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Old 10-15-2008, 01:09 PM
 
485 posts, read 1,710,579 times
Reputation: 387

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I do not see how America will ever get out of this economic recession. Here is why:

1) Cheap Credit for rich and poor is dead. It is to risky for the banks and other lenders

(The result of the end of the cheap credit era is disastrous. Because middle class people will not be able to buy as much. Our economy is based on consumer spending. Fewer cars, TV's, and other consumer goods)

Mortgages will be harder to get in the future with higher interest rates due to massive inflation and government borrowing. Less people will be eligible and able to save up the 20% downpayment.

2) We will have to raise taxes at all levels of government eventually as the economic conditions get worse and the revenue of the government goes way down. These higher taxes will cause us to have less money to spend on consumer goods.

3) Economic problems are causing salaries to stagnate so we will spend less.

4) Outsourcing of so many jobs overseas continue to limit our consumer wealth.
----------

How can we ever get out of this? What would ever cause America's economy to ever boom again?
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Old 10-15-2008, 01:24 PM
 
1,954 posts, read 4,930,727 times
Reputation: 1121
Your analysis is completely flawed in every single way. Here's why:

1) The "boom" we had in recent years was not based on anything real; rather, it was based on phony asset prices on paper for houses and stocks. That money never actually existed. We borrowed and spent as if it did.

2) Once asset prices are properly revalued and debts are wiped away (or serviced), we'll be back on a much better foundation.

3) Production and savings will increase - that's what a recession is all about - decreasing spending and increasing production/savings. "Recession" is just another word for "correction." We should be welcoming this.

4) There is no earthly reason why taxes need to be raised on anyone. Cutting government spending and cutting taxes would be far better for the economy, as it would allow existing money to be used more efficiently. Government spending ALWAYS results in inefficiency.

5) Outsourcing is bound to slow. If overseas economies continue to do well, the price of outsourcing will only grow. If this recession results in greater unemployment and less spending in the U.S., there will be a downward pressure on wages and the cost of services here, making them more competitive.

Disaster will only occur if the government continues to print money, raise taxes and pay for inefficient services, not to mention subsidies to corporations or foreign military adventures.

No government interference might result in some serious short-term pain, but it would ensure much greater prosperity in the years ahead.
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Old 10-15-2008, 01:33 PM
 
485 posts, read 1,710,579 times
Reputation: 387
Interesting viewpoints but I disagree about taxes. Our local and state governments are already making plans to raise taxes to make up for reduced revenue. These taxes are going to reduce how much money I can spend on consumer goods. It sounds like a good idea to cut government spending but there are to many interest groups who want to raise spending and provide more expensive services. The money has to come from somewhere!

Quote:
Originally Posted by StoneOne View Post
Your analysis is completely flawed in every single way. Here's why:

1) The "boom" we had in recent years was not based on anything real; rather, it was based on phony asset prices on paper for houses and stocks. That money never actually existed. We borrowed and spent as if it did.

2) Once asset prices are properly revalued and debts are wiped away (or serviced), we'll be back on a much better foundation.

3) Production and savings will increase - that's what a recession is all about - decreasing spending and increasing production/savings. "Recession" is just another word for "correction." We should be welcoming this.

4) There is no earthly reason why taxes need to be raised on anyone. Cutting government spending and cutting taxes would be far better for the economy, as it would allow existing money to be used more efficiently. Government spending ALWAYS results in inefficiency.

5) Outsourcing is bound to slow. If overseas economies continue to do well, the price of outsourcing will only grow. If this recession results in greater unemployment and less spending in the U.S., there will be a downward pressure on wages and the cost of services here, making them more competitive.

Disaster will only occur if the government continues to print money, raise taxes and pay for inefficient services, not to mention subsidies to corporations or foreign military adventures.

No government interference might result in some serious short-term pain, but it would ensure much greater prosperity in the years ahead.
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Old 10-15-2008, 01:38 PM
 
Location: Keller, TX
5,674 posts, read 5,558,378 times
Reputation: 4089
Quote:
Originally Posted by Refugee56 View Post
It sounds like a good idea to cut government spending but there are to many interest groups who want to raise spending and provide more expensive services. The money has to come from somewhere!
Just wait until 1) Medicare for Boomers and 2) a TRUE energy crisis.

Budget Deficit Charts | Perot Charts - Part 12

Those are the two biggest problems the economy is facing in the long term.
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Old 10-15-2008, 01:52 PM
 
Location: Chino, CA
1,458 posts, read 3,054,784 times
Reputation: 555
Quote:
Originally Posted by Refugee56 View Post
I do not see how America will ever get out of this economic recession. Here is why:

1) Cheap Credit for rich and poor is dead. It is to risky for the banks and other lenders

(The result of the end of the cheap credit era is disastrous. Because middle class people will not be able to buy as much. Our economy is based on consumer spending. Fewer cars, TV's, and other consumer goods)

Mortgages will be harder to get in the future with higher interest rates due to massive inflation and government borrowing. Less people will be eligible and able to save up the 20% downpayment.

2) We will have to raise taxes at all levels of government eventually as the economic conditions get worse and the revenue of the government goes way down. These higher taxes will cause us to have less money to spend on consumer goods.

3) Economic problems are causing salaries to stagnate so we will spend less.

4) Outsourcing of so many jobs overseas continue to limit our consumer wealth.
----------

How can we ever get out of this? What would ever cause America's economy to ever boom again?
Innovation, productivity, and other nations (developed nations) rising up in the world (convergence).

Let's do a S.W.O.T

Strengths:
- Standards, and Rule of Law
- Existing Infrastructure
- Diversity of Labor force
- Land and Existing Capital
- Freedom of Speech, Openness of Ideas
- Higher Education System
- Still the most Assets in the world... although more claims against them with our liabilities
- High Levels of productivity or production per capita
- Land and Property Rights
- Openness of government and the financial system (More so than most countries - ie, stats, data, budgets, etc.)
- Ability to Vote and our Constitution

Weaknesses:
- Trade Imbalance
- High Debt Load
- Energy Dependence
- Diminishing Production Capacity
- High Costs of Health care
- High Costs of Education
- More Restrictions and Taxes on Business
- Arrogance
- Ignorance
- Apathy
- Stagnant Wages in the lower/middle classes

Opportunities:
- Mass Amounts of Foreign Capital (Sovereign Wealth Funds, Trade Surpluses, etc.) - US is progressively getting cheaper for the Creditors which may help attract more FDI
- Growing Consumerism in Developing Nations - Our Logistics systems, warehouses, etc. (potential reverse to an export orientation)
- The World is Growing Older - Tourism (we have the service infrastructure... we can direct it more towards servicing foreigners), land and property and RE is larger and mostly better than what is available overseas.
- Global Environment and Climate is a growing Concern - Alternative Energies (wave, wind, geothermal, solar, etc.) can help reduce trade deficits and efficiencies. Our landscape is very diverse and could foster growth in these technologies (we have land, labor, and capital).
- The World is growing more diverse and more intertwined - America has already been the melting pot of the world... potentially the US can be a role model of how nations intertwine and interact.

Threats:
- More Super Powers emerging in the world - The US isn't the sole hegemony anymore and therefore higher competition for resources and capital
- Disparity between the Rich and Poor Countries - May cause social and global unrest... security threats
- Aging Developed Nations with the majority of the younger/working age population in impoverished countries - may cause a drain on resources with reduced production
- Climate Change
- Global turmoil

So, in short, we use our strengths to pursue opportunities and reduce our exposure to threats by shoring up our weaknesses. Others can add to this.

-chuck22b
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Old 10-15-2008, 01:53 PM
 
Location: Londonderry, NH
41,478 posts, read 54,145,586 times
Reputation: 24729
How long will it take the US to return to an economy based on real production in agriculture, mineing and manufacturing? When we do that we will create real prosperity instead of the false profits created by the absurd FIRE economy.
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Old 10-15-2008, 02:01 PM
 
Location: western East Roman Empire
8,023 posts, read 11,805,414 times
Reputation: 7964
Quote:
Originally Posted by Refugee56 View Post

How can we ever get out of this? What would ever cause America's economy to ever boom again?
I'll give you an answer that may summarize some of those you have already received.

production - consumption = saving + investment

Policy can help that equation, or policy can exacerbate the imbalances.

My expectation, however, is that the basic equation will be increasingly measured globally, not domestically, to the detriment of traditional US values to be sure, but we are on track to enter a new age, for better and for worse.

Let's put it this way: our children are the Chinese: they will take care of us and then inherit the house ... something like that.
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Old 10-15-2008, 02:01 PM
 
Location: Albemarle, NC
7,730 posts, read 13,134,374 times
Reputation: 1508
Quote:
Originally Posted by GregW View Post
How long will it take the US to return to an economy based on real production in agriculture, mineing and manufacturing? When we do that we will create real prosperity instead of the false profits created by the absurd FIRE economy.
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Old 10-15-2008, 02:34 PM
 
5,409 posts, read 10,329,247 times
Reputation: 4478
Quote:
Originally Posted by bale002 View Post
I'll give you an answer that may summarize some of those you have already received.

production - consumption = saving + investment
That is a good fundamental equation to understand.

Sort of means that any "consumer" based economy (US, for example) -- where the consumption is greater than production -- would have to have an overall negative for the right hand side (savings + investment)

Paraphrasing Dr. Phil -- How Is That Working For US?


Quote:

Let's put it this way: our children are the Chinese: they will take care of us and then inherit the house ... something like that.
I suppose that is fair enough as the US has aborted 50 million or so of our own.
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Old 10-15-2008, 03:26 PM
 
Location: Humboldt Park, Chicago
2,686 posts, read 7,262,440 times
Reputation: 1194
Default The economy will recover when house prices recover

Until housing prices bottom I think there will be no overall economic recovery. Once there is a housing recovery, which may take years I think things will get better. Unfortunately, I believe things will get worse before they get better, and this includes continuing decreases in housing prices for the next 1-2 years, depending on which market you are in.

Great post Chuck.
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