Market crash: are we there yet ?

[danjarch]

Wrong. You need to read something that is not produced in the US. I am being completely honest when I tell you that the information you receive from your mass media is not accurate.

Just spent two weeks in Spain reading the European papers. You saying there all full of crude too. Because;

In Spain the big issue was how a regulation that was opposed by all the leading European economies had actually shielded they're bank from the worst of it but even with that they were going to have to come up with some bailout.

In France again the finance ministers predictions but of course Sarkoszy gave a big speach at Versaille saying how he was going to continue spending big and put some needed reforms on hold for awhile.

Still in France, Pugeut/Citroen trying to find some way around they're agreement not to close any factories in France in excange for a big chunk of taxpayer cash.

Now to Germany. Big PR score with passing a law that limits deficits to no more then 0.35%. Of course it doesn't take effect for years and has a bunch of loop holes like if an unforseen weather event or economic event happens. Bet they'll have a lot of bad stroms in 2014.

Again in Germany, a lot of talk about how they're bailing major industries while pretending not to by covering idled workers salaries. A nifty idea if this all end by say Christmas this year but just more deficits if it keeps going.

In fact I like European newspapers overall. Of course the only english TV channel was CNN and it went to crude once Micheal Jackson died. Not that I really watched that much TV for the first week and a half, but after everybody started to head home, and we had seen all the close towns there wasn't much the rest wanted to do. So I can't really say if CNN europe is any better then it is here.

[camaraderie]

Dan...good post on trade...interesting perspective.
I am a FAIR trader though... even after reading. I'm all for free markets and competition but I'm always gonna say that we have to compete on an equal basis... otherwise I am helping the WORLD at the expense of my countrymen.
I'm sure the 10% who are out of work here cause the factories moved offshore take little solace that they are helping end world poverty.
Protected trade no...fair trade yes.

[sailaway21]

It's ok, Cam. We'll work with you on that. (g)

Perhaps it would make more sense if you looked at fair trade for what it actually is; a political construct. Knowing of your love for politicians, I ask, how can that end well?

The only fair trade is free trade.

[wind_magic]

Originally Posted by Sailormann

We want to live in a secure society with enough food to eat, a roof over our head and opportunity for our children to do the same.

These words don't mean much to me.

Americans, and people in most civilized countries around the world, have become so spoiled that this line you have written about "food to eat, a roof over our head", "opportunity", and like thoughts is such a futile moving target that it isn't even worth considering it as an actual goal for the country anymore. People's expectations about what is "necessary" have become so out of sync with any kind of objective measure of what really has historically been necessary that "necessity" is just a worthless thing to even try to discuss, it has become an empty platitude.

It takes so little effort in America, for example, to get food to eat and have a roof over your head that it is absurd to even consider that a healthy person wouldn't be able to do it with even the most ephemeral of motivation. Yes, there are homeless people, etc, but there will always be a certain number of people who live on the streets no matter how easy it is to make a living, I don't know why that is but it is.

Think about it, what really is "necessary" ? It wasn't that long ago that what was "necessary" was a ham hanging in the root cellar for winter, 200lbs of wheat to get your family through the year, a little shed of a house to stay out of the snow, some blankets to keep you warm after the stove died down at night, etc. You could build a house and a lifestyle like that for a few thousand $us a year, easily. Around here a 50lb bag of wheat costs you about 32$us, just shy of 1$us a pound, and sugar doesn't cost much more than that.

In this modern world most people could work about a month, or even a week in some cases, to pay for what would have required a year's worth of labor just 100 years ago. If we all lived like that, we'd all be retired right now, but that isn't what happens is it ?

No, what happens is that as soon as people make more money than they actually need, instead of saving the extra for a rainy day, or trying to retire early, or whatever, they increase their lifestyle to match whatever it is they make as an income. Suddenly 200lbs of wheat isn't good enough, they want refined flour instead so they don't have to grind up the wheat themselves, they want honey instead of white sugar, they want two horses instead of one. Continue on into the modern world and what is "necessary" has become two cars, a house so big you could house 10 third world families in it, 20 pairs of shoes in the closet, etc, and yet that still isn't enough is it ?

It doesn't matter how much people make as income anymore, you could double it and it wouldn't matter, most people would still do whatever it takes to enslave themselves into debt and destroy their own futures. Until we find a way to educate people and to encourage them to want to save for their own futures, for them to want to have some discipline over their own budgets, etc, we are always going to end up in these situations. I don't see the current administration, the previous one, or any in recent memory working to try to encourage people to be strong independent citizens in this country who can stand on their own two feet, in fact the message has been quite the opposite.

"Enough food to eat, a roof over our head" ? That's so easy these days that anybody who can't figure out how to find food to eat or a dry place to sleep in America is either trying not to, or has some kind of health (mental or physical) issue that makes it impossible. I bet 5 of your typical American families could all lose their homes and move into ONE suburban home together and still be living better than their great grandparents did. These days people are so spoiled they think they are roughing it when their kids have to share a bedroom, or when there isn't a separate jacuzzi in the guest bathroom. It wasn't that long ago that people walked about 100 yards away from the house to take a *%&$ in a big hole they dug in the ground, then carried a bucket down to the creek to get water so they could cook up some turnips for dinner.

Most modern people don't have any idea what "necessary" actually means - hint: it doesn't involve gameboy's for the kids. The USDA's food stamp program helps 31.5 million people in this country (approximately 10% of the population) at about 100$us/month in benefits. Not much, right ? No, most people consider it a supplement, just enough to help them cover a little bit of their food bill. Well that's right, if you're buying Coca cola and HoHo's it isn't that much money, but 100$us buys about 150lbs of grain, enough to feed your average Chinese person 2.2lbs/day for over 2 months. Most folks in the third world could live on food stamps and actually turn a profit!

Anyway, I don't even know what my point was, but I think it was that if "enough food to eat, and a roof over our heads" is our goal, well, let's have a big celebration party, because we're there. If you can't survive in America, you just ain't trying. I've said it before and I'll say it again - this country doesn't have an income problem, we have an expectations problem.

[TropicCat]

Originally Posted by sailaway21

By comparison to the current administration FDR was hardly an uber liberal and the congress less so. The historically-challenged?

Rewriting History again Sailaway? You must have writer's cramp this morning.From wikipedia...

"Theorists hold that the key cause of the Great Depression was the expansion of the money supply in the 1920s that led to an unsustainable credit-driven boom. "

In other words, easy credit created an unsustainable bubble (sound familar?). In their view, the Federal Reserve, which was created in 1913, shoulders much of the blame. By the time the Fed belatedly tightened in 1928, it was far too late and, in the Austrian view, a depression was inevitable.

Conservatives ran the Fed as well as our government. An inconvenient fact that republicans would love for everyone to forget. The problem is that they went and did it again.

And we let them do it.....

[TropicCat]

Originally Posted by danjarch

By the way, all you fair traders or anti free trader. You need to do a little soul searching.

Soul searching? My friend, it's no longer a theory, as we now have 30 years of data to look at.

Originally Posted by danjarch

Opening up our markets has surely slowed the rising standards of living for most and reversed them for some,

I'm going to stop you right here. You are correct. In fact this is the point. Free traders never expected anything else to happen. They just didn't care. Profits dictated actions, social responsibility was deemed to be governments problem, and then later they tried erasing that responsibility.

The result was essentially throwing workers to the wolves and ultimately facilitating the decline of the middle class in America. And now, the decline of business and corporations as well. It took 30 years, but they now realize they shot themselves in the foot.

So, the immediate corporate reaction is to foist health care onto government alleviating themselves of this responsibility as well. A fact that conservatives obfuscate by telling us it's Obama's idea. It isn't.

[snider]

Originally Posted by wind_magic

No, what happens is that as soon as people make more money than they actually need, instead of saving the extra for a rainy day, or trying to retire early, or whatever, they increase their lifestyle to match whatever it is they make as an income. Suddenly 200lbs of wheat isn't good enough, they want refined flour instead so they don't have to grind up the wheat themselves, they want honey instead of white sugar, they want two horses instead of one. Continue on into the modern world and what is "necessary" has become two cars, a house so big you could house 10 third world families in it, 20 pairs of shoes in the closet, etc, and yet that still isn't enough is it ?

It doesn't matter how much people make as income anymore, you could double it and it wouldn't matter, most people would still do whatever it takes to enslave themselves into debt and destroy their own futures. Until we find a way to educate people and to encourage them to want to save for their own futures, for them to want to have some discipline over their own budgets, etc, we are always going to end up in these situations. I don't see the current administration, the previous one, or any in recent memory working to try to encourage people to be strong independent citizens in this country who can stand on their own two feet, in fact the message has been quite the opposite.

[/B].

Good Point!!!!!!

[TropicCat]

Originally Posted by wind_magic

If we all lived like that, we'd all be retired right now, but that isn't what happens is it ?

No, what happens is that as soon as people make more money than they actually need, instead of saving the extra for a rainy day, or trying to retire early, or whatever, they increase their lifestyle to match whatever it is they make as an income. .

windy. Your scenario is correct, but I'm afraid you missed the point. We have replaced an economy which was manufacturing based with one based on consumerism. In order for America's GDP to grow, or even stabilize... it's expected that we.. the people...spend everything we have, and then spend what we don't have.

This is our economy. Yes, it's totally screwed up, but then again we don't make the rules.

[sailaway21]

Nice duck, Tropi. Republicans, not conservatives, and any reading at all shows that Roosevelt did much the same as Republicans, just more of it. And you of course overlooked the fact that the depression double-dipped under Roosevelt just because of the anti-trade policies you now favor.

You are sorely confused.

We do not "base" our economy on manufacturing or consumerism as if we had choice in the matter to any significant degree. You continue to fail to understand basic capitalism or, worse, youi only want capitalism to work on the upside (don't we all!).

Despite the government giving the farm, and the farmer's daughter, to the UAW the union is going to emerge from the re-working of Chrysler and GM with approximately half of it's membership intact. And those jobs aren't coming back. In the case of the auto industry, it is highly unlikely that the replacement jobs will even be in the auto industry, that industry suffering from world-wide over capacity. But even were demand for cars not being met, the number of those jobs is going to decline.

They've been declining since the 1970's. And that is because people no longer manufacture things; machines do. Manufacturing jobs per se are going the way of the typewriter; you can still do it that way, but nobody does. And you can jump high and low over this and claim all the trade restrictions you want, but you're just trying to delay the inevitable. The manufacturing of tomorrow will be relatively devoid of human labor and, in fact, much of the manufacturing of today already is.

Perhaps what you're really trying to say is that you are in favor of high value-added jobs remaining the province of the US? And I would submit that we hold a quite substantial lead in those job areas. In the area of IT, the field shifts so quickly that it is difficult to get more than a snapshot of it. Yet we continue to do very well in an exceedingly dynamic field under continuous evolution. The only constant is change, and the only necessity will be education or the ability to learn new things.

Trade is rarely fair in the objective eyes of a third party. The Indians thought that $23 in beads and trinkets was more than fair trade for the fever-infested swampy island of Manhattan. Some days the trade looks better from the Indian side of things.

Of course the labor balance between what it takes in China versus the US will be an issue. It's always been thus and always will be, though maybe not so obvious, but probably so. It is not a question of just comparing man-hours and competitive wages. Windy struck a glancing blow on this in his last post. We're working so that we can put a roof on the garage or spend the weekend at the beach with the kids. Our competition is working so that they can have their own apartment separate from the rest of their extended family and they're not taking weekends or holidays off. We're working to buy braces for the kids; they're working so their kids might be dentists when people can afford to have dentists. They'll sew one hundred pair of blue jeans for next too nothing because in the history of economic advancement, you start with what limited skills you have and work your ass off at them, it being the only economic advantage you have. You do so, of course, so your children can be dentists. The labour in the far eastern sweat shops is gnerally glad to be there, with a few exceptions, and they're using the job to get out of a rice paddy perhaps, where the real work, the work for survival takes place. That will always seem a dubious proposition to westerners separated by many generations from having to make such a choice. Fair trade, whose to say? Free trade, absolutely.

But it makes far more sense than trying to freeze-frame an entire auto industry at a 2009 level just at the time when the world auto industry itself is about to go through a major restructuring and contraction in supply. That will be neither free nor fair because you and I will be paying for jobs in Detroit that are not needed for cars that are not needed. Fair trade cannot overcome it's political baggage.

I'll leave your more myopic points regarding trade restrictions for your long-awaited review of events of the Great Depression. I'd start with Amity Shlae's book, were I you.

I see in your last post, you mention spending all our money on consumerism, but that, "we don't make the rules". True to an extent but you'll notice that the people are making the rules to the extent that they are saving more and pursuing credit less, of their own volition. The TARP money hasn't done a thing; it's just sat there or been returned. People are saving, saving because they're worried. No one knows what the next big thing government is going to do, to help us, and that contributes to not only saving but cautious behavior on the part of business. In the case of finance, it just means waiting to see if government will absolve them of risk. And yes, that's where you're right, the government is making the rules where it has no business in trying to micromanage a macro-economic problem.

We're heading down the same path that got us here. See, we agree on that. But that path is the path of government action, not free market capitalism. Here's the blurb from the inside cover of Meltdown, a book I've not read yet, but on my list to do so;

Is Capitalism the Culprit?

The media tells us that "deregulation" and "unfettered free markets" have wrecked our economy and will continue to make things worse without a heavy dose of federal regulation. But the real blame lies elsewhere. In Meltdown, bestselling author Thomas E. Woods Jr. unearths the real causes behind the collapse of housing values and the stock market--and it turns out the culprits reside more in Washington than on Wall Street.
And the trillions of dollars in federal bailouts? Our politicians' ham-handed attempts to fix the problems they themselves created will only make things much worse.

Woods, a senior fellow at the Ludwig von Mises Institute and winner of the 2006 Templeton Enterprise Award, busts the media myths and government spin. He explains how government intervention in the economy--from the Democratic hobby horse called Fannie Mae to affirmative action programs like the Community Redevelopment Act--actually caused the housing bubble.

Most important, Woods, author of the New York Times bestseller The Politically Incorrect Guide to American History, traces this most recent boom-and-bust--and all such booms and busts of the past century--back to one of the most revered government institutions of all: the Federal Reserve System, which allows busy-body bureaucrats and ambitious politicians to pull the strings of our financial sector and manipulate the value of the very money we use.
Meltdown also provides a timely history lesson to counter the current clamor for a new New Deal. The Great Depression, Woods demonstrates, was only as deep and as long as it was because of the government interventions by Herbert Hoover (no free-market capitalist, despite what your high school history teacher may have taught you) and Franklin D. Roosevelt (no savior of the American economy, in spite of what the mainstream media says). If you want to understand what caused the financial meltdown--and why none of the big-government solutions being tried today will work--Meltdown explains it all.
Amazon.com: Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse: Thomas E. Woods Jr., Ron Paul: Books

Government action is crowding out private sector action, and some of that private sector action is desperately needed. From GM to Citi, what government action has helped over the past 9 months that inaction, presumably resulting in failure of businesses, would not have accomplished better and more swiftly? Both of those businesses would have been broken up and likely formed into new and totally different companies, companies more suited for the future. We're trying to cast them in stone as indelible monoliths, which they are, monoliths to the past.

While the big boys in government, and perhaps favored sectors of business and finance, decide how to screw things up further, we're saving out gold. The recession may end but the recovery is far from being in sight.

[Cruisingdad]

Originally Posted by wind_magic

These words don't mean much to me.

Americans, and people in most civilized countries around the world, have become so spoiled that this line you have written about "food to eat, a roof over our head", "opportunity", and like thoughts is such a futile moving target that it isn't even worth considering it as an actual goal for the country anymore. People's expectations about what is "necessary" have become so out of sync with any kind of objective measure of what really has historically been necessary that "necessity" is just a worthless thing to even try to discuss, it has become an empty platitude.

It takes so little effort in America, for example, to get food to eat and have a roof over your head that it is absurd to even consider that a healthy person wouldn't be able to do it with even the most ephemeral of motivation. Yes, there are homeless people, etc, but there will always be a certain number of people who live on the streets no matter how easy it is to make a living, I don't know why that is but it is.

Think about it, what really is "necessary" ? It wasn't that long ago that what was "necessary" was a ham hanging in the root cellar for winter, 200lbs of wheat to get your family through the year, a little shed of a house to stay out of the snow, some blankets to keep you warm after the stove died down at night, etc. You could build a house and a lifestyle like that for a few thousand $us a year, easily. Around here a 50lb bag of wheat costs you about 32$us, just shy of 1$us a pound, and sugar doesn't cost much more than that.

In this modern world most people could work about a month, or even a week in some cases, to pay for what would have required a year's worth of labor just 100 years ago. If we all lived like that, we'd all be retired right now, but that isn't what happens is it ?

No, what happens is that as soon as people make more money than they actually need, instead of saving the extra for a rainy day, or trying to retire early, or whatever, they increase their lifestyle to match whatever it is they make as an income. Suddenly 200lbs of wheat isn't good enough, they want refined flour instead so they don't have to grind up the wheat themselves, they want honey instead of white sugar, they want two horses instead of one. Continue on into the modern world and what is "necessary" has become two cars, a house so big you could house 10 third world families in it, 20 pairs of shoes in the closet, etc, and yet that still isn't enough is it ?

It doesn't matter how much people make as income anymore, you could double it and it wouldn't matter, most people would still do whatever it takes to enslave themselves into debt and destroy their own futures. Until we find a way to educate people and to encourage them to want to save for their own futures, for them to want to have some discipline over their own budgets, etc, we are always going to end up in these situations. I don't see the current administration, the previous one, or any in recent memory working to try to encourage people to be strong independent citizens in this country who can stand on their own two feet, in fact the message has been quite the opposite.

"Enough food to eat, a roof over our head" ? That's so easy these days that anybody who can't figure out how to find food to eat or a dry place to sleep in America is either trying not to, or has some kind of health (mental or physical) issue that makes it impossible. I bet 5 of your typical American families could all lose their homes and move into ONE suburban home together and still be living better than their great grandparents did. These days people are so spoiled they think they are roughing it when their kids have to share a bedroom, or when there isn't a separate jacuzzi in the guest bathroom. It wasn't that long ago that people walked about 100 yards away from the house to take a *%&$ in a big hole they dug in the ground, then carried a bucket down to the creek to get water so they could cook up some turnips for dinner.

Most modern people don't have any idea what "necessary" actually means - hint: it doesn't involve gameboy's for the kids. The USDA's food stamp program helps 31.5 million people in this country (approximately 10% of the population) at about 100$us/month in benefits. Not much, right ? No, most people consider it a supplement, just enough to help them cover a little bit of their food bill. Well that's right, if you're buying Coca cola and HoHo's it isn't that much money, but 100$us buys about 150lbs of grain, enough to feed your average Chinese person 2.2lbs/day for over 2 months. Most folks in the third world could live on food stamps and actually turn a profit!

Anyway, I don't even know what my point was, but I think it was that if "enough food to eat, and a roof over our heads" is our goal, well, let's have a big celebration party, because we're there. If you can't survive in America, you just ain't trying. I've said it before and I'll say it again - this country doesn't have an income problem, we have an expectations problem.

Windy, that is an excellent writeup and I agree completely.

- Brian