What has been clearly established this fall is that the US economic growth of the last few years was, at least in part, driven by non-organic growth (as our liberal friend Xylene put it recently). What that means is it was artificially inflated by a ponce scheme driven by the Democrat's FreddieMac/FannieMae corruption scandal. The natural requirement is for this non-organic growth to correct itself. Upon reestablishment of a new equilibrium (at what level? I can't say and neither can anybody else) the market will begin to function normally again. Tragically, the Bush-Pelosi bail-out is designed exactly to prevent that return to equilibrium from happening. That means that the recession-depression-economic downturn-or whatever we call those things today will not be ending anytime soon. The gargantuan increases in public debt, transfer of private debt onto the public side of the ledger (via Bush-Pelosi), and the upcoming new taxes and regulations that will inevitably throw more restraints upon our private economy are all going to make this recovery much more difficult for US to recover from.

 

The DOW is not the only indicator of private sector growth to look at. General employment, national productivity, all of the other financial groups (S&P 500, NASDAQ,as well as world markets and trade specific monitors), and others also reflect the general health of the economy. I think all of them will go through a series of upheavals in the coming year. Most likely made exponentially worse by the appalling Congressional leadership and the politically moderate McCain and the blatantly Marxist Obama. 

 

Check Six

 

Rocky

 

 

 

1966 DOW 1,000

1982 DOW 800

 

2008 DOW 14,000

2024 DOW 11,200

 

These are even inflation adjusted figtures. 

Regardless of who is elected some troubling facts argue for a tough economy over the next 16 years.  Boomers reached age 46 in 1992.  The cadre of 46 year olds earns and spends the most of any age group.  The 1990's boom was more the result of boomers making historically high amounts of money, than of the economic policies of the Clinton Administration or the republican congress.

 

The baby boom ended in 1960, or began a significant decline, so we can expect to see starting in 2006 a decling in earning and spending of this 46 year old cadre.  The 1946 boomer is now 62, nearing returement and curtailing spending.  Will "Boomer" change his spending habits and keep up high levels of consumption?  He has all that dot-com money and real estate equity to spend on obscene medical expenses that may continue to drive the economy.  We have millions of Mexicans flooding the market that takes up the slack from the boomer decline, but does a 46 year old non-college educated immigrant make as much as a 46 year old boomer did? 

 

As we had an unprecedented boom in the 1990's, so economists predict a 1930's depression looming over the next 16 years - because "Boomer" is retiring.

 

Obama and McCain may be glad to hand over a sick economy to Clinton or Palin in 2012.

yesterday one of the Obama pundits said that what Obama wants to do is create a new deal like cure for the economy. "Say it ain't so Joe!" The New Deal was not, in the main, an early example of economic management, and it did not lead to rapid recovery. Income per capita was no higher in 1939 than in 1929, although the government?s welfare and public works policies did benefit many of the most needy people. The big growth in the US economy was, in fact, due to rearmament.

 

Yup,

nothing like a big war to get the economy going in a positive direction (getting people employed, good wages to fatten the tax coffers, creating skilled labor, strengthening the country's technological prowess, etc) ...

 

Sad thing though,

that it too often takes a handful of people representing the worst that humanity has to offer

to unite much of the rest of the world and bring out the best humanity has to offer.

 

 

"All those people who cry that wars never solved anything?

They're the people who failed history class."

 

Except that even then, wasn't the rearmament paid for/fueled by significant borrowing?  Perhaps it wasn't until the war ended and we transitioned into a civilian econmy into the 1950s that it actually paid off in terms of real economic growth/strength.  War production doesn't really produce anything useful within the economy.  I admit I'm mostly just repeating what I've read without being able to really back it up, and I defer to much stronger minds than mine, such as Ludwig von Mises, Murray Rothbard, etc., particularly "Economics in One Lesson," by Henry Hazlitt.

 

yesterday one of the Obama pundits said that what Obama wants to do is create a new deal like cure for the economy. "Say it ain't so Joe!" The New Deal was not, in the main, an early example of economic management, and it did not lead to rapid recovery. Income per capita was no higher in 1939 than in 1929, although the government?s welfare and public works policies did benefit many of the most needy people. The big growth in the US economy was, in fact, due to rearmament.

I agree that WWII put the final nails in the coffin of the great depression , but it leads many to think that war would have the same effect today. Unless we get into some massive war (World War III) with Europe, India, China, Russia involved , I doubt it would create the amount of demand for sealift, materials, man-power, replacement parts, and over-all spending. A limited conventional engagement in the 21st Century will not have economic benefits. In fact it would be an economic drain. Military hardware is no longer manufactured in labor intensive mass production techniques. Today if replacements or a ramp up in production of B2 bombers or M1 tanks would probably be accomplished in the existing facilities that already make them. They would not be able to retool Detroit factories to be able to mass produce YF-22s.

 

The New Deal it is argued did not end the depression but it did provide jobs and a way to inject cash into the economy to many people in the throws of the nearest a modern industrialized nation ever came to total collapse of it's economic system. What really set back progress was the increase in tariffs that stifled trade and the requirement ,at the time, of a balanced budget.

Taxation is my point.

1. The per capita income in 1939 was not much different than in 1929

2. The New Deal was the single largest growth of government in the US ever, several programs meant to be temporary are still dogging us today. Social Security for one.

3. Herbet Hoover's reaction to the crash was to raise taxes, that is what caused the depression not the actual crash itself. Unemployment hovered around 25% then and I believe Ednah posted the unemployment for the subsequent years until 1939.

4 FDR taxed any corporation that did not spend money on top of extreme taxes on the corporations imposed by the previous Hoover administration, That Stymied Job growth.

5. The CCC camps did nothing to stimulate the economy, they actually added to the burden of goivernment, They did most will agree make the most desparate at least have a chance, but it can argued quite strongly, that by reducing taxes, the most down trodden would have faired much better with real jobs rather than artificial jobs the New Deal created and cost the tax  payers and the nation far less..

 

Now, look at the two candidates, niether has a programatic solution, however, McCAin says Cut spending everywhere you can, allow for not government growth except for only the necessary. Obama says raise taxes everyone that makes over $250K (The Only Current Job creators being in the 250K - 1 Mill income bracket) And spend money much as the new deal.

 

If people put thier anger aside and use thier heads, there is no choice McCain is only chance to avoid depression. Conversely, Obama+Pelosi+Ried = MASSIVE SPENDING AND TAXATION AND ULTIMATELY Depression, In Fact Charles Schummer is already calling for a New Deal Like solution.

Government spending doesn't inject cash into the system, banks making loans creates money.  A main problem during the Depression not mentioned yet is the fact that interest rates remained too high.  Even the low nominal rates in existence have been deemed too low my modern economists. 

 

But to the late 1990's.  Ben Bernanke wrote before becoming Fed Chairman about the risk of deflation that was hurting Japan.  The Fed continued to prime the money supply pump.  With so much cash around it should not be surprising that real estate prices took off too unreasonable levels, not unlike the stock market of the 1990's. 

 

The U.S. faces the risk of a real depression over the next fifteen years and it will be interesting to see if the Fed chooses the same tool - money supply growth - to mitigate the problem.

Whether you like it or not, the Federal Government is not only one of the largest , perhaps the largest, direct employer but many businesses all across the nation depend on government contracts and spending to survive. By across the board spending cuts it will end up causing increased unemployment and will put the brakes on a lot of economic activity.

The most looming problem right now is the siezing up of commercial paper markets. This is what it required for businesses large and small to operate. If nothing is done to restore confidence we are looking at a problem so big it is actually very frightening. In that sense it would be very similar to the great depression. There are many causes of the great depression but another one was the plethora of holding companies honeycombed throughout the economy at that time. You could have a vibrant railroad or shipping company but if it's parent company went bankrupt then everything top down was tied up in litigation.

 

At first most thought that the bailout was for wall street and many balked. We know now that it is spreading like wildfire. When a money market fund broke the dollar it was realized that had sold commercial paper to Lehman Brothers who the government allowed to go bust. Well those large short term loans were defaulted on and now the money market fund is taking the loss. Now the commercail paper market is siezing up because no one knows the credit worthiness of anyone else. Unless we have the government give some guarantees on interbank and commercial loans this conundrum will only get worse.  The government needs money to do this or else risks crashing the dollar. Cutting spending only makes the problem worse, increasing taxes on everyone only makes the problem worse. Increasing taxes on the rich , is a targeted, probably unfair thing to do, but it is the best option for the government to raise cash and not make the recession worse or devalue the dollar.

Everything you said was spot on until the last sentence. For starters many of those small businesses that employ most of the people in the US would be included as one of those rich people. Not even that, many of those "rich" people are the ones taking up the slack and lending money to the small businesses that cannot borrow it from normal sources. I have two clients that have borrowed the money they needed from some of there well off clients who are looking to put their money into something a little safer then the whole market mess.

 

 Now you have to look at the fact that many of these "rich" people have taken big financial hits themselves. So they will be entitled to serious write offs come this tax season. Now if they that spend lots of money helping revolve our economy have to take more major hits with taxes, you think they will go out to eat, buy nice toys and donate needed money? NOOOOOOOO they wont . So that further freezes the economy.

 

By across the board spending cuts it will end up causing increased unemployment and will put the brakes on a lot of economic activity.

None of what has been done so far in this "crisis" has effected the root problems in our economy. Gov't intervention in private industry, truly insane spending levels by Gov't, high taxes, and democrat congressional corruption (with a little help from their friends on the other side of the aisle). Unless and until those issues are dealt with we will see more misery.

 

 

Rocky

You know my friend Bill O Reilly, you all do  !  :)

 

Here is what the great defender of truth told on August 7 about todays Nobel Price winner on economics :)

 

link