Survey question:
Do you thnk apathy or ignorance are the bigger problem today.
Answer:
"I dont know and I don't care."
Micro-economy - maybe an anachronism or just a dichotomy?
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Do you thnk apathy or ignorance are the bigger problem today.
Answer:
"I dont know and I don't care."
I believe we all see the inconsistencies. One of the things I like about this forum is the diversity of the members, and the intelligence level, common sense included
Here is my take on the economic situation:
The economy is global, as are most medium to large size companies. Growing EBITA is the current corporate mandate. One of the main contributors to growing EBITA is moving work, both manufacturing and services, from high cost centers (North America, Europe) to low cost centers (South America, Asia).
The inevitable result of this work movement to low cost centers is a reduction of the standard of living in the high cost centers, and a rising of the standard of living in the low cost centers.
In the USA, we resist the lowering of our standard of living. We hold the level of our standard of living by both spouses working, and by increasing household debt. Actual job income is falling, so the only revenue enhancer available is increased household debt.
It is common knowledge that the increasing of household debt cannot continue forever. That is why the legislation most requested by the Banking lobby is stiffening the bankruptcy laws for individuals. The Banks want some of AverageFamily’s assets, particularly savings or 401K’s, when AverageFamily defaults. The Banks know AverageFamily will stop spending only when they cannot pay the minimums on their credit cards. That is also why the newest trend in credit card accounts is the lowering of monthly minimums by the Banks. It is in their best interest to keep the gravy train going as long as possible.
Governmental influences in the economic process are few, and cannot have a large impact on the global economy, unless all governments work together: Interest rates, Central bank buying foreign currencies, Tariffs or Subsidies, and Governmental spending. The reality is that governments do not work together, and therefore the impact of any of these measures is local. In the case of the USA, both interest rate increases and massive government spending are already in use. We generally do not buy large amounts of foreign currencies. We do use tariffs and subsidies, but take a beating from our trade partners for doing it.
So in summation, job income is down, our government is already using all of the available options, and AverageFamily is not reducing their standard of living. This is a real recipe for economic disaster.
In my opinion, the indicator to watch is the personal bankruptcy rate. When that starts to spike, watch out
The economy is global, as are most medium to large size companies. Growing EBITA is the current corporate mandate. One of the main contributors to growing EBITA is moving work, both manufacturing and services, from high cost centers (North America, Europe) to low cost centers (South America, Asia).
The inevitable result of this work movement to low cost centers is a reduction of the standard of living in the high cost centers, and a rising of the standard of living in the low cost centers.
In the USA, we resist the lowering of our standard of living. We hold the level of our standard of living by both spouses working, and by increasing household debt. Actual job income is falling, so the only revenue enhancer available is increased household debt.
It is common knowledge that the increasing of household debt cannot continue forever. That is why the legislation most requested by the Banking lobby is stiffening the bankruptcy laws for individuals. The Banks want some of AverageFamily’s assets, particularly savings or 401K’s, when AverageFamily defaults. The Banks know AverageFamily will stop spending only when they cannot pay the minimums on their credit cards. That is also why the newest trend in credit card accounts is the lowering of monthly minimums by the Banks. It is in their best interest to keep the gravy train going as long as possible.
Governmental influences in the economic process are few, and cannot have a large impact on the global economy, unless all governments work together: Interest rates, Central bank buying foreign currencies, Tariffs or Subsidies, and Governmental spending. The reality is that governments do not work together, and therefore the impact of any of these measures is local. In the case of the USA, both interest rate increases and massive government spending are already in use. We generally do not buy large amounts of foreign currencies. We do use tariffs and subsidies, but take a beating from our trade partners for doing it.
So in summation, job income is down, our government is already using all of the available options, and AverageFamily is not reducing their standard of living. This is a real recipe for economic disaster.
In my opinion, the indicator to watch is the personal bankruptcy rate. When that starts to spike, watch out
Great post OMCWankel!
Here's an interesting read:
http://mwhodges.home.att.net/
Look at the change in the way the inflation rate was measured in the 90's. Makes you rethink the 'great' economic boom of the Clinton years.
http://mwhodges.home.att.net/
Look at the change in the way the inflation rate was measured in the 90's. Makes you rethink the 'great' economic boom of the Clinton years.
Excellent post, OMC.
Here in Pittsburgh housing prices are fairly reasonable, downright cheap compared to some places, because the population is dropping...mostly because there are not enough decent-paying jobs. At least we're leading the national curve in something.
Add to that some new construction and there you go.
In other places I think the run-up isn't exactly the value or purely supply and demand, but simply speculation. My cousin, 23 and just out of college, moved to L.A. with a GOOD job and got a loan for $950k with no money down AND a $25k cash rebate to buy a 4-unit townhouse. He'll live in one and rent three. Now, WHY would a bank do that? Because they figure they'll get their interest or if the kid defaults (doubtful) the value will have gone up enough that they can repo it and still make a bundle selling it. Also he works for the bank, but I digress....
Now then, back to Pittsburgh leading the curve. Eventually when enough jobs are lost and aggregate income goes down, people will #1 quit buying new houses, #2 default on their mortgages leading to a glut on the market, #3 sell and downsize to something cheaper. Seen it happen already in real life here in the 80's. Any or all of which will burst the bubble and real estate will go the way of NASDAQ in 2000.
Here in Pittsburgh housing prices are fairly reasonable, downright cheap compared to some places, because the population is dropping...mostly because there are not enough decent-paying jobs. At least we're leading the national curve in something.
In other places I think the run-up isn't exactly the value or purely supply and demand, but simply speculation. My cousin, 23 and just out of college, moved to L.A. with a GOOD job and got a loan for $950k with no money down AND a $25k cash rebate to buy a 4-unit townhouse. He'll live in one and rent three. Now, WHY would a bank do that? Because they figure they'll get their interest or if the kid defaults (doubtful) the value will have gone up enough that they can repo it and still make a bundle selling it. Also he works for the bank, but I digress....
Now then, back to Pittsburgh leading the curve. Eventually when enough jobs are lost and aggregate income goes down, people will #1 quit buying new houses, #2 default on their mortgages leading to a glut on the market, #3 sell and downsize to something cheaper. Seen it happen already in real life here in the 80's. Any or all of which will burst the bubble and real estate will go the way of NASDAQ in 2000.
zackly what I said above....but if all goes to goose poop.....running for dat bank...
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