems to get people feeling they will have a job in 3 months. They might spend then.
Things are normal. This economy looks much like 1982.
Housing: Where I live housing prices were doubling every 2-5 years. Housing prices have not dropped here as much as else where. I think they will continue to drop for the next 4-5 years. Simple put, houses are overpriced here.
Wall street: "Smart guys" have created a bunch of "investment instruments" out of credit card debt and auto debt. These are just like all those derivatives/securities that failed last fall. These also will fail and cause more havoc.
Service & retail: Our economy is based not on making things but on buying things. It's just a stupid model and I hope it never comes back.
Good news: The boom in the late 1800s was based on railroad. Then we had a steel/manufacturing boom. Then a post war industrial boom. Computers. Internet. Energy.
There will be another boom in the next 4 years. My guess is it will be centered around a new energy source/energy breakthrough.
Or I might be wrong about everything. I hope everyone had a great Groundhog Day, the economist's favorite holiday.
can you clarify your stance on retail and service please?
So when people repeatedly shake their heads and mention how our grandkids will be paying for our fecklessness that's just rhetoric?
Budgets have JUST been cut for the coming year in reaction to the mess in October, those effects have not even begun to be felt yet.
Then there is the domino effect that you get in a building industry collapse, the big companies got the credit lines (other people's money) and then started their projects which involve hundreds of subcontractors who in turn hire subcontractors. These people the ones who are currently trying to recover money owed but will get fukked, not the board of XYZ skyscraper corp.
Then there are all the small and medium buinesses who have been struggling as it is (Bush fucked them for 8 years while he gave money to corps), hoping for an upturn, who have been getting deeper into debt. When that shit hits the fan, you won't see an uptick in unemployment numbers or dip in the markets, but you will see more money lost from the treasury, more vacant real estate, more people trying to make ends meet, real problems.
Don't look for any Q this or Q that recovery. The housing bubble was a manufactured bubble because we had already popped the Telecoms, Energy and Dotcom bubbles, all of which proved to have more than their fair share of scams and emperor's new clothes. Remember Enron? Worldcom? any number of dotcom follies?
I don't doubt that the Green Push or whatever can create a lot of jobs, but don't think it's going to be a "sector" or a "bubble"... there will be a million things that will need to be done that won't make a profit and can't be put out to tender for private business, the way govt likes to run things now.
In a nutshell, the race to the bottom is nearly over and we are running out of things to capitalize and monetize in order to run an economy based on virtual wealth.
And really, if people are looking at this as just another downturn, then what was the deal with all this AUDACITY OF HOPE bullshit? CHANGE is good? Or did that have as much relation to reality as a talking gecko does to car insurance?
Can a capitalist economy grow in any meaningful way if society doesn't spend at least a little frivalously? The impression I get is that a saving society, one that tries to make shit last as long as possible before replacing and doesn't get caught up in consumption competition...those economies are fucked.
I'm assuming this is wrong but maybe Stacks or someone else can explain why.
Countries that have a high savings rate have more money to invest which injects a more sustainable amount of money into the economy than consumption spending.
I can see this.
Throughout the 90s and most of this decade, the rightwing British press, together with corporations like the FT and WSJ ran Op Ed after Op Ed about Germany becoming the sick man of Europe and dragging the rest of us down if it didn't immediately relax it's social safety net, centralized economy, and let entrepreneurs come in and create jobs and wealth. This was pure propaganda and did have some effect on the political climate in Germany over the past decade, but thankfully not enough. Now we are in a position where experts say that the UK will be the hardest hit economy of the developed world. That's the result of 30 years of private service sector economy, not from a lack of free markets.
[shameless PBS promotion] Y'all should watch Frontline: Inside The Meltdown, premiering February 17 at 9pm on PBS.[/shameless PBS promotion]
I'll be watching it next Tuesday here at work. We have a screening in our theater for employees.
The press release for anyone interested:
On Thursday, Sept. 18, 2008, the astonished leadership of the U.S. Congress was told in a private session by the chairman of the Federal Reserve that the American economy was in grave danger of a complete meltdown within a matter of days. ???There was literally a pause in that room where the oxygen left,??? says Sen. Christopher Dodd (D-Conn.).
FRONTLINE producer Michael Kirk goes behind closed doors in Washington and on Wall Street to investigate how the economy went so bad so fast and why emergency actions by Federal Reserve Chairman Ben Bernanke and Secretary of the Treasury Henry Paulson failed to prevent the worst economic crisis in a generation on Inside the Meltdown, airing Tuesday, Feb. 17, 2009, at 9 P.M. ET on PBS (check local listings).
As the housing bubble burst and trillions of dollars??? worth of toxic mortgages began to go bad in 2007, fear spread through the massive firms that form the heart of Wall Street. By the spring of 2008, burdened by billions of dollars of bad mortgages, the investment bank Bear Stearns was the subject of rumors that it would soon fail.
???Rumors are such that they can just plain put you out of business,??? Bear Stearns??? former CEO Alan ???Ace??? Greenberg tells FRONTLINE.
The company???s stock had dropped from $171 to $57 a share, and it was hours from declaring bankruptcy. Ben Bernanke acted. ???It was clear that this had to be contained. There was no doubt in his mind,??? says Bernanke???s colleague economist Mark Gertler.
Bernanke, a former economics professor from Princeton, specialized in studying the Great Depression. ???He more than anybody else appreciated what would happen if it got out of control,??? Gertler explains.
To stabilize the markets, Bernanke engineered a shotgun marriage between Bear Sterns and the commercial bank JPMorgan, with a promise that the federal government would use $30 billion to cover Bear Stearns??? questionable assets tied to toxic mortgages. It was an unprecedented effort to stop the contagion of fear that seemed to be threatening the rest of Wall Street.
While publicly supportive of the deal, Secretary Paulson, a former Wall Street executive with Goldman Sachs, was uncomfortable with government interference in the markets. That summer, he issued a warning to his former colleagues not to expect future government bailouts, saying he was concerned about a legal concept known as moral hazard.
Within months, however, Paulson would witness the virtual collapse of the giant mortgage companies Fannie Mae and Freddie Mac and preside over their takeover by the federal government.
The episode sent shockwaves through the economy as confidence in Wall Street began to evaporate. Within days, in September 2008, another investment bank, Lehman Brothers, was on the brink of collapse. Once again, there were calls for Bernanke and Paulson to bail out the Wall Street giant. But Paulson was under intense political pressure from conservative Republicans in Washington to invoke moral hazard and let the company fail.
???You had a conservative secretary of the Treasury and conservative administration. There was right-wing criticism over Bear Stearns,??? says Congressman Barney Frank (D-Mass.), chairman of the House Financial Services Committee.
Paulson pushed Lehman???s CEO Dick Fuld to find a buyer for his ailing company. But no company would buy Lehman unless the government offered a deal similar to the one Bear Stearns had received. Paulson refused, and Lehman Brothers declared bankruptcy.
FRONTLINE then chronicles the disaster that followed. Within 24 hours, the stock market crashed, and credit markets around the world froze. ???We???re no longer talking about mortgages,??? says economist Gertler. ???We???re talking about car loans, loans to small businesses, commercial paper borrowing by large banks. This is like a disease spreading.???
???I think that the secretary of the Treasury could not fully comprehend what that linkage was and the extent to which this would materialize into problems,??? says former Lehman board member Henry Kaufman.
Paulson was thunderstruck. ???This is the utter nightmare of an economic policy-maker,??? Nobel Prize-winning economist Paul Krugman tells FRONTLINE. ???You may have just made the decision that destroyed the world. Absolutely terrifying moment.???
In response, Paulson and Bernanke would propose???and Congress would eventually pass???a $700 billion bailout plan. FRONTLINE goes inside the deliberations surrounding the passage of the legislation and examines its unsuccessful implementation.
???Many Americans still don???t understand what has happened to the economy,??? FRONTLINE producer/director Michael Kirk says. ???How did it all go so bad so quickly? Who is responsible? How effective has the response from Washington and Wall Street been? Those are the questions at the heart of Inside the Meltdown.???
We'll come out of this eventually. Then go back to being irrationally exuberant. Then it will bust again.
Then someone will ghost bump this thread.
Hey,
"Greed is a helluva drug."
People can concoct a million and one ways to justify spending beyond their means. Yeah sure, mortgage companies "made" people go into Adjustable-Rate Mortgage loans to buy houses they couldn't afford. Oh, if only those bad banks didn't twist their arms; yet, didn't the buyer think that if they only make $70,000 a year, they can't afford a $600,000 house. More generally, isn't it stupid to base a large portion of our economy on credit? GTFOOHWTBS!!! Hopefully, these rough economic times will teach people to be frugal and live within their means. But then again, Americans have short memories and avarice trumps reason anyway.
Peace,
Big Stacks from Kakalak
It is the bankers fault. Works something like this.
"Smart" guys on wall street create financial instruments from mortgages.
They then start buying mortgages from banks who had previously held their mortgages.
In the past when a customer came in the bank was careful to only lend the customer the amount the BANK determined they could afford. But under the new arrangement the bank wasn't holding the mortgage or risk, so they loosened their lending rules.
Worse than the banks were mortgage brokers. These are the people who really pushed sub primes and targeted customers who banks would not lend to. They sold the mortgages directly to wall street.
Worse than the mortgage brokers were aggressive mortgage/loan/sharks. These people would target low income home owners. People who had gotten a home through Habitat for Humanity and other housing programs. Home owners would get daily solicitations for "low interest" loans for 110% of their homes value. If the sharks owned that debt they never would have made the loans. But "smart" guys on wall street bought the debt from them as soon as the papers were signed.
I don't know what signing was like when you bought your home. It took us a year to find financing for our home. We got our loan from mortgage broker. At signing there was a stack of papers 2" high. I started to read them. The title company clerk and brokers freaked. "Don't read those" "we will be here all day" "all it says is what we explained to you" "this is the same documents all homeowners sign". Truth is, even if I read them all they were filled with so much legal jargon, I never would have understood them.
To suggest that a first time homeowner should know more about finance than a banker is not a very sophisticated analysis of what happened or why.
BTW we paid off our mortgage in 14 years and own our home free and clear.
May guess is, and no one has been able to show me otherwise, most foreclosers are not owner occupied homes. I think most are developers, speculators, flippers... If my home were underwater it would make no difference to me. I could still live in it. But if I was building 90 homes which suddenly were worth millions less than my business model had called for... Flippers loved all the fancy mortgages that were low interest at the start and high at the end because they were going to sell their houses before the rate went up. But all the sudden their houses are worth less than they paid and they are looking at a very unfavorable long term loan rates.
Lets not blame poor people for rich peoples stupid mistakes.
The economy has been in the toilet since 2000. At the time I was a salesman selling security systems for new homes and in ever new sub-division I would see foreclosure signs. I would say 2 out of 20 of these home were being foreclosed on. Today it's more like 10 out of 20 are foreclosed on.
but look what the banks just emailed me about! loooks like i'm bout to get some obama money! yall didnt get this yet?
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Everyone is comparing the current economy with 1982 which is not on that chart so it is not too helpful. I doubt if we have ever seen jobs evaporate this fast.
Comments
Some countries had very high savings rates and based their economies upon exports. Of course, now that the world has gone into recession these economies are trying to re-think their startegies because their export markets have collapsed.
I think China followed that model. Their real estate market also collapsed like America's so a lot of the people that saved all this money and put it into homes have lost a bundle. The government is trying to force down housing prices to get more domestic spending, but that has screwed the people that already bought homes because some have lost 1/2 or more of their investment in a house.
No ayo.
First thing seems to get people feeling they will have a job in 3 months. They might spend then.
can you clarify your stance on retail and service please?
Budgets have JUST been cut for the coming year in reaction to the mess in October, those effects have not even begun to be felt yet.
Then there is the domino effect that you get in a building industry collapse, the big companies got the credit lines (other people's money) and then started their projects which involve hundreds of subcontractors who in turn hire subcontractors. These people the ones who are currently trying to recover money owed but will get fukked, not the board of XYZ skyscraper corp.
Then there are all the small and medium buinesses who have been struggling as it is (Bush fucked them for 8 years while he gave money to corps), hoping for an upturn, who have been getting deeper into debt. When that shit hits the fan, you won't see an uptick in unemployment numbers or dip in the markets, but you will see more money lost from the treasury, more vacant real estate, more people trying to make ends meet, real problems.
Don't look for any Q this or Q that recovery. The housing bubble was a manufactured bubble because we had already popped the Telecoms, Energy and Dotcom bubbles, all of which proved to have more than their fair share of scams and emperor's new clothes. Remember Enron? Worldcom? any number of dotcom follies?
I don't doubt that the Green Push or whatever can create a lot of jobs, but don't think it's going to be a "sector" or a "bubble"... there will be a million things that will need to be done that won't make a profit and can't be put out to tender for private business, the way govt likes to run things now.
In a nutshell, the race to the bottom is nearly over and we are running out of things to capitalize and monetize in order to run an economy based on virtual wealth.
And really, if people are looking at this as just another downturn, then what was the deal with all this AUDACITY OF HOPE bullshit? CHANGE is good? Or did that have as much relation to reality as a talking gecko does to car insurance?
I can see this.
Throughout the 90s and most of this decade, the rightwing British press, together with corporations like the FT and WSJ ran Op Ed after Op Ed about Germany becoming the sick man of Europe and dragging the rest of us down if it didn't immediately relax it's social safety net, centralized economy, and let entrepreneurs come in and create jobs and wealth. This was pure propaganda and did have some effect on the political climate in Germany over the past decade, but thankfully not enough. Now we are in a position where experts say that the UK will be the hardest hit economy of the developed world. That's the result of 30 years of private service sector economy, not from a lack of free markets.
plaese to not post if you don't have a basic understanding of how economic theory operates.
Turns out I was wrong. You CAN actually invoice an invoice to create cold, hard cash!
I'll be watching it next Tuesday here at work. We have a screening in our theater for employees.
The press release for anyone interested:
On Thursday, Sept. 18, 2008, the astonished leadership of the U.S. Congress was told in a private session by the chairman of the Federal Reserve that the American economy was in grave danger of a complete meltdown within a matter of days. ???There was literally a pause in that room where the oxygen left,??? says Sen. Christopher Dodd (D-Conn.).
FRONTLINE producer Michael Kirk goes behind closed doors in Washington and on Wall Street to investigate how the economy went so bad so fast and why emergency actions by Federal Reserve Chairman Ben Bernanke and Secretary of the Treasury Henry Paulson failed to prevent the worst economic crisis in a generation on Inside the Meltdown, airing Tuesday, Feb. 17, 2009, at 9 P.M. ET on PBS (check local listings).
As the housing bubble burst and trillions of dollars??? worth of toxic mortgages began to go bad in 2007, fear spread through the massive firms that form the heart of Wall Street. By the spring of 2008, burdened by billions of dollars of bad mortgages, the investment bank Bear Stearns was the subject of rumors that it would soon fail.
???Rumors are such that they can just plain put you out of business,??? Bear Stearns??? former CEO Alan ???Ace??? Greenberg tells FRONTLINE.
The company???s stock had dropped from $171 to $57 a share, and it was hours from declaring bankruptcy. Ben Bernanke acted. ???It was clear that this had to be contained. There was no doubt in his mind,??? says Bernanke???s colleague economist Mark Gertler.
Bernanke, a former economics professor from Princeton, specialized in studying the Great Depression. ???He more than anybody else appreciated what would happen if it got out of control,??? Gertler explains.
To stabilize the markets, Bernanke engineered a shotgun marriage between Bear Sterns and the commercial bank JPMorgan, with a promise that the federal government would use $30 billion to cover Bear Stearns??? questionable assets tied to toxic mortgages. It was an unprecedented effort to stop the contagion of fear that seemed to be threatening the rest of Wall Street.
While publicly supportive of the deal, Secretary Paulson, a former Wall Street executive with Goldman Sachs, was uncomfortable with government interference in the markets. That summer, he issued a warning to his former colleagues not to expect future government bailouts, saying he was concerned about a legal concept known as moral hazard.
Within months, however, Paulson would witness the virtual collapse of the giant mortgage companies Fannie Mae and Freddie Mac and preside over their takeover by the federal government.
The episode sent shockwaves through the economy as confidence in Wall Street began to evaporate. Within days, in September 2008, another investment bank, Lehman Brothers, was on the brink of collapse. Once again, there were calls for Bernanke and Paulson to bail out the Wall Street giant. But Paulson was under intense political pressure from conservative Republicans in Washington to invoke moral hazard and let the company fail.
???You had a conservative secretary of the Treasury and conservative administration. There was right-wing criticism over Bear Stearns,??? says Congressman Barney Frank (D-Mass.), chairman of the House Financial Services Committee.
Paulson pushed Lehman???s CEO Dick Fuld to find a buyer for his ailing company. But no company would buy Lehman unless the government offered a deal similar to the one Bear Stearns had received. Paulson refused, and Lehman Brothers declared bankruptcy.
FRONTLINE then chronicles the disaster that followed. Within 24 hours, the stock market crashed, and credit markets around the world froze. ???We???re no longer talking about mortgages,??? says economist Gertler. ???We???re talking about car loans, loans to small businesses, commercial paper borrowing by large banks. This is like a disease spreading.???
???I think that the secretary of the Treasury could not fully comprehend what that linkage was and the extent to which this would materialize into problems,??? says former Lehman board member Henry Kaufman.
Paulson was thunderstruck. ???This is the utter nightmare of an economic policy-maker,??? Nobel Prize-winning economist Paul Krugman tells FRONTLINE. ???You may have just made the decision that destroyed the world. Absolutely terrifying moment.???
In response, Paulson and Bernanke would propose???and Congress would eventually pass???a $700 billion bailout plan. FRONTLINE goes inside the deliberations surrounding the passage of the legislation and examines its unsuccessful implementation.
???Many Americans still don???t understand what has happened to the economy,??? FRONTLINE producer/director Michael Kirk says. ???How did it all go so bad so quickly? Who is responsible? How effective has the response from Washington and Wall Street been? Those are the questions at the heart of Inside the Meltdown.???
It is the bankers fault. Works something like this.
"Smart" guys on wall street create financial instruments from mortgages.
They then start buying mortgages from banks who had previously held their mortgages.
In the past when a customer came in the bank was careful to only lend the customer the amount the BANK determined they could afford. But under the new arrangement the bank wasn't holding the mortgage or risk, so they loosened their lending rules.
Worse than the banks were mortgage brokers. These are the people who really pushed sub primes and targeted customers who banks would not lend to. They sold the mortgages directly to wall street.
Worse than the mortgage brokers were aggressive mortgage/loan/sharks. These people would target low income home owners. People who had gotten a home through Habitat for Humanity and other housing programs. Home owners would get daily solicitations for "low interest" loans for 110% of their homes value. If the sharks owned that debt they never would have made the loans. But "smart" guys on wall street bought the debt from them as soon as the papers were signed.
I don't know what signing was like when you bought your home. It took us a year to find financing for our home. We got our loan from mortgage broker. At signing there was a stack of papers 2" high. I started to read them. The title company clerk and brokers freaked. "Don't read those" "we will be here all day" "all it says is what we explained to you" "this is the same documents all homeowners sign". Truth is, even if I read them all they were filled with so much legal jargon, I never would have understood them.
To suggest that a first time homeowner should know more about finance than a banker is not a very sophisticated analysis of what happened or why.
BTW we paid off our mortgage in 14 years and own our home free and clear.
Lets not blame poor people for rich peoples stupid mistakes.
The economy has been in the toilet since 2000. At the time I was a salesman selling security systems for new homes and in ever new sub-division I would see foreclosure signs. I would say 2 out of 20 of these home were being foreclosed on. Today it's more like 10 out of 20 are foreclosed on.
$500 SENT!
African Millionaire Prince Scam of 2009
And I bet lots of folks fall for it.
Everyone is comparing the current economy with 1982 which is not on that chart so it is not too helpful. I doubt if we have ever seen jobs evaporate this fast.
Alabama Yodel Scam of 2009