Calling all economic experts

[NA8]

Re: The Economy, What's your take

It was the best of times, it was the worst of times.

Wave_Particle, good job. :thumbsup:

 

[js]

Re: The Economy, What's your take

Lux,

Good point. My tone was off! Please accept my apologies. I DID mean to take issue with my impression of your understanding, and not make grandiose, insulting, and sweeping statements about your understanding (which I don't know much about).

Sorry! I'll edit my post.

 

[WAVE_PARTICLE]

Re: The Economy, What's your take

Lux, before you continue, just note that a currency is just a medium of exchange and that the value of this currency is determined by supply and demand. It's as simple as that. The supply is controlled by the Fed and the Banks (via the Fractional Reserve Requirement). And the demand is controlled by the market. You cannot directly link a currency to a value of an economy.....simply because the latter is a measurement....and the former is a unit of measure. It's like saying the kilometer is representative of how long a road is.

 

[Wattnot]

Re: The Economy, What's your take

I believe the economy is in horrible shape. I've been waiting for this latest stock market dump because it was a false rise anyway. I'm fairly certain the entities that are claiming it's good are blowing smoke to avoid panic. Look at the dollar's worldwide value!! We're under Canada now!

EVERY SINGLE person I know is worse off than they were in the 90's. Several people I know have had to downgrade their homes and 3 people I know lost theirs either by reposession or by taking a LOT less to avoid reposession. All of this and I'm in a normally VERY HOT real estate area/high tech area.

You can print in the paper how great our economy is all you want but the dark cloud is approaching fast. It will get better though, eventually.

 

[jtr1962]

Re: The Economy, What's your take

Real Estate (by which I include homes, businesses, other developments, and undeveloped land), especially in desireable locations is one of the things that has a finite, limited supply. The usefulness of real estate and its limited supply creates an expectation of an increasing value....especially in a world with a steadily increasing population.

Traditionally housing prices have kept pace with inflation. This was true at least until the stagflation of the late 1970s. That combined with cheap money in last few years has resulted in real estate prices almost everywhere going through the roof. There was no supply or demand involved, although speculators had a large part in driving up housing prices as well. Look for a major correction in the housing market eventually as houses drop to what they historically should be, roughly 25% to 50% of what they are right now, perhaps a little more in places where demand has actually outstripped supply. Oh, and real estate in desireable locations isn't a finite resource. If 2000 families want to live on the same 100x100 piece of real estate you just build a 50-story apartment building. Problem solved.

3) I don't agree with your linkages between types of jobs/workers (i.e. unskilled vs. higher skilled) and production remaining in this country to having a sustainable future, but that is a complex topic in an already bloated post that probably only you are reading. LOL!

There's this concept in economics known as creating wealth. In general you can only do so if your labor results in a tangible physical asset being, either directly (you build it) or indirectly (you design it). In short, I'm talking about manufacturing, engineering, or research jobs. All are in short supply in this country. Service type jobs are basically manipulating wealth someone else created. By definition they have to pay less because the added value of your labor is less. In some cases, such as tax accountants, they create no value at all but only exist due to government regulations (i.e. income tax laws in this case).

I agree with js that the service economy can't go on. You now have an entire generation of potential engineers and scientists whose abilities have been for the most part squandered. I studied engineering but couldn't even find a job in my field. People stopped studying engineering and science because of lack of career opportunities. Many of the patents issued in the last decade have gone to foreigners. And this can go on? I wonder how many of those predisposed to careers in science and engineering will flock to countries like China and India where they can actually do something they enjoy, rather than a mind-numbing, half-assed, low-paying service job? It's called "brain-drain". It happened once when many engineers from countries like Germany came to the US following WWII. Now the younger generation of engineers will flock out of the US unless we actually start creating employment where they can use their talents. Designing cell phones doesn't cut it.

The US has value beyond their gold/silver reserves. There is enormous tangible value in our national resources, our real estate, our cities, our buildings, museums, artwork, highways, bridges, waterways, coastlines, minerals, agriculture, educational/industrial/military institutions and complexes, and many other physical assets that do not exist elsewhere.

True except more and more foreigners are choosing to invest their US dollars buying these things. In essence, we're selling off the country piece by piece to finance our excessive consumption. This is akin to selling the family jewels to pay for a night on the town.

 

[bitslammer]

Re: The Economy, What's your take

Not changing my lifestyle at all and not really feeling affected. I would add that I've always tried to live well within my means and not been extravegant with my spending. Luckily the tings that make me happy in life are more experential and not material.

That said my take is that hopefully things here in the US are "normalizing." I have a neighbor who works for the local utilty company and he and I got off a a tangent discussion about people spendign and priorities. I told him about the time last week when I drove to work and in the dark noticed that a house that I pass that appears to have two very broken down cars in the drive and almost a hole in the roof, drooping gutters, etc. had a ~46" plasma TV that I could see int eh front room as I drove by. He laughed and told me of the countless times he has to go into houses where the people have no food, the kids have no decent clothes, their heat is broken/turned waaaayyy down, but they have that brand new flat screen TV with cable.

While nobody can know all of the details and I'm not saying that people can't have a little pleasure in life I'm convinced that as a nation there are way too many people living beyond their means and with very screwed up financial priorities.

Hopefuly this "correction" will bring things (and people's behavior) back to a more realistic level.

 

[Nitro]

Re: The Economy, What's your take

Not changing my lifestyle at all and not really feeling affected. I would add that I've always tried to live well within my means and not been extravegant with my spending. Luckily the tings that make me happy in life are more experential and not material.

That said my take is that hopefully things here in the US are "normalizing." I have a neighbor who works for the local utilty company and he and I got off a a tangent discussion about people spendign and priorities. I told him about the time last week when I drove to work and in the dark noticed that a house that I pass that appears to have two very broken down cars in the drive and almost a hole in the roof, drooping gutters, etc. had a ~46" plasma TV that I could see int eh front room as I drove by. He laughed and told me of the countless times he has to go into houses where the people have no food, the kids have no decent clothes, their heat is broken/turned waaaayyy down, but they have that brand new flat screen TV with cable.

While nobody can know all of the details and I'm not saying that people can't have a little pleasure in life I'm convinced that as a nation there are way too many people living beyond their means and with very screwed up financial priorities.

Hopefuly this "correction" will bring things (and people's behavior) back to a more realistic level.

That reminds me when I lived in Indianapolis years ago. I drove by some parts of that city where you would see rows of houses with boards on the windows and half of the roof gone. Meanwhile in the driveway sits a BMW or Mercedes. Granted, cars are easier to buy with unclaimed cash then houses.

 

[jtr1962]

Re: The Economy, What's your take

While nobody can know all of the details and I'm not saying that people can't have a little pleasure in life I'm convinced that as a nation there are way too many people living beyond their means and with very screwed up financial priorities.

One of my mother's friends worked as a real-estate appraisor for a while and noticed the same thing. Whenever he went into houses in poor neighborhoods they wouldn't have food in the refreigerator, the house would be in disrepair, the kids would be running around with old clothes, but they would always have computers, ipods, and big-screen TVs. There would often be a late model car sitting in the driveway. No doubt they were renting some of these things. Totally screwed up priorities. Renting a TV is about as dumb as it gets financially.

Since I've always lived in a pretty austere manner since I've never had much income, I don't think much will be changing with me. For me a spending spree is buying the big bag of Doritos when it's on sale for half price.

 

[Cydonia]

Re: The Economy, What's your take

I find it refreshing that many people here have their heads screwed on properly when it comes to the economic realities that are unfolding rapidly around us. These are profoundly transformational times. Living way below your means and having a "preparation attitude" for all manner of disasters will pay great "dividends" in the immediate future as well :naughty: (Sub_Umbra, you know what I mean!)

May I suggest the concept of... actually getting supplied with foodstuffs at today's prices in the event of any disaster, man made or natural. Everyone should aim for a year's supply of basic dry and canned food on the shelf. Having 3 or 4 years of bathroom tissue and a decades worth of soap, razors, toothbrushes, clothes, shoes etc., is a logical investment. Things you are gonna need anyway... but whose price will rise naturally. So just buy it now. (By the way, there are survival forums full of those who think in a similar manner... might want to check those places out for ideas too...)

There are tremendous imbalances that will be corrected - whether anyone likes it or not. The above mentioned perversity of priorities (Massive TV over food and clothes, rampant sick consumerism etc.,) will be "taken care of" in due course by the Hard Times ahead.

Moderator js, WAVE_PARTICLE, and MARNAV1 have a grasp of what we are dealing with here. It ain't your typical "slump" or "recession". Let me put it this way; I don't think it is possible to be too prepared for what is coming.

 

[js]

Re: The Economy, What's your take

. . .

May I suggest the concept of... actually getting supplied with foodstuffs at today's prices in the event of any disaster, man made or natural. Everyone should aim for a year's supply of basic dry and canned food on the shelf. Having 3 or 4 years of bathroom tissue and a decades worth of soap, razors, toothbrushes, clothes, shoes etc., is a logical investment. Things you are gonna need anyway... but whose price will rise naturally. So just buy it now.

. . .

Really good advice! Food and other basic necesities are being sold at amazing prices right now. They are a flat out bargain. Take the money you get from the $150B (!!!) economic "stimulus" package and BUY FOOD, like canned goods and flour and rice and pasta and so on--stuff that will last. Also, having some amount of extra cash on hand in case the banks close is a good idea as well.

Even if everything turns out to be peachy and the nay-sayers are wrong, it will still be money well spent (or rather, money well turned into value, money "saved".)

 

[js]

Re: The Economy, What's your take

You know, I just have to add that the size of this economic stimulus package, and the urgency with which it is being pushed through, really worries me. I knocked the "calling all economic experts" thread back to the top 10 days ago when I heard that the Fed had allowed foreign bailouts of some central banks. RED FLAG! RED FLAG! Then they convened an emergency meeting just 1 week before the scheduled meeting in order to lower the prime rate by one of the largest steps in a couple decades. Then there was this economic stimulus package.

They're going to flood the economy with even more USD. Desperate, desperate measures.

Previous to this, a couple years ago they stopped publishing the most important measure of the US money supply: M3. M1 and M2 are still published, but M3 they just stopped with little or no justification. At the time they stopped, the Fed had increased M3 by 40 percent over the last 6 years (2000 to 2006). In the early 1990's it was about 4,000B, and at the time they stopped publishing it, it was over 10,000B. And I'm sure with all of the spending on the war that right now it could even have reached 15 or 20T.

The Bush administration, more than any previous administration in recent history, has been funding itself by devaluing the dollar. It's illict taxation. If governments had to actually ask the taxpayers outright for the actual, real cost of these wars, it's likely that we wouldn't have had as many of these wars or military actions.

It boggles the mind. I really would love to know what M3 is right now. (or :thinking: maybe I don't want to know.)

Honestly . . . I'm scared. Genuinely scared.

 

[Retinator]

Re: The Economy, What's your take

All I know is that some of my investments have taken a small turn for the worse, and they can stay there until they regain themselves.

I think the fact that we've had low rates for awhile, has only encouraged overspending. I mean ppl are still paying a mortgage while upgrading their homes ($ 30k kitchen/bathrooms etc...).

I have friends with giant loans because it's free money to them. Retirement time is gonna be a rough road for many.

I also think oil prices are out of control. We could have put China/India and others on hydrogen(or something else), let the economies of scale lower the costs then bang no more oil. You don't start these guys out on oil, now we're all screwed.

I think things need at least 5 years before they really settle down. I doubt the entire thing will collapse, but we need to get our heads screwed on right. Everyone's jumping left then right. Time for a sit down

 

[jtr1962]

Re: The Economy, What's your take

Previous to this, a couple years ago they stopped publishing the most important measure of the US money supply: M3. M1 and M2 are still published, but M3 they just stopped with little or no justification. At the time they stopped, the Fed had increased M3 by 40 percent over the last 6 years (2000 to 2006). In the early 1990's it was about 4,000B, and at the time they stopped publishing it, it was over 10,000B. And I'm sure with all of the spending on the war that right now it could even have reached 15 or 20T.

M3 is currently over $13,000,000,000,000 according to this reconstruction so you weren't off by much. They claim 5 9's of correlation going back to 1980. The number itself is scary, but the rate of growth is even scarier. Looks like it's trending towards infinity very soon.

This huge number reminds me of something I saw on TV years ago. They flashed a similarly huge number, and said asked what does it represent? The multiple choice answers were the national debt, the number of times we could blow up the planet with our nuclear weapons, and the number of fish in the sea. The correct answer was all three.

 

[MarNav1]

Re: The Economy, What's your take

Why do they need an economic stimulus package? I thought everything was hunky dory? Also, what's the problem with M3? Since 95% of it is just numbers on a computer screen you can make it a million trillion, no worries. Then if the computers or servers crash, no problem just start over. Kind of like etch-a-sketch, if you dont like the picture just start over.

 

[LightInTheWallet]

Re: The Economy, What's your take

Here is a version of M3 and other valuable stats: Shadow Government Statistics » Alternate Data Series

 

[shakeylegs]

Re: The Economy, What's your take

Like js, some recent official responses to the economy smell to me of near, perhaps outright "PANICK". I suspect the reasons are many and varied. Still, I'm puzzled as to why Big Ben couldn't wait a week for the regularly scheduled meeting. Then again, as I recall, the markets had already priced in a 1/2 point drop in rates. So maybe Ben just responded in a timely fashion.

There has been some speculation in the thread about the potential for a dire downturn in the economy. So let me ask all of you, with a more globalized economy and all the various protective mechanisms in place to prevent a 30's style crash, how do you feel about the possibility of a similarly devastating economic crash happening now? No way Jose, or Bet-your-Boots it's coming. Personally, I think almost anything is possible, but I'm betting against it.

 

[LightInTheWallet]

Re: The Economy, What's your take

This past monday, MLK day in U.S.the stock market was closed. International markets started tumbling badly. Tuesday morning The U.S. stock exchanges started tanking badly, The Presidents "plunge protection team" had already put into place an idea for buoying the falling market by doing two things: Drastically cutting interest rates via the "Fed" and having the "Fed" member banks purchase large amounts of indicator stocks used in the major indices used to determine the general "averages" , Thus concealing the appearance of a severe downward trend, and setting the market up for a bad situation when the fed INCREASES interest, which will gut the T-bill market auction mechanisms.... then again, maybe I am just a worrywart google scholar with sub-par posting skills.

 

[js]

Re: The Economy, What's your take

M3 is currently over $13,000,000,000,000 according to this reconstruction so you weren't off by much. They claim 5 9's of correlation going back to 1980. The number itself is scary, but the rate of growth is even scarier. Looks like it's trending towards infinity very soon.

This huge number reminds me of something I saw on TV years ago. They flashed a similarly huge number, and said asked what does it represent? The multiple choice answers were the national debt, the number of times we could blow up the planet with our nuclear weapons, and the number of fish in the sea. The correct answer was all three.

OMG! 13T? OMG!

MARNAV1,

It matters.

 

[MarNav1]

Re: The Economy, What's your take

Nah, go back to sleep!

 

[LightInTheWallet]

Re: The Economy, What's your take

The M3 recreation I linked in a previous post pegged the M3 at 15T. I fear that the "go back to sleep" option won't be possible after next friday:tinfoil:YOU SHOULD BE WARY OF THIS MARKET REBOUND