We are in a Bizarro economy

[EL PRESIDENTE]

I still maintain that the USA is so totally fucked to the point of absurdity. It is so bad that we have to enjoy the small things now. We are essentially a country comprised of grifters looking for cheap gadgets to comfort the impending doom.

The entire scope of how utterly and completely screwed we are is being suppressed. Tonight was the season premiere of the Jersey Shore 2...and all over the news people lamenting about how them ringing the bell at wall street on Tuesday signaled the end of civilization.

Its much worse than that.

http://www.bloomberg.com/news/2010-...pads-while-broke-in-new-abnormal-economy.html

“Some consumers are probably liquidity-constrained,” says Kenneth Rogoff, Harvard University professor and former chief economist at the International Monetary Fund. These are “the ones who are probably not the ones buying iPads. But 90 percent of Americans do have a job, and maybe 70 percent are confident about them. And maybe half of those have liquidity.”

On a recent afternoon, Lucy Johnston, 37, an accountant from Tulsa, Oklahoma, could be found at the Fashion Show mall on the Strip in Las Vegas. She’s cutting back on shopping and eating out because of the recession.

“It’s really tough right now,” Johnston says. “I don’t do many full-on spa days anymore.”

Yet there she was, shopping and vacationing in Vegas with her husband.

“We’ve pulled out all the stops. We’re staying at the Bellagio,” she says.

Schizophrenic Consumers

The new abnormal has given rise to a nation of schizophrenic consumers. They splurge on high-end discretionary items and cut back on brand-name toothpaste and shampoo. Companies such as Cupertino, California-based Apple, whose net income jumped 94 percent in its last quarter, and Starbucks Corp., which saw a 61 percent increase in operating income over the same time frame, are thriving.

Mercedes-Benz is having a record sales year; deliveries of new vehicles in the U.S. rose 25 percent in the first six months of 2010. Lexus and BMW were also up. Though luxury-goods manufacturers such as Hermes International SCA and Burberry Group Plc are looking primarily to Asia for growth, their recent earnings reports suggest stabilization and even modest improvement in the U.S.

Need New Car

“I don’t see it getting any better,” she said. “I need a new car, but I don’t plan on getting one anytime soon.”

Instead she recently bought a plane ticket to New York and stayed in a Times Square hotel.

“It was my first time, so it was a lot of fun,” she said.

At the Woodfield Shopping Center in Schaumburg, Illinois, Michelle Rodriguez, 39, a part-time cafeteria worker at a local high school, said she cut back considerably after losing her old full-time job two years ago as a receptionist at Kraft Foods Inc.

“I think the economy has a ways to go,” she said. “I don’t make nearly as much as I used to make.”

Yet she said she bought a 46-inch flat-screen Sony TV in the last year. And now she was waiting for help in the Genius Bar line at the Apple Store.

 

[MikeDC]

I think there's some real truth to the idea that there's an increasing divide between the folks who have jobs and security and those who don't. And while I read all sorts of econ blogs like Krugman, The Money Illusion and Marginal Revolution, it increasingly strikes me as odd how we overlook some of the obvious causes of so much unemployment.

Could we not simply "solve a lot of our unemployment problem" by:

1. Repealing the minimum wage increases that raised the cost of employing your average worker just as the recession was getting under way (bonus points for noting that the states with the highest unemployment rates have even higher minimum wages - Nevada, Michigan, California, Rhode Island for example)

2. Repealing the recent (and continuing) extension(s) of unemployment benefits that removes most any incentive except the basic ethical one for unemployed folks to go out and actually find a job.

3. Repealing the health care act that's introduced a boatload of confusion, complication and cost into everyone's lives at a critically bad moment to do so. This probably goes for the financial "reform" legislation too.

My guess is the first two policies would get us to 6-7%, and the last might get us back to our prior 4-5% baseline in relatively short order.

Is there anything really controversial about this? These are all really basic, widely accepted employment economics concepts. Higher minimum wages increase unemployment. Higher unemployment benefits create higher reservation wages, which increase unemployment. The health and financial bills increased costs for business in some cases (the 1099 fiasco has been discussed here, to name one example), and have introduced a lot of uncertainty as to how folks are supposed to proceed. Businesses tend to not hire in the face of such things.

But because we don't want to accept these basic realities of our legislative choices, we're all supposed to go out and think magically about monetary policy as a means of curing all of these problems?

 

[BLAZER PROPHET]

I think there's some real truth to the idea that there's an increasing divide between the folks who have jobs and security and those who don't. And while I read all sorts of econ blogs like Krugman, The Money Illusion and Marginal Revolution, it increasingly strikes me as odd how we overlook some of the obvious causes of so much unemployment.

Could we not simply "solve a lot of our unemployment problem" by:

1. Repealing the minimum wage increases that raised the cost of employing your average worker just as the recession was getting under way (bonus points for noting that the states with the highest unemployment rates have even higher minimum wages - Nevada, Michigan, California, Rhode Island for example)

2. Repealing the recent (and continuing) extension(s) of unemployment benefits that removes most any incentive except the basic ethical one for unemployed folks to go out and actually find a job.

3. Repealing the health care act that's introduced a boatload of confusion, complication and cost into everyone's lives at a critically bad moment to do so. This probably goes for the financial "reform" legislation too.

My guess is the first two policies would get us to 6-7%, and the last might get us back to our prior 4-5% baseline in relatively short order.

Is there anything really controversial about this? These are all really basic, widely accepted employment economics concepts. Higher minimum wages increase unemployment. Higher unemployment benefits create higher reservation wages, which increase unemployment. The health and financial bills increased costs for business in some cases (the 1099 fiasco has been discussed here, to name one example), and have introduced a lot of uncertainty as to how folks are supposed to proceed. Businesses tend to not hire in the face of such things.

But because we don't want to accept these basic realities of our legislative choices, we're all supposed to go out and think magically about monetary policy as a means of curing all of these problems?

My remedy for lowering the unemployment rate is this:

Allow people to invest in US companies via various stock exchanges. If they keep their money invested for 2 years before selling, their max tax liability is 10%. After 3 years, 5%. After 4+ years, zero. That way companies will be flush with cash and able to spend for capitol improvements, expansion, new hires...

 

[MikeDC]

My remedy for lowering the unemployment rate is this:

Allow people to invest in US companies via various stock exchanges. If they keep their money invested for 2 years before selling, their max tax liability is 10%. After 3 years, 5%. After 4+ years, zero. That way companies will be flush with cash and able to spend for capitol improvements, expansion, new hires...

I don't think that'll do much because shares traded on stock exchanges are not newly issued. When you buy a share of a company, you're not giving money to the company, but to the current owner of the share. Who's just some guy like you and me.

Now, if you limit your policy to investing in IPOs (initial public stock offerings) where a company is issuing new stock, then yes, you'll certainly funnel more money into the company. Even then, I don't see how that's a preferably policy to those I outlined. Mine improve the incentives for companies to hire and people to work across the board. Giving a company more money doesn't really change the incentive to hire more people. It creates the possibility, but doesn't guarantee it. There's lots of ways to spend that money.

 

[maxiep]

If the government wants to lower unemployment, they need to eliminate the uncertainty surrounding companies. The people in the White House seem to have no idea how chilling the violation of the heirarchy of debt was for GM and Chrysler. Investors pump money into our economy because we're not a banana republic where someone's wealth is confiscated; yet that's exactly what the Obama Administration did with the bond holders of those two companies.

Companies (including mine) are sitting on cash because we have no idea what out future obligations to the government are.

 

[OSUBlazerfan]

I still maintain that the USA is so totally fucked to the point of absurdity. It is so bad that we have to enjoy the small things now. We are essentially a country comprised of grifters looking for cheap gadgets to comfort the impending doom.

Thanks for the downer

shiiiit

 

[EL PRESIDENTE]

None of these is going to stop people from buying Flat Screens, trips and ipads when they're out of work or soon to be.......

 

[EL PRESIDENTE]

instead of throwing money at overpriced houses in speculation, they are buying consumer goods.

 

[The_Lillard_King]

I don't see the big problem. Someone isn't going to buy a new car but bought a big TV. To me that is like someone deciding not to vacation in Europe but instead at the coast.

The writer is throwing around judgment on what people spend thier money on. basically implying that they aren't spending or saving their money the right way. Whatever. In this economy, people are going to choose more selectively where they spend their money and where they decide to save their money. But the bottom line is most are cutting back in some way. I'm glad that people are still deciding to spend money because that is good for the economy.

 

[EL PRESIDENTE]

well, the trend nowadays is leading more and more to a pay-check to pay-check lifestyle or a disposible lifestyle. Since housing is kind of fucked, people will not put as much money in that and instead spend on fads and the latest gadgets.

 

[blazerboy30]

I don't see the big problem. Someone isn't going to buy a new car but bought a big TV. To me that is like someone deciding not to vacation in Europe but instead at the coast.

The writer is throwing around judgment on what people spend thier money on. basically implying that they aren't spending or saving their money the right way. Whatever. In this economy, people are going to choose more selectively where they spend their money and where they decide to save their money. But the bottom line is most are cutting back in some way. I'm glad that people are still deciding to spend money because that is good for the economy.

It just shows how many morons we have here, and the weird entitlement mentality Americans have developed. They don't have jobs, they have $20k in credit card debt, and they are "cutting back" by buying a giant TV instead of a car? Slightly less moronic is still moronic.

 

[The_Lillard_King]

It just shows how many morons we have here, and the weird entitlement mentality Americans have developed. They don't have jobs, they have $20k in credit card debt, and they are "cutting back" by buying a giant TV instead of a car? Slightly less moronic is still moronic.

I didn't read that in this article, but if that is the case: who is the moron, the person without a job, 20K in debt and buying the TV . . . or the credit card company or business that lends the money to allow that person to buy the TV?

 

[EL PRESIDENTE]

I didn't read that in this article, but if that is the case: who is the moron, the person without a job, 20K in debt and buying the TV . . . or the credit card company or business that lends the money to allow that person to buy the TV?

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

 

[blazerboy30]

I didn't read that in this article, but if that is the case: who is the moron, the person without a job, 20K in debt and buying the TV . . . or the credit card company or business that lends the money to allow that person to buy the TV?

Clearly it isn't the credit card company who is the moron, considering they are making a profit.

 

[OSUBlazerfan]

Maybe the Credit Card companies are supposed to feel "sad" for the out of work citizen....

looool

 

[OSUBlazerfan]

Whats more commie than that?

 

[The_Lillard_King]

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

What about the person who is 20K in debt with no job and now has a brand new big screen TV . . . which if they declare BK doesn't even have to pay for the TV?

 

[The_Lillard_King]

Maybe the Credit Card companies are supposed to feel "sad" for the out of work citizen....

looool

A credit card company concerned for one of their customers . . . that is a concept to laugh at.

 

[EL PRESIDENTE]

What about the person who is 20K in debt with no job and now has a brand new big screen TV . . . which if they declare BK doesn't even have to pay for the TV?

yeah, they're still the bigger moron.

 

[The_Lillard_King]

yeah, they're still the bigger moron.

So the credit card company works hard to make their profit.

The dude who doesn't work gets a new bigscreen TV he doesn't have to pay for.

The bigger moron is the person who didn't work and got something for it?

I though you were all about minimal work for maximum gain.

 

[EL PRESIDENTE]

So the credit card company works hard to make their profit.

The dude who doesn't work gets a new bigscreen TV he doesn't have to pay for.

The bigger moron is the person who didn't work and got something for it?

I though you were all about minimal work for maximum gain.

They redid the BK rules a few years ago. They don't really work hard to make the profit. They make much more, the guy with the TV loses bigtime.

 

[EL PRESIDENTE]

its this attitude which is going to ensure America's demise. well, not this, I think the supression of what is really going on in America combined with the dumbing down of mass media is ignoring a whole majority of fucked up Americans.

Its way worse than any bar graph, employment numbers, or whatever is released.

 

[The_Lillard_King]

They redid the BK rules a few years ago. They don't really work hard to make the profit. They make much more, the guy with the TV loses bigtime.

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.

 

[EL PRESIDENTE]

People can still pay for cash for TVs. This article kind of touched on it where they buy TVs instead of toothpaste.

 

[BLAZER PROPHET]

What about the person who is 20K in debt with no job and now has a brand new big screen TV . . . which if they declare BK doesn't even have to pay for the TV?

Declare BK? Burger King? How does that help?

What is it lately with all these meaningless made up initials?

 

[The_Lillard_King]

People can still pay for cash for TVs. This article kind of touched on it where they buy TVs instead of toothpaste.

But it's not cash buys that are the demise of the counrty, it is apparently the growing debt these people build up buying things they can't afford. The problem is personal debt and apparently the companies allowing this debt to grow are making big profits doing this while not even working hard while their clients bury themselves.

The new abnormal has given rise to a nation of schizophrenic consumers. They splurge on high-end discretionary items and cut back on brand-name toothpaste and shampoo

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.

 

[EL PRESIDENTE]

Can't you see the relationship between spending one's cash affecting their debt?

 

[EL PRESIDENTE]

[video=youtube;Ubsd-tWYmZw]

 

[The_Lillard_King]

Can't you see the relationship between spending one's cash affecting their debt?

Sure . . . can you see that credit card companies also have the ability to affect one's debt.

You want to put it all on the consumer and say this will be the demise of the country (which it won't). All I'm saying if this is the demise of the country there is a very easy fix to it. Don't try fixing the consumer (that is a hopeless battle) jsut don't give them credit to bury themselves and stop allowing credit card companies to make all this easy cash while the country is going down the tubes (according to you).

 

[EL PRESIDENTE]

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