The State of the Economy

[IGBT]

Everyone's bill was paid and they lived happily ever after.

Just for fun and for lightening the Holiday mood.

I think a step or two was left out. Something about a hedge fund manipulating feed/seed prices which caused a spike and subsequent bankruptcy of the farmer. Also high frequency traders front running pork belly futures trading took $0.05 from the butcher's take.

 

[Seraphim]

I mentioned that one of my biggest sources of information is Morningstar.com. Data and analysis is their business. They have a free membership which provides access to much of their material. For most people, the premium membership isn't worth the money, IMO.

Here's an example (I'm quoting the blurb so no one has to sign up, if they don't wish):

"Real or inflation-adjusted U.S. hourly wages jumped by 0.6% in November after basically no change in the prior two months, bolstered by rising pay and falling gasoline prices, the government reported Wednesday. The increase matched a similar gain in August. The surge in real wages was spurred by a 0.3% increase in hourly earnings and a 0.4% decline in the consumer price index. Yet despite the big gain last month, real hourly wages are up just 0.8% in the past 12 months. Consumers will need to see further gains to encourage them to spend more and boost the economy."

So if inflation is around 2% - I'm lazy, anyone can look it up online lol - wages (dollar amount) increased by about 2.8% the past 12 months, but buying power was reduced by about 2%. Still, very minor increase.

 

[gojo]

I mentioned that one of my biggest sources of information is Morningstar.com. Data and analysis is their business. They have a free membership which provides access to much of their material. For most people, the premium membership isn't worth the money, IMO.

Here's an example (I'm quoting the blurb so no one has to sign up, if they don't wish):

"Real or inflation-adjusted U.S. hourly wages jumped by 0.6% in November after basically no change in the prior two months, bolstered by rising pay and falling gasoline prices, the government reported Wednesday. The increase matched a similar gain in August. The surge in real wages was spurred by a 0.3% increase in hourly earnings and a 0.4% decline in the consumer price index. Yet despite the big gain last month, real hourly wages are up just 0.8% in the past 12 months. Consumers will need to see further gains to encourage them to spend more and boost the economy."

So if inflation is around 2% - I'm lazy, anyone can look it up online lol - wages (dollar amount) increased by about 2.8% the past 12 months, but buying power was reduced by about 2%. Still, very minor increase.

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You seem to be an expert in this area. What is the minimum wage and by inflation, what should it be?

 

[Seraphim]

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You seem to be an expert in this area. What is the minimum wage and by inflation, what should it be?

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No expert - I just read a lot. A lot of things I don't understand, and I do speculate. I try to make clear when I do such.

The Fed's currently trying to keep inflation around two percent. Their biggest fear is deflation - if prices start going down, people won't consume immediately because they're going to wait for lower prices. People delay consuming the economy, starts to drop, increasing deflation, making MORE people slow down consuming...

I *THINK* inflation averages around 3% - Id have to check that information.

What should minimum wage be? IMO? Ideally, I think, minimum wage should be enough to cover the needs of an average family (Let's say 2 adults 3 kids) for a 40 hour work week. Probably need an accountant or statistician to run the numbers.

But, I also don't think that's going to be completely realistic. For every change, there is a cost opportunity - something to be lost by making the change. If McDonalds succumbs to pressure to raise their minimum wage to $15 an hour, something has to give somewhere. They can raise prices, or reduce the labor pool. In most businesses, the biggest operational cost is the labor pool. After 2008, businesses in trouble got flush by laying off employees. Not long after, relatively, the streamlined companies were making profits again. Not as much as in 2007 I don't think, but enough. So in the example of McDonalds, the cost opportunities will cost the consumers money for higher price and ultimately decreases business for McDonalds (who wants a ten dollar Big Mac?) or it will cost some employees their jobs. I'm not smart enough to decide which is 'best'. But also consider, we were discussing a 40 hour a week job. Businesses like part time because they don't have to provide the extras - insurance (maybe a moot point by now), paid vacations, etc.

But the $15 an hour, 40 hour work week scenario provides a gross annual income of $31,200. With an effective tax rate of - Im estimating here - 7%, that's $30,264 a year, or $582 a week. For a 40 hour work week, some part timers will gain, others will their job, and that's in addition to the job losses created by the increased wage.

Do you personally think it's worth the trade off? I don't know.

Today, I think many families need multiple sources of income - both spouses employed. But that's a personal decision, I guess.

Sorry if this wasn't the precise answer to your question. Im not sure one accurate can actually be given.

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On an aside, I read an article where McDonalds was trying out machines to take orders, thereby replacing a person at the cash register. They apparently have a couple in operation already...

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Long term average rate of inflation is about 3.24%. Current rate of inflation - checked today's figure - is 1.37%. Lower than than economists would prefer, I think.

Inflation is basically a good thing, because it shows manufacturers and businesses are being successful, and people are buying goods. When inflation outpaces wage increases, the. It becomes problematic. (you sound like you already understand that, but others reading may not).

 

[cdiggy]

It was bound to happen with people being replaced by machines. It is happening everywhere (grocery self check out lines, Wawa convenience stores on the east coast take your sandwich orders, bank tellers replaced with ATMs,) unfortunately corporations are not people so they see their workers as 'expendable assets'. When I managed a Hooters restaurant I was told I had to keep the labor at 12% (management not included) if I wanted to keep my job so I was expected to send people home after the lunch or dinner rush to keep that number low. It is the easiest way for them to save money. Food/elec/gas was a relatively constant (once a year all the Hooter Restaurant owners get together, usually in someplace vacation like , and beat down food purveyors with promises of buying a certain amount of food collectively). Long story short when it comes to tightening the belt workers go first, management can do the dishes and clean the crappers and can be worked 60 hours a week for the same amount of pay. Owners would tell you that your most valuable asset is the waitresses but their actions (paying her $2.13/hr because she makes tips) say otherwise. Once set up these stores can be money making machines. Sad part is the owners see it as a goose that lays golden eggs. And they have it by the throat trying to get it to poop more eggs. They flat out told me 'Five will get you 30' meaning if I, as a manager, give an employee 5 minutes of my time to listen to whatever they had to say and act truest concerned with what they had to say it would get 30 more days of work from someone who was getting ready to leave. Sorry. End of rant.

 

[flying kurbmaster]

that's easy!!! the way to fix that problem is not to spend your money at these places, the economy is in the hands of those who spend money. I think it is too late for that to happen so America is at the end of the Monopoly game, once the money and property is all in the hands of a few, the game is over, time to congratulate the winner, return the money to the bank, reshuffle the decks, or ask ourselves if we still want to play this game or perhaps someone has another idea for something to do.

 

[Seraphim]

I don't think the vast majority of consumers stop to think about how their purchases have economic consequences. It's all about their own pocketbook. Just speculating, but I think consumer actions have done as much to contribute to income inequality as the current tax code. By purchasing products manufactured overseas, they deny the American laborer income. But those who make their income by investment aren't affected, as they can invest where they will - foreign or domestic - and they can invest in other asset classes than manufacturing.

Not placing blame - I'm as guilty as the next consumer. While my major purchases are generally American made products, other items are weighed more by cost and value. That's just being a 'good shopper', no?

Competition is the key to good prices, but America is being out competed in just about every manufacturing market. I spent a day trying to find American made clothing on line. All I found were the boutique, expensive stuff. Everything else was manufactured overseas. Which industry is next?

 

[IGBT]

I went to the local hardware store and the only thing I could find made in the USA was a toilet lever.

Even the Japanese Makita drill is now made in China. Sad.

I bet if you go buy a USA flag at Walmart or some such place, it too is made in China. (I don't know this for a fact but it would not surprise me).

Now everyone is excited about cheap oil and cheap gasoline. It doesn't seem to matter that all of the saving in gas prices will end up being spent at Walmart on cheap imported goods while the companies trying to drill for oil in the USA will go bankrupt. This will ripple down even to the people on this forum, as their gate guard jobs dry up.

But hey! We can just print another few trillion.

 

[Seraphim]

Yellen apparently disagrees you:

WASHINGTON--The global decline in oil prices is good for the U.S. economy, Federal Reserve Chairwoman Janet Yellen said Wednesday.


Fed officials believe "that the decline we have seen in oil prices is likely to be, on net, a positive" for the economy, Ms. Yellen said at a press conference in Washington.

"It's something that is certainly good for families, for households," she added. "It's putting more money in their pockets, having to spend less on gas and energy, and so in that sense it's like a tax cut that boosts their spending power."

Ms. Yellen conceded that lower oil prices could lead to "reduced drilling activity" and less capital investment in domestic production efforts. But "on balance, I would see these developments as a positive for the standpoint of the U.S. economy," she said. Write to Ben Leubsdorf at [email protected]

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But she's spinning it for the average consumer's benefit.

 

[HarmonicaBruce]

I bet if you go buy a USA flag at Walmart or some such place, it too is made in China. (I don't know this for a fact but it would not surprise me).

According to Walmart's web site, many of their flags are made in the USA, of components originating from the USA. They also have some that are imported.
Walmart's American Flags

 

[Seraphim]

that's easy!!! the way to fix that problem is not to spend your money at these places, the economy is in the hands of those who spend money. I think it is too late for that to happen so America is at the end of the Monopoly game, once the money and property is all in the hands of a few, the game is over, time to congratulate the winner, return the money to the bank, reshuffle the decks, or ask ourselves if we still want to play this game or perhaps someone has another idea for something to do.

But we can't just pack up and start over.

We need some way to reverse the process at a managable rate. Should it get to the point of two financial classes - the minority rich and the majority poor, with no one in the middle - I think history's lesson is one of violence. Not in my lifetime, not in my son's, but the eventual endgame will not be pretty. Social and economic collapse.

But I didn't want to get into apocalyptic prophecy lol.

I liked your observation: the future is in the hands of those who spend. It's a good way to put it, but one that doesn't inspire me to hope...

 

[Bdog1]

I'm really surprised by the number of people that seem to think that $50 oil is bad for the economy. That seems to be the theme here.

Is it true then that $110 oil was in some way good for the economy?

 

[flying kurbmaster]

But we can't just pack up and start over.

We need some way to reverse the process at a managable rate. Should it get to the point of two financial classes - the minority rich and the majority poor, with no one in the middle - I think history's lesson is one of violence. Not in my lifetime, not in my son's, but the eventual endgame will not be pretty. Social and economic collapse.

But I didn't want to get into apocalyptic prophecy lol.

I liked your observation: the future is in the hands of those who spend. It's a good way to put it, but one that doesn't inspire me to hope...

me neither but I didn't want to mention that, you are right in a game you can clear the board in real life it will likely be a little more difficult to make a transition, civil unrest, ideology based tribes, private armies, gated companies, guarded living quarters, those that can't afford that or don't work for one of the corps will likely live in lawlessness, chaos and anarchy

 

[akrvbob]

I deleted some off-topic posts and some bickering posts. Lets stay on topic.

No posts get deleted because moderators disagree.
Bob

 

[IGBT]

I'm really surprised by the number of people that seem to think that $50 oil is bad for the economy. That seems to be the theme here.

Is it true then that $110 oil was in some way good for the economy?

It isn't that $50 oil is bad. It is the drop from $110 to $55 in such a short amount of time, compounded by the large amount of loans that have been made (due to the Fed making interest rates low) to quite a few companies invested in shale oil. The loans must be repaid but the shale oil is expensive to extract and needs more than $55 to break even. Thus the company goes under, the loans get defaulted, the local economy goes bust, and the little guys who expanded their restaurant or barber shop (also with cheap loans) go under because the oil workers are gone.

I guess if the lost oil jobs and supporting industry jobs for those oil jobs get replaced by enough Walmart workers restocking cheap Chinese goods to be bought by the extra dollars in the average joe's pocket that the economy might look ok in the short term.

 

[Seraphim]

I'm really surprised by the number of people that seem to think that $50 oil is bad for the economy. That seems to be the theme here.

Is it true then that $110 oil was in some way good for the economy?

IGBT gave an excellent answer.

But also, what's good for the consumer isn't always good for the business, nor good for the economy. I don't know the correct term, but there's a margin of profitability in which everyone gains - corporate, labor and consumer. I know the oil companies are often cast as greedy and evil, but they do have to maintain a level of profit. They start projects, buy new equipment, hire laborers based on current revenue. When that revenue suddenly and significantly drops, the projects stop, laborers lose jobs. A lot of people are hurt.

There are also oil reserves, purchased $100+ dollars a barrel and sitting in [US and other] storage facilities, which are now worth half as much. The owners of that oil won't sell it now, but will hold on to it until oil prices rise and they can make a profit, rather than take a loss. Holding that oil off the market reduces the available supply.

Globally, the price drop is really hurting some of our trading partners as well, who rely on oil and gas exports for their economy. What affects their economy affects us as well. I'm on more uncertain ground here, though I could speculate cause and effect.

Have to stop. Promised DW a walk. But I look at the economy as a teeter totter. What's good for some is bad for others. That's the nature of the economy: limited resources, unlimited wants. We have to try to balance the teeter totter so everyone gets at SOME of there wants taken care of. And while economics itself doesn't differentiate between a want and a need, as human beings we need to. (And that's kind of getting off topic- sorry).

 

[Bdog1]

Did you see XOM profits? Yea there doing OK. A lot of parts of the chain do well in decreasing markets, the up like a rocket down like a feather thing.

Not to say there won't be winners and losers. It's 80% plus for our economy.

Not so good for Venezuela, Iran and Russia. Not exactly our best allies. I read Mexico's production is 100% hedged for the next 12 months.

 

[Seraphim]

But even Exxon is down from $104.74 back in July. Should have bought a couple of days ago - it was probably around $88(I'm guessing). MS gives its fair value at $108.

 

[Seraphim]

Here's an excellent resource site I had to re-find, which covers managerial economics. Good informational In layman terms.



http://www.managementstudyguide.com/managerial-economics-articles.htm

 

[Seraphim]

Good study guide on macroeconomics. Take the time to research the topics


http://www.mckinneyisd.net/information/docs/feng.pdf

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Spark notes economic guides online


http://www.sparknotes.com/economics/

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AP microeconomic study guides.

Study guides assume you've had some coursework, but I've found they're excellent guidelines for doing your own searches for tutorials on a specific topic.


http://www.apstudynotes.org/microeconomics/outlines/