Good read on US Economy

[Hotrod]

http://www.iht.com/articles/2008/01/23/business/davos.php

DAVOS, Switzerland: The United States has filled various roles at the World Economic Forum over the past decade: dot-com dynamo, benevolent superpower, feared aggressor, and now, wounded giant.

On the first day of this conference, a parade of bankers, economists, and political officials expressed deep fears about the faltering American economy, peppered with blunt criticism of its institutions, chiefly the Federal Reserve, which some accused of sowing the seeds of today's crisis.

George Soros, the financier who made a fortune betting against the pound, went so far Wednesday as to say that the downturn would put an end to the long status of the dollar as the world's default currency.

"The current crisis is not only the bust that follows the housing boom," Soros said. "It's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency."

Signs of a new economic order abounded in this Swiss ski resort: the minister of commerce and industry of India, Kamal Nath, noted that China had overtaken the United States as India's largest trading partner - buttressing his view that India could largely sidestep an American recession.

Completing the role reversal, Nouriel Roubini, an American economist, said, "the United States looks like an emerging market," with large budget deficits and a swooning currency. By contrast, he said, Brazil, an actual emerging market, had done a better job of overhauling its economy.

Roubini, whose frequent predictions of a downturn have made him something of a soothsayer in Davos, predicted the United States would suffer a recession lasting at least a year. He foresees a flood of defaults on car loans and corporate bonds, as well as a prolonged bear market.

"The debate is not whether we're going to have a soft landing or a hard landing," he said. "The question is only how hard the hard landing will be."

Several economists said the Federal Reserve seemed to have lost control of events since the subprime crisis erupted last summer. Some criticized its steep cut in interest rates Tuesday as a knee-jerk reaction to calm the markets rather than a sound response to a deteriorating situation.

"Policy makers are reaching back into the same playbook that got us into this mess in the first place," said Stephen Roach, an economist who recently became the chairman of Morgan Stanley Asia.

By signaling that it is ready to cushion the stock market from the ravages of the credit crisis, Roach argued, the Federal Reserve risks creating conditions for a new round of inflation in asset prices.

The Federal Reserve "made bad judgments," said Joseph Stiglitz, the Nobel Prize-winning economist. "It looked the other way when investment banks packaged bad loans in non-transparent ways."

The rate cut this week, Stiglitz said, would be too little, too late, because monetary policy usually takes between six months and 18 months to be effective, and the United States is in distress now.

For all the talk here about looking at the big picture, the Davos conference is driven by short-term impulses. This week's wild swings on the markets, as well as the Federal Reserve's dramatic response, left people here spooked, perhaps exaggerating the bleakness of the mood



MORE at link

[L.A. BRONCOS FAN]

Several economists said the Federal Reserve seemed to have lost control of events since the subprime crisis erupted last summer. Some criticized its steep cut in interest rates Tuesday as a knee-jerk reaction to calm the markets rather than a sound response to a deteriorating situation.

The perceived "loss of control" is by design.

The fed serves at the pleasure of the same elites who have cashed in on every major recession/crash/depression this country has ever experienced.

[Rohirrim]

Gee, you mean all these "friends" who we supported for decades would just step away as we fell and turn their backs on us? What a shock. I guess if you need a friend in the world of global finance, you should buy a dog? ;D Perhaps America should start worrying about America? I wonder how India and China would be doing if we hadn't exported millions of OUR ****ING JOBS AND MANUFACTURING OVER TO THEM!! Americans have to be the stupidest people on the planet.

[Hotrod]

Gee, you mean all these "friends" who we supported for decades would just step away as we fell and turn their backs on us? What a shock. I guess if you need a friend in the world of global finance, you should buy a dog? ;D Perhaps America should start worrying about America? I wonder how India and China would be doing if we hadn't exported millions of OUR ****ING JOBS AND MANUFACTURING OVER TO THEM!! Americans have to be the stupidest people on the planet.

I believe the poltically correct term is "the nicest retards on the planet"

[L.A. BRONCOS FAN]

I wonder how India and China would be doing if we hadn't exported millions of OUR ****ING JOBS AND MANUFACTURING OVER TO THEM!! Americans have to be the stupidest people on the planet.

The small group of super-wealthy elites who have benefited most from this policy don't give a f*@k about the consequences for the rest of us.

They are not patriots; their loyalty is not to America - it's to the corporation and the bottom line.

The Bush Dollar Trap

The first government response to America's sinking economy was denial. We were told as recently as a month ago by administration officials and Wall Street charlatans that the economy was robust and that there would not be a recession. Now we are told that the economy is in trouble, but that the government is taking decisive action to shore it up.

We saw how effective the first "decisive" proposal was. Bush announced a plan to give every adult taxpayer (no poor people, thank you) $800 in a tax rebate this April. The stock market responded to this idea by dropping a few percent. The idea, as I wrote in my last column, was stupid to begin with because, with the US no longer producing much of anything, all that bonus borrowed cash would end up getting spent on imported goods anyhow, doing next to nothing for the US economy.

So now the Federal Reserve has weighed in with a 3/4 percent cut in the Federal Funds rate. Even though commercial banks followed suit, lowering the prime lending rate by a similar 3/4 percent, the stock market showed how much good that move would do, dropping almost 300 points at the opening bell today--about what it had been expected to do even without an interest-rate cut.

There was one place where the Fed's action did have an impact though: the exchange value of the dollar in foreign currency markets. No sooner was word of the interest rate cut announced, than the dollar fell against major currencies like the British Pound, the Euro and the Japanese Yen.

And there's the rub. The Fed is in a trap. It cannot cut interest rates much more without causing a collapse in the dollar, which, because of the huge US trade imbalance, and all those consumer goods and raw materials--especially oil--that are imported--would lead to serious and politically dangerous inflation. And there is another constraint: with the current rate cut, the US now has the third lowest interest rates in the world. If the Fed makes another cut, as it has hinted it might in a week or so, only Japan would have a lower interest rate environment than the US. That makes the dollar a very undesirable currency for foreigner investors, which means they won't want to hold dollars, and they won't want to hold US stocks.

Yet if the Fed doesn't cut interest rates even further, the stock market will continue to plunge, which again discourages foreign investors from pouring their money into the U.S., which in turn puts downward pressure on the dollar.

This was all predictable.

An economy that is almost wholly dependent on consumer spending, which is the case in the US, is in big trouble when consumers start to worry about the security of their jobs, and when they see inflation eating away at their disposable income. They naturally just stop spending. And that is happening, too.

So get ready for some hard economic times. The next step will be soaring inflation, as strapped companies in China, India and elsewere start raising their prices for goods shipped to the US and paid for in dollars. Then the Fed will have to respond by raising interest rates again, in an effort to shore up the currency. And with that will come deeper recession and an even lower stock market.

The Bush chickens--endless deficits as far as the eye can see, and a $2-trillion military debacle that has no end in sight and that is sucking money out of the country like a giant industrial vacuum cleaner--are coming home to roost. The President and Vice President clearly hoped that they could pass the wreckage of their eight years in office on to the next president and run off to retirement and senior statesman status before it all blew up, but their luck ran out. The economic **** has hit the fan. Chances are that the war that they have tried to tuck away in the closet with a "surge" in troops and a brutal campaign of aerial bombardment, will also blow up on them before the year is out.

http://www.smirkingchimp.com/thread/12342

[baja]

Policy makers are reaching back into the same playbook that got us into this mess in the first place," said Stephen Roach, an economist who recently became the chairman of Morgan Stanley Asia.

This is why we will have a depression.

[baja]

The small group of super-wealthy elites who have benefited most from this policy don't give a f*@k about the consequences for the rest of us.

They are not patriots; their loyalty is not to America - it's to the corporation and the bottom line.

The Bush Dollar Trap

The first government response to America's sinking economy was denial. We were told as recently as a month ago by administration officials and Wall Street charlatans that the economy was robust and that there would not be a recession. Now we are told that the economy is in trouble, but that the government is taking decisive action to shore it up.

We saw how effective the first "decisive" proposal was. Bush announced a plan to give every adult taxpayer (no poor people, thank you) $800 in a tax rebate this April. The stock market responded to this idea by dropping a few percent. The idea, as I wrote in my last column, was stupid to begin with because, with the US no longer producing much of anything, all that bonus borrowed cash would end up getting spent on imported goods anyhow, doing next to nothing for the US economy.

So now the Federal Reserve has weighed in with a 3/4 percent cut in the Federal Funds rate. Even though commercial banks followed suit, lowering the prime lending rate by a similar 3/4 percent, the stock market showed how much good that move would do, dropping almost 300 points at the opening bell today--about what it had been expected to do even without an interest-rate cut.

There was one place where the Fed's action did have an impact though: the exchange value of the dollar in foreign currency markets. No sooner was word of the interest rate cut announced, than the dollar fell against major currencies like the British Pound, the Euro and the Japanese Yen.

And there's the rub. The Fed is in a trap. It cannot cut interest rates much more without causing a collapse in the dollar, which, because of the huge US trade imbalance, and all those consumer goods and raw materials--especially oil--that are imported--would lead to serious and politically dangerous inflation. And there is another constraint: with the current rate cut, the US now has the third lowest interest rates in the world. If the Fed makes another cut, as it has hinted it might in a week or so, only Japan would have a lower interest rate environment than the US. That makes the dollar a very undesirable currency for foreigner investors, which means they won't want to hold dollars, and they won't want to hold US stocks.

Yet if the Fed doesn't cut interest rates even further, the stock market will continue to plunge, which again discourages foreign investors from pouring their money into the U.S., which in turn puts downward pressure on the dollar.

This was all predictable.

An economy that is almost wholly dependent on consumer spending, which is the case in the US, is in big trouble when consumers start to worry about the security of their jobs, and when they see inflation eating away at their disposable income. They naturally just stop spending. And that is happening, too.

So get ready for some hard economic times. The next step will be soaring inflation, as strapped companies in China, India and elsewere start raising their prices for goods shipped to the US and paid for in dollars. Then the Fed will have to respond by raising interest rates again, in an effort to shore up the currency. And with that will come deeper recession and an even lower stock market.

The Bush chickens--endless deficits as far as the eye can see, and a $2-trillion military debacle that has no end in sight and that is sucking money out of the country like a giant industrial vacuum cleaner--are coming home to roost. The President and Vice President clearly hoped that they could pass the wreckage of their eight years in office on to the next president and run off to retirement and senior statesman status before it all blew up, but their luck ran out. The economic **** has hit the fan. Chances are that the war that they have tried to tuck away in the closet with a "surge" in troops and a brutal campaign of aerial bombardment, will also blow up on them before the year is out.

http://www.smirkingchimp.com/thread/12342

This is why I said BUY GOLD A year or so ago.

[W*GS]

Americans have to be the stupidest people on the planet.

Excepting you, of course.

Spoken like a true left-wing elitist.

[baja]

Jesus W*GS if anybody on this board is an elitist it is you

[W*GS]

How so?

I ain't the one calling Americans "the stupidest people on the planet".

[L.A. BRONCOS FAN]

This is why I said BUY GOLD A year or so ago.

Yep.

You were right, and the rightards covering Bush's flank were wrong (as usual.)

http://www.bartcop.com/hourglass-out.jpg

[Rohirrim]

Excepting you, of course.

Spoken like a true left-wing elitist.

I'm not going to play with another of your silly little deflections. I think you know what I meant.

[L.A. BRONCOS FAN]

Yeah, what was Roh thinking?

Exporting millions of our jobs and our manufacturing to China was a smart thing to do, and anyone who disagrees is just a librul elitist.

;)

[W*GS]

I'm not going to play with another of your silly little deflections. I think you know what I meant.

You can call all my posts "deflections" (and thus immediately unworthy of your attention) but that doesn't make them so.

You called all of us Americans "the stupidest people on the planet". That's a very strong statement.

You been ODing on populist/pro-protectionist screed or what?

[W*GS]

Exporting millions of our jobs and our manufacturing to China was a smart thing to do, and anyone who disagrees is just a librul elitist.

How many "millions" of jobs have gone to China? How much manufacturing (of what kinds) went to China? Care to offer some data?

[Bronco Bob]

How many "millions" of jobs have gone to China? How much manufacturing (of what kinds) went to China? Care to offer some data?

Well, for one thing a Maytag washing machine factory in Iowa pulled
up stakes and moved to China. This was something mentioned
several times prior to the Iowa caucus. And those Mattel toys from
China that had the lead paint on them? Those used to be made
at Mattel's factory in Hawthorne, California. And those are just
two examples I can think of off the top of my head without even
bothering to go to Google. I am sure lots of other people here
could cite other examples to rectify your ignorance on the subject.
And I'm not calling you ignorant to be insulting, rather I'm using
the word to denote your lack of knowledge.

[W*GS]

[...]I am sure lots of other people here could cite other examples to rectify your ignorance on the subject. And I'm not calling you ignorant to be insulting, rather I'm using the word to denote your lack of knowledge.

A couple anecdotal IIRCs are not impressive.

[Spider]

After reading a couple of Post , I am convienced W*GS is wrong yet again

[L.A. BRONCOS FAN]

After reading a couple of Post , I am convienced W*GS is wrong yet again

He just can't resist the temptation to defend Bush's economic policies, eh?

[Bronco Bob]

A couple anecdotal IIRCs are not impressive.

So do your own work then and stop living in ignorance.
You asked how many jobs have gone to China.
I provided you a head start with a couple examples.
If you are really interested, it shouldn't be that
hard to find out how many companies have shut
down their manufacturing operations in the US
and have moved their operations to China.
You could start with finding out how many people
were employed by Maytag in Iowa. Then get
back to us with that number.

[W*GS]

He just can't resist the temptation to defend Bush's economic policies, eh?

How does asking you for your data "defend" Bush?

No wonder you think I'm a Bush supporter - you're a ****ing idiot.

[alkemical]

Well, for one thing a Maytag washing machine factory in Iowa pulled
up stakes and moved to China. This was something mentioned
several times prior to the Iowa caucus. And those Mattel toys from
China that had the lead paint on them? Those used to be made
at Mattel's factory in Hawthorne, California. And those are just
two examples I can think of off the top of my head without even
bothering to go to Google. I am sure lots of other people here
could cite other examples to rectify your ignorance on the subject.
And I'm not calling you ignorant to be insulting, rather I'm using
the word to denote your lack of knowledge.

Hershey is trying to close it's plants in Hershey, PA and move it to mexico.

[Spider]

Hershey is trying to close it's plants in Hershey, PA and move it to mexico.

The Great American Chocolate Bar ...... but it wouldnt surprise me

[Rohirrim]

Hershey is trying to close it's plants in Hershey, PA and move it to mexico.

I guess they'll rename the town. How about, Screwed, PA. ? ;D

[alkemical]

I guess they'll rename the town. How about, Screwed, PA. ? ;D

The funny thing about it..... Is that the workers even voted on a pay freeze.....

[alkemical]

The Great American Chocolate Bar ...... but it wouldnt surprise me

Yeah, when i worked there...they bought this mexican candy company and as soon as they did - i knew they were going to move to mexico.