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Old 04-15-2008, 06:41 AM
 
13 posts, read 53,375 times
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All the media and economic pundits are trying to figure out when the recession is going to end. My question is how can it end. Most people report a falling standard of living. People are overwhelmed by raising food, gasoline, energy, college costs and rising local taxes. Their wages have not risen as much as inflation. The result is people have to cut back on their spending. How can the economy ever come back if people spend and save less because of huge inflation? Is America going into a long period of economic stagnation?

 
Old 04-15-2008, 07:12 AM
 
17,809 posts, read 19,821,142 times
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People haven't "lost" their standard of living... they could of never afford that "standard of living" in the first place. They went beyond their means and thought that "that" was the standard of living. Right now, they are being forced to cut back and its still not the standard of living in the U.S. where they "should" be at. It HAS to fall much more to get at the true standard of living and even then, it has to fall MORE because of the bad economy. The bad economy was causing us to return back to the true standard of living and then some. Wages have not gone up with inflation (and I believe they are not "required" to). What has to happen to get America back on "track" is for a lot of these large corporations to go bankrupt so they have NO influence in our government policies. Once that starts, the recovery can begin with banks lowering interest rates to spur business and with it, consumer spending. The problem is that interest rates are way too high (I am not talking about the Fed rate which is only ONE rate). Mortgage rates, student loans, etc etc are too high to stimulate a rebound and big businesses are not going to ease up. They can't ease up because of savers and investors who want better return for their money. The economy is built around debt and debt is killing the economy. They need to unburden those debts with lower interest rates for a couple years for a quicker recover. Businesses need to develop to pitch to consumers. Lowering interest rates that primarily affects only businesses is not going to fix the problem. The barriers to all this happening? Big business and government collusion.. that's why they need to go bankrupt...
 
Old 04-15-2008, 08:12 AM
 
Location: America
6,987 posts, read 15,488,857 times
Reputation: 2067
^^

I agree with this 100%. I think they will use inflation to make up for financial loses. That will either subside later on OR they will pursue policies which cause wage inflation. But i agree with evil 110%. This "standard of living" American's had was a illusion. Look at the housing market, these people knew they could not afford 400,000 dollar homes in 70,000 a year, its just impossible. Using traditional measures 70,000 household income entitles you to 210,000 dollar home. Yet easy money allowed them to live beyond their means. Even IF they refinance these homes, 400,000 dollar fixed mortage is still to much for a 70,000 a year income family to hold down. Things are going to change dramatically in teh coming years. I hope a lot of people wake up real quick to reality or they are going to find themselves @ssed out. Some people are going to have to give up driving and rely on mass transit. some people are going to have to keep their cars for more than 3 to 5 years. A LOT of people will NOT be able to afford homes anymore, and rent for the rest of their natural lives. It is what it is. No one is promised ANYTHING In this life other than life and death. Everything is is not a given. So, good luck to everyone and welcome to the dawn of a new era in America.
 
Old 04-15-2008, 08:57 AM
 
5,642 posts, read 17,320,011 times
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"large corporations to go bankrupt " but that will never happen because they will continue the practices of using cheaper and cheaper materials and offshoring to eastern europe or swaziland or wherever they can get the cheapest labor.

What's going to happen is that no one is going to be able to afford their goods anymore in the U.S. Which is why the corps now are courting foreign markets so heavily. GM is a big player in China right now.

And people are going to have the face it that there is no way we will ever see a real estate market like we just got out of. You will have to keep your property for 5 years to see a profit, just like in the "old days". No "flipping" year after year, making 30% every year.
 
Old 04-15-2008, 09:11 AM
 
Location: Londonderry, NH
41,492 posts, read 51,406,502 times
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Every so ofter a capitalist economy has to clean out the speculators with a recession. So what if people have to keep their cars and houses for over five years and never recieve a 30% or any speculative income from the house. If you want to speculate try a casino or penny stocks. Houses are for living in and cars are for transportation.

We have wasted our substance on speculation and a doomed military backed colonial empire.
 
Old 04-15-2008, 09:12 AM
 
Location: Londonderry, NH
41,492 posts, read 51,406,502 times
Reputation: 24613
A primary reason for this recession (and soon to be depression) is the financialization of the economy that replaced manufacturing and savings with consumption and credit cards. Just add the upper bracket tax cuts (why should they pay taxes when they could lend the money?) and wartime government borrowing and the conversion of a stable housing market to a speculative nightmare and the collapse is guaranteed.

This is an economy of the speculators, by eh speculators and for the speculators. Now the investors lured in by dreams of unbelievable profits are truing to get the government, already overextended by war profiteering, to bail them out and transfer the costs to the lower and middle class taxpayers.

I think the house of cards should be allowed to collapse as soon as possible to minimize overall losses and the government stop wasteful spending on foreign wars and profiteering and reestablish a truly progressive income tax system that effectively eliminates taxation on wage earning citizens receiving less than 150K per year.
 
Old 04-15-2008, 09:26 AM
 
12,310 posts, read 18,425,337 times
Reputation: 19205
I tend to agree "the standard of living" is an illusion. It is only falling because people expect it to rise above that which is expected. 40 years ago people did not have 3 cars in the driveway including a huge SUV, a 2,500 square foot house, a big screen TV, and all the comforts and conveniences of life - cell phones, PC's, etc. They didn't buy their kids $400 xbox's for christmas and pay $100 a month for "texting to their friends". This goes for medical care - 40 years ago did we have machines that could image every organ in the body and diagnose an illness in seconds?

Compared to 40 years ago, the standard of living of an average american has increased 10 fold at least. They just don't know it or appreciate it, or, more importantly, learn to do without it if they couldn't afford it.
 
Old 04-15-2008, 10:55 AM
 
Location: Chino, CA
1,458 posts, read 2,960,781 times
Reputation: 546
Actually the standard of living for a lot of people rose... but it depends on where you stand in the totem poll. From what the reports look like (2004) the top 1% lost some wealth, but the top 20% gained more wealth since the early 2000s.
Wealth Distribution

So, the upper middle class has grown... but the middle and lower middle has shrank. It also states that the wealthiest Americans own 100% of their homes, invest mostly in stocks/bonds/mutual funds, investment properties... and the top 20% own businesses, or are high wage earners in management, or professional jobs. Hmm... we've been loosing manufacturing jobs... but increasing service jobs... does that have anything to do with the shift?

So, it's not that all Americans are feeling the pinch. It's more that middle to lower caste Americans are feeling the pinch. But, that naturally happens in a capitalist society. Taxes, inflation on consumer staples, stagnant wages, keep down the middle to poor... and helps those that control the wealth and power stay in power. Only way up, is to fight neck and teeth and be competitive globally, through education, social networking, and luck.

People who are in the middle, should live within their means, and not get tempted by the lure of faux richness... a lot of wealthy people are rich because they accumulated wealth over time, and are modest.

The economy will recover when the wealthy regains confidence and reinvests, spur business spending, grow jobs, and gets back into the domestic markets.

-chuck22b

Last edited by chuck22b; 04-15-2008 at 11:08 AM..
 
Old 04-15-2008, 11:38 AM
 
Location: Londonderry, NH
41,492 posts, read 51,406,502 times
Reputation: 24613
A lot more rich folks got that way by picking already wealthy parents. Now that is luck!
 
Old 04-15-2008, 12:42 PM
 
Location: Los Angeles, Ca
2,884 posts, read 5,182,400 times
Reputation: 2731
Alot of the offical economic reports don't mean much to the average person.

I think the growth or recession debate, GDP, CPI, core CPI or all these things...they're used to distract people from whats really going on. A big part of the country has been in a stealth recession for a long time now. If you're working longer hours for less money, and you need debt to survive....that's not economic growth.

When I watch clips on youtube from 10 years ago, like NBA games from 96 or 97. Its not that long ago, but I think people at those games were better off than today. People didnt need all this debt, home equity loans, credit cards, refinancing etc to stay afloat.

I think you can chart the economic decline to the decline in pop culture, sports, dumbing down in the media, all kinds of things.

I think to get back to a "normal" savings rate (say 5-7%), lower debt, less reliance in refinancing, credit cards, it'll be a big adjustment downward. This whole era of credit is going to be over. 0% down.

It'd be nice if the whole world could get rich living on credit, but how is it going to last. Would you keep lending money to a country with declining education, declining industrial base, low savings, exploding deficits and debt?
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