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| User Info | Economic Bottom Calls: Willful Ignorance in forum [Ticker] | |||
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Genesis Posts: 71430 Incept: 2007-06-26 
KD^2 
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http://market-ticker.org/archives/1313-E....
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-08-08 15:27:21
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Stemmit Posts: 2035 Incept: 2007-09-07 
NYS
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A well intended rationale for the repeated bottom-calling is to stir consumers to spend and borrow more. Though doomed, this may may be the only way available to delay economic collapse. The leaders know things are bad, perhaps much worse than outlined in the ticker, so the admin claims that now everthing may be fixed, to give hope and spur activity. By analogy, should a company with lots of employees, hopelessly in debt and losing money, end immediately or delay hoping that a new solution emerges, even if the hope is thin. The current lies may be the best we can do. The dishonesty that led to this state of affairs, of course, is really, really bad. ---------- The path of the righteous man is beset on all sides by the inequities of the selfish and the tyranny of evil men. Blessed is he who in the name of charity and goodwill shepherds the weak through the valley of darkness, for he is truly his brother's keeper and the finder of lost children. And I will execute great v Last modified:
2009-08-08 15:59:32 by stemmit
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Frat Posts: 150 Incept: 2009-07-15 NKY
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Well, there it is. Karl's entire view of this recession, and the one to which most people here subscribe (thanks to his work). Karl, realistically, how long do you believe we have, should .gov continue on the current destructive path, until something particularly nasty happens? I'm referring to anything from a market crash to marked deflation to whatever nasty things you can think of.
2009-08-08 15:57:50
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Ilikecoffee Posts: 1019 Incept: 2008-04-17
cold , AK
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I don't understand the term 'willfull ignorance'. Can you define that term better for me?
---------- You can trust the government, ask any American Indian. "When people lose everything and they have nothing left to lose, they lose it" Gerald Celente
2009-08-08 16:12:11
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Digitalcolony Posts: 335 Incept: 2007-07-09
Seattle
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Ticker wrote.....force repatriation of labor so we produce more (which will lead to nasty tariff wars ala The Great Depression.) Is this why it appears that the Fed/Treasury is trying to destroy the dollar? Is their goal to repatriate manufacturing back to the States?
2009-08-08 16:16:24
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Escaping_east Posts: 107 Incept: 2009-04-19 Europe
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Karl, if consumption is 70% and government is 30% then where's investment hidden?
---------- The problem with socialism is that eventually you run out of other people's money
2009-08-08 16:18:37
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Eleua Posts: 9907 Incept: 2007-07-05
N 47.72/ W 122.55
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I agree with both of your solutions, and believe that eventually we will get to a hybrid of both. I see a political gold mine for anyone that advocates "Americans working for America," or the repatriation of US manufacturing. That is where the actual wealth is hiding, and since the BABYBOOMER executives have run only one play (outsourcing), it makes sense that may be overdone and due for a correction. Yes, it will  the rest of the world, but that's their problem. By my count, our economy can, at best, sustain 240 million, which is somewhat dire when looking at the current census numbers.Part-and-parcel to the above is the second part of your solution. We will have to spend less on credit (bringing forward), and more on actual cash. I see that the surviving institutions will either be regulated into sanity, or shepherded by executives with actual gray matter between their ears (after the Boomers retire/die). Combine both of these, and you get a leaner America that produces the goods it needs to move forward. This whole "white collar/service economy" was never, ever sustainable. We just had a 100 million people that decided that they were too damn special to get their hands dirty at work, and offshored to reduce production costs while they masked declining demand by bringing forward consumption via credit. I advocate both. Even then, we get an economy capable of supporting 240 million at a 1960s era standard-of-living. ---------- http://clearcutbainbridge.blogspot.com/
2009-08-08 16:20:48
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Genesis Posts: 71430 Incept: 2007-06-26
KD^2
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Quote:I don't understand the term 'willfull ignorance'. Can you define that term better for me? Sure: Dennis Kneale ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-08-08 16:33:13
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Eleua Posts: 9907 Incept: 2007-07-05
N 47.72/ W 122.55
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---------- http://clearcutbainbridge.blogspot.com/
2009-08-08 16:34:14
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Clumsygardener Posts: 57 Incept: 2009-07-17
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Superb, Karl. This is the best ticker I have ever read. Yes, our blood should run cold. That consumer confidence chart is the most telling chart of them all....so much desperation in obama.gov to restart consumer spending and what do they get for it? Nil. Nada. Rien. The empty set.
2009-08-08 16:39:54
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Grashopa Posts: 415 Incept: 2009-02-03
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Are the numbers on the chart for consumer credit outstanding correct? 2,600,000 billion? Consumer credit has fallen 100 trillion? The government hasn't done nearly enough to replace that if so. But if consumer credit is only 2.6 trillion - then the government has managed to put a lot more than 100 billion into the economy. And 10% of total credit or 260 billion is what % of national income for a test of the ability to handle the interest.
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2009-08-08 16:50:56 by grashopa
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Genesis Posts: 71430 Incept: 2007-06-26
KD^2
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$2.6 trillion.
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-08-08 16:50:22
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Stuki Posts: 30 Incept: 2009-01-29
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Nice analyses, with a weirdly tacked on and surprisingly flawed conclusion. Protectionist measures, just like in they did in the 30's, will only lead to more losses to aggregate earnings ability in already existing US jobs, than whatever gains it may lead to from repatriated "new" ones. To up participation rate, hence aggregate earnings ability and GDP, focus on policies that tilts the participation decisions amongst marginal participants in the direction of participation. Like letting him / her keep more of the upside of him / her participating, and personally see more of the downside of him / her not doing so.
2009-08-08 16:51:14
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Hirooonoda Posts: 77 Incept: 2009-07-31
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Okay, 70% of GDP is Consumption and 30% is Government spending. It appears the way the govenrment will off-set this decline in consumption is just by ramping up government spending. Say 50-50. In their eyes, it's "problem solved." It keeps the illusion that the GDP and therefore the US economy is A-O.K.
2009-08-08 17:01:32
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Genesis Posts: 71430 Incept: 2007-06-26
KD^2
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HOW ARE YOU GOING TO PAY THE DEBT STUKI? I know, the "Right Wing" answer is "cut taxes!" Nice try when you're deficit spending - it doesn't work. We tried that in 01-07 and you see what it got us. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-08-08 17:02:00
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Thumpher Posts: 20 Incept: 2009-06-04 Gainesville, Fl
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Re bringing manufacturing back to the U.S.... I keep hearing that one good way to repatriate manufacturing is to revise our tax code such that it is advantageous for companies to return. Presumably it could even attract foreign companies. It seems to me, though, that labor costs and environmental controls also play a huge roll. If China will allow wigit tailings to be dumped, untreated, in the Yellow River, and pays local workers next to nothing (with little or no benefits) it's hard to imagine that simply tweaking the tax codes could provide that much of an incentive. Which really only leaves protectionism. No real alternative either way.
2009-08-08 17:02:13
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Sondergaard Posts: 512 Incept: 2007-07-13
Big Trees
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Genesis wrote..Attempting more and more fiscal stimulus...the ability of the government to continue down that path is not indefiniteWould you like to speculate on WHEN and HOW the government will be forced to stop liquidity-pumping? It seems to me that the capital markets will continue the wild party until the Fed and Congress stop spiking the punch. With Greenspan acolytes running the show it is a given that they won't stop on their own. When they stop, it will be because they have been forced to stop. But when will they be forced, and by what event? The bond vigilantes know exactly what is going on and don't seem concerned enough to do anything significant. Could it be a matter of years, not months, before the vigilantes change their minds? ---------- And it won't make one bit of difference if I answer right or wrong; when you're rich, they think you really know. --Fiddler on the Roof Last modified:
2009-08-08 17:07:25 by sondergaard
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Eleua Posts: 9907 Incept: 2007-07-05
N 47.72/ W 122.55
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Thumpher, Exactly. The only way we can compete with the Third World is to become them. It's a race to the bottom and we still have the option to get out of the race and allow the ROW to live in squalor. ---------- http://clearcutbainbridge.blogspot.com/
2009-08-08 17:04:41
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Eleua Posts: 9907 Incept: 2007-07-05
N 47.72/ W 122.55
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@Sondergaard, Just my guess, but we had a genuine failure of the last 5yr auction, and as Gen noted, ZEROHEDGE busted wide-open that the 7yr would have failed had it not been for the obvious FED backstop. The snake is eating its tail and it is up to its lungs. The FED can no more QE our way to solvency than you can by paying your MC with your VISA. Seriously... | |||
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Nanna Posts: 2630 Incept: 2008-01-20 NY State
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"Hitting bottom" after falling off a cliff doesn't mend broken bones, nor put a body back at the previous altitude, unscathed. There will be, I expect, a protracted period of adjustment/recovery in our immediate future.Quote:... the only durable solution available is to accept that our economy must contract to a level we can sustain via personal earnings, not credit, and to either pay down or default the excess credit in the system. This in turn will significantly "reset" our standard of living to a lower level, as we will be paying more in cash and less in credit for what we consume. Agreed, but there are many who believe that the American Standard of Living (including healthcare) is a God-Given Right, and will go down fighting to the end rather than accept this as a possibility. I suspect that much of the political gerrymandering of late is a displacement of anxiety resulting from the difficulty of adjusting our notion of what "having it all" might mean. The town hall meetings are a symptom of the anger phase of the grieving process, IMO.
2009-08-08 17:13:26
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Genesis Posts: 71430 Incept: 2007-06-26
KD^2
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Those town halls aren't anger. THIS is anger:  IF the politicians don't start answering to the people, not FreddieMac, FannieMae, GoldmanSucks, Buffett, Wells, BankAmerica, Citi .et.al. I fully expect the SHOUTING to turn into something more ominous fairly soon. It only took six months to get to shouting. The pols are literally playing with a jug of nitroglycerine if they ignore this. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me Last modified:
2009-08-08 17:18:38 by genesis
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Sondergaard Posts: 512 Incept: 2007-07-13
Big Trees
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@Eleua, Agreed that it WILL end eventually. But, at this moment anyway, the TNX has only been wobbling halfheartedly upwards. So the events you cite had minor, if any, immediate effect on interest rates. If auction failures and covert-yet-caught-red-handed printing cause no immediate tightening of cheap money, what will? What will be the event that changes the equation? When will it occur? Is it possible we have years? ---------- And it won't make one bit of difference if I answer right or wrong; when you're rich, they think you really know. --Fiddler on the Roof
2009-08-08 17:18:51
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Radhes Posts: 2 Incept: 2009-07-09 new Jersey
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KD, Thanks for this write-up. I have been reading you for about a month now. I must say, this is THE BEST you have written. The amount of thought you have put into this piece is awesome. I wish I am as bright as you. In terms of intellect, I will put you on par with Floyd Norris of NYT. Once again, thank you for a great write-up. ---Radhe
2009-08-08 17:19:30
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Murf Posts: 2813 Incept: 2007-08-28
the surf Online
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Karl, I'm awed by your broad grasp of the issues we face and masterful ability to communicate them. I'm sure you are aware of Harry Dent's assertion that boomers have by now finished their "major consumption years" and so consumer consumption must fall going forward even in good times as the baby boomers are an unusually large percentage of the US population. More of that darn "math" stuff. ---------- The recovery up is losing steam
2009-08-08 17:19:30
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Ilikecoffee Posts: 1019 Incept: 2008-04-17
cold , AK
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What percentage of the 30% government spending is consumption, so that we know what percentage of the GDP is consumption as a total? I can't think of anything the gov produces.
---------- You can trust the government, ask any American Indian. "When people lose everything and they have nothing left to lose, they lose it" Gerald Celente Last modified:
2009-08-08 17:36:24 by ilikecoffee
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