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Thread: The recession may be over at last so what now? [edited]

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    re: The recession may be over at last so what now? [edited]

    TD and Goobie:

    The state of the economy is mired by a full employment GDP gap, signaling an imbalance in the macro economy. Because we are considering the moment, and immediate future, it does justice to use a short run analysis where aggregate demand determines output (GDP). Due to the fact that prices in the short run are sticky, we are witnessing a discrepancy in what the market wants (falling demand leading to falling supply), and what reality dictates (people do not want their wages, assets, etc... to fall to equilibrium).

    So we have a couple options. The first is that we allow prices to fall and the market to self correct. Sounds good, but what does that encompass exactly? High unemployment (not 10%, more like 20%-30%) where firms downsize, capital investment diminishes (high savings and interest rates), assets devalue (to attract buyers); which will cause the dollar to appreciate leading to greater purchasing power (it cost less dollars to purchase the same goods). Now you might say, "yeah, that sounds good", but does it really? If you own a home, it is now worth less than a year ago. As unemployment climbs, people will be willing to work for less (decreased wages). Borrowing money is now expensive because people/businesses are worried (higher interest rates). So now not only do we begin to experience lower wages, higher interest rates, and devalued assets, the majority of the economy still has a plethora of fixed cost obligations regardless of market sentiment (mortgages, credit cards, auto loans, business loans, health care, education costs, etc...)

    To put it simply, everyone will suffer.

    The alternative? The government runs deficits and begins to apply policies that will positively shift demand (stimulus, specifically government spending not tax rebates). In accordance, central banks go against market sentiment and begin flooding the financial system with liquidity thereby lowering interest rates and preventing a race to the bottom in asset prices (money is not scarce now). Inflation (higher prices) is sought as a way to cure falling asset prices (deflation) because costs in the short term are "fixed". As the psychology of markets leans towards optimism, prices will begin to rise (a signal of naturally improving demand) and these higher prices will attract producers to hire more workers which is necessary to increase production, in accordance with increasing capital spending (business investment) which is interest rate sensitive.

    Once we see consecutive quarters of positive GDP growth, higher employment, greater lending, more monetary velocity; central banks will begin the necessary steps in draining excess liquidity, thereby raising rates (carefully). In accordance, the federal government (with careful timing and consideration) begins raising taxes on in a temporary fashion (to ensure the Ricardian equivalence holds).

    All in the short run. We are now beginning to see real signs of improvement. There might be some more bumps in the road, but that is to be expected when "animal spirits" are released.

    However in the long run, real growth is primarily a function of increased productivity via technological progress. In the long run, it is aggregate supply that determines real output (GDP).
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    re: The recession may be over at last so what now? [edited]

    3.5 is good, but i wouldn't say "the recession is over" quite yet

    at least, not in public

    america might fling fungoid fruit at you

    by all accounts, the 3.5 is artificially inflated by 1.6% augmentation in the auto market, "stimulated" by a clunky contrivance which, now that it's concluded, leaves behind a DOWNWARD impetus on car sales

    hundreds of thousands of consumers even contemplating an auto purchase in the foreseeable future just drove it home in july and won't be shopping for chevys again for years

    the future of the car industry looks bleakly foreboding now that the artificiality is exhausted

    the 8% tax credit for new home buyers is another inflater underlying the 3.5, still foreclosures are at an all time high

    Foreclosures hit record in third quarter 2009 - Oct. 15, 2009

    realtytrac also sees a sad prospectus---"the fastest growing area is in the 180-days late category, the most seriously delinquent borrowers, it's going to be a lingering problem"

    i wouldn't inform those folks flung out of their flats that the famine is finished, even were i flaunting full pads and a football helmet

    consumer confidence has also crashed

    Worsening job picture fuels slide in confidence - Yahoo! Finance

    THAT's the united states economy---no confidence

    the stimulus, which was reported earlier this month to have "saved or created" a piddly 38000 jobs, is reported today to have overestimated even that measly sum by some 13%

    My Way News - Stimulus jobs overstated by thousands

    finally, where rubber meets road---JOBS

    new claims rose by 530,000 in the WEEK ending 10-24

    Initial jobless claims drop less than expected - Oct. 29, 2009

    and we're experiencing a deep psychological, depressive freeze on hiring in the form of discomfiting fears of fines, mandates, taxes, enfolded in cap and trade, health care...

    3.5% is a pretty number, but i'm afraid it's a statistic too abstract for americans with bellies that are substantial

    politics is in the gut, not the head

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    re: The recession may be over at last so what now? [edited]

    What jobs? You mean the ones increasing the size of the federal government?

    J.P. Bill
    Last edited by bridge buff; 10-30-09 at 12:01 AM.

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    re: The recession may be over at last so what now? [edited]

    Quote Originally Posted by Hatuey View Post
    signals end of recession, till the end of the 1st Quarter.
    Cash for Clunkers gives us good numbers this time.
    The Cash for appliances and Halloween, Thanksgiving, and Christmas will make Quarter 4 look at least decent.
    Quarter 1 will tank again.
    From the ashes.

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    re: The recession may be over at last so what now? [edited]

    Quote Originally Posted by dontworrybehappy View Post
    Well based on the fact that his crash for crunklers thing gave a false boost to the economy while yet increasing our debt even more.....yes, he will the focal point.

    Hell, when Bush had 4.5% unemployment and a steady growth of 3.5% he was stated as being a bad president. That's starting to look like gold bricks to this idiot in office now.
    You forget he inherited this mess {sarcasm}
    From the ashes.

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    re: The recession may be over at last so what now? [edited]

    Quote Originally Posted by Phoenix View Post
    signals end of recession, till the end of the 1st Quarter.
    Cash for Clunkers gives us good numbers this time.
    The Cash for appliances and Halloween, Thanksgiving, and Christmas will make Quarter 4 look at least decent.
    Quarter 1 will tank again.
    Thats what one of the talking heads indicated on joe scarborough this AM. Another dip is on the way, says he.

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    re: The recession may be over at last so what now? [edited]

    Quote Originally Posted by Redress View Post
    I hope you are wrong, but suspect that there is definitely more storm coming. This report is good news, but it is hardly proof, or even evidence, that we are out of the worst of things. Unemployment, which is the top measure of how well the people are doing, is going to stay bad for awhile yet.

    We'll have to mark this one down Red.....I agree.....


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    re: The recession may be over at last so what now? [edited]

    Quote Originally Posted by bridge buff View Post
    What jobs? You mean the ones increasing the size of the federal government?

    J.P. Bill
    A distinct possibility.


    source

    Huge government job growth ahead
    Posted Sep 03 2009, 11:08 AM by Kim Peterson Rating: Filed under: Kim Peterson
    The Obama administration is taking on so many issues -- out of ambition or necessity -- that it must hire 270,000 over the next three years for critical jobs, the Washington Post reported.

    The jobs fall into five main categories: medical, security, law enforcement, legal and administrative. And they are needed as the government tackles everything from climate change to financial recovery to fighting two wars. A think tank came up with the jobs total after studying 35 federal agencies.

    Bing: How to get a federal job


    If you include all jobs -- not just the "mission-critical" ones -- the government will have to hire some 600,000 people during the four years of President Obama's term. That would bump up the current workforce by a third.

    Is this crazy, or simply a result of these unusual times? The Post reports that the ongoing wars in Iraq and Afghanistan are resulting in major expansion at the Department of Veterans Affairs. That department will need to hire 48,000 in the next three years, including 19,000 nurses and 8,500 doctors.

    The Department of Homeland Security is also planning to hire big numbers.

    The Post points out that the federal payroll amounted to only .66% of the U.S. population last year, which is actually a decrease from 1970. But that doesn't include the ballooning number of government contractors that previous administrations have hired in attempts to privatize some work.....

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    re: The recession may be over at last so what now? [edited]

    Quote Originally Posted by Goldenboy219 View Post
    The state of the economy is mired by a full employment GDP gap, signaling an imbalance in the macro economy.

    Because we are considering the moment, and immediate future, it does justice to use a short run analysis where aggregate demand determines output (GDP).

    So we have a couple options. The first is that we allow prices to fall and the market to self correct...To put it simply, everyone will suffer.

    The alternative? The government runs deficits and begins to apply policies that will positively shift demand (stimulus, specifically government spending not tax rebates).

    In the long run, it is aggregate supply that determines real output (GDP).
    This was very interesting. I have a couple of questions.

    First is that you say that in the short run, aggregate demand determines output, but in the long run, aggregate supply that determines real output. Could you talk about that difference a little bit?

    Second is that while we have deficit spending and stimulus, my understanding is that most of the stimulus is yet to be spent. So how much deficit spending and stimulus has there been so far and how much impact has it had supporting demand (I think that is what you said it does).

    My point is how much of this "market recovery" (not unemployment recovery yet) is due to govt spending and how much is natural cycle correction?

    Thanks!

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    re: The recession may be over at last so what now? [edited]

    Quote Originally Posted by Goldenboy219 View Post
    The alternative? The government runs deficits and begins to apply policies that will positively shift demand...
    ... whch will then have any number of other terrible effects.
    To put it simply, everyone will suffer.

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