Whatever Became Of Those Green Shoots?
Readers suggested a topic on the current economy. “Whatever became of those green shoots?”
A reply, “Ah, the failure of ‘Capitalism’ (note that it’s between quotes, lest I be accused of being a commie). Never has the world created so much wealth (goods and services) while those who produce it simply cannot afford the fruits of their labor (I wonder why?) Meanwhile, war on the middle class continues. Bug, meet windshield.”
One said, “Will the engineered low inventory and low interest rates will create a trend? Will people forget the underwater scenario and start another bubble? Lender Appraisers are told to inflate or get fired. Remember when they tried listing price ranges, and that trend seemed to die. Debt is just a 4 letter word.”
One posed this, “How about a topic that lists the 10 single biggest causes of the state of affairs in America today regarding the lost of the middle class and the stability of the long term systems. Number one would be the greatest cause. The list should be brief and to the point or summed up in one sentence for each of the 10 causes.”
Another reply, “#1. Bottomless Stockholder Maw (DOB ~1978). We used to be satisfied with 6-7% ROI, which could be earned solely from simply running the business. The BSM wanted 10% profit, so each year a company had to find 2-3% more by cutting costs. Everything leads from that.”
To which was said, “By the late 90s they wanted 20%. The company I was working at then got out of a stable profitable business that couldn’t generate 20% and into something unstable that might generate 20+% in order to please BSM. They no longer exist as a result of that decision, but a small twice-digested slice still lives on.”
And another, “1- Outsourcing of U.S. manufacturing base, cheaper sh*t from China = jobs go bye-bye. 2- Financialization of U.S. economy, financial economy instead of enhancing/enabling main street economy becomes the actual economy. 3- For-profit ‘Health Care’ system consumes 20% of GDP while delivering worse results than other nations with single-payer systems (should be discussed in terms of economics, not framed by American political R vs. D arguments).”
“4- Illegal immigration from Mexico and Central America. Consider impact of adding 20 million mostly poor and uneducated Lucky Duckies to U.S. economy and wages for construction, service sector, et cetera.”
The Wall Street Journal. “International Monetary Fund head Christine Lagarde said Friday that the IMF will cut its global growth forecasts in the next month, adding that a weaker global economy will bring more trouble for Japan in the form of a stronger yen. The world economic outlook will be ’tilted to the downside,’ Ms. Lagarde said at a news conference in Tokyo. ‘Tilted means there’s not an enormous variation, but it’s a negative variation,’ she said, without providing any figures or details of which regions would be affected.”
From CNBC. “Uncertainty about U.S. fiscal policy, Europe’s sovereign crisis and slower global growth have turned the U.S. economy into what feels like a slow-moving zombie. CRT Capital Senior Treasury Strategist Ian Lyngen said the economy feels zombie-like. ‘The risk taking animal spirits have yet to return,’ he said. ‘The U.S. economy has been unable to achieve escape velocity but the amount of monetary and fiscal stimulus in the system has proven adequate enough to keep it going at a 1-2 percent GDP pace. That is slow by historic recovery standards…it feels like a ‘zomb’-economy,” said Lyngen. ‘People are increasingly worried about a double dip,’ he said.”
“‘It feels like it’s sleepwalking,’ Moody’s Economy.com chief economist Mark Zandi said of the economy. ‘We’re walking but not going anywhere fast. I don’t think we’re dead like a zombie. There is some life underneath, but we are sleepwalking.’”
“Economists call it ‘escape velocity’ - the ability of a slow-moving country to finally hit a speed beyond fits-and-starts and into a durable recovery. Trouble is, the U.S. isn’t there yet, even three years after the end of the last recession, and judging by Friday’s jobs report no closer to getting there than it was two years ago.”
“In all, the housing market, considered by some to be the final lynchpin to economic recovery, is far from escape velocity and its improvements are not enough to lift the broader economy.”
“Though it seems that every weak economic sign or stock market downturn brings calls for more central bank easing across the world, people have begun wondering how effective these measures really are. After all, with interest rates in the U.S. near zero and other global central banks getting there as well, how much lower can you go, and how much more can it help?”
“Fed critic Michael Pento at Pento Portfolio Strategies said the U.S. central bank ought to get out of the way and let rates normalize, though he doubts it will happen. ‘There is nothing that can be benefited economically from lowering rates from here on,’ he said. ‘The only thing you will do is levitate asset prices and send commodity prices soaring. That is not the prescription for what ails this economy.’”
The Calgary Sun. “Since the beginning of the Great Recession in 2008, the central banks of major industrialized countries have been keeping interest rates unusually low to ‘help revive the economy.’ The low rates, coupled with the massive money creation engineered by central banks (what is referred to in the jargon as ‘quantitative easing’) are giving economic factors the false impression that there are a lot of savings around to be borrowed, when that’s actually not the case, or not as much.”
‘Saved resources are those set aside instead of being immediately consumed. Printing pieces of paper with dead politicians on them cannot, logically, add real savings to the economy.”
“In Canada, households have reacted to these low rates by getting deeper into debt. At a level surpassing 150% of disposable income, we are actually more indebted than Americans were just before the crisis. And there is increasing talk of a real estate bubble. There’s also talk of bubbles in various other sectors of the world economy, but certainly the biggest bubble of all is the government sector bubble. Government spending has been up, up, up, almost everywhere for the past five years, and most of this new spending is paid for by debt, made easier by central banks.”
“The main debate right now in Europe is which governments are going to have to be bailed out - with money that other governments don’t really have, of course, and that will also ultimately be created out of thin air by central banks. So, essentially, what central banks have been doing with this low-rate policy is encouraging everyone to spend and pile up debt, while discouraging us to save. But they’ve patched up the lack of real savings by creating phony savings.”
“Anyone with two cents of common sense knows that this cannot be a solid foundation for a sound economy.”
