I am not an economist, but I've been reading about the U.S. economy lately, trying to get a handle on where this country is headed. At the risk of being labeled as a negative person who should crawl under a rock, my view is that we have not hit bottom yet and those of us who are most adept at self-sufficiency are in the best position to weather whatever's in store for us and emerge without having lost everything.

According to former labor secretary and economist Robert Reich, we will never recover from this recession because the paradigm has shifted. (See this article)

He makes it sound as if the typical V and U patterns of recovery that have occurred in the past (going back to The Depression days) cannot occur under present circumstances.

The current U.S. economy is driven by consumer spending; people like you and me make up 70% of the U.S. economic engine. With unemployment increasing, real wages decreasing, property values declining (by as much as 70% in some parts of the country), personal debt rising, people are not buying goods and services like we were in the booming '90s. (Say what you want about Clinton, but his administration kept the U.S. economy humming along nicely.)

One only has to look at the car industry to understand the implications. The industry I work in (newspapers) is also said to be dying, thanks to the Internet. (Personally, I just think the industry is transitioning, but that's another topic entirely.)

Then I read articles like this one from the UK about how California may be the first U.S. economic fatality, and I think it's still going to get worse before it gets better.

I don't want to be all doom and gloom, but the evidence looks pretty bleak. Are you being affected by the Recession? In what ways? What are you doing to adjust?

Robert Reich is decidedly left wing. I've heard his commentaries on NPR. Regardless, I think he's smart and has a way better grasp of the implications of what we're dealing with than I do. I'd be interested to hear what your perspectives are about the economy--preferably without laying blame on one party or another.

http://robertreich.blogspot.com/

Around here the biggest changes have come from the computer age taking away office jobs that paid well because people were employed to process information. THey shipped a lot of our manufacturing jobs away in the late 70's and 80's. We still have our natural resources that employ based on what is being manufactured and energy demands. But I'm in a pocket that was hit hard by the downturn I mentioned above.

I think the bigger cities where things were booming based on the economy of the 90's and 2000's will suffer the most. (I think the recession is the result of the "false boom" the Bush administration and Wall Street created + the Bush Administration letting companies ship their manufacturing overseas, or south of the border).

I would hope folks would learn to Live Off of Their Land, even a small plot, through this. If they would look into piling tree leaves up in their back yard to grow vegetables rather than sitting them on the curb.. etc. etc.

It might help America's waist lines if we all ate more vegetables like greens and things that grow for a longer period of time.

Since our economy is mostly built on the purchase and sale of goods we don't need, I expect that Mr Reich is correct. We need kitchen knives, but we probably don't need salad shooters, and since about 70% of our economy is the business of selling salad shooters and other clever, cheaply made, overpriced, not particularly durable, and mostly unnecessary goods, the economy will continue to contract as people realize they can and should get along without them.

Three years ago there were 5 factories building modular structures in the State of Maine, all within a 15 mile radius of here. I guess I took the right job offer, because as of today, it appears we are the only one still standing, a fourth running out of work. We closed our smaller factory last winter and layed off the workers there. We also lost production workers in our main plant. I lost 4 of the 8 engineering staff that I supervise.

I see signs of things improving. Affordable housing projects that seemed dead in the water last year are showing flickers of life as Stimulous money starts to flow to agencies. Investors seem to be willing to commit some money to long-term investments now that the free-falling stock market has been turned around.

We have new committments for large, multi-family condo buildings that could fill out production in our remaining factory until June. I have a temp employee starting tomorrow and a laid-off full-time employee returning in a couple of weeks. If there is no significant drop in single family house orders in the future, I hope we will be able to look at restarting our smaller factory.

It isn't all gloom and doom but it won't turn around over night. A ship can sink in a matter of minutes but it takes a long time of bailing to get ahead of the flow and patch the leaks.

This doesn't really answer the question of what I'm doing. On the job, I'm working harder and even more extra hours to help the company get the new orders that we need. Off the job, I'm investing in more woodworking tools to make bee equipment for a source of possible new income and building rabbit housing towards the same end. Also going to prep part of the barn to restart the used book business.

Wayne

quote:

Originally posted by phoebe bird:
my view is that we have not hit bottom yet and those of us who are most adept at self-sufficiency are in the best position to weather whatever's in store for us and emerge without having lost everything.

Which is one of the many reasons why learning to grow and preserve food is probably not such a bad idea!

Our community just had a big Scandinavian heritage festival. It takes over 6000 volunteers from the community to pull off and draws people (mostly Scandinavians) from not only all over the country, but also from overseas. This year, I was one of the 6000, pulling 3 shifts to benefit my favorite community non-profit. Didn't spend a nickel except for the gas it took me to get over there. In the past, I would have probably bought a meal. With a kitchen full of fresh produce, I had neither the need nor the desire to over-spend on junk. My personal spending habits have definitely changed. If other people are doing the same (and I'd guess they are), then our consumer economy is definitely going to have to recalibrate itself.

I too listen to NPR, and I find it ridiculous when they give the report that things are looking up because they are looking "less bad." As in the jobless report is still growing, more people are losing their jobs, however, the percentage of increase is not as big as it was.

Government stimulus and/or government jobs is not production, that is spending. That costs taxes. Taxes in this country come mostly from income, and people out of work, do not have much for income. We need a production economy. Things like renewable resources, such as farming, logging, cattle, wind. But also industry. Perot was right in that Nafta was a giant sucking sound of our jobs leaving USA.

When you have a stable job market, people have disposable income, and a consumer economy takes on a life of its own, (which I think would have happened, no matter WHO was in office) They shell game that was played with the mortgages was doable because of the size of various banking institutes. When the notion of being "too large to fail" came off last year, why didn't limiting the size of banks idea come forward? Instead, they encouraged those that had some stability to buy those without and continue the problem. Another shell game is 'carbon credits' and someone is going to make a lot of money on that idea, and someone else is going to pay for it, a perfect scam.

This country's government as in our national congress, needs to get the idea of 'wants' and 'needs' straighten up. As a nation, we need to not have bills that have thousands of pages. How can LAWYERS sign things that they have not read???

As what to do about it, get involved, go to community government meetings, and try and be problem solvers. Join local organizations, so as to be able to educate our congress men and women. So often, they only hear one side of the story. Be on the school board, or the utility commision. WE are the government, and if good people, ordinary people do not step up to the plate, then nothing will change.

Mrs.K

During the boom years starting in the nineties or maybe even in the eighties people over spent in comparison to their incomes. The size ,and thus the price of houses, nearly doubled. People insisted on travertine tile floors, granite countertops. Those who didn't have them often took advantage or mortgage equity loans to manage it. These loans were often variable interest, so what is affordable with a steady income could quickly become unaffordable. Cars went from Chevy Impalas to minivans and then to Yukons and Escalades while the average family size shrunk. The two income family made this possible for while though I often compared it to "juggling chain saws". But when one of a couple: gets sick, has their job exported, gets laid off, then what was kinda sorta possible became impossible.

This depression won't go away till peoples debt to income ratio improves. A lot of politicians and corporations helped people get in this mess but the individuals made a lot of the decisions on their own.

They are still not limiting the size of banks, and when small ones fail, they arrange forced marriages between the failing bank and a large bank holding company...which will inevitably lead to more banks "too big to fail".

One of the dumbest things we ever did was to allow interstate banking and to remove limits on intra-state branch banking. The inevitable result was the growth of a few giant bank holding companies setting a decreasingly low standard for service and obtaining a disproportionate share of political clout such that they have been able to gut the usury and bankruptcy laws.

Regardless of the "morality" of declaring bankruptcy, the old bankruptcy code did force banks to actually examine the financial position of the people to whom they were lending money, and loans were not given to people who were likely to default.

Although underwriting standards were already poor and declining at the turn of the century, the bankruptcy "reform" act substantially eliminated them, encouraging even greater hubris in the aggressive lending practices of the last ten years.

Yes, people foolishly used their homes as cash registers. Yes, they spent lavishly on goods and services they did not need, but bankers, with the moral suasion of the law behind them didn't exactly try to suggest that there was any reason to avoid the consumer profligacy.

Twenty years ago, you could trust your banker to say "no". You might not have liked hearing "no". But it forced you to consider whether you REALLY needed the new car, the bigger house, the loveseat, end tables and dinnette set.

I suspect that most of you, like me, avoided taking on debts that you can't afford to pay, but we, nevertheless, will share in the punishment.

quote:

Originally posted by mgulfcoastguy:
Snip....

This depression won't go away till peoples debt to income ratio improves. A lot of politicians and corporations helped people get in this mess but the individuals made a lot of the decisions on their own.

quote:

Originally posted by ctdahle:
Snip....

I suspect that most of you, like me, avoided taking on debts that you can't afford to pay, but we, nevertheless, will share in the punishment.

I agree that until people stop going further into debt we will not see an end to this “condition” that our country is in. We can not simply spend our way out of debt by creating bigger debts and all this “stimulus” is doing is just running us all further into debt. For every dollar more tax we all have to pay that is one less dollar we have to get our debt to income ratio back under control. Hang on to your hat folks, we are in for a very long bumpy ride.

Yup! As my grandmother used to say: “Looks like the foxes are guarding the hen house”.

All I know is that the doctors I work for are geting richer and the employees aren't. They have cut our insurance benefits, cut any overtime,we are all doing double duty because they won't hire another clerical person. I know I should be grateful I have a job and I am, what drives me crazy is that these women are holding that fact over our heads. They all know we just can't quit. We are at their mercy. One of the docs just bought a new Mercedes. The same day she announced that we will get no raise this year. I can't wait for the job market to improve. I'll be looking for something else.
datgirl

yep, dirt pit is true to form, insisting on making it about personalities, rather than the issues. Here we go again.

quote:

Originally posted by call me Major:

I agree that until people stop going further into debt we will not see an end to this “condition” that our country is in. We can not simply spend our way out of debt by creating bigger debts and all this “stimulus” is doing is just running us all further into debt. For every dollar more tax we all have to pay that is one less dollar we have to get our debt to income ratio back under control. Hang on to your hat folks, we are in for a very long bumpy ride.

If you read one of the articles I cited by Reich, he explains that, in fact, the artificial stimulus is what the economy needs, that unless people are working and have money to buy stuff, the economy will continue to get worse. In simple terms, Reich said that the national debt that grew from FDR's New Deal economic stimulus was paid off in the 1950s, when our country became prosperous again after WWII and real wages were going up and our economy was riding a wave until the bubble burst in the '70s with OPEC. I was too young to drive then, but I remember everyone freaking out about gas shortages and the long lines at the pump.

It was proved, both during Reagan's terms and GW Bush, that supply-side economics don't work! How is it fair that the president of Bank of America, who is being forced to step down at the end of this year, is getting a $53 million severance package, while the national unemployment rate is heading into the double digits?

From my perspective, the Have-Mores like Cheney and Rumsfeld and Wulkowitz got richer off the backs of the working and middle class during the Bush years, while driving us deeper into debt and reducing real wages. Read that article in The Guardian about where wages are at today for the average American worker, adjusted for inflation, compared to where they were 10 years ago. We have LESS buying power now than ever before. And if consumer spending makes up 70% of the U.S. economy, we are in deep, deep trouble.

Keeping interest rates artificially low (not that anyone qualifies for a loan these days) and pouring money into the economy to keep people working and purchasing goods and services sounds to me like the only way to get us back on track, 'cause I don't see how we're ever going to compete with the Asian workforce or affect the current trade imbalances.

But, like I said, I'm no economist. I'm just another struggling American.

Phoebe,

I don't care what those so called “experts” want you to think, I am old enough to know what really works because I have seen it all first hand. FDR's “New Deal” had the economy stagnated for years and years until the war time economy turned things around.

I agree that 70% of the U.S. Economy is consumer spending. But how are they going to spend money on consumer goods when most of their money will have gone to pay such a large tax debt? The current administration has spent more money than all the other administrations before him for over 200 years combined. How will consumers buy anything to pull the economy up when they (we) are stifled under such a tremendous tax debt?

Please tell me how we will even pay that huge tax debt when, like you just said: “We have LESS buying power now than ever before”?

All I see offered is just smoke and mirrors.

Speaking of smoke and mirrors. Credit is just that.

Bankers have convinced people that they need instant gratification so that they can get some of your hard earned money diverted into their pockets. If people would save up until they had cash to buy their things then while they were saving they could make a little more money through interest on their savings. But instead they buy on credit which just makes the bankers richer by putting more of the consumers money in the bankers pocket. The banker doesn't have to pay out interest on that savings account and he can charge you money for using his money so he gets a double benefit and the consumer gets the shaft.

As for the bankers making too much money, you can not lift up the poor by pulling down the rich. All you do is end up with more poor. The same applies to doctors, lawyers, engineers or any other well off person that worked hard to pull themselves up. Pulling them down will NEVER rise up those that are below them. NEVER.

PS: It is no different when the government spends on credit. The somebody that loans the money to the government (think China for example) gets the interest money while the rest of us get the shaft.