What's wrong with the economy?

Albacore Tuna Captain · 10-30-2003, 06:49 AM

My question is this. We always want to blame someone for when the economy takes a dip. Bush has been in office for less than three years and when he first came in, the economy started to take a dip. Now it's rebounding with the fastest pace in 20 years. In the news today we get this information;

U.S. Economy Grew 7.2% in 3Q
(Dow Jones) - The U.S. economy roared ahead in the third quarter, growing at its fastest pace in nearly 20 years, fueled by greater consumer and business spending. Third-quarter gross domestic product, a measure of all the goods and services produced in the U.S., rose at a sizzling 7.2% annual rate, more than double the 3.3% rate in the second quarter, the Commerce Department said Thursday. The economy grew at a 1.4% pace in the first quarter.

Let's look at it in an educated light. The economy goes up and down. It is driven by internal forces that are so complicated, no one can say which way it's going to go. So it's not Bush's fault or Clinton or Reagon or Carter or whoever you want to blame.

The sky is not falling!

Pilar · 10-30-2003, 07:27 AM

Mike would this have anything to do with the 100 units of OSB (Oriented strand board) purchased every day by the US government for shipment to Iraq? The mills can barely meet the demand. Or any of the other spending for the war? The price of OSB and plywood is skyrocketing. Business for the wood products industries is good. Mills are ordering equipment as they do every time the price of lumber and engineered wood products goes up.

What about the price of fuel, that went way up too.

War economy?

crabbait · 10-30-2003, 07:43 AM

Yep, nothing like cranking up the old War Machine to stimulate the economy! You might call it dramatically increasing our export quota, har, har, har. Everything that we have "expended" will have to be replaced, right down to the last BB.

The only thing we make better than anybody else is war and the tools for war. Our business is killin' and business is good!

lost_sailor · 10-30-2003, 07:45 AM

One problem is too much wealth is in the hands of too few people. (Paul Allen, 3 yachts)

I don't have a solution, and I know that I must now move to North Korea, Cuba, or China for thinking these thoughts. I'll write.

TheRogue · 10-30-2003, 07:49 AM

Yet....unemployment continues to rise????

TR

skahorse · 10-30-2003, 07:49 AM

LS,

Quote:

I don't have a solution, and I know that I must now move to North Korea, Cuba, or China for thinking these thoughts. I'll write.

Don't worry, you'll fit in in most Western European countries too.

--Skahorse

[ 10-30-2003, 08:50 AM: Message edited by: skahorse ]

finclipped · 10-30-2003, 08:02 AM

Two words, Alan Greenspan. Its all about monetary policy and has little to do with the party in charge. The government can pump money by deficit spending, but the cost of money is the primary tool.

As I get older, I can see how each recession has its own characteristics. This is very interesting to me. this recession one appears to be a jobless recovery.

Miss B Haven · 10-30-2003, 08:03 AM

Not sure about the US or World economy but I sure know what's wrong with my economy. I don't have enough money to retire and follow the Tuna around 365 days a year (yet)! :depressed: :grin:

Pilar · 10-30-2003, 08:04 AM

Hi Crabby, how's it hanging man?

Tanner · 10-30-2003, 08:16 AM

Quote:

The only thing we make better than anybody else is war and the tools for war.

Please...

Quote:

One problem is too much wealth is in the hands of too few people. (Paul Allen, 3 yachts)

lost Sailor: So, no matter how hard someone works to try and make something more of themselves, they should be paid the same as everyone else?

We have an idea here in America called Free Enterprise. The basic idea is the harder and more creatively you work the more you benefit. I guess you just want us to all be robots or clones. How about another hit of Soma?????

[ 10-30-2003, 09:25 AM: Message edited by: Tanner ]

lost_sailor · 10-30-2003, 09:36 AM

I'm just saying I could get by with one yacht!

I'd like to see filthy rich dudes put more effort into helping the "underprivileged." Maybe to the point of massive income taxes above a certain level, coupled with massive deductions for philanthropy. A little motivation!

Bill Gates is actually starting to do a pretty good job of helping people with his extra bucks, I don't think he's really hurtin' yet - in fact it's probably rather satisfying to wield that power. (He's into immunizing children worldwide) (So they can grow up and buy a new version of Windows!)

Hey Fidel, can I bum one of them Havanas?

skahorse · 10-30-2003, 09:49 AM

finclipped,

Quote:

Two words, Alan Greenspan. Its all about monetary policy and has little to do with the party in charge. The government can pump money by deficit spending, but the cost of money is the primary tool.

You are right, however, the party in power can pull Greenspan out at any second. He was appointed by Bush(yet another Clinton holdover

, the DOD is full of them). I couldn't figure out why Bush chose to go with Greenspan, IMO the monetary policy was a little extreme and quickly killed the I-net bubble causing the economy to falter.

I found interesting though, when Clinton was in power Greenspan was completely against Tax-cuts. Bush comes in, and low and behold, guess what? He's pro tax cuts. Go figure. I think the current administration has alot more power than many think.

LS,
Today must be a pick on LS day for me. I hope you're not taking any offense to me always coming at you LS :grin:

Quote:

Bill Gates is actually starting to do a pretty good job of helping people

$500M, yea that's just a modest amount.

I'm sure he contributes more to charities and helping people than a lot of countries do!

--Skahorse

lost_sailor · 10-30-2003, 10:00 AM

Quote:

Originally posted by skahorse:

LS,
Today must be a pick on LS day for me. I hope you're not taking any offense to me always coming at you LS :grin:

Hey, that's why I'm here!

Thumper · 10-30-2003, 10:08 AM

To answer the original question --- Nothing is wrong with the economy that time and patience won't fix.

The economy grew at a blistering 7.2% annual rate for the third quarter, the strongest growth pace since 1984.

Leading economists credit the growth to ramped up investment on the part of corporate America, the lowest interest rates in decades,the Bush tax cut and America's investment in the war effort.

Now the liberal Democrats, who have been moaning about the recession, are moaning about the economic recovery (see above for some truly amazing rationalizations).

If employment begins to boom (and it shortly will) George Bush will get the credit. He will be nearly unstoppable next November, esecially if we manage to find Osama or Saddam.

Good news for all Americans, even those who don't realize it.

[ 10-30-2003, 12:36 PM: Message edited by: Thumper ]

BrokeItOff · 10-30-2003, 10:16 AM

My opinion:

1. Lack of transparency of companies. Who really knows if they are making money or not? This encourages speculation instead of investing, which causes volatility. I am invested in companies that I feel the managagement is managing to increase my wealth not theirs.

2. Most of the recovery is being driven by consumer spending. The business sector does not seem to be spending yet. I am fearful if interest rates go up, which could negatively effect the current valuations in real estate, will cause consumer spending to plummet.

3. Businesses are not hiring yet, and when they do they are doing so in other countries. This does not give consumers much confidence plus it does not add dollars to the economy. We may be on the cusp of a change like we saw in the 1980's when we became a service economy instead of a manufacturing economy.

These are my concerns about the economy.

skahorse · 10-30-2003, 10:20 AM

Thumper,

Quote:

If unemployment begins to boom (and it shortly will) George Bush will get the credit. He will be nearly unstoppable next November, esecially if we manage to find Osama or Saddam.

Didn't you know? They've already got Osama and Saddam, they are just waiting until we get closer to Nov. '04 to reveal it. :grin: That would be awesome, he'd be a shoe-in!

Thumper · 10-30-2003, 10:22 AM

Quote:

Originally posted by BrokeItOff:
My opinion:
Most of the recovery is being driven by consumer spending. The business sector does not seem to be spending yet.

Not true. In the third quarter businesses increased spending on capital equipment by 15.4%, which was the largest increase since 2000. That is a huge increase.

BrokeItOff · 10-30-2003, 10:34 AM

Thumper you are right.. I just read the report.

Quote:

Especially encouraging was the 15.4 percent growth rate in spending by businesses on equipment and software in the third quarter. That marked the largest increase since the first quarter of 2000 and was up from a 8.3 percent growth rate in the second quarter.

Lets hope this continues. I hope the software purchases were new and not just renewals of annual licenses. Hopefully the equipment purchasing will continue too.

While this is very very positive, one more quarter of business activity like this will make me feel better.

Joe Schwab · 10-30-2003, 10:42 AM

One thing is for sure. Whether the tax cuts had anything to do with the recovery or not, I'd rather have the tax cut and a recovering economy than a recovering economy and no tax cuts.

foxer · 10-30-2003, 10:54 AM

Job growth is always the last thing to improve when exiting a recession

Conn · 10-30-2003, 02:32 PM

Brion,

The direction of the economy has more to do with business trends and monitary policy than politics. Deficits affect the economy, however arguements are made that deficit spending during a slow economy will actually stimulate the economy. I.E. increased military spending puts people to work and provides increased profits for those involved. I am not making this arguemnt, just stating there are many who will. To politicise the U.S. economy and blame recessions on the administration is short sighted.

Lets face it, the roots of the recession we recently came out of started long before the Clinton presidency ended. It was not his fault, just as it was not Bush's fault.

It seems much of the recession was caused by over investment and speculation in infrastructure during the late 90's technical revolution. Much of the overspeculation was caused by the cheap money supply. The fed lowered rates to very low levels just before the millenium allowing for a high rate of speculation in unrealistic business'. This overstimulating of the economy caused it to grow in ways which were unsustainable. A cheap money supply is important for business to borrow to finance their business and invest in the future. A too cheap money supply tends to cause speculation and investment in ideas and companies which have no chance of succeeding. I.E. many of the dot com's who are no longer around.

Unfortunately the Fed, realizing the need to slow the economy, hammered the brakes too hard, raised interest rates 13 times, hurting many business' and hastened the implosion of the stock market and the recession. The economy and stock market would definitely have corrected significantly, however a prime rate of 10.5% not only kills the overspeculative business', but also kills valid business' who rely on a reasonable borrowing rate. 10.5% is unreasonable and was unnecessary.

Now seeing the error of their ways and in order to stimulate the economy they have lowered rates to todays prime rate of 4% I believe and a fed funds rate of a little over 1%. Having the cost of money this low will allow business' to borrow and invest on their infrastructure and invest in their future. Much of this is good and is showing results, i.e. 7.2% Q3 GDP. However it can be argued this low of a cost of money can overstimulate and cause another bubble, which again most likely will cause the Fed to overreact on rates to the upside.

To summarize and finish the point, you can count on the economy to continue to expand for at least as long as we are in the cheap money situation we are now in. Keep your eyes open though, market forces are pushing interest rates higher and sooner or later the Fed will have to acknoledge this and raise the fed funds rate. This trend can prevent an overheated economy, but will also slow it down. If the fed decided the economy is ahead of itself and gets too aggressive it will most definitely lead toward another recession.

Sorry for being so long winded.

MightyMo · 10-30-2003, 05:09 PM

Just saw a report on the news that our third quarter growth was the biggest in 20 years. Read into it however you want....

freespool · 10-30-2003, 05:29 PM

The bad thing with a war related economy is that sudden stop at the end. Anyone remember VietNam? If my memory serves me there was a distinct down turn after that police action.

BrionLutz · 10-30-2003, 06:35 PM

Conn,

Quote:

The direction of the economy has more to do with business trends and monitary policy than politics.

Deficits and Debt are fiscal policy, not monetary policy, but they affect monetary policy.

Structural Deficits and Debt are a drag on the economy which is why the Reagan/Bush Sr years were so unproductive overall.

Clinton increased taxes, cutting the Deficit which freed up a lot of money, kept inflation low and allowed Greenspan to use monetary policy to keep interest rates low. This was the reason for the record expansion and job creation under Clinton.

Bush Jr's huge structural Deficits and Debt are a drag over time.

Quote:

I.E. increased military spending puts people to work and provides increased profits for those involved.

Military spending is bad for the economy as it spent on non-productive items. It may be necessary but, economically, it is a necessary evil. A bulldozer creates, a jet does not.

Bush Jr's policies are creating structural Deficits, Debt and structural military spending requirements which are all bad for the US.

Brion

foxer · 10-30-2003, 11:03 PM

Ska', me thinks those WMD's may appear then too!

DanS · 10-30-2003, 11:04 PM

Quote:

If unemployment begins to boom

Psssssst, Thumper.

We don't want unemployment booming.

finclipped · 10-30-2003, 11:19 PM

[QUOTE]Originally posted by skahorse:
[QB] You are right, however, the party in power can pull Greenspan out at any second. .....
I found interesting though, when Clinton was in power Greenspan was completely against Tax-cuts. Bush comes in, and low and behold, guess what? He's pro tax cuts. Go figure. I think the current administration has alot more power than many think.
[QUOTE]

Actually I distincly remember Greenspan coming out against the tax cuts. At the time this seemed like a black eye to the administration, and maybe they did pressure him into changing his opinion.

I really think we are dealing with natural cycles and I think its just grandstanding when you see someone taking credit for a recovery or blaming another for a downturn.

BrionLutz · 10-30-2003, 11:48 PM

Thumper,

Quote:

Leading economists credit the growth to ramped up investment on the part of corporate America, the lowest interest rates in decades,the Bush tax cut and America's investment in the war effort.

Actually the news notes that "leading economists" say it was a one time bump due to the one time rebate checks sent and that "leading econmists" expect this to fall off next quarter.

Keep in mind the comparison date, 1984, when Reagan/Bush Sr deficits were ramping up, Debt was rising and military spending was ballooning.

It lead to record Deficits and Debt and the 1980's had the lowest GDP growth rate of any post WWII Decade. Three recessions in the Reagan/Bush Sr era, the deepest (Reagan's first) and the longest (Bush Sr's first and last).

Note the effect on the Bush Jr Deficit, it is projected to "decline" from $500B to $480B...Yippee!

Brion

TheRogue · 10-31-2003, 05:01 AM

Yup, an explosion in military spending is good for the economy....but so would be investing that $100 BILLION + into the nation's infrastructure! We have had no significant infrastructure spending since the 1970's. We have serious road and bridge problems all across the country. You suppose if that money was invested here IN-COUNTRY rather than overseas, we'd make all sorts of living-way jobs over the next 5-10 years?? I do.

Unfortunately, I also feel that since we're over in Iraq now, we have the obligation to see it through, regardless of the time and cost.

TR

Silver Hilton · 10-31-2003, 05:51 AM

Quote:

Originally posted by MightyMo:
Just saw a report on the news that our third quarter growth was the biggest in 20 years. Read into it however you want....

Well, the stock market sure thought it was important. Naz was down 3 points on the news, struggling to be up 7 points today. Hardly a rousing show of support. If you look at the growth charted over the last several years, you can see that GDP varies a lot, and the 7% rate for this quarter isn't real unusual. See the chart, here. As a matter of fact, from this chart, I would have to conclude that the economy hasn't thought much different about bush's and clinton's policies.

I think the economy is OK. Not great, not in a depression. Thre are big storm clouds, though. The ongoing deficits weigh on the stock market and on business planning. The entitlements of social security and medicare are still funding problems waiting to get fixed. And the uncertainty around security keeps people restrained, in my opinion.

Silver Hilton · 10-31-2003, 05:54 AM

Quote:

Originally posted by freespool:
The bad thing with a war related economy is that sudden stop at the end. Anyone remember VietNam? If my memory serves me there was a distinct down turn after that police action.

Well, the oil shock due to OPEC had a little something to do with that, as well...

Conn · 10-31-2003, 06:54 AM

Brion,

I agree with much of what you say, except that Clinton's raised taxes resulted in a better econom and allowed for faster reduction of the deficit. Raising taxes is the same as raised interest rates. Higher interest rates are in effect a higher tax, it just goes to the bank rather than the govt. Higher outlay to the bank, the govt, whatever slows business investment.

I agree that lowering the deficits improves long term economic outlook, however I will argue that lower taxes, and lower borrowing rates spurs business and actually increases the amount of taxes collected. If a company earnes 1,000,000 at 35% tax rate the govt gets $350,000. If this rate is lowered to 30% the company will use the 5% savings to invest in their company and earn more taxable income. This is the same as lowering borrowing rates by 5%. It spurrs growth. If the rate is increased to 40%, true the government gets $400,000. Sure they get more to pay off the deficit, but the company sacrifices $50k in profit, which is less that can be reinvested. This slows business and reduces the overall taxable income of individuals and business.

Clinton's lowering of the deficit was not a result of higher taxes but a result of less spending coupled with a good economy. An expanding economy allows for larger tax collections. Clinton did not cause the economy to improve. I will argue Clinton inherited an economy which was on the brink of expansion at the time he took office. It wasn't doing so well at the end of his term, not saying it was his fault, it was the business cycle. I will argue his raised taxes worked against the economy, as illustrated above.

Today's deficit spending will hurt the economy long term, however we have made certain decisions, the war, which is causing much of this spending. I do not want to debate the pro's and con's of the war, as I expect we do not agree at all on this issue. I will state one thing, we are in this thing and we must support it financially until the end.

CC