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[quote=Nolefan34;25217559]What if Henry Ford did not invest in his Ford plants because there was market uncertainty? quote]
This is exactly what happened to Ford in the late 1970s. The company did not want to spend money on the minivan. Iacocca went to Chrysler and launched the minivan.
I remember it all too well. I graduated from college in the great 80's Reagen recession and found a minimum wage job after a few months of applying. The OP was correct, ads for jobs would get 100s of applicants, and cold calling to big corporations ended with "we are not hiring right now"
Several of my friends, some with degrees in business, worked at Burger King after graduation
A big difference was that under Carter, the nation saw a mass production of poor quality good made in the USA. When the Japanese offered inexpensive cars which cost less to operate and lasted longer, the American auto industry suffered. It seems that Detroit just could not compete. After a while, Chrysler and GM upped quality and longevity of their product, Ford took a little longer, but today we have a different issue, as Cheap inferior goods are manufactured overseas, leaving Americans jobless and our market stilll flooded with cheap disposable low quality items, of which many people want but cannot afford.
The root cause of the problem is lack of consumer demand due to lack of good wages for average people due to years of declining wages since Reagan was president.
I agree with this 100%. Reagan appeared strong and had a lot of charisma, and that's what made people feel confident again.
But people give him much more credit than he deserves.
He was the best thing that ever happened to illegal aliens and Wall Street.
His "trickle down" economics hasn't "trickled down" so well.
You are confusing cash reserves held by companies vs. cash held by consumers. Companies have all-time highs in cash reserves because they are given gigantic tax breaks or in some cases paying no taxes at all. And this mainly only applies to large corporations, not little Johnny's corner store. The last poster was referring to the average American consumer who has record low amounts of cash. Demand amongst consumers has dropped way off because during the Bush years half of peoples' wealth was wiped out in the stock market and housing bubble. Also, manufacturing jobs that used to pay good wages were shipped overseas. Now average Americans have much less disposable income to spend on goods and services than the 80's. The lack of available credit has only compounded the problems for average people.
You say our economy is not all consumer demand driven. You couldn't be more wrong. It is all consumer demand driven. It makes zero sense for companies to invest in plants and equipment if there is no demand for their products.
Again, you are using the "uncertainty" excuse. Are you telling me there was certainty when Bush was in charge? Did things suddenly change when Obama took over? The uncertainty has been around forever. What if Henry Ford did not invest in his Ford plants because there was market uncertainty? That has got to be the worst excuse I've heard. The root cause of the problem is lack of consumer demand due to lack of good wages for average people due to years of declining wages since Reagan was president.
There is no confusion. Replace "cash" with "assets" or "capital"- the concept relates to consumers as much as companies. Mortgage rates are low, banks are willing to loan to those with good credit. A consumer invests as well - in houses, in education, etc. Some people are unemployed, yes, and some companies are in financial straights. But others are just in sit and wait mode - for consumers, it's wait...until they buy that house, until they buy that car, etc.
"Gigantic tax breaks or sometimes no tax at all...". Besides being an offtopic rant, it does not explain why businesses or people are not spending at all. Actually, we are getting into "what comes first the chicken or the egg" type comparison. Consumer demand is not fixed, it is based on elasticity. Drop the price - more demand, make a better mousetrap - more demand. Companies may have a demand for product, but they won't invest to create better demand - building that better mousetrap or increasing productivity. But it takes risk in investing in plants and machinery. And trust me, companies manage risk and uncertainty. My company (not an American company) hires buildings full of bean counters that analyze this and that metric and indicator and come up with forecasts - short term, long term, etc. They know EXACTLY what is happening in the economy. Every large company does. Market uncertainly can usually be leveraged and hedged, that's not a problem. So what's happening now that has most companies upset? I can tell you - 1.) Healthcare Reform came out of left field, and the change is so massive that companies have yet to know the full effect of it. It may have been the right thing to do, but it couldn't have come at a worse time. 2.) The slow recovery. My company predicted the recession, my company also accuratly predicted how long it would last, almost down to the month when the government metrics told us we were, per definition, out of it. What my company could not predict is the failure of the country to fully recover.
As a nation, we are in uncharted territory now. The models and charts that served us well before aren't working as good for companies anymore. Are they going to see some drastic anti-business regulation? Are new tax laws going to be enacted? They manage risk by holding cash, no investments in new ventures, even at the promise of increased wealth.
The economy during my childhood had been fairly good and there were no 'economic downfalls'. However , when I got married and started raising a family during the late 70's, 80's and early 90's things really started going up. The price of groceries was up ($3/gal milk) and mortgage interest was at 10%. We paid a lot of interest during those years.
Finally when we were able to really save and invest the interest rates dropped to 2.5 and 3%.....our retirement accounts and 401K's took a huge hit from 2001 to 2008, and gas was rising exponentially during that time.....
Luckily we learned to be frugal along the way, so the current recession has not hit us as hard as many.
Call me jaded, more educated or more informed, but the current recession for me doesn't hold the same 'optimistic and hopeful' dreams that I was able to hold during the 80's.
It is hard for me not to feel sorry for the young families that are just starting out this time...
In the early 80's housing kept the economy down due to high interest rates. Now they are at rock bottom but nobody can qualify. Then our major rival was Japan, with the Soviet Union in a supporting role, now it is China, and possibly India. I wonder how many of today's young people will even start families with such terrible conditions.
The economy during my childhood had been fairly good and there were no 'economic downfalls'. However , when I got married and started raising a family during the late 70's, 80's and early 90's things really started going up. The price of groceries was up ($3/gal milk) and mortgage interest was at 10%. We paid a lot of interest during those years.
Finally when we were able to really save and invest the interest rates dropped to 2.5 and 3%.....our retirement accounts and 401K's took a huge hit from 2001 to 2008, and gas was rising exponentially during that time.....
Luckily we learned to be frugal along the way, so the current recession has not hit us as hard as many.
Call me jaded, more educated or more informed, but the current recession for me doesn't hold the same 'optimistic and hopeful' dreams that I was able to hold during the 80's.
It is hard for me not to feel sorry for the young families that are just starting out this time...
It pretty much washed out my intended plans of being a programmer. For years after, the jobs intended for entree level or with a couple of years work went to those with five to ten. For much the same money in some cases, but companies were nervous and saved on the tech side. I learned about frugality and taking care of yourself, and not expecting what you couldn't count on. I'm sorry for the kids today, one of them is mine, but I also understand how while dreams and plans are great, you need plan B. Too many's plan B is to go home and live with mom and dad until they retire.
Hard fact of life is sometimes things don't work out how you expect, and when they don't you go something that works, not sit and complain. And you may not end up getting what you thought you'd be able to in the end, but that's just life.
Hard fact of life is sometimes things don't work out how you expect, and when they don't you go something that works, not sit and complain. And you may not end up getting what you thought you'd be able to in the end, but that's just life.
I hope it didn't sound like I was complaining. Just recalling those times and what it was like to be young and broke......I am a firm believer that everyone should go through lean times to appreciate the good!!
But I still empathize with what young families are facing.
I hope it didn't sound like I was complaining. Just recalling those times and what it was like to be young and broke......I am a firm believer that everyone should go through lean times to appreciate the good!!
But I still empathize with what young families are facing.
Having hard times if you use them to learn can be a very good lesson. I value everything I have, even if not as much as some, because its not just there to impress anyone. The young families struggling right now are going to see things differently from now on, and maybe the next time around, like for some of us. But in the moment it doesn't help too much. It's hard for parents who were raised with all the toys they wanted to say no to kids and feeling as if they are failing somehow.
But its a very good lesson, since if know what's really important, then you are equipped to handle the ups and down which will *always * be there. The best gift you can get is to live in the now and appreciate what good comes your way because you don't know if your dreams will come true, but if you missed the little moments then you missed so much more.
The best defense you can have against stuff messing with your life is simply believing that it can, so you don't assume the easy/best will just go on forever.
Really read what it says, the unemployment rate peaked for a few months only and part of that had to do wiith, what was referred to as RIf: reduction in force, which affected the federal govenment, not private industry per say. Yes, of course there were some cities hit hard, as there always are during bad economic times. But it wasn't coutry wide like you would want people to believe. Our daughter graduated from college in 1980 as did her husband. Neither of them had any trouble getting jobs...nor did any of thier friends.
As for bank closures, do you have any idea why they were closed? It wasn't directly due to any recession, it had more to do with them misusing funds and much of this happened later in the 80s.
you can believe what you want, but no, the recession in the early 80s was nothing like what we have experienced recently. The one thing that was a concern, high interest rates. Of course that was on long term loans, not on credit cards like we are experiencing today.
Economics is more in depth and not as simple as some would like to make it out to be. No one can blame Reagan for the problems. If it had continued for years and years, yes, but it did not and it goes back many years prior to his election. Recessions take years to develop.
You do not have to ask historians how the two compare, we already know, and the answer isn't what you want to hear or what you think.
The 1980 recession hit me hard. I had just built a new shop over the winter, and while 1980 was a good year once I was back up in full production, 1981 almost did me in. Out here in the intermountain west, recessions almost always arrive late, cut very deep and stay long. While the east seemed to recover after 2 years, it lingered here until 1985, and my area did not go back to pre-1981 levels until 1986.
You are correct; Reagan inherited problems that were long standing and pre-dated his term by many years. The same things are true with Obama, as they were with Reagan.
You are also correct about the differing causes of these two recessions. The 1980 recession was not the only one between then and now; there was another in 1990 that was as sharp and brief as the one in 2000, when the dot com bubble burst.
Going back much further, the recession of 1890 was as severe as the Great Depression. Each has had it's own causes, and each has resulted in laws and actions designed to curb the causal problems, but there is always a new unforeseen bubble that bulges up, sometime, somewhere.
The biggest difference I see between 1980 and the present is the depth and scope of the present one. 1980's problems were mostly just ours alone, but 2008 hit most of the developed world.
While the Great Depression had many different factors- Europe's depression came partly from different causes than ours- the effects continued to reverberate for over 10 years. 2008 had fewer causal factors, but those factors were shared by far more countries, and I think the repercussions will take at least 10 years to level out.
Both are like yelling "Where are you?" into a canyon. 10 other people yelling back "Here I am!" is nothing but a cacophony that echoes and echoes, and nobody knows where they are.
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