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View Full Version : Unemployment by industry: Recession or depression? - Eric Janszen



EJ
11-08-08, 10:02 AM
http://www.itulip.com/images/unemployment.jpgUnemployment by industry: Brace for Impact

Friday the Labor Department disgorged a mountain of ugly unemployment data. Another``surprising'' jump in joblessness made headlines.

iTulip has observed and analyzed changes in the US economy for over ten years. In the current economic cycle, since 2006, we have focused on median duration of unemployment to give us early warning of rising unemployment.

Here we extend that analysis to point us to where unemployment is headed overall and also delve into 14 major industry sectors, including one you work in, to fine tune our forecast.

There is no doubt in our minds that this is The Big One -- a depression is all but certain unless the US develops and executes a post WWII scale stimulus plan starting in 2009, but the structure of that stimulus is critical to avoid turning the US into a sclerotic economy dominated by large corporations and big government. In any case, we forecast 10 million jobs lost by the end of next year.

NOTE: Janszen Interview on CBC News: Sunday, Airs Nov. 9th, 2008 @9:40 AM (EST) (http://www.cbc.ca/sunday/2008/11/110908_3.html) debates the government bailout of Big Three automakers.

A mass layoff is the event of at least 50 persons let go by a single employer. Mass layoff events and initial claimants for unemployment insurance September 2007 was 1,307. For September 2008 it increased 57% to 2,269.

iTulip member PHS posted the following report on Friday from Pa. It gives us on-the-ground evidence of the impact.
Since 1990, I have served as a pastor in the UCC (Obama's former denomination) in central Pa. Never in the past 18 years have I had sooo many people call me for assistance. What was once rare now happens several times a week. These people aren't just passing through either. They live in the community. "My electric has been turned off." "We're out of food and the food bank told us to call the local churches." "I've never been layed-off before, I'm really ashamed to call you but we're behind on our bills." ...and so on. I believe that 10 million are now called "unemployed." This is what some of them look like. I suspect this figure will rise significantly over the next year or so. I suspect that I'll be hearing from some of them too.
All across the country the recession hammers the most vulnerable members of American society. Here are today's food pantry related headlines from Google News:

Mayor warns food pantry shelves near empty (http://www.indystar.com/article/20081107/NEWS05/811070497)
Indianapolis Star, United States<nobr></nobr>
<nobr> </nobr>Unemployment Up, Donations Down; Food Pantries Struggling (http://www.courant.com/news/local/hc-foodpantry.artnov08,0,6817193.story)
Hartford Courant, United States <nobr></nobr>
<nobr> </nobr>Food pantries strained with rising demand (http://www.wzzm13.com/news/news_story.aspx?storyid=101164&catid=14)
WZZM, MI<nobr></nobr>
<nobr> </nobr>Need Rising For Area Pantries, Soup Kitchens (http://post-journal.com/page/content.detail/id/516093.html?nav=5018)
Jamestown Post Journal, NY<nobr></nobr>
<nobr> </nobr>Salvation Army's food pantry may re-open (http://www.morningjournal.com/articles/2008/11/07/news/mj211959.txt)
The Morning Journal, OH<nobr></nobr>
<nobr> </nobr>Can-do attitude: Food pantry scrambles to keep up with needs (http://www.thedailytimes.com/article/20081108/FAITH/311089990)
Maryville Daily Times, TN
Food bank will hold raffle for food (http://abclocal.go.com/kgo/story?section=news/local/east_bay&id=6495335)
abc7news.com, CA<nobr></nobr>
<nobr> </nobr><nobr></nobr>Santa needs help: Agencies worry about donations (http://www.sltrib.com/undefined/ci_10927273?source=rss)
Salt Lake Tribune, United States<nobr></nobr>
<nobr> </nobr>Food bank low on supplies - November 7, 2008 (http://abclocal.go.com/wpvi/story?section=news/local&id=6494837)
6abc.com, PA<nobr></nobr>
<nobr> </nobr>Oshkosh Salvation Army: More families are requesting help with the ... (http://www.thenorthwestern.com/article/20081108/OSH0101/811080393/1987)
Oshkosh Northwestern, WI<nobr></nobr>
<nobr> </nobr>Food pantry levels running low (http://www.lexch.com/site/news.cfm?newsid=20192088&BRD=284&PAG=461&dept_id=558509&rfi=6)
Lexington Clipper Herald, NE<nobr></nobr>
<nobr> </nobr>Area food pantries low on supplies, support (http://www.maysville-online.com/articles/2008/11/07/local_news/756foodpantries.txt)
Ledger Independent, KY<nobr></nobr>
<nobr> </nobr><nobr></nobr>Salvation Army In Need of Food Donations (http://www.wibc.com/News/Story.aspx?ID=102235)
93.1 WIBC Indianapolis, IN
Tough times mean we must dig deeper (http://www.beaufortgazette.com/180/story/610639.html)
Beaufort Gazette, SC - <nobr>9 hours ago</nobr><nobr></nobr>
<nobr></nobr><nobr> Sorted by date, today's food pantry stories go on for ten pages covering every state in the nation.</nobr>

Recession or depression?

A year ago October 4, 2007 we wrote Next Wall Street "surprise" is more bad employment news (http://www.itulip.com/forums/showthread.php?p=17153#post17153) to show why median duration of unemployment matters:
We've been tracking the duration of unemployment numbers because they, combined with other data, are a decent leading indicator of future unemployment, especially at economic turning points.

Early in an economic slowdown, six months or more before the lay off employees, companies slow then stop new hiring. As thousands of employers cut new hiring, any worker who is laid off finds that finding a new job takes longer and longer.

At some point the process becomes self-reinforcing; the longer more people stay unemployed, the more spending and consumption is reduced, the more demand declines, the more pressure on firms to reduce head count rises, and so on.
We noted then a strong correlation between rising duration of unemployment and recession. Below is the chart from a year ago.


http://www.itulip.com/images/durationunemp090707.gif


The duration of unemployment chart updated with Friday's data, below, confirms our forecast.


http://www.itulip.com/images/MDU1960-110708.gif


Since our Oct. 2007 report, median duration of unemployment increased from nine to 11 weeks. We see it rising above the 12-week level last seen in 1983 to 14 weeks but likely higher before the recession ends.

What does an analysis of each major sector of the US economy tell us about where this recession is going?

Industry Sector Analysis Spells "Depression"

One of the competitive strengths of the US economy over other countries in the world besides sheer size is its industry and geographic diversity. While recessions in a particular state or industry can been deep and long lasting, such as the oil bust in Texas in the early 1980s that followed 1970s boom, recessions tend to be relatively short and mild across the nation as a whole; if employment in one industry or state is contracting, individuals and families can move to another state where a growing industry is creating new jobs. However, if major industries are declining in all states at the same time a recession can turn into a full blown depression. This has not happened since the 1930s, and if not for major infrastructure programs that built the US highway system and a housing boom after WWII, a repeat of the post WWI depression, that followed the end of that period of war spending, may have recurred in the late 1940s.

In our previous unemployment analysis Housing Bubble Correction Update: Here comes the jobs crash (http://www.itulip.com/forums/showthread.php?p=39709#post39709) we focused on unemployment by state. The data revealed a stark picture of unemployment rising in every large state in the nation.


http://www.itulip.com/images/changeinUSunemploymentJuly2008.gif
Unemployment growth by state, May 2007 to May 2008


In this analysis we look at the 14 major industry sectors tracked by the US Department of Labor to see how various sectors are faring and where the job growth is, if any. Unfortunately, a disturbing picture of jobs losses across all major industries, resulting in millions of job losses in 2009 with few areas for optimism in the private sector, emerges. First, the summary charts.


http://www.itulip.com/images/unemployed-number-1107-1108.gif
Unemployment rising in every major sector of the US economy

http://itulip.com/images/unemployed-percent1107-1108.gif
On a percentage basis, construction, and leisure and hospitality, and professional services are taking the biggest hits so far.

http://itulip.com/images/unemployed-percentchange1107-1108.gif
The largest percentage increase in unemployment occurred in construction, agriculture, and professional services.


Unemployment by Industry

We start our detailed sector analysis with Information Services. Computer and telecommunications software and hardware design and manufacturing comprises this sector.


http://www.itulip.com/images/IS1960-110708.gif

Information Services: Employs 3.7 million


After the collapse of the technology and telecommunications bubble in 2000, the Information Services sector lost 700,000 jobs and never recovered. Where did the jobs go? As you might have guessed, the data say many of the manufacturing jobs went to China and software development jobs to India, Russia, and other countries.


http://www.itulip.com/images/chinatelcoexports.gif

Chinese exports of computer and telco gear pre and post
technology stock bubble


With global demand for technology products falling in 2009, we expect to see between 200,000 and 400,000 more jobs lost in the IS sector by the end of 2009.

Where did many of the unemployed US high technology workers go after 2001? As you'd expect, as the housing bubble and the finance industry that financed it grew, employment the Finance, Insurance, and Real Estate (FIRE) sector and construction sectors expanded, too.


http://www.itulip.com/images/FIRE1960-110708.gif

FIRE Economy: Employs 8 million


FIRE sector jobs have not declined significantly during US recessions since the early 1990s. Employment dipped briefly in the 2001 recession then grew by around 600,000 jobs between 2001 and 2007. After the housing bust and bankruptcy or sale of many lenders, banks, and financial services firms since 2007, the FIRE sector is in steep decline with total employment levels falling rapidly to 2003 levels. By the end of 2009 we expect another 400,000 to 600,000 jobs will disappear from the FIRE sector.


http://www.itulip.com/images/Construction1960-110708.gif

Construction: Employs 7 million

Construction grew strongly after the 2001 recession as the housing and commercial real estate bubbles fueled the creation of approximately 800,000 jobs. More than half of those jobs have been lost since the housing bubble started to collapse in 2006. As the commercial real estate bust joins the residential real estate crash that started in 2006, we expect to see another 600,000 to 1.2 million jobs lost in the Construction industry by the end of 2009.

The following eight industries in addition to the three noted above are either experiencing, or are near, negative growth and will continue to shed jobs next year.


http://www.itulip.com/images/Transport1960-110708.gif

Trade, Transportation and Utilities: Employs 27 million


This enormous industry sector includes Wholesale Trade and Retail Trade (below). Sales and distribution businesses include Motor vehicles dealers, Home furnishing outlets, Computer and software distributors and resellers, and the all important Alcoholic beverages retailers known as liquor stores -- in fact everything that consumers do not buy directly from manufacturers. In addition to hits in demand from faltering businesses and consumers, these businesses are sensitive to the credit contraction because inventories are often floated on bank credit lines.

Among iTulip's 12,000 plus members are many wholesale and retail business owners around the world who have for the past few months reported both difficulty obtaining credit and staggering declines in unit orders and revenue, often exceeding 50% or more year to date.

What began earlier this year as a credit crunch and recession, weakened demand turned into a vicious feedback loop of declining orders, diminished cash flow, reduced ability to meet debt payments, layoffs to reduce expenses, leading to a further decline in demand across the economy.

We foresee a 10% to 15% decline in the Trade, Transportation and Utilities sector with losses of 2.7 million to 4 million jobs in 2009.


http://www.itulip.com/images/Retail1960-110708.gif



Retail Trade: Employs 15 million


The Retail Trade sector is taking the brunt of declining household incomes and consumer confidence, now at an all time low, before filtering up to the Wholesale level, covered next. Retailers reported collapsing sales in October and we expect the holiday season to be even worse than the most pessimistic forecasts that project the worst sales in 17 years. The delayed impact on employment in the sector will not show up until Q1 2009 after many retailers that need holiday sales season to turn a profit for the year–to put them "in the black" -- will not see the revenue they need from the worried and unemployed. Tens of thousands of retailers will go out of business. We will not be surprised to see employment in Retail Trade fall by 10% to 15% by the end of 2009, shedding 1.5 to 2.25 million jobs.


http://www.itulip.com/images/Wholesale1960-110708.gif



Wholesale Trade: Employs 6 million


Many wholesalers in the Wholesale Trade sector will not survive the consumer and business sales crash that will continue through next year. Look for a 10% to 15% loss in jobs by the end of 2009, translating into 600,000 to 900,000 million jobs disappearing. Add other sub-sectors and we forecast total jobs lost by Trade, Transportation and Utilities in 2009 between 2.7 and 4 million.

We believe that the impact of this depression will be a restructuring of the entire global consumer economy much as the collapse of the technology bubble in 2000 changed the structure of that industry and its trade relationship with the rest of the world between 2001 and 2004. After the collapse of the credit-based US consumer bubble is over, the retail consumer sector as a whole will never be the same again. This worldwide economic contraction will ultimately result in a realignment of global trade and capital flows overall. The US will lose access to its traditional sources of financing for its trade deficit and will need to re-build its export earnings and national savings before reentering the global market as a significant consumer in five to ten years.


http://www.itulip.com/images/Goods1960-110708.gif

Goods Producing: Employs 22 million

The Goods Producing sector includes Construction discussed above and Manufacturing, of which Durable Goods Manufacturing is a part, detailed below. This is the "making stuff" sector that at its height in 1979 before the birth of the FIRE Economy employed 26 million Americans providing 36% of all jobs before finance began to crowd out many productive industries, leaving the Goods Producing sector providing 19% of all jobs today. In fact, today the Goods Producing sector is actually smaller than the US Government payroll of 23 million. Jobs in this sector are now contracting at a 5% negative rate and we expect a 10% to 15% decline in 2009 resulting in 2.2 to 3.3 million jobs lost.


http://www.itulip.com/images/Manufacturing1960-110708.gif

Durable Goods Manufacturing: Employs 5 million


Durable Goods is just what it sounds like, composed of goods that you use over and over, such as lawn mowers, but don't use up, like beer. This sector has been in steep decline since the mid 1990s. Its fate was sealed by the 2001 recession when the nascent trend of outsourcing of manufacturing to low wage countries became the primary cost efficiency tool employed by struggling US consumer and business brand manufacturers, turning them into design, marketing and distribution companies. We see no reason why this recession will not continue to create additional major job losses in this sector resulting in a 500,000 to 1 million reduction in employment.


http://www.itulip.com/images/Service1960-110708.gif



Service: Employs 118 million



When you think of the Service sector you may think of restaurants and hair salons, but this sector includes every business that does not produce a physical product, including health care, legal, design, and security companies. Professional Services, detailed below, and the FIRE sector, discussed earlier in this analysis, are large sub-sectors of Services. The sector recently stopped producing jobs and we expect it will contract by 2.5% to 5% and by 3 to 6 million jobs in 2009 with some of the job losses in the Private sector compensated by gains in the Government sector.





http://www.itulip.com/images/ProServices1960-110708.gif

Professional Services: Employs 17 million

The Professional Services sector has already given up over a million jobs since peaking in 2006 and this trend will accelerate in 2009 with 2.5 to 5 million jobs lost.


http://www.itulip.com/images/Leisure1960-110708.gif

Leisure and Hospitality: Employs 4 million


Recessions are never good for hotels and restaurants, as households cut back on vacations and businesses reduce travel expense budgets. The brief boom in European and Asian tourism to the US created by the weak dollar from 2002 to 2007 came to an abrupt end in 2008 first as the dollar strengthened against major currencies and then as the rest of the world entered recession. We expect this sector to contract by 10% to 15% in 2009 and give up 1.3 to 2 million jobs in 2009.


http://www.itulip.com/images/Mining1960-110708.gif

Mining: Employs 800,000

Mining does not employ many people in the US but we added it to show an industry that has enjoyed rapid job growth since 2002 when the dollar started to weaken and commodities priced in dollars -- that is, all of them -- began to rise. The strong dollar, falling demand, and loss of access to credit to finance new mining operations will create mining industry job losses of 20% or more in 2009.


http://www.itulip.com/images/Edu1960-110708.gif



Education and Health Services: Employs 19 million


The Education and Health Services sector is largely immune to recession in the past and we do not believe this recession will prove an exception. Jobs will not increase but if there are losses they will tend to be modest.


http://www.itulip.com/images/Private1960-110708.gif

Total Private Sector Employment: Employs 118 million


Overall, the entire private sector of the US economy is experiencing zero job growth and will be more negative in 2009 than during any recession since 1983.


http://www.itulip.com/images/USgovt1960-110708.gif

Total US Government Employment: Employs 23 million

One area of jobs expansion that we can count on in this recession is the US Government sector and goods and services companies that produce for it. Construction, security, health care, and technology are industries that may benefit from a wide array of infrastructure spending programs that will be created to slow the recession over the next few years.

Solutions

While the start date of the current recession has still not been officially announced, we believe it started on a nominal basis, not adjusted for inflation, in Q2 2008, and on a real growth basis in Q4 2007, as we forecast in Q4 2006. One striking aspect of this recession is that unemployment, a lagging indicator that peaks after the end of a recession, is rising so quickly.

What can the government do to slow or stop the various feedback loops that are reducing demand and creating unemployment in the US economy? Is the loss of 10 million or more jobs in the US economy next year inevitable?

Can the Federal Reserve cut interest rates to stimulate borrowing and spending?

The Fed has already cut the Fed Target Rate to 1% and the Effective Fed Funds Rate is close to zero. There is no more monetary expansion ammo.


http://www.itulip.com/images/fedfundseffective08.gif

Effective Fed Funds Rate is close to zero percent


Can consumers and businesses borrow to compensate for lost income with credit?

The 2001 recession was shortened by the expedient of households borrowing against the inflating value of their homes using cash-out refinancing of mortgage loans from 2002 to 2006. Now that home prices are falling and credit is tightening, no similar trick can be executed today to turn an illiquid asset like a home into cash. Rule changes to allow savers to tap their 401K and pension funds are in the works. However, this relatively limited stock of seed corn can not make much of a dent in the cash shortage that is only just beginning to hit US households. The 50th percentile and down of US households have no money in 401K and Keogh plans versus $96,000 in home equity at the start of the 2001 recession. The 75th percentile has only $15,000 in 401K funds compared to $222,000 in home equity at the start of the last recession. For the vast majority of US households, there is simply no savings or equity left to tap.


http://www.itulip.com/images/bankcredit1947-2008.gif


Bank credit can decline during economic expansions but has never failed to decline during a recession. It's possible that it is "different this time" and that bank credit can continue to expand as this recession progresses. However, we believe credit is more likely to decline as the recession deepens as it always has, further reducing the purchasing power of businesses and consumers and feeding into the recession process.


http://www.itulip.com/images/commloans1947-2008.gif


Borrowing declines during recessions. Business loans rolled over in early 2008 and we believe have a long way to go before bottoming.


http://www.itulip.com/images/consumerloans1947-2008.gif


Similarly, consumer loans have only just begun to slow. What is striking is the rapid declines in business activity even before actual lending contracted in the household and business sectors. This means that contracting credit has not yet contributed significantly to the recession process. Perhaps central banks can think of a way to cut this process short, but a ready source of illiquid capital to covert to cash is nowhere in sight.

Can the US can depreciate the dollar and export its way out of trouble?


http://www.itulip.com/images/dollarexports1973-2008.gif


A weak dollar since 2001 helped the US grow export revenue by hundreds of billions of dollars per year from 2000 to 2008. With the dollar strengthening and global demand falling, that source of economic growth is no longer available. We do expect the US to take measures to depreciate the dollar but for the purpose of increasing inflation expectations.

The US is out of monetary, currency, and credit tricks to play to halt the current recession to prevent it from turning into a depression. The only tools left are fiscal, and the sooner the US deploys them the better the chances that a depression can be avoided.

Conclusion

In total we see the US economy losing between seven and 13 million jobs by the end of 2009 representing a 5% to 10% increase in unemployment. Our forecasts during this crisis have tended to be on the optimistic side; steeper job losses cannot be ruled out, especially if other feedback loops intensify. For example, rising unemployment will lead to a further 20% to 40% decline in real estate prices as households lose access to income to pay mortgage debt. A further tightening of credit as the pool of credit-worthy borrowers contracts means even deeper losses in Wholesale Trade, leading to more unemployment, and so on.

The proximate cause of the current depression is the sudden disappearance of the purchasing power that was created by the expansion of credit in the US economy since 1980. Since 1980, the US economy went from needing a dollar of new private and public sector borrowing to produce a dollar of GDP growth to dependence on more than five dollars of new debt to generate a dollar of GDP growth by 2007. This credit growth was accomplished by various unsustainable means, including foreign borrowing, financial engineering, and leverage.

Since net capital inflows slowed to a stop in 2007, launching a financial crisis associated with capital flows and "sudden Stop" economic effects, first US then international credit markets seized up in 2008. The US government through the Federal Reserve and Treasury Department have attempted to restart the flow of private credit in the US but with only limited success. The inexorable logic of the American political economy dictates that the next phase of economic remediation is direct substitution of government credit for private credit by lending directly to private firms, such as the loans to US auto makers now being discussed. We believe this lending will be broadly expanded throughout the economy in 2009 as the depression deepens, with certain industries and sectors tending to benefit more than others and other unintended consequences drastically changing the structure of the US economy.

We also believe that the structure of proposed loans to US auto manufacturers is the litmus test for government support of US industries in this depression. Our industry sector analysis tells us that the crisis in the US auto industry is the tip of the iceberg. Many other goods producing and service industries will follow.

The backbone of the US economy is not its large manufactures but its many thousands of small goods and services businesses where the innovation occurs that moves America forward. While bailouts of large financial and manufacturing companies are debated in Congress, who is speaking for the small businesses that not only maintain America's competitiveness but traditionally pull the US economy out of recession in the past? Where is their bailout? The unintended consequence of dealing with insolvent employers on a first come, first serve based on size is that small, innovative businesses will be less able to compete with the large, sclerotic corporations.

One thing leads to another. Future bailouts of private companies are likely to follow the pattern of the first bailouts. Given that US budget is not infinite, what set of principles should be used to prioritize and structure government assistance to private industry? What form it should take? The answer lies in the kind of economy we want after the economic crisis ends. Do we want an economy in five years dominated by a few large, internationally uncompetitive companies or many small innovators that can improve American productivity, efficiency, and competitiveness?

The social consequences of the kind of mass unemployment we foresee will, if not addressed by government stimulus, split the nation into competing interest groups by age, income group, and industry that will fight for decades over a shrinking pie that could be growing if all of these groups were working together to achieve a common goal: an efficient, competitive economy based on productivity, savings, and investment. Doing nothing is not an option. On the other hand, the course we are on today of ad hoc bailouts going to the biggest, most vocal, and best politically connected, first in banking and now in the auto industry, will lead to an economy of big corporations and big government, and a decade or more of economic stagnation may follow.

Flawed economic stimulus policy from 2001 to 2003 produced the world's first fiscal stimulus program executed in reverse order -- the housing bubble -- with jobs first and government spending second. We don't need to pile another set of flawed government programs on to cope with the fallout from the last. America was built on innovation and trade. Bailouts of large companies need to be balanced with capital gains and income tax cuts that allow the dynamic sectors of the US economy to continue to grow the economic pie for all.

iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
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EasternBelle
11-09-08, 09:09 AM
Simply flabbergasted...
Eastern Belle

D-Mack
11-09-08, 09:40 AM
I don't get why Stiglitz is optimistic because of a service economy.



Q: How do you expect the crisis to develop? Will another Great Depression occur?

A: I think that the world of today is different from the world of 75 years ago. We have a more service sector-oriented economy. That probably means the unemployment rate will not get as high. More people will be part-time involuntarily. We're already seeing that. But there may be less massive unemployment.

Now, the full answer, of course, depends on what the government does. We are off to what you might say is a very strange beginning because the government has done a massive amount, but the design has been very bad. So we spent trillions (of dollars) around the world, but the money has not been well spent. So for instance, it's been very much a trickle-down ... throw enough money at Wall Street and some money will help the rest of the economy. I'm very pessimistic. It would have been worse if we had not done anything, but we could not have done much worse in the way we did it. It is badly designed.

...

http://www.asahi.com/english/Herald-asahi/TKY200811050060.html

grapejelly
11-09-08, 09:57 AM
Without intervention by fiscal stimulus on the order seen immediately after the end of WWII, unemployment in the US may rise to 1930s levels over the next few years.

Well, your work as usual is very helpful, comprehensive and well done, EJ.

But as usual in this case your conclusion could not be more wrong.

What we need to forestall depression are measures such as:

1. repeal tax on dividends

2. repeal capital gains tax

3. repeal income tax on corporations

4. END THE WARS so that taxes can be lowered

5. Did I mention END THE WARS?

6. End the bailouts of companies that should go belly up

The whole problem with our economy is encouraging consumption, discouraging savings and discouraging investment.

"Stimulus" is more of the same, depreciating stores of private savings, thus dis-incentivizing savings and investment, and encouraging consumption.

Ugh.

jk
11-09-08, 10:11 AM
an interesting sector to follow will be state and local government. given, on the one hand, a squeeze on sales taxes and local income taxes along with balanced budget mandates, and on the other hand the fact that they've already gone to the federal government with their begging bowl, there's potentially a large swing built in here.

grapejelly
11-09-08, 10:17 AM
an interesting sector to follow will be state and local government. given, on the one hand, a squeeze on sales taxes and local income taxes along with balanced budget mandates, and on the other hand the fact that they've already gone to the federal government with their begging bowl, there's potentially a large swing built in here.

This is the Big Kahuna IMHO.

And broadly defined as including state universities...

The problem so far has been that even if you lay off a state employee, you pay this and you pay that...and you lose whatever productivity you had, but still end up paying and paying (for retirement benefits, termination costs, retraining, etc. etc.)

These people have it very cushy compared to the private sector. There is so much waste and over-compensation that it is incredible. And very hard to root out.

Look at what our friend Michael Bloomberg did. So typical:

1. No more tax rebates -- the City can't afford to give back money that is rightfully theirs (the City's)!

2. Close the libraries

3. Then it's good ol' music and after school activities...wanna bet?

It's whatever will cause the greatest pain amongst middle and upper middle class voters that gets the ax. And the public plays patsy over and over to this stoopid game.

Just go into a school and you can see with thine own eyes what needs to be cut back. It's the five people in the attendance office, the three people in the main office, the six admins doing nothing...

But instead, they will cut off what causes the most pain for the least savings. Manipulate the voters.

I don't think it will matter this time around. Public employees are gonna be laid off bigtime. Heck, even the USPS announced 40,000 layoffs!

labasta
11-09-08, 10:31 AM
Well, your work as usual is very helpful, comprehensive and well done, EJ.

But as usual in this case your conclusion could not be more wrong.

What we need to forestall depression are measures such as:

1. repeal tax on dividends

2. repeal capital gains tax

3. repeal income tax on corporations

4. END THE WARS so that taxes can be lowered

5. Did I mention END THE WARS?

6. End the bailouts of companies that should go belly up

The whole problem with our economy is encouraging consumption, discouraging savings and discouraging investment.

"Stimulus" is more of the same, depreciating stores of private savings, thus dis-incentivizing savings and investment, and encouraging consumption.

Ugh.


Quite.

They are still beating the old worn out drum. How long will it take for them to realise that they need to beat out a tune on a new drum? I fear, the longer they take, the worse it will get.

Unfortunately, I'm not at all surprised by these projected unemployment figures.

I foresee main street following wall street (as it seems to have done so far). This means that banks becoming insolvent and nationalised and merged in Oct 2008 will be replaced by many mid to large sized companies becoming insolvent, nationalised or merged by Oct 2009.

The small businesses will go to the wall.

This leaves the US looking more like a socialist republic by the day.

In the end (100 years from now?) we will all work for government directly or indirectly.


In Ireland, I foresee a massive increase in unemployment for 2009 and 2010.

I read a headline a few days ago in the Irish independent which said unemployment levels in October had not risen by as much in 25 years! If this continues, by 2010, Ireland will be seeing the beginnings of their glorious 1980s past with 13% unemployment and lines 100 long for a job at the fast food joint. The added salt in the wound is that there will be nowhere to emmigrate to as all other countries will be in the same boat but to different degrees.

I shit you not, I think we are in for a real big f###ing mess.

Also, on the happy front, I heard on the radio this morning that an in depth survey done by (forgotten the name but it was a serious and thorough organisation according to the commentators) 45% of all foreign businesses in Ireland want to move to Eastern Europe or India to reduce costs.

http://www.independent.ie/national-news/firms-sorry-they-came-to-ireland-1530011.html


I fear the worst. How is Ireland to industrialised if the American companies leave. That was the reason for the Celtic Tiger. Ireland did capitalise a bit on this and produce its own manufacturing entrepeneurs on a small scale, but no Irish "Ford". The richest families in Ireland all belong to the old school pre-Celtic Tiger, you know, toll road owners, beef exporters etc.


Shite

tastymannatees
11-09-08, 11:19 AM
<nobr>Sorted by date, today's food pantry stories go on for ten pages covering every state in the nation.</nobr>I Think the number is a little understated as you have to factor in the number of food stamp recipients.

Food Stamp Participation in July 2008 Tops 29 Million (http://www.frac.org/html/news/fsp/2008.07_FSP.htm)

here is a chart showing the increase over the last 5 years (http://www.frac.org/data/FSPparticipation/2008_07.pdf#page=3)....Modern version of the soup line?

Wild Style
11-09-08, 11:31 AM
What did EJ mean by the "education sector"? Is it higher education or grade school? Grade schools in California and Florida have been laying off teachers and staff workers. The fall in real estate values and rising foreclosures is killing taxes which in turn are hurting education budgets. Also, a lot of people are moving from hard hit cities which mean fewer students. From Dade and Broward county the number of students enrolled has dropped significantly. In NYC they said the population of working adults has declined since 2007. The only reason population has not declined over all in NYC is because birth rates have offset the outflows. With property values taking a beating and even more people expected to leave NYC over the coming years, I would imagine that school system isn't doing so well right now either. This happened in Texas in the 80s from my understanding. Tons of teachers lost their jobs. A friend of mine started a teaching job at a high school in Miami in September 2008. He said in October they laid off twenty teachers.

In higher education schools are taking beatings too. I work at a major university here in South Florida. A dean told me the other day it is the worst they have seen since being employed at the university, budgetary. Big name research universities seem to be doing well though and big name state schools. Florida International University has already laid off a large number of its work force, gone to a four day work week and has frozen wages until 2011. That has comes from a Director I know at FIU.

we_are_toast
11-09-08, 11:38 AM
EJ has already addressed the libertarian, dogma over reason, expressed here.

The numbers you are predicting are absolutely mind boggling! I have not seen any other predictions anywhere near these. The 240,000 number from October shocked many people, but you're talking about something near a million job losses a month! This approaches the rate of increase last seen in 1931.

How will Americans react to a million jobs lost a month?! Will there be civil unrest?

I respect the research done here on itulip, I really, really hope you are wrong on this, but I fear you are not.

don
11-09-08, 12:17 PM
Great info EJ.

The problemo continues:

GM Opens $300 Million Russian Plant to Boost Sales
By Paul Abelsky

Nov. 7 (Bloomberg) -- General Motors Corp. (http://www.bloomberg.com/apps/quote?ticker=GM%3AUS), the world's biggest carmaker, opened a $300 million factory in Russia as it looks to compensate for slumping sales in western Europe and North America.


The plant in the Shushary district on the outskirts of St. Petersburg will produce 70,000 Chevrolet Captiva sport-utility vehicles and the Opel Astra, with plans to manufacture the Chevrolet Cruze compact car next year.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aUULJgE6.ly8&refer=news

Billions in Tax Money to GM which moves taxpayers' jobs to Russia.

Can't we all just get along....since class conflict in America is so over :rolleyes:

Techdread
11-09-08, 01:06 PM
Nothing wrong with GM moving jobs to Russia their Car market was booming before the crisis hit.

I think we all are missing the big picture capitalism as practised by the west only works when the other nations don't compete.

After all with modern day production techniques there is not enough jobs to go around, unless nations start exporting to Aliens.

Mega
11-09-08, 02:53 PM
Thanks EJ
I print off and take it to read @ "Work" tomorrow (Work being feet on the table in the office for 4 hours-4 hours on a manchine). I am having to strech out days now.

Mike

Mega
11-09-08, 02:58 PM
One point EJ.
You say "Its the big one unless they start a hugh works program by 2009"........."As big as post WW2"..........

Might i ask, how will they fund it?

Seeing how "O-be" just said he was to attack Afgan with everything he got!

Mike

Slimprofits
11-09-08, 03:09 PM
Big name research universities seem to be doing well though and big name state schools. Florida International University has already laid off a large number of its work force, gone to a four day work week and has frozen wages until 2011. That has comes from a Director I know at FIU.

Boston University froze all new staff and administrative hiring and the start of construction projects not yet underway, at the end of September (http://www.boston.com/news/local/articles/2008/10/01/bu_head_calls_for_a_hiring_freeze/).

labasta
11-09-08, 03:44 PM
One point EJ.
You say "Its the big one unless they start a hugh works program by 2009"........."As big as post WW2"..........

Might i ask, how will they fund it?

Seeing how "O-be" just said he was to attack Afgan with everything he got!

Mike

I assume they'll fund it with inflation.

grapejelly
11-09-08, 03:59 PM
One point EJ.
You say "Its the big one unless they start a hugh works program by 2009"........."As big as post WW2"..........

Mike

yes of course...how will they fund it...and more than that, how is this any different than what failed in the 1930s in the US and in the 1990s in Japan?

How does printing money, and/or taxing people even more, and then spending the money on public works, get people saving and investing again...?

These sectors facing depression or recession, wouldn't they be better off if they were sending fewer/no dollars to Uncle Sam, so the owners could re-invest in their business, cut costs, and turn a profit?

Isn't what we have in the US a lack of savings and productive investment, in these sectors that EJ has enumerated?

And won't taking more money away from people, either through currency depreciation (inflation) or taxing, cause these companies to be even worse off?

kingcopper
11-09-08, 04:20 PM
Boston University froze all new hiring two or three months ago.

The "Mega Monkey" had some great quotes a while back regarding our universities and their future income deflation. He told some kids and their parents to wait for Universities to drop their prices because no one would be able to afford tuition much less receive a loan to pay for tuition. Our universities will suffer soon enough.

Wild Style
11-09-08, 05:23 PM
Boston University froze all new hiring two or three months ago.
has their been talk of layoffs yet? We have a state school down here Florida Atlantic University (not to be confused with Florida International University). They started a hiring freeze as of June but they haven't started laying off yet. Hope it doesn't come to that.

Slimprofits
11-09-08, 05:32 PM
has their been talk of layoffs yet?

Not yet. Here is more from UPI and NYT: Colleges feel economic slump (http://www.upi.com/Top_News/2008/11/08/Colleges_feel_economic_slump/UPI-56991226167467/)



Cornell, Brown and Boston University have announced selective hiring freezes while Arizona State University this week ended contracts with an estimated 200 adjunct teachers, The New York Times reported Saturday.

Tufts University this fall suspended new capital projects and said it may not be able to maintain its "need-blind" policy of admitting the best-qualified applicants and then meeting their full financial needs, the Times reported.


And on a side note, if we're looking for a sector in which business is up other than thrift stores (http://news.google.com/news?hl=en&um=1&tab=wn&nolr=1&q=thrift+store&btnG=Search+News), people all over the globe are choosing cremations over burials at a higher rate (http://news.google.com/news?hl=en&q=cremation%20burial%20trend&um=1&ie=UTF-8&sa=N&tab=wn).

rabot10
11-09-08, 07:14 PM
Thanks for being honest EJ - it is not a nice picture. But the good news is I don't work in those kind of industries. I am now working on my plan to get through this in one piece. (my family if U know what i mean)

I am going to kick some ass and make this a real win for my family and friends - it's not that hard if u know whats coming! Hope U all do well.

Your Friend
rick

PS look at the post "Time at last to Short the Markets" to make money! I'm making a killing lol - OK not enough to off set my PM loses - but lots

Munger
11-09-08, 07:59 PM
Well, your work as usual is very helpful, comprehensive and well done, EJ.

But as usual in this case your conclusion could not be more wrong.

What we need to forestall depression are measures such as:

1. repeal tax on dividends

2. repeal capital gains tax

3. repeal income tax on corporations

4. END THE WARS so that taxes can be lowered

5. Did I mention END THE WARS?

6. End the bailouts of companies that should go belly up

The whole problem with our economy is encouraging consumption, discouraging savings and discouraging investment.

"Stimulus" is more of the same, depreciating stores of private savings, thus dis-incentivizing savings and investment, and encouraging consumption.

Ugh.


Bah - following these policies would exacerbate our problems. The issue isn't so much that Americans don't save enough - even though many clearly don't/can't. The issue is that wealth disparity has increased significantly over the last 30 years due to tax-cuts and productivity gains that have benefited the investor-class only.

As an example, imagine all money were held by a single person - Investor. Investor clearly has more money than he knows what to do with - so, he decides to put it to work in the economy by building a widget factory. Investor rightly expects to earn a return on his investment (he should know this is not possible as he already has all of the money, but I digress).

So he starts producing widgets - but he can't sell any, as no one else has any money. One possibility at this point is that Investor pulls his money out of the widget operation: if he cannot increase his share of the wealth he might as well keep what he has by putting it all in his vault.

Another possibility is that Investor may loan a bit of money to Consumer. Consumer uses this borrowed money to buy a few widgets and Investor gets this money back via his factory operation. Now Investor has all the money again, and expects his loan to be paid back with interest. But, since Consumer spent the money he borrowed and has no more, and Investor again already has all of the money, Investor finds that Consumer cannot pay him back. Investor may eventually realize that he cannot get more money than he started with, but this is beside the point: Investor stops making loans to Consumer; Consumer can no longer buy widgets. At this point Investor pulls his money out of the widget operation and puts it safely in his vault.

All the money in existence is again sitting in Investor's vault, but he has learned a valuable lesson: investing his money is pointless since he already has all the money there is to be had.

Now, there are still humans willing to labor to create goods and services - Consumer is willing to work at the widget factory - but there is no incentive for Investor to make widgets and pay Consumer if he cannot increase his share of the money.

Come now Keynes and Friedman to the rescue: government can create jobs and money to pay for these jobs to get Consumer laboring again to create goods and services. Consumer running around with money to spend may encourage Investor to begin operating his widget factory again.

Investor is really not too pleased about this, as he no longer has all of the money in existence. But it matters not: after Consumer gets paid for building a road that both Investor and Consumer may drive on, Consumer drives down that road to the store to purchase a widget. So in the end Investor ends up with all the money, only now there is a road and a widget as well.

So say what you might, but Bernanke is a very smart man, as is Volker, Buffet, etc. They understand this story well; Phil Gramm and Ron Paul do not.

But is it really true that supply-side economics is FAIL and Keynesian demand-stimulus works? Yes. (http://krugman.blogs.nytimes.com/2008/11/08/new-deal-economics/)

dbarberic
11-09-08, 09:33 PM
Probably the most sobering and direct to the point piece I've read on iTulip in awhile.

Ugh... :(

Slimprofits
11-09-08, 11:28 PM
Wildstyle, more about higher education here: More Schools Impose Hiring Freezes (http://www.usnews.com/blogs/paper-trail/2008/11/07/more-schools-impose-hiring-freezes-2.html)

Basil
11-09-08, 11:58 PM
Boston University froze all new hiring two or three months ago.

Several universities have done the same. Though I do actually know of two faculty searches at BU that are going forward.

Universities are hit from three sides: 1) shrinking endowments, 2) shrinking donations, and 3) students that can no longer attend (daddy worked for Lehman or something along these lines). In addition many students have been getting smart and realizing that if they take an overload they can get out of school in 3 or 3.5 years, i.e. for up to 25% less. If inflation picks up again, then universities will get whacked on a fourth front.

Many state school systems have invoked pay freezes for faculty. I would predict that several private schools will soon do the same. Down the line, though perhaps as early as next year, some colleges and universities will begin to let go of untenured tenure track faculty in good standing, as they will not be able to get rid of the senior faculty members whose 401ks have shrunk. The best schools will avoid this like the plague, but some will not be able to do so.

Some university endowments were heavily invested in the new fangled 'low risk high return' products being sold by Lehman and others. A friend of the family who advises Columbia University said she could not believe where they have been putting their money. She predicts that their endowment will be halved. George Washington University has let most of the endowment ride on down town real estate and their debt exceeds their endowment. That may not turn out well.

At the end of the day some colleges and universities will go under. Some may even merge.

grapejelly
11-10-08, 04:32 AM
Bah - following these policies would exacerbate our problems. The issue isn't so much that Americans don't save enough - even though many clearly don't/can't. The issue is that wealth disparity has increased significantly over the last 30 years due to tax-cuts and productivity gains that have benefited the investor-class only.

No, that isn't the issue at all. The rich/poor gap is a result of some participating in the FIRE economy and making outsized gains, and the rest in the producers & consumers economies paying for those gains through currency depreciation and taxes.

So you lost me already. But then you write:


As an example, imagine all money were held by a single person - Investor. Investor clearly has more money than he knows what to do with - so, he decides to put it to work in the economy by building a widget factory. Investor rightly expects to earn a return on his investment (he should know this is not possible as he already has all of the money, but I digress).

This is already too far into the land of fantasy rather than a thought experiment, I am afraid.

Let's say investors are holding onto their money and not investing, as you posit.

Question: will "priming the pump" get things moving again?

Why aren't investors investing? Because their return by stuffing their money in a mattress exceeds the return by investing.

So what you do is, let the market forces go to work. Let people keep their money instead of taxing it away through currency depreciation or direct taxes.

Entrepreneurs will borrow money and invest. Interest rates will rise. There will be a return on capital. More capital will be invested.

If instead, you tax and depreciate and "stimulate", there will be no pools of capital to invest. Taxes and currency depreciation provide a negative return on savings, a disincentive to save and invest. If you invest and make money, you are taxed heavily. If you just keep your money on the sidelines, you lose it more gradually through currency depreciation.

In this "you are screwed" world, you are more likely to spend your money and not invest it at all. Consumption is more rational than losing it altogether.

That's where we are at right now. Keynsian solutions steal money from where it would be employed productively, and incentivize consumption rather than savings and investment.

labasta
11-10-08, 04:35 AM
Thanks for being honest EJ - it is not a nice picture. But the good news is I don't work in those kind of industries. I am now working on my plan to get through this in one piece. (my family if U know what i mean)

I am going to kick some ass and make this a real win for my family and friends - it's not that hard if u know whats coming! Hope U all do well.


Can you give me a few tips?

tombat1913
11-10-08, 11:45 AM
Well, your work as usual is very helpful, comprehensive and well done, EJ.

But as usual in this case your conclusion could not be more wrong.

What we need to forestall depression are measures such as:

1. repeal tax on dividends

2. repeal capital gains tax

3. repeal income tax on corporations

4. END THE WARS so that taxes can be lowered

5. Did I mention END THE WARS?

6. End the bailouts of companies that should go belly up

The whole problem with our economy is encouraging consumption, discouraging savings and discouraging investment.

"Stimulus" is more of the same, depreciating stores of private savings, thus dis-incentivizing savings and investment, and encouraging consumption.

Ugh.
Yes, there's a man speaking sanity! Less unproductive government jobs, less war, less tax.

just one more little thing, END THE FED!

Masterburg
11-10-08, 11:56 AM
I am new on this Forum, here from Luxemburg; situation is getting tougher here too..

Now, concerning recession or depression, inflation or deflation, I found this good article from Hugo Salinas Price on http://www.plata.com.mx/mplata/articulos/articlesFiltPrint.asp?fiidarticulo=89

concerning the sudden schrink (or sudden stop in exponential growth) in the Reserves of World's Central Bank.
As he explains:

'It seems to me that when a huge number such as USD7 trillion suddenly stops growing, it must indicates that someting very serious is going on..'

What could be the explanation ? Financial heart attack ?

et merci a EJ et a tous les bloggers..

SBell
11-10-08, 12:20 PM
4. END THE WARS so that taxes can be lowered

5. Did I mention END THE WARS?

I definitely agree with "end the wars" but aren't both Afghanistan and Iraq "off budget" anyway? We're not paying higher taxes to fund them (if we were the wars would have ended a long time ago), we're simply borrowing the money. So ending the wars only means not having to borrow the money to fund them. It can maybe reduce the taxes on the future generations that have to pay the borrowed money back, but I don't see how it could affect current taxes?

lurker
11-10-08, 12:22 PM
I definitely agree with "end the wars" but aren't both Afghanistan and Iraq "off budget" anyway? We're not paying higher taxes to fund them (if we were the wars would have ended a long time ago), we're simply borrowing the money. So ending the wars only means not having to borrow the money to fund them. It can maybe reduce the taxes on the future generations that have to pay the borrowed money back, but I don't see how it could affect current taxes?

Ending the wars and keeping borrowing at current levels would allow the government to spend more on reconstruction of the US (Alt-E, infrastructure).

dcarrigg
11-10-08, 12:45 PM
an interesting sector to follow will be state and local government. given, on the one hand, a squeeze on sales taxes and local income taxes along with balanced budget mandates, and on the other hand the fact that they've already gone to the federal government with their begging bowl, there's potentially a large swing built in here.


jk, you are right on point, I think. When looking at Rhode Island, the state with the worst unemployment and the fastest rising unemployment in the nation, this state/local government sector is already fast declining due to huge budget shortfalls and an inability to borrow as creatively as, say, Californina. RI, which has been in an unquestioned recession for about a year now, is likely a microchasm of what is to come for most of the US.



http://www.projo.com/news/content/RI_ECONOMY_PROBLEMS_11-07-08_2RC6OSD_v146.3d4c6ba.html

http://www3.whdh.com/news/articles/local/BO93568/
http://www.forbes.com/feeds/ap/2008/10/24/ap5603549.html

metalman
11-10-08, 12:57 PM
Ending the wars and keeping borrowing at current levels would allow the government to spend more on reconstruction of the US (Alt-E, infrastructure).

i'm not as optimistic as some here that the invisible hand has a chance against the visible hands that are grabbing at... what did hudson call it years ago? the economic/political 'jump ball'.

rant warning... :eek:

i bet 99% of the free marketeers here are engineers. in their fantasy world economic and political power is given up to no one in particular on the basis of abstract theories and no ambitious & greedy guys leap into the vacuum to grab control of the levers and money flow. take the kind of gee whiz free market solutions to this crisis like the ones some of you are proposing here and bring them to the hank paulsons of the world... well, be prepared for him and his buddies drag your ass into the boys room, stick your head in the toilet and steal your lunch money.

this picture says it all. can you imagine obama or clinton or mccain allowing themselves to be photographed this way? i love the guy and his fight to get some real issues on the agenda.. no doubt a good guy and someone you'd want to hang with, but... this is a leader?

http://bagnewsnotes.typepad.com/bagnews/images/Ron-Paul.jpg
it's a battle, guys. face the facts. ron paul can wave his ideological flag from the kiddies table but the adults at the big table are making the decisions that will make or break this country. get with the program!

the economy is imploding.

the data here are tough to argue with... unemployment will go way up next year. the 'whining' will turn into something much worse.

the fed's out of rate cuts and running out of money.

the usa is running out of credit.

what PRACTICAL solutions do you have besides...

'Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. That will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.' -Andrew W. Mellon, 1931

didn't work last time, won't work this time.

don
11-10-08, 01:11 PM
Boots on the ground anecdote: We shop at a small supermarket chain (a dozen or so stores) that pitches its tent between Safeway and Whole Foods. Definitely 'higher middle class' but nowhere boutique. We noticed a few friendly faces missing and asked an employee we knew well enough what was up. She said three people- a butcher, a cheese seller and a deli saleswoman- were all canned in one week for rules violations. I didn't ask but I assume something like marijuana smoking in the john. They were all seasoned employees. Would they have been summarily canned if the economy was booming or be let off with less than dismissal? Times are getting tougher and this chain is in a struggle for its survival.

(Comment Bonus: Consider this a free-shot gift to all the self-righteous Libertarians on site :p)

LazyBoy
11-10-08, 01:32 PM
(Regarding a works program...)


yes of course...how will they fund it...and more than that, how is this any different than what failed in the 1930s in the US and in the 1990s in Japan?


I don't know history well enough, so I'll stick my neck out.

Should we let the unemployed masses starve?
If the government is going to feed them anyway, why not
do it in exchange for work? Infrastructure work is needed,
so...

metalman
11-10-08, 01:49 PM
(Regarding a works program...)



I don't know history well enough, so I'll stick my neck out.

Should we let the unemployed masses starve?
If the government is going to feed them anyway, why not
do it in exchange for work? Infrastructure work is needed,
so...

plenty will wind up in gangs and robbing and mugging before they starve.. then in prison. can we build high tech high speed rail with chain gangs? sure... if enough of them will have a phds in physics. :mad:

tip for free marketeers... prisons aren't cheap.

BobH
11-10-08, 02:05 PM
EJ, these are just jaw-dropping numbers!

Would it be possible to have you update your state unemployment numbers. With national numbers being forecasted at somewhere between ~12 - 17%, the state numbers in certain states must be well above that!

For instance, as I recall, your numbers for California were to have peaked at ~10%.

FWIW, I'm in the retail service business. Nothing has dramactically happened yet but you can sure feel it coming! First of the year is my guess. We will, most likely, be lucky to survive this and we have been in the business for over 20 years.

Finally, thank you to the poster that put up the Food Stamp increases by state. A 32% increase from 7/2003 to 7/2008! Most of this time was during the so-called growth years! WOW!

zoog
11-10-08, 02:31 PM
I Think the number is a little understated as you have to factor in the number of food stamp recipients.

Food Stamp Participation in July 2008 Tops 29 Million (http://www.frac.org/html/news/fsp/2008.07_FSP.htm)

here is a chart showing the increase over the last 5 years (http://www.frac.org/data/FSPparticipation/2008_07.pdf#page=3)....Modern version of the soup line?



...Finally, thank you to the poster that put up the Food Stamp increases by state. A 32% increase from 7/2003 to 7/2008! Most of this time was during the so-called growth years! WOW!

I have posted this chart before (http://www.itulip.com/forums/showthread.php?p=37389#post37389) but here is an update with data through August 2008 from the USDA website. As a percentage of the national population, the number of participants in the food stamp program has indeed been growing for a few years now. It has been this high before though, as the chart shows.

http://img55.imageshack.us/img55/7485/foodstamppctue5.jpg (http://imageshack.us)

grapejelly
11-10-08, 02:43 PM
(Regarding a works program...)
I don't know history well enough, so I'll stick my neck out.

Should we let the unemployed masses starve?
If the government is going to feed them anyway, why not
do it in exchange for work? Infrastructure work is needed,
so...

So let's make unemployed people into slaves. Pay their room and board in exchange for their working. Wasn't that somehow outlawed in all Western countries like 150 years ago, or am I thinking of something else??





the economy is imploding.

the data here are tough to argue with... unemployment will go way up next year. the 'whining' will turn into something much worse.

the fed's out of rate cuts and running out of money.

the usa is running out of credit.

what PRACTICAL solutions do you have besides...

'Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. That will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.' -Andrew W. Mellon, 1931

didn't work last time, won't work this time.

It wasn't TRIED last time!!! It was "stimulus" all the way, and the Great Depression resulted! When stimulus WASN'T used, in 1921, the Depression lasted 18 months.

We need some leadership here. Which I agree, we are not getting. But that doesn't make it true that "stimulus" is completely WRONG and will perpetuate the depression and make it almost endless.

If the gubmint had just let things adjust, the depression would have lasted a few years and then been fine. The gubmint made it ENDLESS by stealing people's private investment and savings, and paying people who were not productive to do things the private sector didn't value.

So we have "stimulus" that steals from productive, investing people, and pays it to non productive people in make-work jobs...and this is somehow A-OKAY?

We're not talking ideologies here. We're talking about what works vs. what makes the problem WORSE.

Let me repeat: the problem is LACK of savings, LACK of investment. It isn't lack of CONSUMPTION although it looks that way. When people are saving, they are consuming LESS than they earn. That is GOOD because that investment can be employed in building businesses and creating real wealth.

But when the gubmint TAKES this money away through confiscatory taxes OR currency depreciation (we have a lot of both), then the lack of savings and investment PERPETUATES with no end!


plenty will wind up in gangs and robbing and mugging before they starve.. then in prison. can we build high tech high speed rail with chain gangs? sure... if enough of them will have a phds in physics. :mad:

tip for free marketeers... prisons aren't cheap.

I'm not sure what this even means. Are you suggesting we bring back slavery?

FRED
11-10-08, 02:47 PM
EJ, these are just jaw-dropping numbers!

Would it be possible to have you update your state unemployment numbers. With national numbers being forecasted at somewhere between ~12 - 17%, the state numbers in certain states must be well above that!

For instance, as I recall, your numbers for California were to have peaked at ~10%.

FWIW, I'm in the retail service business. Nothing has dramactically happened yet but you can sure feel it coming! First of the year is my guess. We will, most likely, be lucky to survive this and we have been in the business for over 20 years.

Finally, thank you to the poster that put up the Food Stamp increases by state. A 32% increase from 7/2003 to 7/2008! Most of this time was during the so-called growth years! WOW!

Here you go! Ranked by unemployment growth, the > 2% growth in unemployment prize winners are: FL, TN, NV, ID, CA and AZ. Most of them housing bubble states. RI takes the "almost 4%" prize in a class by itself. All of this before the credit crunch and drop-off in lending started.


http://www.itulip.com/images/unemploymentStateSept2007toSept2008.gif

BobH
11-10-08, 05:10 PM
Ed, didn't you guys do a 'forecast' of what the unemployment percentage would be for each state? Some how I recall this! If so, I was looking for an update on your forecast by state.

Thanks and sorry for the mis-statement. You responded correctly.

Munger
11-10-08, 05:11 PM
So let's make unemployed people into slaves. Pay their room and board in exchange for their working. Wasn't that somehow outlawed in all Western countries like 150 years ago, or am I thinking of something else??


They are debt slaves now. Under a public works program they have the choice of starving or building roads. You could call them slaves, I doubt they'd care if they were eating.




It wasn't TRIED last time!!! It was "stimulus" all the way, and the Great Depression resulted! When stimulus WASN'T used, in 1921, the Depression lasted 18 months.


Ideological storytelling. What actually happened?
http://krugman.blogs.nytimes.com/2008/11/10/fiscal-fdr/
http://edgeofthewest.wordpress.com/2008/11/06/stop-lying-about-roosevelts-record/
http://krugman.blogs.nytimes.com/2008/11/08/new-deal-economics/




Let me repeat: the problem is LACK of savings, LACK of investment. It isn't lack of CONSUMPTION although it looks that way. When people are saving, they are consuming LESS than they earn. That is GOOD because that investment can be employed in building businesses and creating real wealth.


Correction: lack of saving by people who now cannot afford goods - the people who could not save much anyway. Certain portions of the populace have massive amounts of savings, more than they could spend in 20 lifetimes. Where is that capital and why isn't it being employed? Don't give me the "there is no incentive to invest" argument - they can't spend all the money they have. Lowering the interest rates to zero and increasing inflation is more incentive to not stick it under your pillow.

They don't like the returns they might get in the market - because a large percentage of the population has no money with which to purchase goods.

metalman
11-10-08, 05:29 PM
mind if i butt in?


They are debt slaves now. Under a public works program they have the choice of starving or building roads. You could call them slaves, I doubt they'd care if they were eating.

debt slaves and wage slaves. wage earners have no pricing power at all except in the high tech field. so who's going to clean the sewers and empty the bed pans and how should they live?


Ideological storytelling. What actually happened?
http://krugman.blogs.nytimes.com/2008/11/10/fiscal-fdr/
http://edgeofthewest.wordpress.com/2008/11/06/stop-lying-about-roosevelts-record/
http://krugman.blogs.nytimes.com/2008/11/08/new-deal-economics/

there you go again with your facts. go to the von mises site for some well crafted history that has fdr showing up before the depression and causing it. they paint hoover as a rabid anti-capitalist and social reformer. it's really amazing. one might spend a hour on google books to read about what actually happened but then the tortured storyline of the corrupt gov't meddlers vs the wholesome forces of free markets falls apart.


Correction: lack of saving by people who now cannot afford goods - the people who could not save much anyway. Certain portions of the populace have massive amounts of savings, more than they could spend in 20 lifetimes. Where is that capital and why isn't it being employed? Don't give me the "there is no incentive to invest" argument - they can't spend all the money they have. Lowering the interest rates to zero and increasing inflation is more incentive to not stick it under your pillow. what? you mean after the debt industry sucked ever last dime of monthly cash flow out of middle class families, from the minute they entered college to the day they take out the reverse mortgage on the family homestead to pay off the insurance companies from the expenses they ran up on their deathbed, they don't have any savings net of debts? isn't that the logical conclusion of a credit-based money system? one group collects all the rents and the other group pays them? we can't all be winners, you know. and there's one sure fire way to get those savers spending after you slap on capital controls, natch... inflation, baby! the ultimate creditor's haircut. 'when you can't confiscate, inflate!' is the motto.


They don't like the returns they might get in the market - because a large percentage of the population has no money with which to purchase goods.oops. ran out of renters.

charliebrown
11-10-08, 05:33 PM
Its an easy lesson in economics.

In 1985 I graduated with and engineering degree from the Univ. of Ill. The cost? tuition & fees for 4 years about 10K. I was able to earn 10K working part time during school, So I graduated with no debt.
For 10K I was pretty much guaranteed a job starting at 30K with a bright future. It was a no brainer to go to school. Now U of I is around 20K a year ( according to the letter from my alumni assoc) So I have a 80K bill upon graduation.
In engineering there are no more job guarantees, due to competition overseas. Starting Salaries I understand are 40 - 50k in my field.

Not a slam dunk anymore is it??
What do I tell my son?
Hmm maybe get the education then default.
They can't reposess your brain.
Not the way I was brought up.

Either tuition needs to come down, or salaries go up.
the ROI of a higher education for knowledge workers is eroding rapidly.

metalman
11-10-08, 05:38 PM
Its an easy lesson in economics.

In 1985 I graduated with and engineering degree from the Univ. of Ill. The cost? tuition & fees for 4 years about 10K. I was able to earn 10K working part time during school, So I graduated with no debt.
For 10K I was pretty much guaranteed a job starting at 30K with a bright future. It was a no brainer to go to school. Now U of I is around 20K a year ( according to the letter from my alumni assoc) So I have a 80K bill upon graduation.
In engineering there are no more job guarantees, due to competition overseas. Starting Salaries I understand are 40 - 50k in my field.

Not a slam dunk anymore is it??
What do I tell my son?
Hmm maybe get the education then default.
They can't reposess your brain.
Not the way I was brought up.

Either tuition needs to come down, or salaries go up.
the ROI of a higher education for knowledge workers is eroding rapidly.

right, and who is benefiting from this arrangement?

http://bigpicture.typepad.com/comments/images/2008/04/18/student_loan.gif

charliebrown
11-10-08, 05:45 PM
I dont know. Why has tuition gone up 5x in a little over 20 years?
Is it salaries of staff? Infrastructure, falling state contributions, the football team??

Does anyone have a pie chart of costs in 85 vs. 2005??

metalman
11-10-08, 06:13 PM
I dont know. Why has tuition gone up 5x in a little over 20 years?
Is it salaries of staff? Infrastructure, falling state contributions, the football team??

Does anyone have a pie chart of costs in 85 vs. 2005??

this explains why... http://collegesavings.about.com/od/understandingcollegecosts/a/risingcosts.htm

merry
11-10-08, 07:10 PM
Hmm maybe get the education then default.

It is my understanding that one cannot default on student loans. The banks can and will garnish even disability checks.

metalman
11-10-08, 07:18 PM
It is my understanding that one cannot default on student loans. The banks can and will garnish even disability checks.

that's true. one of the few recourse loans in the usa.

reminds me... as the credit industry runs the usa and ain't stupid, how long before non-recourse loans are legislated into recourse loans the way bankruptcy laws were tighten up right after revolving credit peaked in 2005?

zoog
11-10-08, 07:25 PM
It is my understanding that one cannot default on student loans. The banks can and will garnish even disability checks.

Yeah pretty much. Apparently about 75% of those who do default (or try to anyway, depending on how you want to define it) are people who dropped out of school before finishing a degree.


Consequences of Default (http://www.finaid.org/loans/default.phtml)
If you default on your student loan:



Your loans may be turned over to a collection agency.
You'll be liable for the costs associated with collecting your loan, including court costs and attorney fees.
You can be sued for the entire amount of your loan.
Your wages may be garnished. (Federal law limits the amount that may be garnished to 15% of the borrower's take-home pay.)
Your federal and state income tax refunds may be intercepted.
The federal government may withhold part of your Social Security benefit payments. (The US Supreme Court upheld the government's ability to collect defaulted student loans in this manner without a statute of limitations in Lockhart v US (04-881, December 2005).)
Your defaulted loans will appear on your credit record, making it difficult for you to obtain an auto loan, mortgage, or even credit cards. A bad credit record can also harm your ability to find a job.
You won't receive any more federal financial aid until you repay the loan in full or make arrangements to repay what you already owe and make at least six consecutive, on-time, monthly payments. (You will also be ineligible for assistance under most federal benefit programs.)
You'll be ineligible for deferments.
Subsidized interest benefits will be denied.
You may not be able to renew a professional license you hold.

And of course, you will still owe the full amount of your loan.

Chomsky
11-10-08, 07:27 PM
this explains why... http://collegesavings.about.com/od/understandingcollegecosts/a/risingcosts.htm


That article omits a crucial driver of soaring college tuitions: the free availability of student loan debt, which dramatically increased demand. Like everything else, a credit bubble blew up college tuitions. That, too, shall pop.

metalman
11-10-08, 07:55 PM
That article omits a crucial driver of soaring college tuitions: the free availability of student loan debt, which dramatically increased demand. Like everything else, a credit bubble blew up college tuitions. That, too, shall pop.

agree! another victim of credit inflation. it was good demand, but the debt and the supply constraint is a bitch.

cancel the debt, increase the supply.

FRED
11-10-08, 10:51 PM
I am new on this Forum, here from Luxemburg; situation is getting tougher here too..

Now, concerning recession or depression, inflation or deflation, I found this good article from Hugo Salinas Price on http://www.plata.com.mx/mplata/articulos/articlesFiltPrint.asp?fiidarticulo=89

concerning the sudden schrink (or sudden stop in exponential growth) in the Reserves of World's Central Bank.
As he explains:

'It seems to me that when a huge number such as USD7 trillion suddenly stops growing, it must indicates that someting very serious is going on..'

What could be the explanation ? Financial heart attack ?

et merci a EJ et a tous les bloggers..

We think Hugo has over-dramatized the data.

Nervous Drake
11-10-08, 11:31 PM
agree! another victim of credit inflation. it was good demand, but the debt and the supply constraint is a bitch.

cancel the debt, increase the supply.

Actually, just as Fannie Mae and Freddie Mac, so Sallie Mae. I posted this thread in May: http://www.itulip.com/forums/showthread.php?t=4104

Unfortunately, the article was taken down. But I took the meat of it and quoted it.

*T*
11-11-08, 03:43 AM
i bet 99% of the free marketeers here are engineers. in their fantasy world economic and political power is given up to no one in particular on the basis of abstract theories

Totally disagree with that comment -- would say it's the opposite.

Remember as an engineer the stuff you build actually has to work and you design in safety margins at every step. It's called robustness and is exactly the opposite of what we built into our financial system - fragility.

vinoveri
11-11-08, 11:32 AM
this explains why... http://collegesavings.about.com/od/understandingcollegecosts/a/risingcosts.htm

No it doesn't - this is same ole self serving BS to justify the ludicrous existence of many a college curriculuum and fees.

The whole educational establishment is effectively compulsory and subsidized -and this is why tuition goes up -"Because it can".

If the gov weren't underwriting the costs (through loans and grants) and the "culture of experts" weren't effective at lobbying the gov to monopolize professions to only those who "go to college/certification" -college would be more about learning how to think and communicate (liberal arts) and a lot cheaper.

We live in a highly regulated world where every profession seeks to a monopoly on who can practice in order to limit competition w/i the field ( from med school, law school, P.Engineers., social workers, certified waste management.) Our culture frowns on "rennaissance men" OR "jack of all trades" - and now we live in a world where each narrow field of expertise arrogates authority for itself, but defers authority to every other field to do the same, and these experts are turned to by helpless folk and gov for all the answers.
As G K Chesterton called it, we live in "a Madhouse of Monomaniacs"

For all your criticism of Von Mises, the point of allowing the free market to determine who succeeds and who does not holds a lot of attraction and makes a lot of sense IMO - and it's libertarian (are you?). The argument that the gov needs to regulate and protect us from quacks and other "fraudulent practicioners" is just lazy, nanny state mentality - liberty demands responsibility and the use of one's wits - not blind faith and dependence on some 3rd party "certifying agency". An imcompetent "professional" will soon be discovered in the market and will lose his business (and will get sued). But potential great doctors, lawyers, et cet are foreclosed from being unless they submit to the "licensing process".

The expression used to be "those who can do and those who can't teach" - teachers have always made less than those who actual produce and well they should now with the kind of crap they spew out now. Half the junk that's taught today in higher education is politically correct tripe - our children are not being taught how to think but what to think -and even that is garbage. The common man being deprived of his common sense.

By the way, MM, what is the origin of your avatar (who is it?)

jk
11-11-08, 11:39 AM
No it doesn't - this is same ole self serving BS to justify the ludicrous existence of many a college curriculuum and fees.

The whole educational establishment is effectively compulsory and subsidized -and this is why tuition goes up -"Because it can".

If the gov weren't underwriting the costs (through loans and grants) and the "culture of experts" weren't effective at lobbying the gov to monopolize professions to only those who "go to college/certification" -college would be more about learning how to think and communicate (liberal arts) and a lot cheaper.

We live in a highly regulated world where every profession seeks to a monopoly on who can practice in order to limit competition w/i the field ( from med school, law school, P.Engineers., social workers, certified waste management.) Our culture frowns on "rennaissance men" OR "jack of all trades" - and now we live in a world where each narrow field of expertise arrogates authority for itself, but defers authority to every other field to do the same, and these experts are turned to by helpless folk and gov for all the answers.
As G K Chesterton called it, we live in "a Madhouse of Monomaniacs"

For all your criticism of Von Mises, the point of allowing the free market to determine who succeeds and who does not holds a lot of attraction and makes a lot of sense IMO - and it's libertarian (are you?). The argument that the gov needs to regulate and protect us from quacks and other "fraudulent practicioners" is just lazy, nanny state mentality - liberty demands responsibility and the use of one's wits - not blind faith and dependence on some 3rd party "certifying agency". An imcompetent "professional" will soon be discovered in the market and will lose his business (and will get sued). But potential great doctors, lawyers, et cet are foreclosed from being unless they submit to the "licensing process".

The expression used to be "those who can do and those who can't teach" - teachers have always made less than those who actual produce and well they should now with the kind of crap they spew out now. Half the junk that's taught today in higher education is politically correct tripe - our children are not being taught how to think but what to think -and even that is garbage. The common man being deprived of his common sense.

By the way, MM, what is the origin of your avatar (who is it?)
and what toy company would allow its toys to be coated in lead-based paint? they'd soon be out of business and no harm done!
what dairy would would contaminate its milk and allow candy, for instance, to be manufactured with it? that would be foolish and insane. no need to worry about that!
what bank would hold billions in toxic debt on its books, risking failure? such behavior would abrogate management's responsibility to shareholders and risk the bank's very survival! didn't sir prints-a-lot, alan greenspan, just say something about this?:rolleyes:
i can't wait to get treated by one of those unlicensed doctors!

metalman
11-11-08, 12:13 PM
No it doesn't - this is same ole self serving BS to justify the ludicrous existence of many a college curriculuum and fees.

The whole educational establishment is effectively compulsory and subsidized -and this is why tuition goes up -"Because it can".

If the gov weren't underwriting the costs (through loans and grants) and the "culture of experts" weren't effective at lobbying the gov to monopolize professions to only those who "go to college/certification" -college would be more about learning how to think and communicate (liberal arts) and a lot cheaper.

We live in a highly regulated world where every profession seeks to a monopoly on who can practice in order to limit competition w/i the field ( from med school, law school, P.Engineers., social workers, certified waste management.) Our culture frowns on "rennaissance men" OR "jack of all trades" - and now we live in a world where each narrow field of expertise arrogates authority for itself, but defers authority to every other field to do the same, and these experts are turned to by helpless folk and gov for all the answers.
As G K Chesterton called it, we live in "a Madhouse of Monomaniacs"

For all your criticism of Von Mises, the point of allowing the free market to determine who succeeds and who does not holds a lot of attraction and makes a lot of sense IMO - and it's libertarian (are you?). The argument that the gov needs to regulate and protect us from quacks and other "fraudulent practicioners" is just lazy, nanny state mentality - liberty demands responsibility and the use of one's wits - not blind faith and dependence on some 3rd party "certifying agency". An imcompetent "professional" will soon be discovered in the market and will lose his business (and will get sued). But potential great doctors, lawyers, et cet are foreclosed from being unless they submit to the "licensing process".

The expression used to be "those who can do and those who can't teach" - teachers have always made less than those who actual produce and well they should now with the kind of crap they spew out now. Half the junk that's taught today in higher education is politically correct tripe - our children are not being taught how to think but what to think -and even that is garbage. The common man being deprived of his common sense.

By the way, MM, what is the origin of your avatar (who is it?)

your point is well taken for those professions that are not highly technological. i'd like to know if my doctor is a trained doctor who has met a reasonable test of competency rather than have to rout around on the internet to find out how many patients he's killed before letting him operate on me.

you don't need a degree to be a journalist or a mortgage broker... anyone can do it and anyone does.

what jk is referring to is the 'fallacy of composition' that koo refers to, where market participants by each making rational decisions in their own self interest destroy the market for all.

but it's worse even than that... under our system, there is no self-correction of private interests who fail to act in the public interest as the free market religious freaks believe. as the housing bubble proved, the 100,000 watt bull horn of the msm yelled 'housing prices only go up!' 100 times a day, 7/24 for years on end was up against itulip then years later a pile of blogs that few read or believed... cries in the wilderness. on net, the truth about the housing market was suppressed by the rre industry's influence over the channels of market information.

what's the solution? regulation of private media? a large, public funded media that competes with private media?

my avatar is oscar wilde.

vinoveri
11-11-08, 12:31 PM
and what toy company would allow its toys to be coated in lead-based paint? they'd soon be out of business and no harm done!
what dairy would would contaminate its milk and allow candy, for instance, to be manufactured with it? that would be foolish and insane. no need to worry about that!
what bank would hold billions in toxic debt on its books, risking failure? such behavior would abrogate management's responsibility to shareholders and risk the bank's very survival! didn't sir prints-a-lot, alan greenspan, just say something about this?:rolleyes:
i can't wait to get treated by one of those unlicensed doctors!

in the toy, milk, and candy instances, they would be out of business (unless they're the only game in town or too big too fail - in which case the gov would bail them out and I wager protect them until the public outcry grew too loud) - and the market would respond by developing it's own watchdog. There may be harm done - and that's why we have the courts to resolve tort cases - if you don't want to be sued and go out of business - don't hurt the public. Strict Liability in injurious products suits is what keeps most products safe IMO.

It comes down to whether you want the gov to manage your risks or want to assume some personal responsibility about it - granted there may be reasonable roles for gov, but the growth in regulation over the last 30 yrs attests to the rapidity with which the gov has assumed power - and the rationale is its always for the "greater good"

As for the licensing of MDs, it's not the licensure per se, but the stranglehold over the licensing requirements. If one can pass the medical "bar" exams or whatever the equivalent is, and have enough clinical experience (e.g., apprenticship) and is supported by references of other practicing Drs., why should one not get a license?
By the way, there are still 4 states (Virginia is one) in the U.S. where you can get a license to practice law by "apprenticing" under an attorney or judge for 4+ years and then take the bar exam (w/o ever stepping foot in a law school). I'd be surprised in the law schools are supportive of this.

I for one would not object to my high school age children being taught science by a PhD physicist or chemist, even without a teaching certificate that is now required.

vinoveri
11-11-08, 12:40 PM
what jk is referring to is the 'fallacy of composition' that koo refers to, where market participants by each making rational decisions in their own self interest destroy the market for all.

but it's worse even than that... under our system, there is no self-correction of private interests who fail to act in the public interest as the free market religious freaks believe. as the housing bubble proved, the 100,000 watt bull horn of the msm yelled 'housing prices only go up!' 100 times a day, 7/24 for years on end was up against itulip then years later a pile of blogs that few read or believed... cries in the wilderness. on net, the truth about the housing market was suppressed by the rre industry's influence over the channels of market information.

what's the solution? regulation of private media? a large, public funded media that competes with private media?

my avatar is oscar wilde.

thanks. points taken. i don't have the answers, but think that more gov is not the answer. the housing bubble description above seems to leave out the role that the gov played in it (low interest, fannie, freddie). could we have had the bubble and the current repurcussions w/o the gov involvement?

Nervous Drake
11-11-08, 12:57 PM
thanks. points taken. i don't have the answers, but think that more gov is not the answer. the housing bubble description above seems to leave out the role that the gov played in it (low interest, fannie, freddie). could we have had the bubble and the current repurcussions w/o the gov involvement?

"The founders of this country figured out that there was only one way to have fairness in media. The way to have fairness in media is to make it possible for ordinary people to create media." - Uknown guy on Working Assets Radio talking about the FCC holding a hearing on receiving public comment on its media ownership rules.

I think the solution is to keep the internet the way it is with respect to freedom of information. People will learn. This is the perfect medium for media "because it makes it possible for ordinary people to create media."

WDCRob
11-11-08, 01:12 PM
If a thousand points of compassionately conservative light had been enough in and of themselves grandma wouldn't have been eating dogfood in the first place - and we'd have no Social Security. But, hmmm... look at the poverty rate among the elderly before and after.

If the fact that people don't really care to die from eating beef au rotten was enough to stop meat packing companies from killing people Sinclair Lewis wouldn't have had much to go on, and there'd be no FDA.

Coal mine safety? OSHA. Or maybe you support the unions? No, I didn't think so. And if you want to live in a society where hard-working people are faced with a choice between starvation and death by black lung, methane explosion or tunnel collapse, well what can I say? Move to China.

If governments can't solve problems why can you swim in the Cuyahoga River today without risk of third degree burns? Got EPA?

NASA? Government program last time I checked.

WWII? Oops, more big government. Oh, wait. Libertarians think government should do that one? Keep the peace, enforce the law, fight the wars?

Hmmm... sounds like Libertarians are people who expect the government to provide what they can't do for themselves. Just like everyone else.

bpr
11-11-08, 01:23 PM
If a thousand points of compassionately conservative light had been enough in and of themselves grandma wouldn't have been eating dogfood in the first place - and we'd have no Social Security. But, hmmm... look at the poverty rate among the elderly before and after.

If the fact that people don't really care to die from eating beef au rotten was enough to stop meat packing companies from killing people Sinclair Lewis wouldn't have had much to go on, and there'd be no FDA.

Coal mine safety? OSHA. Or maybe you support the unions? No, I didn't think so. And if you want to live in a society where hard-working people are faced with a choice between starvation and death by black lung, methane explosion or tunnel collapse, well what can I say? Move to China.

If governments can't solve problems why can you swim in the Cuyahoga River today without risk of third degree burns? Got EPA?

NASA? Government program last time I checked.

WWII? Oops, more big government. Oh, wait. Libertarians think government should do that one? Keep the peace, enforce the law, fight the wars?

Hmmm... sounds like Libertarians are people who expect the government to provide what they can't do for themselves. Just like everyone else.

Well put. I'm always amazed at politicians telling voters that the government shouldn't be involved or is incapable (Reagan's famous government is the problem line). What they're really saying is that they themselves shouldn't be involved and are incapable.

Slimprofits
11-11-08, 01:52 PM
From metalman's link:



The fact that more students than ever are attempting to get a college degree allows colleges to be aggressive in how they price their tuition.




Vinoveri: The whole educational establishment is effectively compulsory



Enrollment in higher education doubled from 7 million in 1970 to 14 million in 2002, while the total population of young people barely budged from 36 to 39 million.

There have been way too many (including myself at one point) undergrads in silly majors.

Munger
11-11-08, 02:37 PM
thanks. points taken. i don't have the answers, but think that more gov is not the answer. the housing bubble description above seems to leave out the role that the gov played in it (low interest, fannie, freddie). could we have had the bubble and the current repurcussions w/o the gov involvement?

If you are interested in learning about why you are wrong, familiarize yourself with the work of Joseph Stiglitz (http://en.wikipedia.org/wiki/Joseph_E._Stiglitz) (the most cited economist alive ... behind only Von Mises or Ron Paul were internet forums counted as citations). Specifically. (http://www.jstor.org/pss/1891114)

vinoveri
11-11-08, 02:52 PM
If a thousand points of compassionately conservative light had been enough in and of themselves grandma wouldn't have been eating dogfood in the first place - and we'd have no Social Security. But, hmmm... look at the poverty rate among the elderly before and after.

If the fact that people don't really care to die from eating beef au rotten was enough to stop meat packing companies from killing people Sinclair Lewis wouldn't have had much to go on, and there'd be no FDA.

Coal mine safety? OSHA. Or maybe you support the unions? No, I didn't think so. And if you want to live in a society where hard-working people are faced with a choice between starvation and death by black lung, methane explosion or tunnel collapse, well what can I say? Move to China.

If governments can't solve problems why can you swim in the Cuyahoga River today without risk of third degree burns? Got EPA?

NASA? Government program last time I checked.

WWII? Oops, more big government. Oh, wait. Libertarians think government should do that one? Keep the peace, enforce the law, fight the wars?

Hmmm... sounds like Libertarians are people who expect the government to provide what they can't do for themselves. Just like everyone else.

Good soundbites, but a few historical and sentimental anecdotes aren't really convincing to me that we should allow the gov to do whatever it pleases in "our self interest". Never said the gov can't solve problems. It does have a tendency though to create more than it solves IMO and deprive the populace of its freedoms.

In the cases you cite, the pattern appears to be that wrongs are identified by the public, the public collectively empowers/demands the gov address the specific problem - the gov creates an agency - addresses the problem AND THEN, instead of closing down until the next public demand, looks (and of course always finds) for more "problems" to address in order to feed itself and maintain its power.

and NASA? maybe putting a man on the moon was a feat difficult to regret; and maybe the Hubble Telescope's been worth it; what else - is the conclusion that once a gov org accomplishes its mandate it should grow and seek out new things to do?

and grandmas are normally (historically anyways) taken care of by their children and grandchildren - oh, perhaps we don't want that responsibility - so let's pass it off on the rest of the country - and while we're at it let's pass on the responsiblity of raising our kids to the gov (oops -forgot, we don't need to have kids because the gov will take care of us in our old age instead of our kids); and hey let's go one more - let's have the gov take care of us - guarantee us a living.

Sounds good except for the part of, say loss of personal dignity/integrity, self-reliance, and living under the yokes of some bureocratic whims, transferring gov debt onto our children and grandchildren (oops -forgot we don't need children to take care of us anymore, well maybe we do need them so they can serve the master all protector gov).

vinoveri
11-11-08, 03:16 PM
If you are interested in learning about why you are wrong, familiarize yourself with the work of Joseph Stiglitz (http://en.wikipedia.org/wiki/Joseph_E._Stiglitz) (the most cited economist alive ... behind only Von Mises or Ron Paul were internet forums counted as citations). Specifically. (http://www.jstor.org/pss/1891114)

wrong about what? that more gov is not the answer? I'd need some kool-aid to make such a seachange. thanks for the link though

Munger
11-11-08, 03:24 PM
wrong about what? that more gov is not the answer? I'd need some kool-aid to make such a seachange

Sorry: Why you are wrong that the market is more efficient without government and should be left to itself:

"Adam Smith, the father of modern economics, is often cited as arguing for the 'invisible hand' and free markets: firms, in the pursuit of profits, are led, as if by an invisible hand, to do what is best for the world. But unlike his followers, Adam Smith was aware of some of the limitations of free markets, and research since then has further clarified why free markets, by themselves, often do not lead to what is best. As I put it in my new book, Making Globalization Work, the reason that the invisible hand often seems invisible is that it is often not there.

Whenever there are 'externalities'—where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated—markets will not work well. Some of the important instances have been long understood—environmental externalities. Markets, by themselves, will produce too much pollution. Markets, by themselves, will also produce too little basic research. (Remember, the government was responsible for financing most of the important scientific breakthroughs, including the internet and the first telegraph line, and most of the advances in bio-tech.)

But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets—that is always.

The real debate today is about finding the right balance between the market and government (and the third 'sector'—non-governmental non-profit organizations.) Both are needed. They can each complement each other. This balance will differ from time to time and place to place."

http://blogs.iht.com/tribtalk/business/globalization/?p=177

"The theories that I (and others) helped develop explained why unfettered markets often not only do not lead to social justice, but do not even produce efficient outcomes. Interestingly, there has been no intellectual challenge to the refutation of Adam Smith’s invisible hand: individuals and firms, in the pursuit of their self-interest, are not necessarily, or in general, led as if by an invisible hand, to economic efficiency. The only question that has been raised concerns the ability of government to remedy the deficiencies of the market.

Within academia, a significant fraction of economists are involved with developing and expanding on the ideas of imperfect information (and imperfect markets) that I explored. For instance, Edmund Phelps, this year’s Nobel Prize winner, belongs to this 'school' of thought. But in political discourse, simplistic 'market fundamentalism' continues to exert enormous influence."

http://www.beppegrillo.it/eng/2007/01/stiglitz.html

SAM08
11-11-08, 05:46 PM
"In total we see the US economy losing between seven and 13 million jobs by the end of 2009 representing a 5% to 10% increase in unemployment. Our forecasts during this crisis have tended to be on the optimistic side; steeper job losses cannot be ruled out, especially if other feedback loops intensify. For example, rising unemployment will lead to a further 20% to 40% decline in real estate prices as households lose access to income to pay mortgage debt. A further tightening of credit as the pool of credit-worthy borrowers contracts means even deeper losses in Wholesale Trade, leading to more unemployment, and so on".

EJ/Fred- If I connect the dots, the above in conjuntion with your Global Finance Disneyland piece tells me you believe that this will be an inflationary depression. Unless I'm misunderstaning and you have changed your view that the disinflation/deleveraging/unemployment pushes the reflation/poom out until 2010. It is challenging to see how the Fed can generate spending with unemployment running at 15%. Perhaps they will have no choice, but devaluing the dollar in the midst of rampant unemloyment sounds like a receipe for revolution. I can't imagine too many will be happy losing their jobs and then seeing half the money in their wallet evaporate overnight via debasement.

dcarrigg
11-11-08, 06:23 PM
I dont know. Why has tuition gone up 5x in a little over 20 years?
Is it salaries of staff? Infrastructure, falling state contributions, the football team??

Does anyone have a pie chart of costs in 85 vs. 2005??


The current 2008 expense breakdown estimated by the common fund institute is as follows:


file:///Users/dcarrigg/Desktop/Picture%201.png813




The greatest increases in higher education costs at public institutions have occurred when appropriations funding has decreased in a given fiscal year.



814




Overall, utility costs, fringe benefits for employees, materials and supplies, and upper-level administrator salaries have been the biggest drivers for increased costs at US Universities and Colleges:



815




Fundamentally, it seems that higher education prices have generally conformed to within +/-2% of CPI over 5-year average intervals since 1970. The HEPI has not been less than the CPI since 1993. The "skyrocketing" costs of higher education relative to inflation are likely due in large part to the redefinition of CPI by the BLS. See http://www.shadowstats.com/alternate_data (http://www.shadowstats.com/alternate_data)



816




This being said, two-year colleges have kept prices significantly lower than their four-year counterparts, and it is probably very good advise to encourage students to spend two years at a two year school before transferring to a state university.



817

EJ
11-11-08, 06:42 PM
"In total we see the US economy losing between seven and 13 million jobs by the end of 2009 representing a 5% to 10% increase in unemployment. Our forecasts during this crisis have tended to be on the optimistic side; steeper job losses cannot be ruled out, especially if other feedback loops intensify. For example, rising unemployment will lead to a further 20% to 40% decline in real estate prices as households lose access to income to pay mortgage debt. A further tightening of credit as the pool of credit-worthy borrowers contracts means even deeper losses in Wholesale Trade, leading to more unemployment, and so on".

EJ/Fred- If I connect the dots, the above in conjuntion with your Global Finance Disneyland piece tells me you believe that this will be an inflationary depression. Unless I'm misunderstaning and you have changed your view that the disinflation/deleveraging/unemployment pushes the reflation/poom out until 2010. It is challenging to see how the Fed can generate spending with unemployment running at 15%. Perhaps they will have no choice, but devaluing the dollar in the midst of rampant unemloyment sounds like a receipe for revolution. I can't imagine too many will be happy losing their jobs and then seeing half the money in their wallet evaporate overnight via debasement.

Only the hard work, intelligence, creativity, saving, and investing of an economically free, well educated and ambitious people, relatively unhampered by taxes and regulation, and also of threats of theft and violence, can create purchasing power.

Unfortunately, our economy became too dependent on the purchasing power of credit. How dependent? Hard to say. Twenty percent? Forty? We shall only know in the course of time as all the credit disappears.

We will be left with many intelligent and well educated people willing and able to work, to apply their intelligence and creativity, but lacking savings and a financial system that enables investing. Economic freedoms will be threatened by the political reflex of over-regulation, and a well educated and willing people may lose their ambition, hampered by taxes and fees and the death by a thousand cuts that a government desperate for revenue can inflict on a people. Theft and violence are likely to increase in any case, as the high expectations that the purchasing power of credit created turn to disappointment and anger as the credit goes away, leaving debt in its wake.

The administration will be confronted with nothing but politically unacceptable choices. Each option is awful by degrees, every one of them. They can be broken down into three broad categories:

Option 1: Terrible


High first year unemployment (10% - 15%)
Median income provides access to necessities but living standards decline 10% to 20%
Debts are paid off slowly out of inflated wages

Option 2: More Terrible


Higher first year unemployment (15% - 20%)
Median incomes provide access to necessities but living standards decline 20% to 40%
Debts are extended by restructuring, sapping household cash flow without reducing total debt

Option 3: Horrific


Very high first year unemployment (20% - 25%)
Median incomes do not provide access to necessities. Living standards decline by 40% to 50%
Debts are defaulted on

This is the logic behind our Ka-Poom Theory from 1999, that when the fallacy of the credit system was at last exposed by the course of events, when it could not be again resuscitated by fresh credit expansion, that governments walk down the list of ugly options and choose the one that create the least pain for itself, the lowest unemployment. That is not Option 3, a 1930s style deflation. That option is Option 1: a high inflation, higher than the 1970s, but not a hyperinflation.

The mechanism for that inflation, per Ka-Poom Theory, is the mountain of dollars that live overseas in official and private accounts. It will be beckoned home in stages, with the holders willing participants in devaluation of their own reserves.

marvenger
11-11-08, 07:27 PM
EJ I agree that option 1 looks the best, but the critical issue is being able to pay back debt through higher wage base. Is there analysis on iTulip of how the higher wage base is acheived. Its a big turn around in how the economic pie is divided up, it would also sap the will of those with capital you would think.

audrey_girl
11-11-08, 10:28 PM
very sobering article -

i work in hi-tech (silicon valley) and its layoff and hiring freeze time again.

Have friends at all the major players here

i fear it is going to get very bad; perhaps the worst i have ever seen

what is even more frightening is what you see if you are paying attention to some of the news that is not getting a lot of play, but that points to how very ugly it may get:

http://www.progressive.org/mag/wx100708.html

lurker
11-12-08, 09:12 AM
The "skyrocketing" costs of higher education relative to inflation are likely due in large part to the redefinition of CPI by the BLS.

Spot on. I think higher education and healthcare are two sectors where massive inflation in the money supply has not been offset by outsourcing to low wage economies.

In other words had the US consumer not benefitted from outsourcing to ultra low wage economies everything would have risen by the same amount as tuition and healthcare, and the "low inflation" lie would have been seen by the masses years ago.

phirang
11-12-08, 10:23 AM
Spot on. I think higher education and healthcare are two sectors where massive inflation in the money supply has not been offset by outsourcing to low wage economies.

In other words had the US consumer not benefitted from outsourcing to ultra low wage economies everything would have risen by the same amount as tuition and healthcare, and the "low inflation" lie would have been seen by the masses years ago.

so what happens to inflation when people stop paying top dollar for diploma mills and getting their fat sucked out?

i think by the time it becomes clear, the gold bugs will have committed hari kari!

tsetsefly
11-13-08, 04:12 AM
Well, your work as usual is very helpful, comprehensive and well done, EJ.

But as usual in this case your conclusion could not be more wrong.

What we need to forestall depression are measures such as:

1. repeal tax on dividends

2. repeal capital gains tax

3. repeal income tax on corporations

4. END THE WARS so that taxes can be lowered

5. Did I mention END THE WARS?

6. End the bailouts of companies that should go belly up

The whole problem with our economy is encouraging consumption, discouraging savings and discouraging investment.

"Stimulus" is more of the same, depreciating stores of private savings, thus dis-incentivizing savings and investment, and encouraging consumption.

Ugh.
agree, part of what caused the outsourcing of jobs where high corporate tax rates on manufacturers...
FDR's programs during the depression proved to worsen the depression, what we need is the government to allow that innovative middle class to innovate, that is cut down on taxes and regulations that punish investment and saving...

grapejelly
11-13-08, 05:41 AM
agree, part of what caused the outsourcing of jobs where high corporate tax rates on manufacturers...
FDR's programs during the depression proved to worsen the depression, what we need is the government to allow that innovative middle class to innovate, that is cut down on taxes and regulations that punish investment and saving...

spot on. And the worst that the gubmint can do is to further "stimulate" the economy, subsidize failing firms, provide bailout money to the banks. In short, exactly what the gubmint is doing now...and what FDR did...almost assures the economic problems will become worse than they otherwise would be.

steveaustin2006
11-13-08, 01:16 PM
governments walk down the list of ugly options and choose the one that create the least pain for itself, the lowest unemployment. That is not Option 3, a 1930s style deflation. That option is Option 1: a high inflation, higher than the 1970s, but not a hyperinflation.

Question is what are they waiting for? Has there not been enough pain in asset markets yet? Not enough pain in unemployment yet to justify the higher future inflation to the public once it arrives?

metalman
11-13-08, 11:04 PM
Question is what are they waiting for? Has there not been enough pain in asset markets yet? Not enough pain in unemployment yet to justify the higher future inflation to the public once it arrives?

waiting? you're kidding.

http://www.itulip.com/images/bankcredit010108-103108.gif

grapejelly
11-13-08, 11:10 PM
waiting? you're kidding.

http://www.itulip.com/images/bankcredit010108-103108.gif

yep...all seized up! Or what is the line this week?

steveaustin2006
11-13-08, 11:40 PM
waiting? you're kidding.

metalman,

I should clarify. I mean I am under the impression that this expansion was anticipated not to work in devaluing the dollar. My impression was that this in itself wasn't the action that would push the dollar over the cliff and that something more was going to be required- as alluded to in the recent EJ articles - i.e. they make some statements about how they are going revalue down so sentiment has an effect to overpower repatriotation - or central banks just get together and do it.

The dollar has only appreciated due reasons we all understand so when I say what are they waiting for - I mean the silver bullet - could it happen at anytime on its own soley due to foreign central bank sentiment shift? or will it be a coordination to sell of dollars?

And once again I ask the same question I've asked a million times - if a sharp devaluation could happen at any time, why in the world would you want to sit 80% in USD treasuries? when some commodity currencies should at that point offer more protection esp. now that they have been hammered?

Do you think there is more pain to come and that the duration of 13 wk treasuries will give you ample time to get out? I understand that other currencies might be a temporary solution wrt other currencies also devaluing eventually.

metalman
11-13-08, 11:41 PM
metalman,

I should clarify. I mean I am under the impression that this expansion was anticipated not to work in devaluing the dollar. My impression was that this in itself wasn't the action that would push the dollar over the cliff and that something more was going to be required- as alluded to in the recent EJ articles - i.e. they make some statements about how they are going revalue down so sentiment has an effect to overpower repatriotation - or central banks just get together and do it.

The dollar has only appreciated due reasons we all understand so when I say what are they waiting for - I mean the silver bullet - could it happen at anytime on its own soley due to foreign central bank sentiment shift? or will it be a coordination to sell of dollars?

And once again I ask the same question I've asked a million times - if a sharp devaluation could happen at any time, why in the world would you want to sit 80% in USD treasuries? when some commodity currencies should at that point offer more protection esp. now that they have been hammered?

Do you think there is more pain to come and that the duration of 13 wk treasuries will give you ample time to get out? I understand that other currencies might be a temporary solution wrt other currencies also devaluing eventually.

no this is the action that might scare usa creditors into selling...

The unthinkable (http://ftalphaville.ft.com/blog/2008/10/27/17448/the-unthinkable/)

steveaustin2006
11-13-08, 11:50 PM
no this is the action that might scare usa creditors into selling...

The unthinkable (http://ftalphaville.ft.com/blog/2008/10/27/17448/the-unthinkable/)

Thanks was a little confused on that and since FRED last night referred to the coming "coordinated, global debt monetization" as if it will be deliberate and orderly rather than one or two creditors deciding to not want to individually purchase US debt.

thoughts on the 13 wk treasury risk question? i.e. sitting in USD assets when the dollar could fall off a cliff any day?

thanks for your patience.

metalman
11-13-08, 11:53 PM
Thanks was a little confused on that and since FRED last night referred to the coming "coordinated, global debt monetization" as if it will be deliberate and orderly rather than one or two creditors deciding to not want to individually purchase US debt.

thoughts on the 13 wk treasury risk question? i.e. sitting in USD assets when the dollar could fall off a cliff any day?

thanks for your patience.

if the dollar tanks the short end blows up first for the obvious reason that the bill mature sooner. every 13 wks you roll 'em over... 1%, 4%, 8%, 12%, 16%, 24%, wheeeee!

grapejelly
11-13-08, 11:56 PM
the deleveraging has a lot further to go for the USD to tank...6 months or so I think.

Slimprofits
06-15-09, 11:52 PM
How do the official unemployment treatment numbers treat new high school and college graduates, that have never worked full-time and are seeking full-time jobs?

metalman
06-16-09, 12:09 AM
How do the official unemployment treatment numbers treat new high school and college graduates, that have never worked full-time and are seeking full-time jobs?

http://www.bls.gov/data/




Both sexes, 16 to 19 years (http://www.bls.gov/news.release/empsit.t01.htm)

Civilian noninstitutional population......... 17,064 17,076 17,064 17,064 17,098 17,090 17,083 17,076 17,064
Civilian labor force....................... 7,020 6,066 6,430 7,231 6,547 6,610 6,493 6,501 6,573
Participation rate................... 41.1 35.5 37.7 42.4 38.3 38.7 38.0 38.1 38.5
Employed................................. 5,660 4,799 4,910 5,868 5,188 5,184 5,083 5,103 5,082
Employment-population ratio.......... 33.2 28.1 28.8 34.4 30.3 30.3 29.8 29.9 29.8
Unemployed............................... 1,360 1,267 1,520 1,363 1,359 1,427 1,410 1,398 1,491
Unemployment rate.................... 19.4 20.9 23.6 18.9 20.8 21.6 21.7 21.5 22.7
Not in labor force......................... 10,044 11,010 10,634 9,834 10,551 10,480 10,590 10,575 10,491

Slimprofits
06-16-09, 12:15 AM
thank you.