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Policymakers have made another Depression Unavoidable


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2011 Jun 4, 11:03am   11,926 views  59 comments

by kentm   ➕follow (0)   💰tip   ignore  

continuing the 'fyi' reposting series...

http://www.informationclearinghouse.info/article28244.htm

If you slash government spending, lay off workers, and trim the deficits, then spending will slow, incomes will shrivel, GDP will wither, and the economy will slip back into recession.

Mike Whitney

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1   Done!   2011 Jun 4, 1:27pm  

Uh, well not if you give money to McDonald's to hire more people to put behind the counter, for you to wonder why it takes ten minutes to get a hamburger, while 5 milling about doing nothing and that one girl in the back making burgers, using your burger as a grease rag to wipe her hand as she wraps your order.

That and don't forget the Middle class are going to be forking over 4 times their income tax roll over to the Insurace Empire, that's gotta be good for sucking money from the poor, into the system.

There'll be plenty of money to steal, come on, Obama hasn't even gotten really creative yet. I'm sure we can do $100 a pound beef, before the years out.

When there's $4.00 gas people don't even want to see Meeter maids. Let alone 60 son of a bitches behind the counter at the DMV, and only one Mother fucker is doing an honest days work.

I loved this part...

The Republican mantra, "job killing stimulus" is an oxymoron like "military intelligence" or "jumbo shrimp".

For you dumb fucks to stupid to follow along at home.

New Rules it is 100 douche bag points to use Oxymoron, and an additional 200 douche bag points in you define it's meaning with a simile. And 300 douche bag points if your similes are "military intelligence" and "jumbo shrimp".
It's like those are the only two valid words people can think of. Do these people even know what oxymoron means? Surely its definition isn't over used examples its self.

2   B.A.C.A.H.   2011 Jun 4, 2:28pm  

Tenouncetrout says

McDonald’s to hire more people to put behind the counter, for you to wonder why it takes ten minutes to get a hamburger, while 5 milling about doing nothing and that one girl in the back making burgers, using your burger as a grease rag to wipe her hand as she wraps your order.

Tenounce, be careful.

We do have freedom of speech. It means that you have the freedom to put your foot in your mouth.

The internet and blogosphere are not anonymous, just ask the companies that cooperated with the Patriot Act.

Employees at McDonalds work hard. A whole lot harder than the desk jockeys who have leisure time for blogging. McDonalds, rightfully, may take offense to what you write about their employees.

Watch your back.

3   kentm   2011 Jun 4, 2:57pm  

Tenouncetrout says

to stupid

TOO stupid...

Also, funny you mention MacDonalds. Did you know that jobs at MacDonalds are now counted as "Manufacturing" by the gov rosters?

5   Done!   2011 Jun 5, 12:50am  

sybrib says

The internet and blogosphere are not anonymous, just ask the companies that cooperated with the Patriot Act.

Employees at McDonalds work hard. A whole lot harder than the desk jockeys who have leisure time for blogging. McDonalds, rightfully, may take offense to what you write about their employees.

Watch your back.

OH My aching ASS is McDonalds part of Liberal Church of the almighty now?

Hey I got an idea, why don't McDonalds hire all of the out of work teachers, THAT WAY, when little Jr. goes and gets his Big Mac and french fries, he'll have to answer a few questions from the FCAT first.

6   Done!   2011 Jun 5, 12:53am  

Troy says


“Nessuna soluzione . . . nessun problema!„

I thought we were friends? Ah gee Hey Patric you should make it so when you ignore someone, it can send email to the person being ignored, and an announcement to the rest of Patnet that Troy and TOT got a Blog divorce.

7   HousingWatcher   2011 Jun 5, 12:57am  

Cutting spending has NEVER created a single job. Nor has cutting taxes for rich people. The Republicans are sabatoging the economy so that Obama won't be able to get re-elected. I guarantee you that last Friday, when the horrible unemployment data came out, there was lots of cheering in John Boehner's office.

8   Done!   2011 Jun 5, 1:06am  

HousingWatcher says

I guarantee you that last Friday, when the horrible unemployment data came out, there was lots of cheering in John Boehner’s office.

um... Isn't he on "HIS" side? It's your division, now get back on "YOUR" side.

You guys fail to realize, you can't do this shit with out the Middle class. The middle class is under the Bus.

9   HousingWatcher   2011 Jun 5, 1:15am  

Republican ransom notes discovered:

10   Done!   2011 Jun 5, 1:26am  

The Democrat plan is Obama picking each and every middle class up by the ankles and shaking vigorously, until all of their income falls on the floor, where Health Care execs and Health Care investors scurry about collecting every cent as it falls. Like a demented game of Hungry Hungry HMO's.

11   Done!   2011 Jun 5, 1:45am  

Well Hello Mr. Selective memory!

Obama was still signing Bush era legislation, when Oslo was giving him the Booby prize.

12   clambo   2011 Jun 5, 2:55am  

Cutting government spending means that captital that was sucked up by the central planners and overpaid government workers can go where it is actually needed.
For example, we have a Dept. of Education in DC. This is a complete waste and folly. I am 100% certain that none of the schools I attended since 8th grade took direction from Washington bureaucrats.
Cutting government jobs means that capital can be directed to creating more capital and more jobs.
If I have to pay all my disposable income in taxes, then I have no capital to invest in those solar roof tiles or Tesla like Obama wants me to.
The future value of your investments and your dollars is eroded slowly as Democrats try to borrow our way out of financial difficulty. The only thing standing between you and a worthless dollar in your future retirement are those "unreasonable stubbon" guys who are saying stop borrowing to pay promises.
Paying actual debt obligations we can afford. Geithner was fearmongering.
We can't afford to pay out unemployment for 2+ years for example.
Hoover sent the Mexicans home so Americans could find work. Meanwhile we are paying zillions in food stamps to the little kids born to them.
Washington DC is full of enablers and debt spenders. Someone has to cut up their credit card.

14   marcus   2011 Jun 5, 3:40am  

clambo says

as Democrats try to borrow our way out of financial difficulty.

Seems to me that it was republicans (more than democrats) that borrowed our way in to financial difficulty, with their "deficits don't matter" starve the beast mentality.

Things are working out just as some had hoped they would. Now they magically find fiscal discipline and insist that the FDR and Johnsons "socialist" policies are dismantled.

Well,... isn't that convenient.

15   HousingWatcher   2011 Jun 5, 3:58am  

"as Democrats try to borrow our way out of financial difficulty."

When will Republicans stop lying? Seriously, can you go without lying just for 1 day????

16   HousingWatcher   2011 Jun 5, 4:04am  

"The only thing standing between you and a worthless dollar in your future retirement are those “unreasonable stubbon” guys who are saying stop borrowing to pay promises."

Are you referring to the same people who were in charge from 2001-2009?

The U.S. Dollar Index:

17   HousingWatcher   2011 Jun 5, 4:19am  

"Cutting government spending means that captital that was sucked up by the central planners and overpaid government workers can go where it is actually needed."

Companies already have more than enough capital.

"Corporate America is hoarding a massive pile of cash. It just doesn't want to spend it hiring anyone."

http://www.washingtonpost.com/wp-dyn/content/article/2010/07/14/AR2010071405960.html

18   HousingWatcher   2011 Jun 5, 4:29am  

The #1 driver of the deficit are the Bush tax cuts folowed by the 2 wars. Interesting that those who want to cut spending never mention the tax cuts.

19   HousingWatcher   2011 Jun 5, 4:38am  

"Nothing is more important than balancing the budget with the least increase in taxes. That is vital to the still further promotion of employment and agriculture. It gives positive assurance to business and industry that the Government will keep out of the money market and allow industry and agriculture to borrow the monies required for the conduct of business."

--Herbert Hoover

http://www.presidency.ucsb.edu/ws/index.php?pid=23478#ixzz1OQc39sSA

20   clambo   2011 Jun 5, 5:12am  

The reason for "balancing the budget" is obvious.
The interest on the debt means you are paying interest on money already spent, which is capital that could be used for more production=wealth.
The debt per se matters as it grows to a larger number than the increase of GDP.
If your wages go up 4% per year, and your credit card debt is one year of your pay, and your debt goes up 7% per year, you have a problem and this will hurt your ability to have any capital to do anything productive. You cannot find capital to invest because it is all gone to interest payments.
If you can reverse the trend, the situation can become manageable.
Capital is best used where the market sends it, not where the government central planners wish it would go to.
Goverment meddling in the housing market resulted in capital and debt directed to an asset that became a bubble.

21   marcus   2011 Jun 5, 5:20am  

clambo says

Goverment meddling in the housing market resulted in capital and debt directed to an asset that became a bubble.

Let's not re-litigate this. He won't get it anyway.

22   HousingWatcher   2011 Jun 5, 6:11am  

"Capital is best used where the market sends it,..."

Like to China and India, which is where the market is sending capital. The only reason capital is being invested in the UNITED STATES is because of the govt. The private sector is not interested in spending money here.

23   MisdemeanorRebel   2011 Jun 5, 6:19am  

Or clambo says

Capital is best used where the market sends it, not where the government central planners wish it would go to.

Like Enron shares. MBS C-level tranches promising big returns on NINJA loan packages... or the buying of CDS that bet on their failure. etc. etc. etc.

24   HousingWatcher   2011 Jun 5, 6:30am  

"Other countries have take austerity measures and guess what? They are doing better than we are."

Like the Baltic countries??

http://patrick.net/?p=692226

25   HousingWatcher   2011 Jun 5, 6:35am  

Latvia GDP during Austerity:

http://www.tradingeconomics.com/latvia/gdp-growth

WARNING: It's ugly

26   Â¥   2011 Jun 5, 7:16am  

shrekgrinch says

They are doing better than we are. Germany and Britain comes to mind

You want to know why Germany is doing better than us, SG?

"People with jobs must, as a rule, make payments to four parts of the system, for health insurance, long-range nursing care, pensions and unemployment. These payments will usually come to about 40% of gross income, but the employer normally pays half of the cost, meaning that the employee is out of pocket only 20% of his income."

40% of wages right off the top for payroll taxes.

Germany didn't have much of a housing bubble, and their high tax burden had a lot to do with it.

All taxes come out of rents.

As for England, they're fucked.

http://www.guardian.co.uk/politics/2011/jun/04/george-osborne-plan-not-working

27   B.A.C.A.H.   2011 Jun 5, 7:25am  

My German friend's son was born with the heart outside of the cavity. The outcome was excellent and now the kid is a robust healthy alpine skiing teenager.

His dad told me that there was private medicine available there, they did not seriously consider using it because they could not afford it. Nonetheless they did their homework at the time and concluded that the public program was not inferior.

28   marcus   2011 Jun 5, 7:29am  

Troy says

“People with jobs must, as a rule, make payments to four parts of the system, for health insurance, long-range nursing care, pensions and unemployment. These payments will usually come to about 40% of gross income, but the employer normally pays half of the cost, meaning that the employee is out of pocket only 20% of his income.”

Sometimes losing is actually winning. Of course I'm referring to WWII. Unlike us, they don't have to support a military industrial complex.

29   Â¥   2011 Jun 5, 7:39am  

marcus says

Unlike us, they don’t have to support a military industrial complex.

LOL. Neither do we -- nearly every dollar we spend on our military is borrowed from overseas. . .

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt

$600B in debt-add vs. $666B in defense spending for 2010.

30   Â¥   2011 Jun 5, 7:42am  

shrekgrinch says

What does their labor laws have to do with them not spending more than they take in? Uh…nothing.

Their high tax level and stricter loan standards prevented them from blowing up their economy with a consumer mortgage credit bubble like we did.

The latter half of the Bush Economy was being fueled by TWO TRILLION of corporate and household debt take on PER YEAR.

That's why we crashed in 2008 and they did not.

Government's main job is being the GOVERNOR in the mechanical sense, to keep the the economic system from flying apart as it will ALWAYS do when left to do its thing without regulation and the negative feedback of government intervention where needed.

"Unfortunately, the stringent loan to value requirements of the system in Germany has resulted in one of the lowest homeownership rates in the industrialized world, relying on renting for over half its population.

"But without the proper regulations, even covered bonds can get a country into trouble. German regulators ensure that investors get periodic updates on the state of the collateral securing their covered bond, and they do not allow covered bonds to be secured by loans with an LTV ratio above 60%. Unlike in the U.S., these regulations were not eroded during the housing bubble."

http://banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=db3677d5-eefe-403a-82c0-6d816c8cfc51

31   Â¥   2011 Jun 5, 7:59am  

shrekgrinch says

Sigh. More crap to justify oranges even though it has NOTHING to do with apples.

Here's the first mention of Germany in this thread:

"Other countries have take austerity measures and guess what? They are doing better than we are. Germany and Britain comes to mind"

You were talking about "austerity" but Germany doesn't NEED austerity because it is already a WELL-GOVERNED system that did not blow itself up during the bubble boom times like so many other DEREGULATED economies did, ours being the posterchild for getting ourselves into way too much PRIVATE debt:

http://research.stlouisfed.org/fred2/graph/?g=J0

blue line is the sum of red (household) and green (corporate) debt.

"Austerity" means cutting government spending. Thing is, it is the government spending that is being used to prop up our economy after the debt bubble, and I have a pretty good graph to demonstrate it:

http://research.stlouisfed.org/fred2/graph/?g=J2

blue line is annual household debt take on. Note that it peaked at $1.2T TRILLION in 2006 -- notionally 24M McJobs ($50k/year) being supported by this debt flow into the middle-class economy.

Red line is corporate debt take-on, peaking a bit later than consumer but also at $1.2 TRILLION a year.

The credit cycle ended and we were well and truly fucked with no way to repay our debt.

Some half-assed keynesian stuff has kicked the can down the road (green line) but households are still being liquidated and corporate debt take on is only at what it was during the dotcom crash.

Going for "austerity" here would be an interesting experiment in how much a smoking hole this economy can create.

Bring it on, as far as I'm concerned. I'm just a plane ticket away from leaving this place.

32   HousingWatcher   2011 Jun 5, 8:51am  

"Latvia is recovering now."

Latvia has 17% unemployment. While we had a recession, Latvia has a DEPRESSION thanks to austerity. Latvia had a 30% drop in GDP.

33   HousingWatcher   2011 Jun 5, 8:55am  

Why Budget Cuts Don’t Bring Prosperity

Remember the German economic boom of 2010?

Germany’s economic growth surged in the middle of last year, causing commentators both there and here to proclaim that American stimulus had failed and German austerity had worked. Germany’s announced budget cuts, the commentators said, had given private companies enough confidence in the government to begin spending their own money again.

Well, it turns out the German boom didn’t last long. With its modest stimulus winding down, Germany’s growth slowed sharply late last year, and its economic output still has not recovered to its prerecession peak. Output in the United States — where the stimulus program has been bigger and longer lasting — has recovered. This country would now need to suffer through a double-dip recession for its gross domestic product to be in the same condition as Germany’s.

http://www.nytimes.com/2011/02/23/business/economy/23leonhardt.html

34   MisdemeanorRebel   2011 Jun 5, 9:01am  

Troy says

As for England, they’re fucked.

HousingWatcher says

Latvia has 17% unemployment. While we had a recession, Latvia has a DEPRESSION thanks to austerity. Latvia had a 30% drop in GDP.

It's interesting to note that the countries most hurt by the 2008 Financial Crisis were all into the "Anglo-American" economic system.

Those that were the least hurt, France, Scandinavia ex-Iceland, Germany - were those that refused to buy into the "We can all be rich by increasing Financial Innovations, and by swapping houses back and forth to each other, so forget about the 'old economy'" bullcrap, and instead insisted on developing the broader economy as a whole.

Iceland, Ireland, the UK and US are the worst hurt by the Great Recession. That's no accident, and it ain't the fault of the French.

35   HousingWatcher   2011 Jun 5, 9:05am  

You forgot Spain... 21% unemployment.

And what is Spain doing right now? Imposing austerity of course.

36   HousingWatcher   2011 Jun 5, 9:14am  

"Other countries have take austerity measures and guess what? They are doing better than we are. Germany and Britain comes to mind, as well as Iceland and others."

Iceland had a NEGATIVE GDP last quarter:

http://www.tradingeconomics.com/iceland/gdp-growth

37   MisdemeanorRebel   2011 Jun 5, 9:23am  

True. And much of the Spanish overconstruction was due to their variant of "all these overpriced condos and villas will be brought by rich Britons as vacation homes." Just like every Miami Realwhore thinks that South Americans are eventually going to buy up all the surplus Condos and SFHs or every West Coast realtor thinks about South or East Asians.

After WW2, we had a brief recession because people were worried we'd return to the Great Depression, where would the demand come from?

We insisted on rising wages, on the job training (not "you're on your own training on your own dime and on your own time" like today) for all, and a loose safety net. Since just before the fall of the Soviet Union, capitalists "Clawed Back" old assumptions about laissez-faire, employment-at-will, etc. and since then the middle class has been on the defensive, and steadily giving up ground.

Getting a degree or certificate in the old days showed you had gumption; today it's become a given and taken for granted by employers. The costs of education and training has increased, but the work hours haven't decreased and the wages haven't increased. The two-income family is also taken for granted, problem is much of the extra money goes to child care, a second vehicle, and convenience costs.

Another step in fixing the economy is to completely re-form primary education, so not everybody is absolutely forced to go to college. You can always go to school later if your mechanics training leads you to wonder about physics, Zen of Motorcycle Maintenance style.

We are in a demand crisis, not a supply one. Supply side economics is of no help in this situation.

Companies won't add jobs until their sales growth increases. Revenue increases by cost cutting (layoffs) is not sales growth.

38   Â¥   2011 Jun 5, 9:42am  

thunderlips11 says

The two-income family is also taken for granted, problem is much of the extra money goes to child care, a second vehicle, and convenience costs.

actually every last dollar of that second income is going into either the mortgage or the rent.

I find it really funny that basically everyone has a blind spot about land values. I had it too, for the first 30-odd years, I didn't understand the crucial nature of land in our economy.

I sensed it, living in high-rent LA on my own in the late 80s, and in Tokyo in the 90s, and coming back to a total nuthouse here in Silicon valley in 2000, but I did not have the analytical understanding to see what made land different from other goods.

Now I do, LOL

39   MisdemeanorRebel   2011 Jun 5, 9:44am  

Troy says

actually every last dollar of that second income is going into either the mortgage or the rent.

Good point, no doubt whatever is left of that second income gets poured into housing expenses.

Over the long term, it makes one-income households very difficult to operate on typical wages. Not just "traditional" dad-working mom-at-home families, but single parents and even singles, period.

40   Â¥   2011 Jun 5, 9:46am  

thunderlips11 says

We are in a demand crisis, not a supply one

we are in a "we-are-fucked" crisis.

Perot was right in 1992. Cheap labor from Mexico and China is pulling $300B/yr out of our paycheck economy.

Paying for imported oil is pulling another $300B or so out, never to come back as wages, just like our trade imbalance.

And on top of that, elsewhere on the internet I recently calculated that there's roughly $300B of ground rent being pulled from the renting public's pockets.

Then there's the extra $1T in deficit spending that is allegedly keeping everything from going to hell again.

We need $3000 gold, but that will also create $300 oil.

My sig says it all

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