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I always get mixed views when this topic comes up in a discussion since some people will say the economy is fine right now and some will say the economy is bad. I'm not too knowledgeable myself when it comes to economics, but what exactly are the key indicators that a person looks out for when measuring economic conditions? Or what are the physical signs that a person should look out for? I live in New York City so maybe it isn't as apparent here as in other states. I walked around midtown the other day and a lot of commercial space and retail stores in the street I usually shop at have closed down and become vacant space open for rentals. Again, not sure if that had anything to do with anything, but it's something I've observed. I read a lot of posters who say the job market is bad, and some who say there are plenty of jobs out there. I'm still in school at the moment so I'm not exposed to the job market yet. So what do you guys and girls think? What are the signs?
That's not actually a bad way of doing it. It doesn't give a macro picture of course, but it tells you how your neighborhood is doing, and at the end of the day, that's what matters to you.
On the other extreme end of things, interest rates have been falling for 30 years. In Germany and other parts of Europe they've even gone negative. (Loan me $1010 and I'll pay you back $1000 in the future) This is fairly new territory as, not just the Fed, but the World has engaged in quantitative easing in order to eliminate the impact of a large amount of bad debts evaporating in value at the same time would have on the world economy (depression). Now they're all looking for ways to pulling that money back. As long as all of the world leaders play nice together for a decade or so, they'll be able to do it......
But if they don't you have two scenarios. Scenario one is that the money leaks into the economy, causing rampant inflation. The banks are destroyed and currency values race to the bottom as countries look to gain competitiveness (i.e. cheapen labor) using the national currency. Scenario 2 is that the world banks pull back their money too quickly, leaving capital markets too tight and the world slides into deflation.
The deflation case tightens with things like Brexit. The inflation case tightens when the Fed calls for a "Pressure Economy" Balancing all of these headwinds is the Fed. Trade protectionism is net loser everywhere. A fall to either side at the heights we're at cannot be stopped and it knows it. So it's acting very cautiously. As long as they can balance, I'd look forward to 1%-2% growth for a long time.
On the other extreme end of things, interest rates have been falling for 30 years. In Germany and other parts of Europe they've even gone negative. (Loan me $1010 and I'll pay you back $1000 in the future) This is fairly new territory as, not just the Fed, but the World has engaged in quantitative easing in order to eliminate the impact of a large amount of bad debts evaporating in value at the same time would have on the world economy (depression). Now they're all looking for ways to pulling that money back. As long as all of the world leaders play nice together for a decade or so, they'll be able to do it......
But if they don't you have two scenarios. Scenario one is that the money leaks into the economy, causing rampant inflation. The banks are destroyed and currency values race to the bottom as countries look to gain competitiveness (i.e. cheapen labor) using the national currency. Scenario 2 is that the world banks pull back their money too quickly, leaving capital markets too tight and the world slides into deflation.
The deflation case tightens with things like Brexit. The inflation case tightens when the Fed calls for a "Pressure Economy" Balancing all of these headwinds is the Fed. Trade protectionism is net loser everywhere. A fall to either side at the heights we're at cannot be stopped and it knows it. So it's acting very cautiously. As long as they can balance, I'd look forward to 1%-2% growth for a long time.
This is why 95% of population doesn't understand how ECONOMY should work, it's always the same = GROWTH IS GOOD AND DEFLATION IS BAD. What if DEFLATION can't be avoided? Economists today can't even agree that there is such thing as a Business Cycle. They pretend economics is a science. They all went to same schools and learned the same creed. Why do we always have economic depressions after expansion is over? We need to wise up. This is not accidental. It is a cyclical process.
Interest rates are the mechanism we need to use to encourage both sides of this cycle. Of course, it is very easy to lower rates and encourage the Business Cycle. It is a much different story to raise rates and encourage recession, even depression. But the truth is this: we need both sides of this cycle, the side that expands and the side that contracts. No economic growth is possible during the Non-Growth Cycle. Lowering interest rates during the Non-Growth Cycle is an open admission of panic.
Lowering interest rates after the Business Cycle has ended (2001) does not generate growth, but generates debt-growth only, and asset bubbles, which is the opposite of growth, which are cancers.
Contraction accompanied by higher interest rates protects the local currency, which is vital to the sustainability of the national life. Higher interest rates limit debt during Non-Growth seasons, which help limit subsequent default and bankruptcy. Business contraction with higher interest rates also shifts the reward spectrum AWAY FROM speculators and BACK TO the 99% of ordinary citizens, who can profit from SAVINGS appreciation and can build a nest-egg through safe investment with higher and higher rates, which savings then become the investment seed for the next Business Cycle when it returns.
Those leaders who refused to raise interest rates in 2001 for fear of recession or depression see only the negative side of the end of the cycle. They have to also see the positive side. Lower rates encourage borrowing and weaken the local currency, which helps trade expand. But no society survives long if it does not have a reverse application to strengthen the local currency. Everything in nature breathes, being itself and also its opposite, at the same time.
The interest rate mechanism is the breathing apparatus of the monetary system. But both sides of this mechanism must be used equally. Expand (with lower rates), Contract (with higher rates). This is the recipe for Eternal Life, a rhythm of constant opening and closing.
In 2001, when the Business Cycle ended, the FED needed to begin raising interest rates. Modern economic theory believes that 'growth' can and even needs to be perpetual. We measure the health of the economy by GDP, by how much Growth there is, that is, by how much spending. SPENDING is the key. And if the society is borrowing money to SPEND, this is still GDP-positive, because SPENDING is growing. But Spending is only one side of the coin. The other side is SAVING.
Modern economic theory hates Saving, because saving detracts from Growth (Spending).
Modern economic theory believes Spending is good, and Saving is bad. Saving hurts GDP - which tells us that GDP as an indicator is one-eye blind, a false indicator.
When the Business Cycle ended in 2001 (it ran from 1983-2001), the FED should have begun raising interest rates and deflating this bubble. It did not. The theory was that Depression (think the 1930's) was caused by mistakes made by the FED and other central banks. If they had only been more clever, they could have avoided the Great Depression.WRONG! Deflation is the other side of the Inflation coin. You get one, you get both. Had the FED raised rates in 2001, the economy would have contracted - as it did anyway - and debt would have become LESS ATTRACTIVE. Remember, we want to DISCOURAGE debt at the end of the Business Cycle. Debt taken out after expansion ends is largely lost capital.
The hoarding of wealth for the rich in America, engineered by the Fed, means that the great unwinding of debt that should have occurred form 2001-PRESENT DID NOT OCCUR. This is a major violation of natural law. The Fed and the other global central banks conspired to protect their own wealth during this Great Emptying Out process by enslaving global citizens with wave after wave of debt, lowering interest rates to effect this global enslavement. The FED's recent manipulation of monetary policy to "extend the Business Cycle" was designed to avoid Depression. To avoid the bad side of Depression - but also the good side of Depression. Philosophy shows us that all phenomena is good and bad at once. The good side of Depression is that prices come down - instead we have had price bubbles in housing, health care, insurance, education, commodities, stocks and bonds - higher prices are NOT good if wages are stagnant. This combination creates wage slaves. The whole world has been creating wage slaves since (especially since) 2001; instead of getting a wage increase the world got lower interest rates and encouragement to take on more debt, to become debt slaves. How discouraging: we control wage inflation so we can keep interest rates low and create a world of debt slaves, instead of just giving wage increases. Oh, but wage increases fuel "inflation" - which we abhor - and debt increase we tell ourselves is NOT inflation. Instead of having rich workers (which the capitalist class must fund through higher wages and fewer profits), we have poor workers who become increasingly owned by banks through debt slavery. Now, that is enlightenment. Thank you Greenspan, Bernanke, Yellen. Bush; Obama. Thank you for making us all debt slaves. Thank you for making the collapse of our banking system inevitable.
"Extending the Business Cycle" is a euphemism for stealing money from unborn citizens to spend today to mitigate the BUST cycle. We have the BOOM cycle, when "everyone" makes a killing; then we have the FED orchestrate "quantitative easing" (or some version of this), where the FED steals money from the future to protect the rich from the BUST cycle, makes our unborn great-grandchildren pay to protect today's rich from the BUST cycle. DEFLATION has a JOB to 'lessen' the wealth differentiation between the riches and the poorest Americans. That is why DEFLATION is build into our economic system, that is the way it is suppose to be.
If we cannot all be rich together, then we will at least all be poor together. That is what Depression is, the Economic Winter. Our economic system needs both growth and deflation. We shouldn't fight deflation, we simply need to embrace it!!!!!!!!
Good point. There's a time to get into debt, and a time to retire debt. The EU basically got it backwards. For US-based investors, the additional insult was the relentless decline of the Euro, with respect to the US Dollar.
There are good things about a strong dollar and good things about a weak dollar. Better than any of that is being able to ride the elevator up and down from time to time if it stops at your floor.
Quote:
Originally Posted by ohio_peasant
And atop of the EU's poor judgment, their demographic outlook is abysmal. Of course, ours can become nearly as parlous, if we fall into the "immigration is bad" mindset.
Despite complaints from short-sighted nativist types, it is indeed the pools of young, healthy, industrious immigrants from south of the border that have separated us from the age-gap crises that confront China, Japan, Korea, and most of western Europe. In our case, there are still significant stocks of those types waiting in reserve if we ever decide to normalize our immigration policies.
Quote:
Originally Posted by ohio_peasant
I don't believe that the US economy is presently "bad", but I agree with CPG, that indeed it's fragile. Sustained growth depends on vigorous public-private partnership. Businesses are allowed to thrive, and public policy ought to provide an environment in which such thriving is facilitated. Dumb policy decisions - fiscal or monetary - can easily knock us off course.
For purely partisan reasons, one of our two major political parties has been preaching fear of spending and debt since Obama was elected. After providing a major boost in 2009-10, fiscal policy has contributed next to nothing to recovery since that party gained control of the House in 2011. Gains since then have come all but exclusively on the back of the most expansionary monetary policy the Fed could come up with. We aren't helping either ourselves or the rest of the world here.
That said, economies are always in a precarious position with regard to something. In a world with high rates of change, stable equilibria become more rare and less long-lived. Having non-whackjobs in key policy and oversight positions becomes more and more important.
The most important economic indicator is the Gross Domestic Product (GDP) which has been growing at a rate lower than 3% for the past few years. Other important indicators are the Consumer Price Index (CPI) which measures inflation, the Homeownership Rate, the U.S. International Trade in Goods and Services Deficit, and the Construction Spending Report.
I would recommend you to read and analyze this indicators and its quarterly results using a government source like US Census Bureau: Economic Indicators and not any mainstream media outlet because a lot of people want to bring in their political views and use terms like "social justice" and "income redistribution" to determine if the economy is good or bad.
My personal opinion is that the economy has not been very strong for the past 8-10 years and proof of this is that interest rates (which are the cost of borrowing money) are very low and the GDP is still not growing enough.
I always get mixed views when this topic comes up in a discussion since some people will say the economy is fine right now and some will say the economy is bad. I'm not too knowledgeable myself when it comes to economics, but what exactly are the key indicators that a person looks out for when measuring economic conditions? Or what are the physical signs that a person should look out for? I live in New York City so maybe it isn't as apparent here as in other states. I walked around midtown the other day and a lot of commercial space and retail stores in the street I usually shop at have closed down and become vacant space open for rentals. Again, not sure if that had anything to do with anything, but it's something I've observed. I read a lot of posters who say the job market is bad, and some who say there are plenty of jobs out there. I'm still in school at the moment so I'm not exposed to the job market yet. So what do you guys and girls think? What are the signs?
When I am employed and my neighbor is not, the economic conditions are good. When I am unemployed, the economic conditions suck.
This is why 95% of population doesn't understand how ECONOMY should work, it's always the same = GROWTH IS GOOD AND DEFLATION IS BAD. What if DEFLATION can't be avoided? Economists today can't even agree that there is such thing as a Business Cycle. They pretend economics is a science. They all went to same schools and learned the same creed. Why do we always have economic depressions after expansion is over? We need to wise up. This is not accidental. It is a cyclical process.
Interest rates are the mechanism we need to use to encourage both sides of this cycle. Of course, it is very easy to lower rates and encourage the Business Cycle. It is a much different story to raise rates and encourage recession, even depression. But the truth is this: we need both sides of this cycle, the side that expands and the side that contracts. No economic growth is possible during the Non-Growth Cycle. Lowering interest rates during the Non-Growth Cycle is an open admission of panic.
Lowering interest rates after the Business Cycle has ended (2001) does not generate growth, but generates debt-growth only, and asset bubbles, which is the opposite of growth, which are cancers.
Contraction accompanied by higher interest rates protects the local currency, which is vital to the sustainability of the national life. Higher interest rates limit debt during Non-Growth seasons, which help limit subsequent default and bankruptcy. Business contraction with higher interest rates also shifts the reward spectrum AWAY FROM speculators and BACK TO the 99% of ordinary citizens, who can profit from SAVINGS appreciation and can build a nest-egg through safe investment with higher and higher rates, which savings then become the investment seed for the next Business Cycle when it returns.
Those leaders who refused to raise interest rates in 2001 for fear of recession or depression see only the negative side of the end of the cycle. They have to also see the positive side. Lower rates encourage borrowing and weaken the local currency, which helps trade expand. But no society survives long if it does not have a reverse application to strengthen the local currency. Everything in nature breathes, being itself and also its opposite, at the same time.
The interest rate mechanism is the breathing apparatus of the monetary system. But both sides of this mechanism must be used equally. Expand (with lower rates), Contract (with higher rates). This is the recipe for Eternal Life, a rhythm of constant opening and closing.
In 2001, when the Business Cycle ended, the FED needed to begin raising interest rates. Modern economic theory believes that 'growth' can and even needs to be perpetual. We measure the health of the economy by GDP, by how much Growth there is, that is, by how much spending. SPENDING is the key. And if the society is borrowing money to SPEND, this is still GDP-positive, because SPENDING is growing. But Spending is only one side of the coin. The other side is SAVING.
Modern economic theory hates Saving, because saving detracts from Growth (Spending).
Modern economic theory believes Spending is good, and Saving is bad. Saving hurts GDP - which tells us that GDP as an indicator is one-eye blind, a false indicator.
When the Business Cycle ended in 2001 (it ran from 1983-2001), the FED should have begun raising interest rates and deflating this bubble. It did not. The theory was that Depression (think the 1930's) was caused by mistakes made by the FED and other central banks. If they had only been more clever, they could have avoided the Great Depression.WRONG! Deflation is the other side of the Inflation coin. You get one, you get both. Had the FED raised rates in 2001, the economy would have contracted - as it did anyway - and debt would have become LESS ATTRACTIVE. Remember, we want to DISCOURAGE debt at the end of the Business Cycle. Debt taken out after expansion ends is largely lost capital.
The hoarding of wealth for the rich in America, engineered by the Fed, means that the great unwinding of debt that should have occurred form 2001-PRESENT DID NOT OCCUR. This is a major violation of natural law. The Fed and the other global central banks conspired to protect their own wealth during this Great Emptying Out process by enslaving global citizens with wave after wave of debt, lowering interest rates to effect this global enslavement. The FED's recent manipulation of monetary policy to "extend the Business Cycle" was designed to avoid Depression. To avoid the bad side of Depression - but also the good side of Depression. Philosophy shows us that all phenomena is good and bad at once. The good side of Depression is that prices come down - instead we have had price bubbles in housing, health care, insurance, education, commodities, stocks and bonds - higher prices are NOT good if wages are stagnant. This combination creates wage slaves. The whole world has been creating wage slaves since (especially since) 2001; instead of getting a wage increase the world got lower interest rates and encouragement to take on more debt, to become debt slaves. How discouraging: we control wage inflation so we can keep interest rates low and create a world of debt slaves, instead of just giving wage increases. Oh, but wage increases fuel "inflation" - which we abhor - and debt increase we tell ourselves is NOT inflation. Instead of having rich workers (which the capitalist class must fund through higher wages and fewer profits), we have poor workers who become increasingly owned by banks through debt slavery. Now, that is enlightenment. Thank you Greenspan, Bernanke, Yellen. Bush; Obama. Thank you for making us all debt slaves. Thank you for making the collapse of our banking system inevitable.
"Extending the Business Cycle" is a euphemism for stealing money from unborn citizens to spend today to mitigate the BUST cycle. We have the BOOM cycle, when "everyone" makes a killing; then we have the FED orchestrate "quantitative easing" (or some version of this), where the FED steals money from the future to protect the rich from the BUST cycle, makes our unborn great-grandchildren pay to protect today's rich from the BUST cycle. DEFLATION has a JOB to 'lessen' the wealth differentiation between the riches and the poorest Americans. That is why DEFLATION is build into our economic system, that is the way it is suppose to be.
If we cannot all be rich together, then we will at least all be poor together. That is what Depression is, the Economic Winter. Our economic system needs both growth and deflation. We shouldn't fight deflation, we simply need to embrace it!!!!!!!!
The Bay Area real estate market Is living proof that deflation won't happen. From 10k for a house in 1958/1959 to 1M+ today
Near zero interest rates for 8 long years tell you the recovery is weak. Savers are getting punished with next to no interest income on their savings. The stock market is being propped up by low rates as is the economy by discouraging saving in favor of spending to keep this tepid recovery moving very slowly forward. Investors don't keep all their savings in stocks usually a half to a third are in bonds depending in risk tolerance and life stage etc. The fed did it's job to get the recovery from 200 recession started but this admin and congress passed job killing laws or regs and killed the growth.
Most of what you say is correct.
But I could rephrase some of it this way.
It's not that the recovery is weak. It's that what we went through was MUCH worst than anyone can imagine. GWB once lamented "we're gonna lose this thing" when the banks started going under...the big secret is that they DID lost "this thing".
And so, we savers and most everyone who isn't a billionaire has been "taxed" in one way or another...or at the very minimum we've been slowed down in our rise....which is what is called "slow growth".
Imagine growing a nice maple tree for 30-40 years. Then cut it down to just a stump. The growth from that point for a LONG time will be "slow growth". There is no other alternative.
If Americans want a truly better economy they need to change the entire system...and it's not going to happen. Until they we are playing the lottery - a lot of losers and some winners.
Near zero interest rates for 8 long years tell you the recovery is weak. Savers are getting punished with next to no interest income on their savings. The stock market is being propped up by low rates as is the economy by discouraging saving in favor of spending to keep this tepid recovery moving very slowly forward. Investors don't keep all their savings in stocks usually a half to a third are in bonds depending in risk tolerance and life stage etc. The fed did it's job to get the recovery from 200 recession started but this admin and congress passed job killing laws or regs and killed the growth.
The last part is clearly wrong. The US GDP growth in 2015 ranked about 100 out of 250 countries. US growth beat the EU, France, Germany, Australia, and the UK (this was before Brexit). If our problem were as you claim, due to the Obama administration, then I would expect all of those countries to be doing better than the US, but they didn't do better, they did worse.
So who did have a better GDP growth in 2015? Most of the 100 or so countries with better GDP growth in 2015 were so-called emerging economies (what used to be called "third world" countries). But this is something long predicted by economists, that there will be a shift in growth from developed to emerging countries. This has nothing to do with politics and has more to do with the fact that labor is cheaper in emerging countries and birth rate is much higher. About half of GDP growth is due solely to a growth in population.
Real interest rates have only returned to about what they were between 1940 and 1972. Nobody is being punished.
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