More peachy economic news

This is bad, no?

P.S. And this...

Comments

[Mad Max, Esquire]

Not to mention the $1.5 trillion war in Iraq.

[dcl]

oui.

[gahrie]

Am I the only one that noticed the "within a decade" line?

The first article had nothing to do with the current economy in the U.S., and everything to do with the long term economic prospects ogf the U.S. Moody's is expressing concern about the rising tide of entitlement obligations, and the unwillingnesss of Washington D.C. to deal with the structural deficencies of Social Security and Medicare.

The second article is anticipating a recession. Anyone who knows anything about economics knows that recessions are normal, and many believe necessary to long term economic health. (They prevent depressions)

And if you were reading too quickly, you would have noticed the one piece of good news the article mentioned...but couldn't have de-emphasised more. ("Oil prices were pressured by gains for the dollar against the euro and pound")

If you look at where our economy was in Aug 0f 2001, then where it was after 9/11, and then where it is now; it is quite clear that the American economy is fundamentally strong and sound. If we are entering a recession, odds are it will be (by historical standards) shallow and short.

[gahrie]

Just for the hell of it, for all of you screaming that "the sky is falling" with regard to the U.S. economy:

1) What would you consider good unemployment figures? (note that current unemployment numbers were once considered optimal)

2) What would you consider good inflation numbers?

3) What would you consider good growth numbers for the US GDP?

4) What would you consider good decline in the US trade inbalance?

5) What would you conider good numbers for the growth of exports?

Note, that I am asking for "good numbers", not "optimal numbers". (even though current numbers in some of these categories were considered optimal not too long ago)

[jlr]

Look, the country has been headed for a recession for a while now. Unfortunately, this looks like a regular market adjustment--things will be tough for a little while, and then they'll get better again. Welcome to free market economics.

I'm just glad that as long as there are kids to educate, I'll have a job...

[Mad Max, Esquire]

I don't know if the recession will be short or shallow. We have some fundamental problems facing this economy that we haven't seen in a long-time (or before) happening at the same time:

1. Historically weak housing market. The sub-prime debacle has already resulted in housing prices experiencing the greatest decline since the Great Depression. There is no way people who took out interest-only ARMs are going to suddenly be able to afford a Traditional 30-year mortgage, no matter how low the rates go. Housing is going to get worse over the next year or so.

2. Weak dollar. I don't think I've ever seen the dollar this weak. It is so weak that countries like China are toying with switching over to Euros. Any effort to lower interest rates to help the housing market will further weaken the dollar and America's standing in the world economy.

3. Oil. I don't know how many of you remember the late 70s, but they were a bitch economically. This was due in part to oil being at historic highs (which we are about to be reached again). Yes, high tax rates and price controls were a big problem then, but high energy costs are putting inflationary pressure into the economy at the time the economy is cooling off. I'm not sure we will get to stagflation, but higher energy reduces our options to act.

4. The war. War is usually good for the economy, but not this time. It has become an unplanned long-term obligation with no end in sight. While this is good for defense stocks, it is bad for pretty much everything else.

5. Government spending. Under George W. Bush's "conservative" leadership, the U.S. has increased Federal spending by the largest amount since the Great Society. This happened primarily under a Republican Congress. When Bush entered office with a $1 trillion surplus he had the opportunity to save Social Security with the much maligned "lock box." Instead, he gave tax cuts to Ken Lay and Bernie Ebbers. That's really worked out, hasn't it?

[Mad Max, Esquire]

Oh, and before you guys start bragging about Bush's tax cuts helping the economy, the economy has been driven by the speculative bubble in housing. The people who are now facing foreclosure on their houses pulled out the equity in 2004 and 2005 and went on a spending spree. Now that those people are facing bankruptcy, there isn't much on the horizon to spur consumer spending - even another tax cut.

[Joe Mama]

Hehe . . . the sky sure isn't falling for us first time home buyers! Everytime I'm considering making an offer on a house, the asking price drops another $20K. Woohoo!

[gahrie]

1) Housing prices were artifically inflated. People who behaved irresponsibly (both banks and individuals) are going to be hurt. I have trouble feeling sympathy.

2) Your a couple of months late. The dollar has been gasining on the pound and euro lately. The second link in the original post confirms this. Besides a "weak' dollar helps increase exports and reduce the trade deficeit.

3) Yes the price of oil is high. However, when adjusted for inflation, it is still affordable. And even with the rise in the cost of oil and food, inflation is at normal rates.

4) The war has had no effect on our economy. Defense spending is a small fraction of overall government spending.

5) I agree that government spending is a long term problem. I disagree with your attempted assertion that the republicans are the problem. I do agree however that they were not the solution like they should have been.

6) Bitching about the economy is easy. It also happens every ptresidental election year that the president is Republican. ( don't believe me...go back and check)

If you think the current economy sucks...what economy are you looking for? Try answering my questions a couple of posts above this.

[Mad Max, Esquire]

gahrie-

Your questions are irrelevant. I don't think anyone is saying we are in a recession now. They are saying trends in the economy now point to recession sometime this year.

As for your replies:

1. I don't feel sorry for these people either. However, the collapse of the sub-prime market is impacting the entire housing market. People like me who would normally sell at this time aren't doing it. As a result, we aren't buying, either. This is stagnating the entire market which ripples through the construction and banking industries resulting in broader implications for the economy.

2. The dollar is still weak, hence the record flight to gold as a safe haven. The impact of the weak dollar on exports and the trade imbalance have been insufficient to offset the impact of the low dollar on rising oil prices (oil is traded in dollars, which is fueling the record increase in prices).

3. Adjusted for inflation, oil is now trading in the range it was during the energy crisis of the 70s. Inflation has been at normal rates be we are starting to see record spikes in wholesale prices as the cost of oil is making its way into prices.

4. The war has had no effect on the economy? Are you kidding me? What do you think is behind the high oil prices?

5. Republicans have been fiscally irresponsible. We went from a $3 trillion deficit to a $9 trillion deficit on their watch. The numbers don't lie

6. That is a bizarre statement. So you are saying that the recessions of 92, 82, 74, etc, were just made up because Republicans were running?

[yea]

it seems like the republican solution to the deficit is to further decrease taxes on the wealthy and increase funding for the war on terror. maybe im missing something.

Economics isn't science. You people who think there are rules and laws to economic phenomenon are fools.

[Sandy Underpants]

The Republican solution is to ignore the evidence and continue to spout the party line. They'll keep telling us everything is great right up until Hillary is sworn in and then it will all come crashing down and the Democrats will take the fall, January '09. At least we'll start hearing most of the truth for once.

[Mad Max, Esquire]

"Economics isn't science. You people who think there are rules and laws to economic phenomenon are fools."

ec·o·nom·ics /ˌɛkəˈnɒmɪks, ˌikə-/ Pronunciation Key - Show Spelled Pronunciation[ek-uh-nom-iks, ee-kuh-] Pronunciation Key - Show IPA Pronunciation
–noun

1. (used with a singular verb) the science that deals with the production, distribution, and consumption of goods and services, or the material welfare of humankind.

[gahrie]

As I have said before, recessions are a normal part of the economic cycle. We should welcome them, they are innoculations against depression.

Crying doom and gloom about the economy is a self fulfilling prophecy. The more the MSM plays up the story, the more people react to it by reducing their spending, which then produces the downturn in he economy that was forecasted. I am saying that recessions can be, and are, caused by exactly the type of behavior from the MSM we are seeing.

No one started talking about how bad the economy is until they were no longer able to spin the news from Iraq as doom and gloom. Notice there is no more discussion of Iraq from the MSM and the the Left?

Today's inflation and employment numbers were once considered optimal. Not good, optimal. Poverty is at such an all time low, they have to keep redefining what it means to be poor.

The only thing wrong with the economy is that it is an election year.

[Mad Max, Esquire]

March 16, 2001 | It's a laissez-faire neoconservative's worst nightmare. Just as Republicans take over the presidency, the economy hurtles into free fall, with consumer confidence levels and stock prices racing each other downward in an ever-accelerating plummet. And suddenly, after months of bad-mouthing the economy and claiming that the '90s boom had nothing to do with Clinton administration policies and everything to do with entrepreneurialism, George W. Bush and his aides find themselves in the unlikely position of having to admit that "good public policy" may be necessary to avoid a recession.

What does that post have to do with anything?

[Joe Mama]

I don't think anyone is saying we are in a recession now. They are saying trends in the economy now point to recession sometime this year.

Yeah, partisan hacks like Paul Krugman have been using that one for a while now:

"[R]ight now it looks as if the economy is stalling..." — Paul Krugman, September 2002

"We have a sluggish economy, which is, for all practical purposes, in recession..." — Paul Krugman, May 2003

"An oil-driven recession does not look at all far-fetched." — Paul Krugman, May 2004

"[A] mild form of stagflation - rising inflation in an economy still well short of full employment - has already arrived." — Paul Krugman, April 2005

"If housing prices actually started falling, we'd be looking at [an economy pushed] right back into recession. That's why it's so ominous to see signs that America's housing market ... is approaching the final, feverish stages of a speculative bubble." — Paul Krugman, May 2005

"In fact, a growing number of economists are using the "R" word [i.e., "recession"] for 2006." - Paul Krugman, August 2005

"But based on what we know now, there’s an economic slowdown coming." - Paul Krugman, August 2006

"this kind of confusion about what’s going on is what typically happens when the economy is at a turning point, when an economic expansion is about to turn into a recession" - Paul Krugman, December 2006

"Right now, statistical models ... give roughly even odds that we’re about to experience a formal recession. ... [T]he odds are very good — maybe 2 to 1 — that 2007 will be a very tough year." - Paul Krugman, December 2006

Heh.

[Alasdair]

Joe Mama - perhaps if we do get a President Obama (or Hillary), Krugman will finally get to have one of his Doom and Gloom articles actually be accurate ...