We are in a Bizarro economy

[BLAZER PROPHET]

If you shut down the CC companies, consumers will just find another way.

So we shut down the CC companies and people end up declaring BK and end up in the SH and on WF until their SCI and then they can be GC and not BC.

 

[The_Lillard_King]

So we shut down the CC companies and people end up declaring BK and end up in the SH and on WF until their SCI and then they can be GC and not BC.

TDT

 

[blazerboy30]

Well if credit card companies don't work hard to make profits and the demise of the country is people living life in debt and growing their debt through credit cards companies. . . maybe the moron is the guy in debt, but I can tell you where the problem in society lies . . . the company allowing people to bury themselves, if fact helping them bury themselves, while not working hard and making big profits.

Sounds like they shouldn't be reforming the BK laws as much as reforming the credit card laws.

So the problem with American society is that people aren't responsible for themselves, and companies should be responsible for keeping individuals from hurting themselves? Interesting. I feel that the demise of the country is because individuals aren't required to take responsibility for themselves anymore. It is always somebody else's fault, or somebody else or the government should fix the individuals' problems.

 

[blazerboy30]

I perosnally wouldn't do that, but who are we to judge where people spend thier money. If someone wants to save money shopping at a grocery stoer and take those saving and spend it on a luxury item, if they aren't going into debt, then what is the problem with that. If they are going into debt doing that, I think it's wrong. But maybe they something should be done to avoid allowing people to go into such massive debt.

It isn't my responsibility to keep you from harming yourself.

 

[maxiep]

So the problem with American society is that people aren't responsible for themselves, and companies should be responsible for keeping individuals from hurting themselves? Interesting. I feel that the demise of the country is because individuals aren't required to take responsibility for themselves anymore. It is always somebody else's fault, or somebody else or the government should fix the individuals' problems.

I wish I could rep you a hundred times for this post. Personal responsibility (or more accurately the lack thereof) is the crux of most of our problems.

 

[The_Lillard_King]

So the problem with American society is that people aren't responsible for themselves, and companies should be responsible for keeping individuals from hurting themselves? Interesting. I feel that the demise of the country is because individuals aren't required to take responsibility for themselves anymore. It is always somebody else's fault, or somebody else or the government should fix the individuals' problems.

You bolded my conclusion but that was based on if a statement is true . . . which I don't think that statement is true.

I don't see a demise to the country. US, like many other countries in the world, are going through hard economic times. People want to start saying these hard economic times are leading to a path straight down to the demise of US. That just isn't true.

I believe poeple should have to take responsiblity for thier actions. I also believe the gov't needs to control big business that has one objective, to make money. Businesses (most) don't care about people or society, they care about making a profit. In fact I will go so far as to say that many businesses will take advantage of people, especially the naive and needy.

But yes I think personal accountability should come into play when forming laws and policies.

 

[BGrantFan]

But 90 percent of Americans do have a job, and maybe 70 percent are confident about them. And maybe half of those have liquidity.”

That's not true. The true UE rate is close to 20% because of people who came off of UE rolls, are self-employed but not working, or just flat-out quit trying to find a job. One would think that a Harvard economist would acknowledge real UE, and not just those supposedly "seeking work" or still eligible for UE benefits that are counted on the "official" UE rate.

 

[The_Lillard_King]

It isn't my responsibility to keep you from harming yourself.

But if the demise of the US is because of these people hurting themselves (which it isn't), then shouldn't the gov't step in to stop these people from hurting themselves for the good of the country and to stop the demise of teh US?

And why exactly is suicide illegal?

 

[The_Lillard_King]

I wish I could rep you a hundred times for this post. Personal responsibility (or more accurately the lack thereof) is the crux of most of our problems.

Says the banker.

I say the root of the economic problems lies in the finacial sector of our country.

 

[blazerboy30]

But if the demise of the US is because of these people hurting themselves (which it isn't), then shouldn't the gov't step in to stop these people from hurting themselves for the good of the country and to stop the demise of teh US?

If frogs had wings, etc, etc...

 

[The_Lillard_King]

If frogs had wings, etc, etc...

Hey, that was my point. I wasn't saying shut down credit card companies. I was responding to a senario saying here is the solution . . . but I realize that senario wasn't reality.

 

[Denny Crane]

A few points:

Joe Biden, from Delaware, is VP. MBNA, the biggest credit card company is in Delaware. Numerous corporations are Delaware Corporations. According to this site, http://www.wisegeek.com/what-is-a-delaware-corporation.htm, almost 1/2 the Fortune 500 companies are Delaware Corporations. I wouldn't hold my breath that this administration is going to do anything to hurt anything to do with Delaware. In fact, they've funneled about $3.7T of cash into companies like MBNA.

90% of the people don't work. True unemployment rate of 20% doesn't mean 80% of the people don't work. The workforce is on the order of 120M, and the population is on the order of 310M. So something like 190M people don't work, or 61% don't work.

For MikeDC - companies do sell their own stock and there are more than just INITIAL Public Offerings (there are secondary ones, and so on). But in general, when you buy stock you are buying it from some other person not particularly related to the company. More likely, you're buying shares from some institution, like a retirement fund or maybe an insurance company.

More for MikeDC - remember our conversation before the housing bubble burst, and what I said about consumer spending?

 

[Sug]

the person w/o a job. Credit Card companies still make record profits.

Off of what should be outlawed.

 

[barfo]

A few points:

Joe Biden, from Delaware, is VP. MBNA, the biggest credit card company is in Delaware. Numerous corporations are Delaware Corporations. According to this site, http://www.wisegeek.com/what-is-a-delaware-corporation.htm, almost 1/2 the Fortune 500 companies are Delaware Corporations. I wouldn't hold my breath that this administration is going to do anything to hurt anything to do with Delaware. In fact, they've funneled about $3.7T of cash into companies like MBNA.

I think you have a point about Biden/MBNA, although I'd question how much influence Biden actually has, as well as how much influence MBNA has over Biden.

As for the corporations being incorporated in DE, that has nothing to do with anything. My company is a DE corporation, and I don't give two shits what happens to Delaware. Turn it into a nuclear waste dump, fine with me, as long as the secretary of state's office stays open. It's like ships being registered in Liberia. None of the ship owners cares whatsoever about Liberia. It's just cheap and easy to register a ship there.

90% of the people don't work. True unemployment rate of 20% doesn't mean 80% of the people don't work. The workforce is on the order of 120M, and the population is on the order of 310M. So something like 190M people don't work, or 61% don't work.

Well, if we get rid of those damn child labor laws, we can up the % working, and solve that pesky illegal immigrant problem.

barfo

 

[Denny Crane]

barfo,

I don't believe for a second that MBNA and companies like them will see any of the hate for business shown by the administration elsewhere.

That 190M don't work is a pretty good thing, no?

 

[Eastoff]

This is relevant I believe.



Basically she's saying that like humans, monkeys will go for the safe bet when it comes to gains, and gamble when it comes to losses. Basically she's arguing that primates in general make dumb decisions about finances.

 

[EL PRESIDENTE]

 

[EL PRESIDENTE]

haha...sorry, saw that gif on google image search, never saw it with the KFC.

 

[blazerboy30]

Off of what should be outlawed.

Providing credit and charging for the associated risk should be outlawed? Weird.

 

[barfo]

barfo,

I don't believe for a second that MBNA and companies like them will see any of the hate for business shown by the administration elsewhere.

I'm not sure what hate that is.

That 190M don't work is a pretty good thing, no?

I dunno? Is work bad?

barfo

 

[Denny Crane]

I'm not sure what hate that is.

Link

NPR, too.

I dunno? Is work bad?

barfo

Work's not bad at all, but it's not good if everyone has to work and there's no leisure time or time to invent new things.

So do you believe that those who are able to work should work? Or do you think it's OK for many who are able to live for free off the taxpayer? I'm not talking about children, but adults who are able.

 

[Eastoff]

Work's not bad at all, but it's not good if everyone has to work and there's no leisure time or time to invent new things.

So do you believe that those who are able to work should work? Or do you think it's OK for many who are able to live for free off the taxpayer? I'm not talking about children, but adults who are able.

What about people who have made tons of money and want to retire young? Should they be able to stop working, even though they can work? (just a curious)

 

[Denny Crane]

What about people who have made tons of money and want to retire young? Should they be able to stop working, even though they can work? (just a curious)

Google "wealth effect"

I'm not sharing my opinion at this point, I'm asking barfo for his. Besides, people like to see me make him dance.

[video=youtube;PD7KRqoY9Ss]

 

[barfo]

Link

NPR, too.

Business people are a lot like Rudy Fernandez.

Work's not bad at all, but it's not good if everyone has to work and there's no leisure time or time to invent new things.

So do you believe that those who are able to work should work? Or do you think it's OK for many who are able to live for free off the taxpayer? I'm not talking about children, but adults who are able.

I don't believe adults who are able to work should be able to live for free off the taxpayer, unless there is no work available to them.

barfo

 

[KingSpeed]

Damn this article has me pegged. I have no job and am often worried about spending money on basic things and yet I have no problem buying iPads for me and my brother. I choose the cheaper gym, but I gamble the amount of the better gym in one night.

Caught!

 

[MikeDC]

Denny- Yeah, there's more than just IPOs, I was mostly just simplifying. IIRC, you agreed with the idea consumption "drives" economic growth?

Economic growth means an increase in folks' income. Consumption is folks' spending. Increased income could be used on personal spending or a number of other things (saving or taxes, for example), but it's intuitive to think about consumption rising as a function of income. If I go from making $50k to $100k/yr, I'll increase my consumption by some amount. It doesn't have to, but increasing income allows increasing consumption.

The opposite is not the case. It is neither intuitive nor correct to say that I've increased my spending, therefore it is possible for me to earn more money.

Now, at the aggregate level it's true in some way that one person's spending equals another person's income. That's basically the identity property of GDP (GDP as measured spending will = GDP as measured income). Yet that doesn't explain causation. Remember, the concern here is change (growth or decline) in income.

The identity... in economics it's put into a "circular flow model" is pointless in explaining changes because it has no functions for time or productivity.

 

[Denny Crane]

Denny- Yeah, there's more than just IPOs, I was mostly just simplifying. IIRC, you agreed with the idea consumption "drives" economic growth?

Economic growth means an increase in folks' income. Consumption is folks' spending. Increased income could be used on personal spending or a number of other things (saving or taxes, for example), but it's intuitive to think about consumption rising as a function of income. If I go from making $50k to $100k/yr, I'll increase my consumption by some amount. It doesn't have to, but increasing income allows increasing consumption.

The opposite is not the case. It is neither intuitive nor correct to say that I've increased my spending, therefore it is possible for me to earn more money.

Now, at the aggregate level it's true in some way that one person's spending equals another person's income. That's basically the identity property of GDP (GDP as measured spending will = GDP as measured income). Yet that doesn't explain causation. Remember, the concern here is change (growth or decline) in income.

The identity... in economics it's put into a "circular flow model" is pointless in explaining changes because it has no functions for time or productivity.

The point I raised was how 2/3 of the economy is driven by consumer spending. The spending was made possible by profits on speculation (day trading, real estate) and debt (refinancing). The issue now is jobs, jobs, jobs, just to get people who could work and earn money and spend it to be able to do so.

 

[MikeDC]

The point I raised was how 2/3 of the economy is driven by consumer spending. The spending was made possible by profits on speculation (day trading, real estate) and debt (refinancing). The issue now is jobs, jobs, jobs, just to get people who could work and earn money and spend it to be able to do so.

There is no "how" because 2/3 of the economy is not "driven" by consumer spending. 2/3 of the economy is consumer spending. 2/3 of a pie does not drive the rest of the pie. It is 2/3 of the pie.

As you say, the issue is not spending, it's getting people to work. Those are supply issues. Why aren't people working? Well, for pretty much the reasons I laid out in the second post.

Look at the people who aren't working. They are disproportionately your working class folks. I won't bother using the term "low skilled", but point out that the employment rate for high skilled workers is quite small. The recession looks like a "bizarro" economy because it affects different people differently.

The policies I've pointed out are basically
1. Making it more costly for businesses to hire working class folks (uncertainty, higher min wage), so they're less willing to hire.
2. Making it more costly for working class folks to go out and work (unemployment benefits work out to a better deal, in many cases, than taking an available but low paying jobs).

Thus, we have high unemployment.

 

[barfo]

The policies I've pointed out are basically
1. Making it more costly for businesses to hire working class folks (uncertainty, higher min wage), so they're less willing to hire.

Higher minimum wage does drive down employment to some extent. However, I don't see how uncertainty changes hiring of low-skilled, low paid workers. Low-skilled, low-paid workers are by definition easy to find, and easy to get rid of. If I need them now, I hire them now. If conditions change in the future, I get rid of them.

I'd argue that uncertainty would have a much bigger effect on hiring professionals, where the time and effort to recruit is higher, and there are higher costs for termination.

2. Making it more costly for working class folks to go out and work (unemployment benefits work out to a better deal, in many cases, than taking an available but low paying jobs).

People on unemployment are lazy and don't want to work? I'd like to see evidence for that assertion.

It is true that getting laid off from a high-paying job will provide better unemployment benefits than taking a minimum wage job. Those people, I would expect to stay unemployed until they have to go flip burgers. However, now we are talking about replacing a high paying job with a low-paying job. That might help the unemployment rate, but it is not helping the economy. The unemployment rate isn't the only measure of success here.

barfo

 

[maxiep]

I touched on this issue in another thread, but the more fundamental question is why has personal consumption become such a large percentage of our economy? When you are merely producing for the populace, you limit your market to 300M people who are affected by many of the same local and national issues. This leads to more boom and bust. Developing a true export economy allows you to spread your risk over the entire planet and also increases your market.

The economic growth over the past two decades has largely been built on consumer spending, and even worse, consumer credit. That is a foundation of sand. There is no more slack in the line; consumers are tapped out. Until we repay our personal debts, the economy won't get going again. A more fundamental change has to occur in our economy. We have to move to an economy where we export more goods and services. One that's less consumer-based and more business-based.

I'm not a mercantilist by any means, but citizens need to not only pay off their debts, but have some substantial savings for retirement. Our parents and grandparents did fine with fewer consumer products; I bet we can as well. The Yankee ideal of thrift has faded away and needs to be reborn. In fact, that heritage of using what you have laying around is consistent with being "green", which should make all the PC folks feel terrific.

And we haven't even begun to address the spending problems we have with our local, state and federal governments. Too many people are dependent on them for their daily needs. People need to become more dependent on themselves. If we're going to promote a new service or expansion of benefits, it needs to be paid for from the get-go. I bet if taxes were increased immediately after passing a new "benefit" we'd see fewer of those types of programs. Government deficit spending should only be a last resort.

This stuff won't be sorted out overnight. And barring a miraculous new invention that transforms our economy, we're headed for a "new normal"--much slower growth. We have the Japanese example of what not to do. They have not only one "lost decade", but are on the verge of two of them. The relationship between our population and government needs to change. Our expectations of filling the void in our lives with new stuff has to end.

Welcome to the 1930s.