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Why is America's economy still in such bad shape?

it's in bad shape because people that we need to become consumers cannot become consumers because the jobs that constituted the lower to middle rungs of the ladder were exported. this socioeconomic segment can only just afford discount products made by those exported jobs. so now they have minimized purchasing power, and climbing the ladder has become increasingly difficult due to those missing rungs.

the imported energy / imported everything for "cheap" model has failed.
 
Antiderivative said:
The economy is lagging due to two main reason:

(i) Uncertainty. Uncertainty is pervasive throughout the economy; businesses are reluctant to hire and invest consumers are reluctant to spend. This uncertainty is primarily stemming from Washington.

(ii) We are applying short-term solutions to a long term problem. We experienced a severe economic catastrophe, but our solution to the problem was short-sighted. While some say that the stimulus plan is an "investment" into our economy, it is not. Investment is the creation of new capital (physical or human capital). Very little of the stimulus bill went towards the creation of new capital. Instead, it was mostly comprised of tax cuts and welfare benefits. Tax cuts and welfare benefits do not necessarily create new capital. When this administration found out that their short-term solutions didn't work, what do they do? The keep passing other measures of tax cuts and welfare benefits. It is insanity.

I also personally think that the market needs to liquidate the malinvestment and let prices drop, especially in housing. However, I am a realist and don't expect Washington and the Federal Reserve to support any deflationary policy, even a mild one. Most economists view deflation as a black hole and have this overwhelming and unnecessary fear it.
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Deflation is unquestionably bad for one segment. Wall Street. That is why they fear it. I agree that a bit of deflation is not going to hurt nearly as much as the screwed up solutions we have came up with.
 
megaprogman said:
The root issue is that due to stagnant/declining middle class wages, people don't have as much to spend. We certainly kept the illusion going for a few decades though.
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Exactly. We kept up the illusion by consumer borrowing and improvements in technology.
 
Bob Blaylock said:
Suppose you have a good-paying job, and you're living a lifestyle that your income can barely support. Perhaps you're on the edge as it is, borrowing money to live just a bit beyond your income.

Then you lose your job, and end up taking a minimum wage job in its place, making nowhere near the income you were before.

On noticing a decline in your ability to pay your bills, you decide to take drastic action, in the form of going all out and buying a new car, a new flatscreen TV, a new computer, and all sorts of other stuff you don't really need, and probably couldn't have afforded on your previous income.

And now, you're scratching your head, wondering why, your financial situation has become worse rather than better.

That's what Obama and his lackeys did to this nation's economy.
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Your analogy does not accurately depict our economic reality. Furthermore, the analogy does not take into account how effective costs of borrowing have decreased. When a "person's" income falls, their ability to borrow is reflected in the cost of borrowing (interest rate). What has been observed in the past three years is this; the effective cost of borrowing during this recession has went down.

There are external factors at work which incentivize public debt expansion during periods of economic stagnation/loss. Failure to recognize the problem (lack of demand) because you are so displeased with a particular symptom (debt expansion) misses the forest for the trees.

At a time when our situation was already in bad shape, they went on an outrageous, irresponsible spending spree, that we couldn't have afforded even before the economy turned downward. So now, the economy is even worse, and those fools who supported him can't figure out why.
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The economy is certainly not "even worse" as evident by the rate of change of monthly employment being positive.

The best hope for this nation and its economy is that in 2012, we'll put the nation's checkbook and credit cards back in the hands of grown-ups, who will treat them with some degree or responsibility and restraint.
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Sure... if you believe our government should be managed in the same manner of a family, in which a family's finances are constrained. However, the constraint is not equivalent which renders your entire argument as fallacious.
 
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Helix said:
it's in bad shape because people that we need to become consumers cannot become consumers because the jobs that constituted the lower to middle rungs of the ladder were exported. this socioeconomic segment can only just afford discount products made by those exported jobs. so now they have minimized purchasing power, and climbing the ladder has become increasingly difficult due to those missing rungs.

the imported energy / imported everything for "cheap" model has failed.
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Very well said!
 
1Perry said:
Deflation is unquestionably bad for one segment. Wall Street. That is why they fear it. I agree that a bit of deflation is not going to hurt nearly as much as the screwed up solutions we have came up with.
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Think about the impact of deflation on a large scale debtor nation like the U.S. The administration and the Fed are doing everything they can to devalue our dollar to import inflation. If only the Europeans were not so screwed up we would be well on our way.
 
washunut said:
Think about the impact of deflation on a large scale debtor nation like the U.S. The administration and the Fed are doing everything they can to devalue our dollar to import inflation. If only the Europeans were not so screwed up we would be well on our way.
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That allows them to not concern themselves much over debt. The answer is less debt, not negate it with inflation.
 
1Perry said:
Doing the same thing over and over that isn't working now. What's the point of trying to make interest rates lower and lower, even though that will cause it's own problems when there is no desire for this money?
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Not only no desire...the banks wont LEND IT...they have made the criteria to get a loan impossible but for only the rich
 
lpast said:
Not only no desire...the banks wont LEND IT...they have made the criteria to get a loan impossible but for only the rich
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Not even close to being true. They have made it harder when you do not have the credit for a loan. That is also not a bad thing. My daughter makes around 35K. She bought a 100K house this summer. I'm not rich. I (along with thousands of others) have had no problem getting a car loan. I had no problem refinancing our house last spring.
 
1Perry said:
Not even close to being true. They have made it harder when you do not have the credit for a loan. That is also not a bad thing. My daughter makes around 35K. She bought a 100K house this summer. I'm not rich. I (along with thousands of others) have had no problem getting a car loan. I had no problem refinancing our house last spring.
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Anecdotes establish very little in regards to the discussion. Consumer credit has diminished, which is a viable reason to operate way under capacity if you are in the business of making a profit!
 
1Perry said:
That allows them to not concern themselves much over debt. The answer is less debt, not negate it with inflation.
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We already have the debt, to late to say have less of it.
 
China and India joined the worlds economy in a meaningful way 30 years ago (Reagan went to China to open trade relations) and the next day, nothing big changed. But after 30 years, they have become a force in manufacturing, and they (China and India) still have 20th century wage rates. You can't blame business for taking advantage of that, if they don't they will be put out of business by the high prices they charge. But, the result in this country will be hard, it is part of what we are seeing. The economy in the US today is nothing like the economy here in the 1960's. 1960's solutions won't necessarily work, and that is what we are seeing (like "tax cuts" or "spending programs")

Combine it with widespread use of computers and robots, and we are radically reducing the need for workers. Some must be maintained to pick up trash and serve our burgers, for sure. Not all jobs will vanish. But many jobs have vanished. Yes, some new jobs are created. When you lay off 100 assembly line workers and replace them with a robot, somebody has to program the robot, maybe 2 people. But the tradeoff is not a good one. The laid off 100 workers now compete to pick up trash or serve burgers.

We have an excess of labor. Highly skilled workers will still find jobs, but increasingly they will be competing with workers in China, India, Russia, because telephones and email allow it to happen. This will keep a ceiling on wage increases.

Solution: Have fewer kids. In 30 or 40 years, it will start to balance back out. In the short run, don't over consume; live within your means AND save for your retirement since you employer won't be helping you too much. Set your expectations lower, we need to. Of course as the labor force pulls in its horns and consumes less, the economy will remain sluggish.

I think we will have a rough 30 or 40 years ahead, some will make out well, but most will not.

If we fail to accurately diagnose the problem (excess of labor), and we therefore cannot solve it because we don't know what the real problem is, then we won't solve it at all. The repubs and dems are not being helpful here, they are just playing political games and trying to discredit each other and gain power, and neither is discussing what the real problems are. It would scare the people.
 
Goldenboy219 said:
Anecdotes establish very little in regards to the discussion. Consumer credit has diminished, which is a viable reason to operate way under capacity if you are in the business of making a profit!
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Of course it is AND you did nothing to dispute what I said. You said consumer credit has diminished. I said it had diminished. The rest of your statement doesn't really make much sense to me.

The accusation was NOT that credit had diminished but that it was not available. The fact that thousands of auto loans are being made is not an anecdote.

It has diminished because we can no longer afford to give loans to those who can not reasonably pay them back. It's a fools position that we should go back to that.
 
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1Perry said:
No it isn't. Pay it down.
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HAHA, the reality is that the politicans the American people including the President are not paying it down, and will not. Just look at our deficits now, them look at two waves about to hit. First HC bill in 2014 will add at least $100 billion/yr. then you tell me what our interest expense would be if interest rates get normalized.
 
washunut said:
HAHA, the reality is that the politicans the American people including the President are not paying it down, and will not. Just look at our deficits now, them look at two waves about to hit. First HC bill in 2014 will add at least $100 billion/yr. then you tell me what our interest expense would be if interest rates get normalized.
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Your arguement is that government will not do what is needed. I do not disagree. It's the reason for this topic.

It's the reason why the economy is in such bad shape.
 
1Perry said:
Your arguement is that government will not do what is needed. I do not disagree. It's the reason for this topic.

It's the reason why the economy is in such bad shape.
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I would agree that the deficit is a reason but not the only reason. Taxes and regulations need to be rationalized if we are to fix our outsourcing of jobs in the U.S. This seems to be the biggest problem for our economy. We have an economy of 300+ million. We can't all work for government or be a lawyer etc. There needs to be more of a base of manufacturing jobs.
 
washunut said:
I would agree that the deficit is a reason but not the only reason. Taxes and regulations need to be rationalized if we are to fix our outsourcing of jobs in the U.S. This seems to be the biggest problem for our economy. We have an economy of 300+ million. We can't all work for government or be a lawyer etc. There needs to be more of a base of manufacturing jobs.
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Indeed, it's all a part of the problem.
 
There's this sense of loss of previous purpose that is accelerating. We used to nearly all be farmers or quasi-farmers. But we "advanced" out of that. The displaced farmers found manufacturing, and we've "advanced" out of that. Then we became a "service economy" and we're at a point where we don't really need any more "servicing" by others. Now our money and our economic measurements and everything else is smoke and mirrors and we're biding our time until "something" comes around to kick our asses.

This seems pretty obvious to intuitive people, and many therefore want to regress in some fashion or another. We want to go back. Some black and white partisan fools want what we had during the boom years, so we should just elect another Democrat president like Clinton and eventually the mess left by Bush will be all cleaned up and the economy will improve and THEEEEN we can address our fiscal nightmare. I think this is probably the dumbest mindset of them all, but that's just me. Others want what our parents or grandparents had. Some want to regress to an earlier tax structure with 70%+ upper brackets, and just assume or regurgitate presumptuous arguments that this will work magnificently despite a shiny new global economy (which we have never had before, ever). Others want back that time when we had plenty of manufacturing jobs paying a so-called livable wage. Well, they're not needed, and we're no longer competitive in that way, and we can't be, unless consumers decided to get really rigid about buying ONLY hand-made American-made stuff and were prepared to even do without all goods and services unless provided by an American. China would then throw a fit and we'd probably be at war, I'm guessing. Opting out of the global marketplace like this would come with its own sh*tstorm of consequences. People like me would really like to regress further, to a time when we produced our own food and lived extremely modestly, in connection with the Earth and the seasons, and all that other Paganistic craziness. Honestly that's what I want, and I believe our rate of extraction, production and consumption of finite energies will eventually necessitate this shift anyway (hence my alias), but for me to say "this is what we need" disregards the obvious pain and chaos and death that would happen during the transitional periods...

...I think we're all strapped into this ride and it's going to take us where it takes us. On an individual level, we can prepare in any number of intelligent ways for a continuation and worsening of our economic climate well into the future. There's no doubt in my mind that the future will be worse than the past. From a resource and population standpoint it is a total inevitability.

/ramble
 
Neomalthusian said:
There's this sense of loss of previous purpose that is accelerating. We used to nearly all be farmers or quasi-farmers. But we "advanced" out of that. The displaced farmers found manufacturing, and we've "advanced" out of that. Then we became a "service economy" and we're at a point where we don't really need any more "servicing" by others. Now our money and our economic measurements and everything else is smoke and mirrors and we're biding our time until "something" comes around to kick our asses.

This seems pretty obvious to intuitive people, and many therefore want to regress in some fashion or another. We want to go back. Some black and white partisan fools want what we had during the boom years, so we should just elect another Democrat president like Clinton and eventually the mess left by Bush will be all cleaned up and the economy will improve and THEEEEN we can address our fiscal nightmare. I think this is probably the dumbest mindset of them all, but that's just me. Others want what our parents or grandparents had. Some want to regress to an earlier tax structure with 70%+ upper brackets, and just assume or regurgitate presumptuous arguments that this will work magnificently despite a shiny new global economy (which we have never had before, ever). Others want back that time when we had plenty of manufacturing jobs paying a so-called livable wage. Well, they're not needed, and we're no longer competitive in that way, and we can't be, unless consumers decided to get really rigid about buying ONLY hand-made American-made stuff and were prepared to even do without all goods and services unless provided by an American. China would then throw a fit and we'd probably be at war, I'm guessing. Opting out of the global marketplace like this would come with its own sh*tstorm of consequences. People like me would really like to regress further, to a time when we produced our own food and lived extremely modestly, in connection with the Earth and the seasons, and all that other Paganistic craziness. Honestly that's what I want, and I believe our rate of extraction, production and consumption of finite energies will eventually necessitate this shift anyway (hence my alias), but for me to say "this is what we need" disregards the obvious pain and chaos and death that would happen during the transitional periods...

...I think we're all strapped into this ride and it's going to take us where it takes us. On an individual level, we can prepare in any number of intelligent ways for a continuation and worsening of our economic climate well into the future. There's no doubt in my mind that the future will be worse than the past. From a resource and population standpoint it is a total inevitability.

/ramble
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I don't agree with your solution, but I can't disagree with your analysis of the problem. The old economic models simply aren't equipped to handle the modern world, and that includes both traditional capitalism and traditional communism. We need to scrap them and start over from scratch. Sure, it'll be unpleasant for a while, but it's the only way we're ever going to make any progress.
 
I didn't really pose anything as a "solution."
 
1Perry said:
Of course it is AND you did nothing to dispute what I said. You said consumer credit has diminished. I said it had diminished. The rest of your statement doesn't really make much sense to me.
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If consumer credit has diminished, then businesses will have less of an ability to sell their goods, thereby allowing them to run way under capacity without being penalized by opportunity costs.

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It has diminished because we can no longer afford to give loans to those who can not reasonably pay them back. It's a fools position that we should go back to that.
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When have i stated that we should allow horrible risk management practices to fail our financial system? Never!

Banks are simply less willing to lend in an environment marred by a significant drop in demand.
 
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Too many years of borrowing, a slowing economy, a mismanaged economy designed for artificial and superficial growth, and a culture of spend, borrow, and consume
 
Goldenboy219 said:
If consumer credit has diminished, then businesses will have less of an ability to sell their goods, thereby allowing them to run way under capacity without being penalized by opportunity costs.


When have i stated that we should allow horrible risk management practices to fail our financial system? Never!

Banks are simply less willing to lend in an environment marred by a significant drop in demand.
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I appreciate the fandom here but it's really not necessary to remake my arguements for me. That's my only conclusion as you've countered nothing I've said. If you have the credit and what you are wanting falls under normal lending practices, how likely is it that you will get the loan?
 
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