The State of the Economy

[Seraphim]

We've been hijacking the Stock Market thread with discussions of the economy, so I thought I'd start this thread so the Stock Market thread can go back to discussing the Stock Market.

I find it interesting, when talking to face to face with people, about economics, that most people can't even offer a definition of the word. So, a definition is a good place to start.

Economics is the study of scarcity: the study of allocating limited resources amongst unlimited wants. Economics, per se, does not distinguish between needs and wants - it is not a study of morality. A want is the same, statistically, as a need. Morality discussions will come I to play in the discussions, but I think it's important to understand that morality does not affect the actual science. Morality is about how we, as humans, use that science.

So - any thoughts on the current state of US economy?

 

[cdiggy]

It needs to get a lot better!

 

[caseyc]

Wage stagnation is................real.

 

[Luisafernandes]

[emoji40]

 

[dragonflyinthesky]

Still not good or many are afraid to let loose of money. I was doing very well before the poop hit the fan. An artist produces what isn't needed, it's wanted. When there is extra money, and yes, there is such a thing, people will buy what meets their eye, they certainly don't need a painting to hang over their couch but if they don't have to watch their pennies closely, they will buy my useless painting for a decent sum. Now I have adapted and produce art but I turn it into cards and useful little things or even tee shirts. Takes more work to make the same money. An artist or a musician just is. Telling us to get a real job and forget our craft is like telling someone who can do math or accounting and so forth to change the way their brain works and dig ditches or get a job in the circus. It's real easy to look from the outside at artists and craftsmen and musicians that have always struggled financially and think how much better off we would be with a real career. There will always be rich people whose services are needed in one way or another. My economic outlook is that there needs to be more people who don't have to worry about rent, utilities and food so they will buy my painting just because it appeals to them.

 

[cyndi]

The government wants us to believe the economy is improving. They *prove* this by *massaging* (that's a term I learned while working for the feds) the numbers. They regurgitate massaged statistics hoping we'll go out and spend more money that we don't have. The strategy appears to be working.

 

[Seraphim]

Still not good or many are afraid to let loose of money. I was doing very well before the poop hit the fan. An artist produces what isn't needed, it's wanted. When there is extra money, and yes, there is such a thing, people will buy what meets their eye, they certainly don't need a painting to hang over their couch but if they don't have to watch their pennies closely, they will buy my useless painting for a decent sum. Now I have adapted and produce art but I turn it into cards and useful little things or even tee shirts. Takes more work to make the same money. An artist or a musician just is. Telling us to get a real job and forget our craft is like telling someone who can do math or accounting and so forth to change the way their brain works and dig ditches or get a job in the circus. It's real easy to look from the outside at artists and craftsmen and musicians that have always struggled financially and think how much better off we would be with a real career. There will always be rich people whose services are needed in one way or another. My economic outlook is that there needs to be more people who don't have to worry about rent, utilities and food so they will buy my painting just because it appeals to them.

An interesting way of putting the situation into tangible terms.

---

The government wants us to believe the economy is improving. They *prove* this by *massaging* (that's a term I learned while working for the feds) the numbers. They regurgitate massaged statistics hoping we'll go out and spend more money that we don't have. The strategy appears to be working.

I agree. Look at the unemployment rate: if all the discouraged workers, who just gave up seeking employment were included in the 'labor force' calculations quoted by the government, the true unemployment rate would show over 14%, last time I checked. Instead, when a person reports they given up and are no longer actively seeking employment, they are removed from the calculation, which permits the government o show a much more postive unemployment rate. They also fail to voluntarily acknowledge the recent drops in unemployment rate have been caused by low paying, part time employment, which is often below survival level. They just check the person off as 'employed'.

 

[HarmonicaBruce]

Economics is the study of scarcity...

The problem today is there is no scarcity. We've already talked about food. I used to say there the reason I know there is no hunger in American is because there are so many stray dogs. In Detroit if you get caught shoplifting less than $10, the police won't come. The store owner has to let the person go (my girl friend used to be a store detective for Kroger grocery). What scarcity does exist is artificial. Laws limit how many houses can be built on a certain size lot, how many stories high apartments can be, where you can put mobile homes. We have more vacant houses in America than we have homeless. I sold my trailer in Florida for $3500.

The only reason someone isn't making it in America is because they're not trying.

 

[Seraphim]

I will agree that a lot of people in the US aren't trying -they're content to let the system support them. But not all. Far from 'all'.

No hunger in America? You must be living in a totally different America than I am. I can't speculate on more vacant houses than homeless. I don't have the stats. I suspect you don't either. What has that to do with the topic?

I have no idea what your comments about police response or the sale of your trailer have on the topic at hand.

---

In both of our careers, DW and I came across homeless and hungry. A large portion of the kids in her school came in having had no breakfast. Many would have had no lunch if the school didn't provide it. Heaven knows what - or if - supper consisted of. Too many had no coats in the winter, and old shoes which couldn't compete with the snow and wet.

---

I've changed my mind, Bruce. I'm not really sure what world you live in, if you can disagree with the fact there is hunger in America. Must be one of your mental manufacture.

 

[Seraphim]

Wage stagnation is................real.

Wage stagnation has been a problem, especially recently. I think it's starting to improve, though. No facts to back up my thoughts, though.

---

More on the hunger issue:


http://en.m.wikipedia.org/wiki/Hunger_in_the_United_States

The U.S. produces more than sufficient food for its population. But food isn't free. If people haven't the resources to purchase the food, available quantity is a moot point. Scarcity refers to resources, in general. To the hungry, there is a scarcity of resources to put food on the table, even though the food itself may not be scarce.

---

This leads me to consider income inequality, which has gotten significantly worse in the years after the recent depression.

There are three things a person can sell (lease) to provide income for themselves: real property, money, or their own physical /mental labor. Most people only have the latter to begin with. Someone who has neither land nor money, and hasn't the mental/physical capability - for the last means of providing income, or is living in a high unemployment enviroment, has no options. No matter how hard they're willing to try.

Selling ones money - investing - has always been, IMO, the most efficient source of income. Back to the money lenders of historical times. People who have money can make money more efficiently than those who have to rely on personal labor. The rich get richer.

In 2008, when stocks hit bottom, people with money bought as many stocks as possible at extremely low costs, knowing the values would recover in time. People who needed money due to the crash had to sell, and their shares were gobbled up. The subsequent recovery provided the buyers with a rapid rate of return while the incomes of the laborers -at best - stagnated. Those who managed to keep jobs.

So, income inequality grew at a fantastic rate in the last six years.

 

[HarmonicaBruce]

No hunger in America? You must be living in a totally different America than I am.

You'll have to show me that one. If someone is hungry in America, why don't they get on food stamps? Why don't they go down to their local soup kitchen for free food? Why don't they knock on the door of their nearest church and ask for food? When I see news stories of food banks passing out food, we see people in nice vehicles picking it up. Why don't we see news stories of emaciated people in America? I think it's because there aren't any.

I can't speculate on more vacant houses than homeless. I don't have the stats. I suspect you don't either.

I never make stuff up that I write about on forums. 3.5 Million Homeless, 18.5 Million Vacant Homes In US

I have no idea what your comments about police response or the sale of your trailer have on the topic at hand.

The point about the police is that anyone in detroit can walk into any store that sells food and steal it, as long as it's less than $10. I suspect a truly "hungry" person would do that. My trailer was to illustrate how easy it is to provide yourself with housing.

In both of our careers, DW and I came across homeless and hungry. A large portion of the kids in her school came in having had no breakfast.

Sorry, I don't consider missing breakfast to be the same as hunger in America. There's a difference in poor parenting and hunger. Sure, if a kids mother is stoned out on drugs and doesn't bother to feed her kids, they suffer. That's not an economic issue. We also have people who suffer anorexia nervosa, and are severely malnourished. That's not an economic issue. There are people who lock their kids up in the basement and don't feed them. Do you think the solution for poor parenting is for schools, and the taxpayer, to feed their kids? Why aren't these parents collecting food stamps? I suspect they are, but they're selling them for drugs.

The fact is anyone in America who wants food can get it with a tiny bit of effort.

I've made an effort to fight world hunger by helping to show people how to get free food:[video=youtube]

 

[PastTense]

The rich are getting richer and the poor are getting poorer.

 

[Bdog1]

Back to the economy....

We hear a lot about things improving, perhaps they are. The current plunge in fuel prices is generally seen as a massive stimulus, to the common man this time not the banks. So here's my concern, with this acknowledged bonus and our minimal improvements, what happens if fuel costs suddenly spike back to their former levels? I don't feel this will happen but, I think it would drop us right back into recession. Things are pretty fragile right now.

Oil stays low? Several country's are on the chopping block. That can make some global waves.

 

[Seraphim]

There are no emaciated photos of people, so there are no hungry people. If there were, your solution is to steal, if they don't meet the criteria for food stamps. All hungry children go hungry because of poor parenting. Including the 2-3 million homeless children who should - what - break into vacant homes and live in them? But if everything is hunky-dory with the current economic situation, they shouldn't be homeless to begin with. I guess they all want be homeless, or they'd just prefer to be homeless rather than get a job or hunt squirrels? Gotta steal the materials for a trap, or a gun, but that's OK with you. Getting food without money is just so damned easy. Or they sell their food stamps for drugs , of course. And, of course, they all should have $3500 laying around for your trailer, assuming they have a place to put it. Or they can just go get a loan, I'm sure.

So, since everything is so easy to acquire, the economy must be in great shape.

I've never heard an argument so full of causal fallacies, logical inconsistencies, stereotyping, and lacking any actual proofs or evidence whatsoever. It is, however, your opinion, and I respect your right to have it. And to speak it.


http://www.worldhunger.org/articles/Learn/us_hunger_facts.htm

This page relates strictly to the U.S.

And despite what your girlfriend encountered in Detroit as a clerk, don't count on the rest of enforcement agencies following Detroits lead. I watched a man sentenced in court for a felony conviction for a $1.79 jigsaw blade. Another go to jail for a newspaper from his neighbors driveway. But hey - Free food and housing, easy to get - right!? I've got a bit more experience in that particular department than your girlfriend. A victim wants charges signed, and there's PC, they get signed. I find it interesting Detroit won't send an officer to a theft, just because of the value of the theft. But again, that's not economics. Or is it - the city's in financial distress.

But nothing is free - someone pays for it. One way or another.

 

[akrvbob]

34% of Americans are in the private work force and they're carrying the rest of the economy. What's worse is that it's only going to get worse as the baby boomers like me reach retirement age and exit the labor force. That's so fundamentally unsound I see no hope for the economy in the long run. Here is a graphic from a site I enjoy that makes it very clear. http://www.mybudget360.com/not-in-labor-force-oxymoron-not-in-labor-force-numbers/

It breaks the entire population of the country (319 million) into their work status:

 

[akrvbob]

Any posts that try to turn this into politics will be quickly deleted.
Bob

 

[Seraphim]

Back to the economy....

We hear a lot about things improving, perhaps they are. The current plunge in fuel prices is generally seen as a massive stimulus, to the common man this time not the banks. So here's my concern, with this acknowledged bonus and our minimal improvements, what happens if fuel costs suddenly spike back to their former levels? I don't feel this will happen but, I think it would drop us right back into recession. Things are pretty fragile right now.

Oil stays low? Several country's are on the chopping block. That can make some global waves.

Personally, I don't see lower gas prices as a stimulus, though others disagree. It frees up a bit of money to spend elsewhere - but only a percentage of your average gasoline bill. About 40%?

Gas prices will rise again. The only question is when. Will it shoot up immediately? *shrug*

There's always another recession in the future. I don't see oil prices triggering it, but other spending factors, combined with a backlash from the extended quantitative easing the Fed just put us through. It eased the pain of recovery a bit, but only by extending the payback period. They drove bond values down, forcing investors into stocks - thus over valuing the stock market. Its still over valued, despite octobers correction. They reduced the prime interest to zero, which is unsustainable over loeriods of time. They'll have to let the interest rates rise, and this is what I think will factor towards the next recession. Bond values will tank further, the stock market will drop since it is no longer being artificially supported by the QE, and like the roller coaster it is, the stocks will drop below fair value, driven further down by the lemmings who start dumping stocks in an effort to get out before values drop too badly.

The low quality of current job offerings, the decline of the stick and brick retailer in favor of the virtual store, decline of basic manufacturing jobs, continued deficit spending and large debt balance...

I dnt think the next recession will be as bad as the last, but recessions are part of the process - the cycle. This time, there won't be the devasting impetus of upside down mortgages, and rapid job loss from companies desperate to streamline to save profit margin.

And, if course, after the lemmings are done dumping stocks, Investors with available cash will scoop up the shares at low cost and harvest the gains as the market recovers.

The rich get richer - income inequality increases.

---

But the national money supply is a finite amount. When one income level makes a percentage gain, another level must take a loss, in one form or another. I think this is the biggest weakness of our current economy. It's exacerbated by the fact that money in the hands of the wealthy is less likely to be circulated, where it does the economy some good, and more likely to be invested, where it helps the market, but not necessarily the economy.

 

[Seraphim]

34% of Americans are in the private work force and they're carrying the rest of the economy. What's worse is that it's only going to get worse as the baby boomers like me reach retirement age and exit the labor force. That's so fundamentally unsound I see no hope for the economy in the long run. Here is a graphic from a site I enjoy that makes it very clear. http://www.mybudget360.com/not-in-labor-force-oxymoron-not-in-labor-force-numbers/

It breaks the entire population of the country (319 million) into their work status:

+1

---

And I think there's another distinction about the discussion of economics. Economics does distinguish between needs and wants. Everything, to the science of economics, is a 'want' - whether it is necessary to survival or not.

In th US, I think the average person has had so much, they want more. They want that bigger TV, that smarter phone, that nicer house. The standard of what a person considers 'necessary' has become grossly inflated. And even when those wants are met, the average person still wants more.

Finite resources vs unlimited wants. If everyone could reduce their wants, the existing available money supply could be sufficient to cover not only needs, but everyone's limited wants. I don't see that as happening. Even someone with all their current wants fulfilled looks to the future (what if?) or looks to provide for future generations - so they keep large portions of the money supply out of circulation, and away from others who still have unfulfilled wants.

And as Bobs graphic points out, the decreasing labor force, with the most access to what's available in the money supply, is supporting a greater number of unemployed - unemployed for various reasons.

The labor force is generally considered those between the ages of 18 and 65. The U.S. has a 'natural' unemployment rate of about 5%. This refers to people currently not working (going to college, temporarily between jobs, taking a sabbatical or I'll) but who are still planning on being employed and consider themselves part of the work force. The actual unemployment rate - I think I mentioned earlier - is about 14%. As the boomers retire, adding to the retirement sector, and the labor force decreases due to a decreased - and still decreasing - birth rate, more people are being supported by fewer workers, and the situation is forecast to keep getting worse.

Just additional info to Bobs graphic.

 

[Seraphim]

And 20% of those working are part time...

About one in five workers.

 

[Spirituallifetime]

This shows what I have thought to be true. That The baby boomers will have to work beyond retirement age or retire from the careers they worked at all their life to do something else part time or full time until they can't work any more.