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Old 10-12-2011, 08:50 AM
 
Location: it depends
6,074 posts, read 5,307,006 times
Reputation: 5771

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Having been hit with a fiscal crisis and a severe recession, policymakers and politicians and C-D posters argue about the right presecription going forward. All sides can mount reasons or rationale for their beliefs, but the first and necessary step is to figure out where we are:

1. By the peak in economic activity, we had built an economy capable of building 250% of the homes we need each year. This excess was equivalent to more than 3% of GDP.

2. We had also built an auto industry capable of selling 17 million new units a year--but could not make any money at that level due to over-capacity.

3. Retail sales were pumped up by unsustainable borrowing.

Economic activity crashed from late 2007 until the summer of 2009. Since then, all the indicators have pointed to slow growth, an anemic recovery. Month by month, we have spent a little more, made more products, shipped more goods.

But at the same time, households are paying off debt and putting money in the bank--about half a trillion a year--the highest saving rate since the early 1990's.

This is what it is: we are deleveraging, paying off debt, saving money. Households are busy improving their financial position and debt payment requirements are now below the twenty-year average. The key thing is that the economy is NOT getting worse, in terms of aggregate activity. When we are done with delevering, times will get better.

A. The desire to get back to where we were is foolish. That excessive investment in housing has done nothing for our long term wealth and prosperity. Large companies doing big volume and making no money did us no good. The hundreds of thousands of people involved in needless real estate activity (speculation), mortgage brokers and real estate agents and Fannie Mae processors--also do us no good.

B. The Keynesian notion that we need to "prime the pump" is not going anywhere, because we the people will use any short-term stimulus to pay down debt or restore savings.

C. The monetary policy of zero interest rates hurts savers, distorts markets, scares people, and limits future monetary policy options.

Now we are working through the housing glut over time, the automakers and other large companies have profitably adjusted to lower volumes, and time is needed so that households can continue to repair their financial positions.

Conclusion: embrace the new economy...it will give way to faster growth, later. Stop the histrionics over pump-priming and monetary gymnastics. Work on reducing the dead weight of (some) regulation and the excessive costs of compliance with a Byzantine tax code. Yes, there are people who need food and shelter, and we must provide for them. But let's stop screwing up the natural recovery from the boom and bust.

What do you think?
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Old 10-12-2011, 09:15 AM
 
48,516 posts, read 83,524,755 times
Reputation: 18035
There is no new economy its the same one that has evolved for deacdes now. It tanked because people thoght their was a new one by connig themselves.The sad part is the reckless behaviour of alot of people actually has effected people who did nothing but suffer from job loss;otherwise woudl be payig their bills and others that suffer because of savings income loss.Its mostly a result of welath share policies that resulted i too many dependent on too few and wantig a eqaul shre .I the end the many got too big for the few to support at that level.if you look at now Clinton balanced the budget it left nothing to cut other than basic needs when growth lowered has economic trends do on up swings and down swings.The first thing he satatred to do after cuttig the miltary budget on what was called the peace dividend in purely consumption policies. Not investig it in polcies that assured the big three by reforms and payment plan of the big 3; Socvial security;medicare and medicaid.If you rememebr democrats refused their on Breauc commision recommendations statig that SS was secure for the duture;then started spending on new programs.
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