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Stocks pile on losses amid worries on economy

Goldenboy219 said:
These types of posts always frustrate me. Not because the thinking employed makes any sort of economic sense, but because people try to make points based on a limited (at best) understanding of inflation.

Consumer preferences change from time to time; the % of expenditures allocated towards gasoline has decreased since 1978. Which means your reference to 1978 is meaningless.
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Whistling past the graveyard won't work either.

j-mac
 
AdamT said:
You always seem to assume that things could not be worse.
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How is that different than your assumptions?

Unemployment is high, so the stimulus didn't do anything. Well, it did. Unemployment would be higher without it. Economic activity is low, so QE has not worked. Well, it has. If interest rates were high businesses would be in that much more trouble, and the real estate industry would be in even worse shape.
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If my neighbor is out of work and I take my life savings and give it to the manager of Burger King to hire him and he does, was that successful?

Unfortunately the government only has so many cards it can play -- particularly when reserves have been frittered away during good times. Here the government has done enough to lift us out of recession, but not enough to give the private sector momentum to keep growing without government stimulus.
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We are headed back in the other direction. What it did was temporary. It didn't work under Carter and it's not going to work under Obama.
 
Goldenboy219 said:
These types of posts always frustrate me. Not because the thinking employed makes any sort of economic sense, but because people try to make points based on a limited (at best) understanding of inflation.

Consumer preferences change from time to time; the % of expenditures allocated towards gasoline has decreased since 1978. Which means your reference to 1978 is meaningless.
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My response was concerning how we measure inflation. It wasn't a comment on one single item. How does the fact that we measure inflation in a different way today than we did in 1978 skew my understanding of inflation?
 
If my neighbor is out of work and I take my life savings and give it to the manager of Burger King to hire him and he does, was that successful?
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Depends on the context. What are the alternatives, assuming that your neighbor can't find any other work?

1. Do nothing for him so that he eventually runs out of money and winds up homeless or on publica assistance;

2. Pay him to do nothing while his skills erode and he becomes less employbable by the day, or

3. Help someone who can use the help employ him -- a one-time cost after which your neighbor will be self supporting and the BK will be more profitable.

I'd say that option No. 3 is the best option.

We are headed back in the other direction. What it did was temporary. It didn't work under Carter and it's not going to work under Obama.
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It's a different situation than Carter was in. Here the stimulus was too small given the magnitude of the recession.
 
AdamT said:
Depends on the context. What are the alternatives, assuming that your neighbor can't find any other work?

1. Do nothing for him so that he eventually runs out of money and winds up homeless or on publica assistance;

2. Pay him to do nothing while his skills erode and he becomes less employbable by the day, or

3. Help someone who can use the help employ him -- a one-time cost after which your neighbor will be self supporting and the BK will be more profitable.

I'd say that option No. 3 is the best option.
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All of those are great options but not the point when you exclude the idea that my life savings is gone.

It's a different situation than Carter was in. Here the stimulus was too small given the magnitude of the recession.
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Opinion noted.
 
1Perry said:
All of those are great options but not the point when you exclude the idea that my life savings is gone.
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I guess I would say that your life savings would have been a lot more substantial if you had been better at saving (i.e., hadn't handed out massive tax cuts that weren't paid for and fought two wars that weren't paid for).
 
1Perry said:
The problem is, the theories are not working. The reason they are not working is because the underlying foundation is screwed up. Despite these low rates people are not taking advantage of them. Many that would have otherwise refinanced have done that long ago or they are in a situation where they can't.

The Fed has screwed the pooch with their actions over the, well I'll say 15 years.

Yes, I would say that the psychological effect of higher rates would help the economy right now. Seniors would have more money and hopefully could drop back out of the job market freeing up jobs. Less money would be going into commodities making things more affordable, freeing up money for other things. The dollar would improve which has a psychological positive effect on people.

Yes, we should quit giving money away.

It would initially be bad for Wall Street which is why we don't do it.
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Rebolded part
More along the lines of 30 years, with a higher level being done in the 90s and 2000's

As for higher rates

They would be a double edged sword to say the least. Seniors holding secure bonds would of course be ok, but take a look at those who would be hurt by higher interest rates

The various governments with debt (nearly all)
Home owners. Higher interest rates would see housing prices decrease even more, as carrying costs increase
People with debt that will be reset in a short period of time

Low interest rates are not stimulating the economy much because people are trying to reduce debt in general. Higher interest rates would further negatively impact that aspect of the economy. Creditors would be helped up untill the point of their debtor defaulting
 
AdamT said:
I guess I would say that your life savings would have been a lot more substantial if you had been better at saving (i.e., hadn't handed out massive tax cuts that weren't paid for and fought two wars that weren't paid for).
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Or if the government had:

not paid out billions to keep union workers happy....

not paid out billions so people could buy new vehicles that got 3 more mpg than the one they had that ran perfectly well.....

not paid out billions to fight in a third war that we have no business in.
 
Lord Tammerlain said:
Rebolded part
More along the lines of 30 years, with a higher level being done in the 90s and 2000's
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O.K. but the point is this has been a long time building. It's not any one persons fault but the fault of many. It seems we agree there.

As for higher rates

They would be a double edged sword to say the least. Seniors holding secure bonds would of course be ok, but take a look at those who would be hurt by higher interest rates

The various governments with debt (nearly all)
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They've knew this while burying themselves in debt. The solution for some is to add more and more debt. You don't fix a problem by multiplying it. I have a hard time feeling bad for the entity that gives an alcoholic a bottle of booze and then gets upset when they puke on their shoes.

Home owners. Higher interest rates would see housing prices decrease even more, as carrying costs increase
People with debt that will be reset in a short period of time
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Rather than pump Wall Street full of money we could have helped main street instead. We made it so Wall Street could get cheap money which they used to run up commoditites. I'm not a big fan of government interference BUT we would have done far, far better if we would have concentrating our actions on housing as opposed to Wall Street.

We could have created a program that would have allowed rates to rise while still providing low rates for those wanting to buy a house. As it is now, we didn't address any of the problems. We've already agreed that Wall Street gave a big F**K you to those who thought they would use the money to hire. I'm still at a loss as to why anyone thought they would hire before the need was there, but eh whatever. Housing still sucks and Wall Street is crying for more taxpayers intervention.

Low interest rates are not stimulating the economy much because people are trying to reduce debt in general. Higher interest rates would further negatively impact that aspect of the economy. Creditors would be helped up untill the point of their debtor defaulting
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Debtors already have the low rates. Granted, and we are simply putting this off for future drags on the economy, granted those with variable rates would be hurt. A few years ago someone argued that banks were using fraud, deciet, slight of hand and outright lies to put people into these more profitable loans. I argued that people should know what they were signing. I was proven wrong on that point.

Banks indeed did manipulate things to get people into these loans. They should have been forced to lock in the rates where they were at.
 
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1Perry said:
O.K. but the point is this has been a long time building. It's not any one persons fault but the fault of many. It seems we agree there.



They've knew this while burying themselves in debt. The solution for some is to add more and more debt. You don't fix a problem by multiplying it. I have a hard time feeling bad for the entity that gives an alcoholic a bottle of booze and then gets upset when they puke on their shoes.


Rather than pump Wall Street full of money we could have helped main street instead. We made it so Wall Street could get cheap money which they used to run up commoditites. I'm not a big fan of government interference BUT we would have done far, far better if we would have concentrating our actions on housing as opposed to Wall Street.

We could have created a program that would have allowed rates to rise while still providing low rates for those wanting to buy a house. As it is now, we didn't address any of the problems. We've already agreed that Wall Street gave a big F**K you to those who thought they would use the money to hire. I'm still at a loss as to why anyone thought they would hire before the need was there, but eh whatever. Housing still sucks and Wall Street is crying for more taxpayers intervention.



Debtors already have the low rates. Granted, and we are simply putting this off for future drags on the economy, granted those with variable rates would be hurt. A few years ago someone argued that banks were using fraud, deciet, slight of hand and outright lies to put people into these more profitable loans. I argued that people should know what they were signing. I was proven wrong on that point.

Banks indeed did manipulate things to get people into these loans. They should have been forced to lock in the rates where they were at.
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Re Bolded part

I generally agree

However, to cure the problem will make everyone very sick for a period of time, instead of slightly ill for an extended period of time. Ideally the US (and other countries) would never have gotten into so much debt in the first place
 
AdamT said:
I guess I would say that your life savings would have been a lot more substantial if you had been better at saving (i.e., hadn't handed out massive tax cuts that weren't paid for and fought two wars that weren't paid for).
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I'm all for ending all three wars.
 
Lord Tammerlain said:
Re Bolded part

I generally agree

However, to cure the problem will make everyone very sick for a period of time, instead of slightly ill for an extended period of time. Ideally the US (and other countries) would never have gotten into so much debt in the first place
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No, we can not fix this in short period of time. We can not fix this by taking from those who were harmed and giving it to those who did the harm.
 
Gill said:
Or if the government had:

not paid out billions to keep union workers happy....

not paid out billions so people could buy new vehicles that got 3 more mpg than the one they had that ran perfectly well.....

not paid out billions to fight in a third war that we have no business in.
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Actually the deficit would have been worse if GM and Chrysler had gone belly up, putting over a million people out of work at the height of the recession.

Hybrid tax credits aren't even a rounding error in the budget.

Likewise, the Libya conflict is a relatively minor expense, whether or not you agree with it.
 
1Perry said:
No, we can not fix this in short period of time. We can not fix this by taking from those who were harmed and giving it to those who did the harm.
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I would tend to agree, but if those that did the harm default they will do even more harm

High interest rates for your savings are meaningless if the capital is being destroyed as the debt gets defaulted on
 
Meanwhile, in case y'all didn't notice, the markets are still plunging. Congress squabbling over whether we can reduce the defict by $3 or $4 trillion dollars over 10 years ... and the markets have shed $4.5 trillion in the past two weeks....
 
Wow, today the Dow wen from up 150 points, to down 180 points, and then in about 10 minutes, to down only about three points. Strange days indeed.
 
AdamT said:
Meanwhile, in case y'all didn't notice, the markets are still plunging. Congress squabbling over whether we can reduce the defict by $3 or $4 trillion dollars over 10 years ... and the markets have shed $4.5 trillion in the past two weeks....
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How are the stocks of TEA companies doing?
 
And then, in about three minutes, back down 80 points! :shock:
 
AdamT said:
Actually the deficit would have been worse if GM and Chrysler had gone belly up, putting over a million people out of work at the height of the recession.
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Indeed but there is no reason it had to happen. Airlines have exited from Bankruptcy to do fine.

Hybrid tax credits aren't even a rounding error in the budget.

Likewise, the Libya conflict is a relatively minor expense, whether or not you agree with it.
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All of these thousands of relatively "minor" things add up.
 
The airlines went through Chapter 11 reorganization -- not Chapter 7 liquidation. Big difference.
 
Lord Tammerlain said:
I would tend to agree, but if those that did the harm default they will do even more harm
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Fine, but they are now making record profits. Why are we still eating their bad debts?

High interest rates for your savings are meaningless if the capital is being destroyed as the debt gets defaulted on
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"Default" has been used as a scare tactic.
 
AdamT said:
The airlines went through Chapter 11 reorganization -- not Chapter 7 liquidation. Big difference.
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Of course. There is no reason the auto companies couldn't have done the same.
 
Without doubt, bad policy has contributed to the market losses. Specifically, the political dysfunctionality demonstrated in Washington and the lack of credible fiscal consolidation program has reinforced concerns that the U.S. is either unwilling or unable to take necessary policy decisions to tackle its big challenges. But the problem is broader than that. There is a structural flaw in the nation's economic model that is increasingly being exposed: overreliance on leverage. PIMCO CEO and Co-
CIO Mohamed El-Erian succinctly describes the problem in a CNBC piece:

"The key challenge is how to safely delever Western economies that became too dependent on credit and debt," El-Erian said. "You need growth. Unfortunately there are too many structural impediments to growth."

..."We didn't solve the medium-term fiscal issues. In fact we made it worse," he said. "There are significant structural impediments. Until we see structural solutions out of Washington, (slow) growth will not allow us to delever fast enough."
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News Headlines

The ratio of domestic nonfinancial debt to GDP vividly illustrates the overdependence on leverage:

1980: 1.418
1990: 1.868
2000: 1.825
2010: 2.486

These numbers show that for every dollar of GDP, there was $1.418 in domestic nonfinancial debt in 1980. In 2010, there was $2.486 in domestic nonfinancial debt for every dollar of GDP. Put another way, every dollar of GDP growth in the 1980-2010 was accompanied by an increase of $2.740 in domestic nonfinancial debt. In the 2000-10 period that coincided with the dramatic run-up in the housing bubble, every dollar of GDP growth was accompanied by a $3.923 increase in domestic nonfinancial debt.
 
AdamT said:
Wow, today the Dow wen from up 150 points, to down 180 points, and then in about 10 minutes, to down only about three points. Strange days indeed.
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There is a partial fix for this. Tax trades. It would accomplish two goals. It would slow volatility and "tax the rich".
 
1Perry said:
Of course. There is no reason the auto companies couldn't have done the same.
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Yes, there is a reason. They didn't qualify for Chapter 11 without government assistance.
 
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