What all political thinkers MUST understand:There is no "recovery" on the horizon

[Kurt_and_Hunter]

Everyone who thinks about politics, let alone about their own finances, has to understand that there will be no recovery--in the way we have all understand the term--any time soon.

In fact, if Barack Obama serves two terms (likely) there may well not be anything worth calling a recovery during his entire presidency, even if he does a fine job. (for example, eight years averaging under 1.5% GDP growth would be growth, but nobody would call it a recovery)

And if a Republican takes over then we could be much worse in 8 years than we are today... their ideas (sic) are truly dangerous.

This is important stuff with implications for both policy and politics.

A normal recession happens when everyone has too much STUFF. Because economic players move in tandem, everyone simultaneously realizes they have accumulated to much inventory and/or possessions and stops buying for a while. That normal business cycle recession typically lasts a year and we bounce out of it naturally when inventories have sold down enough to warrant buying more stuff.

The 1982 recession was induced by Paul Volker, federal reserve head at the time, to defeat inflation. A monetary policy induced recession has a natural ending since the Fed eventually reverses monetary policy when the work is done.

Our current downturn is not normal. It is like the great depression and Japan in the 1990s--a downturn caused by VALUATION. It has become fashionable to call this a "balance sheet" recession because the problem is that everybody is in DEBT and their ASSETS are not worth nearly what everyone supposed.

You don't rebound strongly from such a thing. It isn't possible. If you owe $500,000 on a $300,000 house there is nothing that will return you to previous economic behavior except a check for $200,000 or the magical return of a baseless $500,000 valuation. Neither is going to happen.

That $200,000 shortfall sits there year after year. Nothing will fix it. Whether you are employed or unemployed, despairing or hopeful, the raw reality of your balance sheet sits there with no prospect of meaningful short-term improvement. How long does it take a family to save $200,000? What are the implications of that for their overall longer-term spending? (Notice how inflation would help the debtor in that particular equation... but that's a separate topic.)

Multiply that times the entire economy and that's where we are.

The current "rebound" is like an accident victim surviving a crisis in intensive care. When she lost her leg in the accident she lost so much blood that she went into shock and almost died. Immediate infusions of plasma kept her stable. Oxygen helped forestall irreversible brain damage. The short-term mortality crisis passed. That is where we are today.

The point is, the leg is still gone. That's the longer-term reality. There will be no return to pre-crash VALUATION (adjusted for inflation) for a generation.

And that is what everyone has to internalize.

[babylonsister]

1. How do you know that? Oh, that's right, you don't. nt

[Kurt_and_Hunter]

3. Thanks for the thoughtful response sister.

Actually, I do KNOW much of what is said in the OP.

And the part that is predictive is as sound as global warming--the consensus view of 90% of economists who are not paid to say something different.

The fact that you would think there's anything controversial in the OP shows just what a bubble DU is.

If you know a way for the hypothetical family to save $200,000 in a big hurry without reducing their spending please share because it would be a great help to almost everyone.

Do you think that 2006 asset valuation adjusted for inflation will return in our lifetime? If not, I don't understand why the OP seems far-fetched to you.

[babylonsister]

5. Well thank you for such a negative post that does nothing but

inspire fear about the future, which you don't know about. No one does.

And for you to posit that for the next 8 years "there will be no recovery" is just plain fear-mongering.

[AllentownJake]

8. Some people call talk of global warming fear mongering

:shrug:

[Kurt_and_Hunter]

13. No, it is a call to useful action

I am worried that Obama will own the next leg down after all this short-term euphoria.

I want that to be avoided.

It is vital that Republicans do not gain power which would likely plunge us to even lower lows and ensure an even longer time digging out.

I want the administration to think in realistic terms and to shape public impressions accordingly.

The OP criticizes nobody. It puts forth a set of assumptions that should form the basis of policy AND politics.

[Fire1]

9. Saving? No. But there are short and long term nvestments

that could yield that amount in a reasonable amount of time.

[dmallind]

27. Why do they have to?

Not only have few markets seen that kind of decline - and only from highs that were fleeting indeed, but it doesn't even matter for most homeowners.

Those who bought between say 2003 and 2007, with hardly any equity or downpayment, in overheated markets that have now collapsed like Arizona or Florida or parts of CA, may indeed be looking at 200,000 in negative equity. But even for that small minority, it is irrelevant unless they have to sell their house.

Let's say their monthly payment on a $500K mortgage (100% no down payment or equity - most extreme possibility) is about $3500. Presumably to them the house was worth $3500 per month. As long as they continue to pay $3500 a month they are in no different a situation than they were in the housing bubble. So you have to posit a family who bought at the highest price in the very recent past, with very low or no downpayment, and is now unable or unwilling to continue paying. Do these people exist? Certainly. Are they representative of most mortgage holders (fewer that 10% of whom are in default let alone in default on upside down mortgages)? Not at all.

Now as long as these unwise borrowers still pay that $3500 and still retain the income that allowed them to (again unemployment even in the most histrionic overestimation on DU does not approach 50% so this would be the majority) they still have EXACTLY as much discretionary spending to consume as they had when the house was worth $500K on paper when it was worth $300K. No loan company cares about their upside down equity (unless of course they want a home equity loan) so they can buy a car if they were going to, or new furniture on store credit if they were going to. Nothing really changes until they default or have to sell their house. Now their perception or confidence may change, and indeed much of the slowdown is based on such subjective emotions, but their financial position in objective terms, absent the default/sale options already ceded, certainly doesn't.

I move a lot. I'm in my third state and fourth house in the last five years. I lost about 12% (nowhere near the 40% suggested) on my last house that was bought at the height of the house price boom and just sold a couple of months ago. Now that 12% was entirely out of equity because like MOST mortgage payers I didn't get a zero down loan. Sure it means my cash cushion is a bit reduced, but what all the doom and gloomers seem to ignore is that falling house prices mean somebody who sells low also buys low too. This was an upper middle class house in a not particularly thriving undiversified town with very few major employers. I currently reside in a suburb of a contracting, economically depressed, major rust belt city. The house I bought just as the bubble was bursting is worth, according to local experts and comparables (since I will almost certainly be moving yet again soon), about exactly what I paid for it. No bubble = no burst.

Your horror story applies to recent, unwise, buyers in overheated markets with atypical mortgages and STILL assumes they are unable or unwilling to continue paying the mortgage they did. Again I have no doubt hundreds of anecdotal examples can be found. But there are tens of millions of homebuyerts out there, and most of us are nowhere near that kind of situation.

[Kurt_and_Hunter]

32. The ability to borrow underlies all economic activity, even if not used

A person who can easily borrow $100,000 against equity in their home is a very different economic actor than one who cannot even move if they wished to.

For instance, the former might start a business knowing that if it fails they will not be literally on the street. The later cannot.

The former might buy a new car, using no equity, knowing that if they get laid off it isn't the very end of the world. The later does not.

Etc.

more than 50% of all GDP growth from 2000-2006 was equity draw-downs and most of that activity is gone. That's 50% of an already lackluster economy.

By saying "save" I mean a shorthand net combination of saving and not spending and not borrowing. Sorry for the sloppiness. It's not that they will actually have a saving account with $200K in it. (They would probably do much better to apply it to mortgage principle along the way.)

The failure to borrow $200,000 cash against the home equity is itself a form of saving. It "adds" to equity. But it's murder on the broader economy.

Surely their retirement will be affected by a $200K swing in household net worth, so they have to save/invest more there rather than spend it today. And they will be spending less every year throughout retirement, and so on.

Even though the former $200K was an illusion it was an illusion that caused more spending, more debt and lower retirement and emergency saving. And all of that has to be roughly made up somehow.

[dmallind]

34. But again only home equity loans are affected

I've pulled many a credit report and there is no indication of home equity, only mortgage payment history just as with other loans. A family upside down or with no equity but otherwise acceptable credit will get any other kind of consumer loan with no trouble. And remember in this hypothetical situation, they would not have qualified for a home equity loan anyway, as they had none at $500K.

Now you can introduce the idea of a family in this situation that put $100K down and now is in a reverse equity scenario because of falling home prices, but then your original $200K hole is down to $100K too (and of course they would have had limited home equity loan room even then).

For MOST (not all) people this economic crisis is one of emotion and confidence.

[Kurt_and_Hunter]

35. The specific role of equity withdrawal is, sadly, almost unimaginably large

borrowing $30K at 20% vs. $7.5% (tax deductible, no less) is a difference in degree that becomes a difference in kind. Inability to service debt is a ballooning, not diminishing, problem. Servicing credit card debt is three times harder than servicing home equity debt. (Also, equity loans are cash deposited in your account, so they must be compared to credit card cash advances to be apples to apples.)

And people, since we are talking about future behavior, borrow in light of their total ability to borrow. If a person has income X and easy/automatic access to $50K they don't think as much about borrowing $10K. If they have the same income but access to only $15K borrowing $10K seems hazardous--no cushion left.

And, again, the phrase "only home equity" loans is problematic because drawing on equity was the majority of US 2000-2006 GDP gain. That's from the numbers--it's so extreme an effect that I never could have intuited it. Here's a way to put it: the GDP contribution of drawing down equity 2000-2006 was at least as large as the GDP contribution of productivity gains from computers and the internet 1994-2000.

So it's a big chunk to lose.

[BeFree]

50. Yep

To put it slightly different: Economic growth 2 years ago was based almost exclusively on 'magical' equity savings accounts being borrowed against and the cash being spent on 'goodies'.

That process masked an underlying contraction, or anti-growth.

Once the magic $200K savings accounts ended, spending came to a screeching halt.

[Reterr]

49. What a stupid, stupid post.eom

[patrice]

2. There is only honest personal creative functional adaptation.

Nothing else is likely.

[lunatica]

18. What a great way to put it!

:thumbsup:

And I agree. It's lean times and each must do what they must.

[patrice]

44. Though "necessity IS the mother of invention" what we need is to strip all of the crap out of our

lives and form common cause with others who are doing the same.

[AllentownJake]

4. What I've been saying since this began

K&R

[RDANGELO]

6. I agree with you to the point that this is not a normal recession

, and that it is going to take longer to come out of it. I think most Americans realize that.

[Kurt_and_Hunter]

10. I hope you are right but I don't know that Americans do realize that

There's little reason for them to realize it. Nothing in our collective life experience suggests that bad times don't bounce back to levels as strong as before.

The idea of an L-shaped recession, as opposed to V-shaped, is an abstract concept that none of us--outside Japan--have ever seen.

As an observer of politics I feel that the people are not big on intellectual abstractions at odds with a life of personal experience.

Our recent stock-market rebound in March was the biggest monthly move since... 1933. Yet the depression continued on for 8 years after that rebound from the abyss.

Example: The economic consensus is that housing will fall another 20-30% in price. Are people really internalizing that?

I am not so sure.

[patrice]

7. Here's hoping that Necessity really IS the Mother of Invention.

[TheKentuckian]

11. Probably correct

The bubble burst left a whole in the world economy that would take 1-3 years of the total world gross income to refill. I've never believed we could do much more than keep the economy on life support long enough to to solidify the floor underneath us that will eventually give us a new foundation to build off of. Clean, abundant, renewable energy is that foundation. Anything we do is worthless without it and any money thrown down rabbit holes that allows it is a prudent investment, with education and healthcare as the "central load bearing beams".

Stimulus too small-can't help but to be, no matter how grand the design. Too much money to the robber barons that broke us-a form of life support.

[glitch]

22. Well said. nt

[Beetwasher]

12. Unless Of Course You Have Something Akin To A Technological Revolution

Like for instance, investment in new energy technologies, development and production.

Instead of a "chicken in every pot" how a bout a "solar panel on every house"? A new energy grid for every block. A new electric car for every family. Hydrogen fuel cells for all. Etc.

My cynicism about certain aspect of the human species is only matched by my faith in other aspects of it.

[Kurt_and_Hunter]

25. That's an important point, but raises its own questions

The short-term economic benefit of a novel technology comes from investment in anticipation of its good economic effects.

Radio was as useful in 1930 as it was in 1929--in fact, it played a larger and growing role in American life than it had in 1929.

But enthusiasm for wild investment in radio peaked in 1929.

The problem with new technologies today is that unless they provoke a comparable bubble they will not off-set what has happened. That's the thing... we want a booming economy but we don't want a bubble. But the two may well be intertwined in our expectations.

We haven't seen a sane, sensible reaction to any transformative technology... railroads, radio, aviation, transistors, integrated circuits, the PC, the internet... always a froth of wild investment with boom-and-bust.

So if we have good, sustainable growth spurred by energy and/or green technologies it will be far short of our expectations because our (learned) expectations include irrational investment psychology.

I agree that energy-technologies are very important and hopeful, but assuming there will be no green-technology bubble then we will not get the kind of sharp rebound we have come to expect of novel technologies.

For instance, the internet didn't save Japan in the 1990s though they were as able as anyone to benefit from its productivity promise. Their terrible balance sheets ate up all the gains.

So in a post-bubble environment even important new technologies can have a restrained effect because people's whole concept of investing has changed. (For a long but not permanent time.)

[Beetwasher]

40. Depends On Perspective

Was the effects of the New Deal short or long term? Transformation from a fossil fuel based energy dependence to green/renewable infrastructure would be a transformative, long lasting event with effects and multipliers we almost assuredly fail to comprehend. Arguably akin to the industrial revolution.

[Freddie Stubbs]

14. If there is no recovery, Obama will not get a second term

[Kurt_and_Hunter]

17. I disagree.

If patterns hold he will be running against a lunatic, and the economy will probably be stable, albeit at low levels.

I think he'd probably win either way.

Against someone like Romney it could be iffy but I expect a Goldwater or McGovern type since that's what usually happens after a party gets a big kick in the teeth.

(I like McGovern, but you know what I mean.)

[TreasonousBastard]

15. If I didn't know better, I'd think you wanted this collapse...

because a lot of people do.

The dirty little secret behind much economics is perception-- wish it and it will happen.

If enough people think their houses will go up in price, their houses will go up in price-- buyers will bid up to get in on the deal. If enough people think their houses will decline in price, they will decline in price-- they will sell at a loss to avoid a larger loss.

If management thinks sales will rise, it will invest in labor and capital. If it thinks sales will decline, it will reduce spending on labor and capital.

All of this involves a crystal ball, and no one has a perfect one. It also has limits-- houses will reach a price point where no one can afford them and prices will drop back and people have to eat, live in something, wear clothes, and watch TV, so sales of stuff will eventually rise.

The ONLY difference between our current situation and the South Sea Bubble or tulip bulbs is that we have a good chance of finally bumping up against the Malthusian dilemmea of just having too damn many people in the world. We also have managed to come up with the technology to finally destroy the planet we grew up with-- global warming, as bad as it is, pales in comparison to the poisoning of every bit of land, lake, and ocean and the mass extinction of plant and animal species.

[Kurt_and_Hunter]

16. A lot of people probably thought I wanted us to lose in Iraq

I predicted it based on what seemed the most relevant facts available at the time.

You are right that psychology is a lot of economics.

But the fact that psychology must bump into reality eventually is also part of economics.

Hence bubbles.

The only way we can get back to "normal" is to have another bubble because our normal (1996-2006) IS a bubble. That is our baseline.

[AllentownJake]

19. "Positive Thinking"

Relies on people having jobs, credit, and savings to make purchases.

[mkultra]

21. 96-2006 was not a bubble

the economy was fine, the housing market had a bubble and that bubble wrecked the credit market which wrecked the economy. We did not have unhinged growth.

[Reterr]

48. Couldn't agree with you more on that last para

The ONLY difference between our current situation and the South Sea Bubble or tulip bulbs is that we have a good chance of finally bumping up against the Malthusian dilemmea of just having too damn many people in the world. We also have managed to come up with the technology to finally destroy the planet we grew up with-- global warming, as bad as it is, pales in comparison to the poisoning of every bit of land, lake, and ocean and the mass extinction of plant and animal species.

Well said.

[mkultra]

20. uh, what the fuck are you talking about

A recession is caused by a decline in demand. not in a realization that you have enough STUFF. NO one ever suddenly wakes up and says "Hey, i think im cool now" much less an entire nation of people doing that. What happens is people get FIRED and they say "Ugh, i cant buy more STUFF" and they stop. Which causes businesses to stop selling and thus firing more.


Those who owe more than there house is worth will either do a quick sale and give the house back to the bank where it becomes toxic debt or they will renegotiate thier loan terms and the bank will eat the difference.

Since TARP gave money to banks to cover what they ate and Geihtner is buying up toxic debt, The end result this time around is that the government has borrowed fake money from the future to kick start the economy again. Taxing the rich at a higher rate will recover this borrowed money over the next 8 years.

The housing debacle result in a credit debacle which dragged business borrowing to a halt. While under BUSH, the rich got richer and the poor got poorer. This disparity is being corrected by many degrees by TARP and the bailouts. You can see from the different money supply number below that that emphasis is now shifting. Dont tell anyone, but hes redistributing some of the wealth :)

[Kurt_and_Hunter]

23. Sorry, but you're way wrong

You just postulated that in a business cycle lay-offs cause the initial lower demand rather than that inventory-driven lower demand causing the lay-offs so you are already in flat-earth territory.

If you do not recognize that 1996-2006 was a global asset bubble running sequentially through a series of asset classes and that the housing bubble was a terminal phase of the tech bubble then that's what you think.

Do you know that from 2000-2006 GDP minus borrowing against home equity never cracked 1.5%? Mortgage equity provided more than 50% of GDP growth from 2000-2006 despite having never played a large role, let alone a majority role, in total GDP before 2000.

That's your healthy economy.

[mkultra]

28. actually, i didnt

I stated that the spiral is self feeding due to layoffs. Many thing can start a decline but its NEVER a massive group of people deciding they have enough stuff.


This time, it was the pop of the housing bubble.

The housing bubble had nothing to due with the tech bubble at all. The housing bubble was a result of bad monetary policy at the fed and by bush. (if you don't understand this, then i think you are not paying attention)

As per your assertion that GDP(i have to assume you actually meant to say growth in GDP) was 75% borrowing on existing homes, i would take serious issue with your number. Even if this where true,which it inst, it would only be further evidence that the collapse was do to overvaluation of homes which was caused by fed policy on MBS and CDO sales.

Where do you get your data on GDP(growth?) - borrowing?

On EDIT:

I check your GDP number minus equity borrowing and its utter bullshit. for 2005 alone, the GDP was 10 trillion dollars while home mortgage debt(not just equity borrowing but the whole damn debt) was 10 billion. That means that home mortgage debt represents 1% of the overall GDP. Mathematically, it would be impossible for equity borrowing to be responsible for more than 1% of GDP change and in that case, only if it doubled, which it didn't.


Your making your numbers up.

[slay]

31. I tend to agree

I'm no economic genius, but I consider myself a realist and the reality of the situation in the simplest terms, and most convenient definitions are that we. are. fucked. People don't want to believe that everything they have worked for WILL lose value - that the decadent and carefree world of the 80's and 90's is gone and never, ever coming back - that the world as they have come to know it is not the world they thought (that they were told) it was. People are going to have to face some harsh realities in the coming years - and I figure you and I are pretty much on the same page about that - just wanted to say I enjoy reading your posts and don't let others criticism get you down - the warnings are well needed - it's just that the poor bastards are in shock.

[leftofthedial]

24. this is a paradigm shift, not a cyclical "correction"

"recovery" is non sequitur

We can go one of two ways: we can allow the remaining wealth of the world to be concentrated into the hands of the few (the end stage of this process is now happening), or we can overthrow the status quo order and replace it with something more egalitarian.

[mkultra]

30. The bailout process is essentially a redistribution of wealth

let me illustrate.

Under Bush, the rich and poor disparity grew severly. This can measured in M1 vs M3 money supply. The overvaluation of housing lead to a crash which essentially resulted in forclosures resulting in banks taking it in the shorts. When the government stepped in and bailed the banks, they did it by borrowing money from the future. This money will be regained through higher taxes on the wealthy*the increase in the top bracket from 36% to 39%)

In essence, the rich are gonna pay for this problem. Some may have a problem with that but i don't. The various bailout packs passed by bush(TARP) and Obama have already started to have this effect on redistribution as evidenced by this graph.

[denem]

26. There is a way out depressed asset prices: re-inflation.

Or "quantitative operations" as the central banks are calling it now. The the real value of debt falls.

[Kurt_and_Hunter]

29. Yes. I have become a big fan of inflation lately.

As Paul Krugman said to a surprised interviewer: "If you guarantee me we will have five years at 4% inflation then we don't have a crisis."

The lenders are holding the bag in every scenario. (Except endless bail-outs) Either they get paid in diluted dollars or they don't get paid at all.

So screw 'em.

Inflation went up from 1930-1982, from zero to double digits. It went down from 1982-2009 bottoming out in depression type conditions.

The return of inflation seems the natural course of things. 4-5% is fine. Hyperinflation is obviously not fine, but aside from wing-nuts and the most literal Freidmanites nobody takes that prospect at all seriously.

(Funny that people on entitlements have been conditioned to fear inflation. With COLAs they actually do better in an inflationary environment than average workers do.)

[mkultra]

33. your making up numbers again

here is the actual data on inflation.

[denem]

36. That's bullshit. CPI - however the basket is weighted is not inflation

it's the effect of inflation on the average consumer.

If you wanted to prove a point, you would be looking at the GDP deflator.

All measures, even yours, do not change the fact that inflation decreases the burden of real debt.

[mkultra]

52. There isnt much differece between the two

I agree that the deflator is a better judge but i was responding to his nonsense. There isn't really much difference between the two in an economy the size of ours but just for you, here's a better chart. Inflation doesn't really lend towards recovery because of its severe impact on the working classes. While more money is spent, the amounts of goods being bought remains constant.

[Kurt_and_Hunter]

38. Yeah, I make up numbers. That's my deal. Another chart...

The statement that inflation went up from 1930 and down from 1982 is not particularly controversial. Despite the oscillations of wars, oil shocks and the business cycle the broad trends are clear. (It is even supported by your own chart unless you demand that the SGS CPI, and only the SGS CPI, can be said to measure inflation.)

I apologize for using the word "inflation" rather than "real and expected inflation as expressed in the market price of short term treasuries."

Short term treasury interest rates are closely aligned with inflation and offer none of the ambiguity of consumer and producer inflation measures. They are hard numbers and easily tracked over time.

[mkultra]

53. well, it sure looks that way

your statement that:

"It went down from 1982-2009 bottoming out in depression type conditions"

is unfounded. while short term T can be used as a proxy to predict EXPECTED inflation. It is NOT inflation.

[Kurt_and_Hunter]

54. If you insist on limiting it to consumer goods, yes, I agree

And yes, expectations are not inflation. And you are correct that my literal statement goes to far because we have not reached 1930 levels because we have diluted the currency by trillions and trillions of dollars to avoid 1930 levels because the trend would--without extraordinary intervention--take us right to 1930 levels.

Excluding real estate from the inflation/deflation picture by limiting the concept of inflation to a basket of consumer goods is one way of looking at the picture.

If you ask a hundred random economists, "What year does our current price stability environment most resemble" almost all of them will name a year between 1930-1932.

The price of a home is cut in half but a loaf of bread goes up two cents. That's a generally deflationary environment, IMO.

But if we define inflation to mean consumer price inflation then yes, we are not pressing zero in that measure.

[mkultra]

57. well, even if you use the GDP deflator as mentioned before

it still closely follows the CPI and we are NOT near 1930's levels. We are in a recession. Of that there is not doubt, But the jobless rate is no where near what it was and conditions and light years from those in the great depression.

The now does not look anything like then and i disagree with your statement regarding asking "any economist." I do agree that we are in danger of sliding more toward depression which is why we must act NOW.

Geihtners plan will work and hoping for inflation will drive us in deeper. What we need is some wealth redistribution from the top to the bottom. That is being accomplished by Obama. borrow money from the future to restart the economy, tax the rich to pay it back.

Tada!

[ecstatic]

37. some people want to force others to live in their reality

of gloom and doom. I'll pass.

[quiller4]

39. No we don't.

"There will be no return to pre-crash VALUATION (adjusted for inflation) for a generation."

In many areas the decline in home values is in the range of 11-17%. While it won't happen overnight, it doesn't take a generation for a property to increase in value by even 25%.

I agree that there is no quick fix and that property values are continuing to decline in many markets but some are already starting to rebound and others haven't changed much at all in the last two years. That is especially true in some places where there were almost no subprime mortgages and where unemployment has held steady at about one-half the national average.

When demand picks up, prices will rise. I don't think anybody can say now how quickly that will take place.

[PurityOfEssence]

41. Yet we're continuing on with the same assumptions

Since we're now a world economy, things will even out. For those of us disproportionately well-off simply by dint of living in the United States, we need to accept that our standard of living and expectations of wealth are going to seriously recede.

Somehow, the worship of the individual, which is one of the dark sides of our national character, resists any encroachment on the privilege of the few or the assumption of what they deserve to make. As a result, the looting of companies to pay unwarranted salaries and benefits to the reckless mountebanks in their executive suites will continue. The lockstep obedience to the concept of unrestrained private enterprise as the only form of acceptable society will continue to leave the people holding the bag for the inevitable busts after cycles of looting have run their destined courses.

Even the simplest analysis of our history shows that the fact that our workers made good wages and spent them is the biggest explanation for our societal success, and yet we connive and deceive to find ways to make sure people can't make a decent wage and are saddled with unbearable health care costs in a world with seemingly unchecked population growth. The very model of our society simply doesn't work when the prime tactic of our corporate overlords is to keep people poorly paid.

Obama is a corporatist. Although his attitude toward labor is somewhat promising, his allegiance to big money, big medicine and Religion Incorporated does not bode well.

The model doesn't work. It fails on a regular basis. Only the reforms of the New Deal kept it restrained enough to not careen out of control on a regular basis, and since 1980, those programs have been systematically unenforced and dismantled outright. It wasn't just the Republicans who did this, although they were by far and away the true sinners in this con-job; Bill Clinton allowed it to happen, and the economic team assembled by Obama is nothing short of an outrage.

The old days are over. Perhaps this is a somewhat good thing: people will be forced to realize that they're not that much different than others and that the unholy heaps of treasure amassed by some is not only unobtainable but pointless. Human nature doesn't sort out all that well on this subject, though, so we shall see.

[Kurt_and_Hunter]

43. nicely written

[Dappleganger]

42. To a certain degree I agree with this...

But the definition of 'recovery' needs to change!

Does recovery mean we go back to the way things were, or to a place where we should have been (a corrected real estate market, for example)? IMO it will take decades before getting back, and some things will NEVER BE THE SAME.

However, most of the US does not equal conditions such as in Ohio and Michigan.

People like our family (dependent upon manufacturing jobs) MUST learn to live differently--we have to be mobile, use less, be ready to adapt to change (that's an attitude problem in my family), open to thinking outside the box. Learning to make a life renting instead of owning homes, if that's what it takes to stay in the business (or stay employed for that matter). Perhaps it means some of us moving our family to a 'hub' and the prime earner flying or driving out regularly then visiting as he/she is able. It may be cheaper to do that and give more stability than moving the entire family every couple of years. Just a few rambling thoughts.

[invictus]

45. K&R

[amborin]

46. NT Times Bizz Section had big article on this today, saying what economists were saying all along

which is why it was not good for Obama to have made that statement saying he was taking
responsibility for economic recovery and staking his re-election on it

[biopowertoday]

47. I have heard economists talk about what the OP is saying

the last few weeks. There will be no back to normal cause the normal is no more.

[Drunken Irishman]

51. Can I get next week's lotto numbers?

:eyes:

[Celeborn Skywalker]

55. Agree.

I think we'll eventually pull out of this mess and keep relatively high standards of living, but we certainly won't be able to live above our means like we have been. No more Mcmansions or Hummers, I don't think.

[Marie26]

56. Yep

It was a false prosperity, based on easy credit. That easy credit is gone & so is the illusion of properity it brought.

[w4rma]

58. Not using Geithner's rip-off scam there isn't. (nt)