The Daily Economic Rag (for Ricter)
- Thread starter Tsing Tao
- Start date
Not exactly. I mean if the deficit and QE ended today and the budget was balanced, the economy would contract by 18-20% within a few months. According to my best guess, that's where the GDP 'equilibrium point' is, right now. The equilibrium point arrived at through: balanced budget (no deficit) and no FED private sector asset purchases (or excessive treasury purchases) + ripple effects.
For perspective, the 2008 recession saw a peak-to-trough contraction of ~3.3% GDP. So if all borrowing and QE stopped tomorrow, the resulting 'contraction' would be of a magnitude 6 times larger than the '08 crash. Equity, real estate, credit and insurance markets would basically implode. It would rival the great Depression in scope (~32%). This is what politicos mean when they say the deficit is "structural". Literally, it's supporting the economy. Figuratively, it's a load bearing column in a high rise building....
What happened is this: since offshoring began in the 80's, an economic sink hole began to form in the economy. As those jobs (and wealth) migrated overseas at an accelerated pace, the sinkhole got deeper. To 'patch it up', successive Presidents pushed more money down the 'sink hole' to make it level. That money was borrowed, in the form of the deficit. Throw in repeated bubbles (S&L, LTCM, Nas, '08) which destroyed huge amounts of private capital, stagnant wages (from offshoring) and further deindustrialization, the sink hole got so fucking big it eventually eroded ~13% of the economy. Where we stand today. That's why the Government is now spending 13% of GDP, and in return has seen zero to 1% growth. Apparently, this slow, crumbling of the very foundations of the economy has been going on for literally decades. And now, we're close to running out of money to patch up the sink hole. Soon, the US Gov will not be able to borrow at low rates. When that happens, the raging torrent underneath that sink hole will wash away all that 'dirt' covering it up, and we'll all be staring down into a huge, ugly, gaping pit. And a lot people and businesses will get sucked into that pit (economically), as a result. As far as blame, there's lots to go around. Solutions? Short of jacking tariffs 100-200% against Chindia and abolishing the income tax, I think we're done. And I'm pretty certain none of that will happen. Politically, it's untenable. So, I'm preparing for a SHTF scenario. What's even more frightening (if you can stomach it) is the exact same circumstances are playing out in Western Europe, right now. Collectively, the "West" offshored a huge swath of it's industrial capacity (and therefore, wealth and jobs) to Asia. In return, we all used borrowed cash to offset the resulting massive decline in economic activity. All countries have debt limits. Europe was the first to hit theirs. The Euro PIIGS, specifically. Greece, Ireland, Portugal. Same scenario, on a much, much smaller scale. Soon, Spain, France then the UK will have their turn. As will the United States. Shortly following, Canada. We're all marching over the cliff together. Hand-in-hand. It's all very grim. Sorry.
You are essentially referring to the Glass-Steagall Act? As I recall, it was Obama who wants regulatory reform, whereas his political opponents, described as Republicans, want little or no regulation. And I didn't think Bernanke and the Fed participated in such legislation.Quote from Tsing Tao:
Sorry it took so long. I got a call from a recruiter (i guess maybe the market IS improving, Ricter)
All you have to do is look up the Volcker Plan. It was designed to remove the trading apparatus from Banks and force them to have no ownership in hedge funds and the like. Obama touted it, Bernanke didn't like it. Geithner hated it. Eventually, the "Volcker Plan" which was supposed to end TBTF was sliced, diced and watered down into absolutely nothing. And it was done so by Timmah and the democrat led Senate without so much as a peep by Obama.
Yes, I agree with that. Developed countries have living standards to maintain. Not profit margins or shareholder dividends. High labor cost nations cannot compete with low cost nations where minimum wage laws, pensions, healthcare benefits and safety and environmental regulations are non-existent. It's impossible. To preserve that inherent wealth, we have tariffs. However, our tariff and trade policy was highjacked by corporations who wanted to smash the unions instead of investing and building out automated manufacturing in the United States.
So now we have what Smith alluded to in your quote: foxes took over the hen house. And the hens (us), being the ignorant, trusting, naive birds we are, didn't make a fuss when the Foxes took over. And here we are. The politicians, well, they're traitors. A lot of them knew what was going on and refused to speak out and inform the public. They did that for campaign contributions. To keep themselves in a job. God knows why else.
Ditto. Should have been Ron Paul in 2010.
Dumbass, greedy American tit-sucking parasites don't care about our future... only care about "getting a check in exchange for their vote"
As someone who hires individuals on occasion, the only reason I would be hesitant is because people who are unemployed tend to take any job they can at the moment, and are more likely to leave when the economy improves. People who you get from another job actually accept the job you're offering because they want it.