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Old 12-22-2008, 06:00 PM
 
Location: Chino, CA
1,458 posts, read 3,007,557 times
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Quote:
Originally Posted by sheenie2000 View Post
But if you look at Table R. 100, it shows the how much wealth has been destroyed in 2007 and 2008. (Specifically lines 10-14). The total is already over 7 trillion dollars and that *only* includes household assets. A 1 trillion dollar plan doesn't even put a dent into what's happening today. And that 1 trillion will take a long time to implement.

http://www.federalreserve.gov/releas...Current/z1.pdf
The 7 trillion probably has a lot to do with the wonderful multiplier effect as the credit market deflated. Your forgetting to look at the previous years and the close to 20 trillion in house hold wealth increases (4 years)... which... probably a large percent of it was due to the credit expansion (multipliers).

1 trillion in government expenditures have a trickling and multiplier effect as each dollar moves through the economy. Private employers would also have to gear up, and act to bid, receive, and attain contracts. Low interest rates and tax incentives for businesses would definitely help out.

Anyhow, I can't predict the future.... but what the government is doing in both monetary and fiscal policies are major forces that could potentially fill in this major credit collapse. Eventually, banks and the private sector would lend again. If you look at the credit markets, it has significantly eased recently. Overtime, with fiscal stimulus domestically, it should help out.

-chuck22b

Last edited by chuck22b; 12-22-2008 at 06:12 PM..
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Old 12-22-2008, 06:48 PM
 
3,722 posts, read 4,718,320 times
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Quote:
Originally Posted by baystater View Post
Well which is worse. Taking the pay cut? or being out of a job? They both suck but which one sucks more. Like you said 70ford. Easy come easy go.
Do other fixed costs for the person taking the pay cut change? Rent, mortgage, car note, etc. Of course there are always second and third jobs if you can find someone hiring.
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Old 12-22-2008, 07:13 PM
 
5,090 posts, read 10,046,595 times
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Quote:
Originally Posted by Humanoid View Post
Ahem.......deflation...

The 401(k) cuts are interesting, just when people will sell equities to fund retirement or due to hardship....there will be less buyers. Gee.....I wonder what is going to happen.
Yeah, no kidding. Could have seen this coming for years.

When the first boomer was due to take the first dime back out of the Jenga Tower, it was bound to start collapsing.

Back towards the topic of lower wages / lower business income. We are figuring on running-on / operating-on 50% (highest) to 25% (lowest). Gives us a LOT of margin for the roof to collapse without cramping our headroom.

What downside numbers are other folks using?
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Old 12-22-2008, 08:22 PM
 
Location: Fort Myers Fl
2,305 posts, read 2,751,880 times
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Quote:
Originally Posted by Philip T View Post
Yeah, no kidding. Could have seen this coming for years.

When the first boomer was due to take the first dime back out of the Jenga Tower, it was bound to start collapsing.

Back towards the topic of lower wages / lower business income. We are figuring on running-on / operating-on 50% (highest) to 25% (lowest). Gives us a LOT of margin for the roof to collapse without cramping our headroom.

What downside numbers are other folks using?

No downside numbers here, infact we are getting ready to ramp up soon. Had several meetings with bank in last few weeks and things are looking good. But then we are in road building, so the future does look bright.
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Old 12-22-2008, 08:54 PM
 
Location: Los Angeles Area
3,306 posts, read 3,558,423 times
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Quote:
Originally Posted by chuck22b View Post
Anyhow, if people pay down debts, that only means there's a transfer of debt from the household sector to the government sector. Which is good for the household sector as it'll free up disposable and livable incomes (income tax holidays, or stimulus checks?).
No it doesn't, if people pay down debts money is destroyed. It doesn't transfer anything to the government.

Quote:
Originally Posted by chuck22b View Post
The other part, is to create jobs and that is where the infrastructure and other spending plans (including business tax breaks?) and potentially future incentives to keep and retain R&D and jobs in the States. If people have jobs and are working... eventually some of that income will translate to spending, loaning, and re-expansion of credit.
Not that I'm completely against fiscal stimulus, but the government can't get something for nothing. The stimulus will need to be paid for in some fashion, if its not paid for by future production (i.e., taxes) then it will be paid for via inflation. If the government puts money into the wrong things (which its likely to do) the long term consequences of any fiscal stimulus could be negative.

Quote:
Originally Posted by chuck22b View Post
It's really not that hard to get banks and people to spend. The "government" somehow helped spur spending in the last decade through low interest rates and unregulated markets.
Okay, so what are they waiting for? You can't create another credit expansion on the back of a credit expansion.

Quote:
Originally Posted by chuck22b View Post
better transportation/reduced time, and less reliance in imports (oil) would greatly improve our GDP mix and get us on a better frame work for more sustainable growth.
Let me know when Americans become interested in this sort of thing.
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Old 12-22-2008, 09:04 PM
 
Location: Sitting on a bar stool. Guinness in hand.
4,429 posts, read 5,809,671 times
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Quote:
Originally Posted by chuck22b View Post
Well I guess it depends on how much of a cut, and how long the cut will last. If the cut is high, and it's an indefinite time span (or no end in sight - permanent cut).... then perhaps finding a job in a growing industry would end up being better in the long run.

I mean you can only go for so long supplementing lost income with savings or not saving at all. And, there is going to be growing segments of the economy (ie, health, medical, education, government, and soon engineering, infrastructure, alt. energy sectors) that will come online in the near future.

Anyhow, the company I work for already made some hefty cuts in the last months to weather some revenue shortfalls.... but hopefully when things pick up with infrastructure spending and engineering in the coming year, my company should benefit from the future pick-up in these activities.

Therefore, I see the cuts as temporary. If the cuts last quite awhile and even if things pick-up, but the cuts remain... then it'll be a good time to move to another company/industry.

-chuck22b
Point taken. But I think it would be much harder for a 45 - 60 year old to just switch careers. Granted they hopefully do have a good nest egg and can get out early or at least weather the storm. But I have my doubts. I've seen a lot of poor folks put all there eggs in one basket and have taken hit and will have to continue working for a bit even at a lower rate.
But I very much agree with you that I think a lot of there cuts are temporary and I think a lot of business are actually sincerely try to help people by keeping more of them employed at a lower rate of pay than to cut more people and pay a couple the same rate that they always have.

Quote:
Originally Posted by trishguard View Post
Do other fixed costs for the person taking the pay cut change? Rent, mortgage, car note, etc. Of course there are always second and third jobs if you can find someone hiring.
Yes and being unemployed helps pay those bills...........how?

As for rent that variable if people can't pay high rent rates the landlords will have to lower them.

With the mortgage will at this time, it looks like a few people will be able to negotiate there mortgages.

Car note. Well even if they Repoed your car because of non-payment it would just sit on a lot somewhere and the loan company would lose money on a useless asset. Better to renegotiate that loan as well.

As for second and third jobs. Well times are hard. If you spent or gambled (in the market) you money away. Or you just made bad/wrong decisions. Then you got to do what you got to do to survive. On top of this some folks are going to have to downsize certain items in there lives (Ex. cars) .
Look just keep yourselves feed, clothed, and housed for the next couple of years. And by then things should start looking up....I'm not saying it's going to be great. But thing should get a little better. And then you can rebuild from there.
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Old 12-22-2008, 10:50 PM
 
5,090 posts, read 10,046,595 times
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Quote:
Originally Posted by thebigr View Post
No downside numbers here, infact we are getting ready to ramp up soon. Had several meetings with bank in last few weeks and things are looking good. But then we are in road building, so the future does look bright.
That sounds dangerous

Half joking with you, but not really -- as we say sometimes to the happy low bidder at the bid opening -- Congratulations! (and mumble under our breath -- see you at your auction).

There is ALWAYS a downside risk and if you follow Sun-Tzu's wise advice, you should always know the numbers. While I have plenty of bright prospects lined up for the year ahead, as well, I have to know to "discount" them for what other factors are lying ahead that even the customer may attempting ignore the downside risk about.

An example -- We had over a million (on our Engineering end) dollars wiped out this last month on gas/oil/refinery work. Rule number 1 of business is The Customer Must Have Money. Theirs just ran out like a Big Dog. For my part I could see that coming a month or more prior, as soon as Oil and Gas started breaking downwards. But as far as I can tell the customer was the most surprised folks in the process.

Roads are generally Govt -- Either Fed, State, or Local -- is that the case with your projects? Have you ever been no-paid or late-paid on a Govt. Contract? It happens and with the payroll, equipment rents, fuel and materials all due without regard to those scheduled payments -- that banker can quit being your friend and can get a real negative and aggressive interest in you. Can be all good faith on your part, and you just wind up screwed.

That stuff is very real, and it really does happen. The harder times around are, the harder it can hit, and the more likely. That is what I am talking about with down side risk numbers. You have to know them if you want to survive them.
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Old 12-23-2008, 12:12 AM
 
Location: Georgia, on the Florida line, right above Tallahassee
10,474 posts, read 14,171,725 times
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Quote:
Originally Posted by baystater View Post

As for rent that variable if people can't pay high rent rates the landlords will have to lower them.
That's not happening in Seattle, at least as far as I've seen. Rents (at least my rent is) are getting higher, people who can't pay get kicked out or you get a room mate or have to move to a cheaper area.
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Old 12-23-2008, 01:08 AM
 
Location: Los Angeles Area
3,306 posts, read 3,558,423 times
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Rents won't decline over night.... Rents are very sticky. I wouldn't expect to see nominal rents decline that much, but real rents should decline over the next decade.

Here, listed rents haven't changed much but the sorts of deals you can get have changed. Vacancy rates seem to be getting worse too.
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Old 12-23-2008, 10:35 AM
 
Location: Chino, CA
1,458 posts, read 3,007,557 times
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Quote:
Originally Posted by Humanoid View Post
No it doesn't, if people pay down debts money is destroyed. It doesn't transfer anything to the government.
I know, debt pay down/default is money destruction... that's why when the government incurs debt (ie, creates government notes/debt, tax holidays, stimulus checks, etc.) and gives it to the people and the people pays down debt then essentially it's a transfer of debt from the people to government. That's what I meant... it's a net neutral effect on the money/credit supply (balance sheet shift).

Quote:
Not that I'm completely against fiscal stimulus, but the government can't get something for nothing. The stimulus will need to be paid for in some fashion, if its not paid for by future production (i.e., taxes) then it will be paid for via inflation. If the government puts money into the wrong things (which its likely to do) the long term consequences of any fiscal stimulus could be negative.
I agree, it's a most precarious situation but no one else is spending/lending... the big "G" is trying to avoid a deflationary spiral trying to get Real prices back above zero.

A zero interest rate situation where people still don't borrow means that the Real rate of borrowing is actually negative (deflationary - which makes holding cash better than borrowing). So, fiscal stimulus and monetary policy aims to combat this situation. As things pick-up, of course government debts would have to be retired as private enterprises and the population pay back through taxes and moderate levels of inflation.

Quote:
Okay, so what are they waiting for? You can't create another credit expansion on the back of a credit expansion.
They're balancing their books, accessing the environment. Waiting to see what government actions are going to occur. There is some more lending going on now more so than a few months ago. Credit markets has loosened quite a bit since October.
Quote:
Let me know when Americans become interested in this sort of thing.
I don't know but economy might force its' hand on Americans. As noted in other threads, Americans have altered behavior because of the economic circumstances (savings, paying of debt, and becoming more conservative in energy and other uses (look at gas prices and consumption) - ie more efficient).

-chuck22b
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