Forum: pol
Page 2741
Subject: The World Economy and the Coming Recession

  Posted by: Matt S - [45621302] Sat, Sep 09, 2006, 15:21
I have written a short summary of why I feel the US and the world are heading towards a major economic recession (or depression). I don't claim any of it to be groundbreaking, but it is a collection of information I have been researching for the better part of the last year. I intend to use it in an attempt to get some credits for a political economy degree I am starting. I would like to get some feedback as to the content and generate some discussion.

Introduction:

The United States is headed towards a recession. A global recession will follow, as the US economy makes up 1/3 of world GDP, and the growing economies such as China and India will not be able to absorb the difference. The economic boom the world has experienced since 1991 is coming to a close and the turning point is just around the corner. The US Federal Reserve has been printing money at a phenomenal pace to keep up with a growing trade deficit, current account deficits and to allow for foreign governments to support US consumer debt. Yet market analysts continue to disregard such extremes and instead suggest the US may have a ‘soft landing’ or completely avoid the ‘R’ word for the fear of coming across as a pessimist or being “un-American” It is precisely in times of denial like these that we experience the biggest and nastiest of market crashes. As Sir John Templeton famously stated, “the four most dangerous words of investing are ‘it’s different this time’”

US Debt:

US Federal Debt currently stands at $8.5 Trillion dollars. This number, as Lawrence Kotlikoff pointed out in this article, can be very misleading, as when you include the US commitments to Medicare and Social Security for the current generation, their debt is closer to $65 Trillion dollars. A number that is 5 times their current GDP. The UN has a debt threshold level of 60% of GDP before they say correctional hyperinflation will occur.

The US public debt as of the last calendar year is $11.5 Trillion dollars. For the average working man or woman this amounts to about $59,000 each. US Consumer Debt servicing Ratio is approaching 14%. That is the percentage of the average American’s income that goes towards paying their own debt. This is not the percentage of their income paid towards mortgages, car loans, etc. This is just what the banks are taking. And as interest rates rise to combat inflation, this number is also going to rise dramatically.

The US trade deficit stands at around $519 Billion dollars per year. This is $519 Billion US dollars going into foreign banks every year. They hold these dollars in their banks as a reserve currency and it does not re-enter the marketplace unless the holders of these dollars begin to feel nervous about their value. When they do so, these trillions of dollars of debt will be back on the market, diluting the real value of the US dollar and causing inflation. This has begun already as Russia, Italy, Sweden, the UAE, and Qatar have all quietly slashed their US dollar holdings by significant amounts. Numerous oil producing countries have elected to sell their oil in Euros, making the cost of oil more expensive as the US dollar loses strength against the Euro.

Inflation:

The value of a US dollar is not immune to the supply and demand factors of any other commodity such as wheat, copper or oil. When there is more of them, demand will decrease, sending the price lower. Until 1971 this was not the case, as the amount of US dollars circulating was set as a certain ratio to US gold reserves. Effectively, this meant the US dollar was a promise on paper to pay a certain amount of gold to it’s holder. There is currently no such promise, allowing for the US dollar to fluctuate on nothing other than supply and demand factors.

In order to keep up with all of the aforementioned debt and overspending, the US Federal Reserve must, of course, increase the amount of money it prints. For that, it releases monthly indicators M0, M1, M2 and M3 for how much money is out there. The M3 indicator is the most comprehensive of all of them, taking into account almost all forms of money we have (it is still inadequate, leaving out securitizations of mortgages and other debt instruments, the debits and credits of the international carry trade in currencies and the derivative markets, but it is the best we have.) As of February, 2006 the year over year increase in M3 was about 8%. The indicator hasn’t been published since, and the Federal Reserve stated it will not be published again.

The US Federal Reserve instead thinks it is better to judge inflation by it’s Consumer Price Index. This takes in to consideration a basket of goods and services that the average American would buy over the course of a year. I believe this indicator to be massively flawed. It feels the drop in the price of a computer or a toaster can help to even out rising costs of rent, energy and food. Granted, it weights items based on their frequency of use or purchase, however this weighting is done in accordance to a base year that is changed regularly. If this year happens to be one of economic prosperity (or hardship), the entire index becomes useless.

The US government may indeed be trying to hide the fact inflation is growing by about 8%, but the free market laws of supply and demand are not to be fooled. That sound you hear is John Maynard Keynes rolling in his grave. The US dollar is losing it’s purchasing power overseas, and it is doing so at an accelerating pace.

A lower US dollar would mean that imported items would become more expensive to US consumers, making it impossible to buy these items for what we could previously. Considering consumer spending accounts for 70% of the US economy, even a slight reduction in this measure (5%) would send the US economy into recession. A larger reduction in consumer spending of 25-50% (consider how much we buy that we really don’t need for our economic survival) would destroy the economy altogether.

The Housing Boom and Bust:

The United States was heading for a recession 6 years ago. The economy had gotten way ahead of itself, stock market euphoria was sweeping the nation and people were spending beyond their means. People were buying dot com stocks without even knowing what they were. Companies with no profits were trading at $50 on the NASDAQ. The tech bubble burst and millionaires that were made, were lost almost in an instant. But at the time, there was a way out. Interest rates could be dropped to almost nothing, creating almost free credit to Americans, allowing their purchases to buoy the economy.

Ordinary Americans could now afford the cost of a new home, new car or new HD television. “Why pay now when you can pay later?” was the maxim. The amount of Americans rushing to buy new homes created a new euphoria, this time in the real estate market. The ensuing rise in real estate prices created new equity for Americans and gave them even more access to cheap credit. With it they bought more properties for speculation. Condos were pre-sold even before the foundations were laid, their buyers intending to sell once finished for a tidy profit. With real estate, “you couldn’t go wrong.” Sound familiar?

This continues today, but just as the dot com bubble burst, the real estate market will too and the first signs are starting to spring up all over front lawns across North America. Housing inventories are higher than they’ve ever been. Those pre-sold condo units that I mentioned are no longer pre-sold and now completed, their developers are having to give away country club memberships and new cars to entice buyers. The housing shock is coming and it is going to take the average American citizen with it.

Rising Energy Costs:

Energy is to economic growth what oxygen is to life on earth. Undeniably essential. Aristotle used the term as a synonym of ‘activity’ or ‘operation.’ Energy was required to produce everything you see around you. In the recent history of the last 200 years, human energy consumption has grown by a staggering amount, allowing for the production of cheap goods to be transported to more people, allowing for a seven fold increase in world population, a vast increase in the standard of living and the economic growth that continues today. Over these two hundred years we have relied on irreplaceable resources to provide this energy, and as the reality of their scarcity sinks in, the laws of supply and demand take hold and the price of energy, growth, activity or operation rise.

Are we ignorant enough to think that our rate of growth can continue while the price of growth (energy) has gone up between 200 and 600%? The higher oil prices of the 70’s led to a massive recession while the world got used to the higher prices. Those higher prices turned out to be premature, as more production capacity was brought on line, the price came back down.

It has been well documented that there has been no new significant (1 million bpd+) oil discoveries in the last 30 years, the Gulf of Mexico being the last. Much has been talked about ‘peak oil’, the theory put forward by M. King Hubbert, that we will eventually reach peak production capability and will soon after experience a drop in production. There have been some new ways of extracting oil and consuming it (oil sands, increased reliance on natural gas, better efficiency) but this, combined with continuing growth in demand, has done nothing but delay the tipping point a decade or less. We may have reached Hubbert’s Peak, we may not have. We likely won’t know until a few years after the fact.

Additionally, OPEC countries have had no incentive to accurately state the amount of oil they have in their oilfields, as production quotas are linked with reserves. There are substantial claims that Saudi Arabia, Iraq, Iran, UAE, Kuwait and Venezuela may not have nearly as much oil as they claim. They have mysteriously added substantial reserves very rapidly without any evidence of a major oil discovery. Saudi Arabia alone mysteriously added 89 Billion barrels of oil (enough to fuel the world for 3 years at current rates of consumption) in 1990 with no new major oilfields found, and no questions asked. This is factored minimally into the price of oil.

The closure of the Prudhoe Bay oilfield for an “indefinite” period of time is a bit of an eye opener. As old equipment begins to corrode after 30 years or more of use, the cost of replacing this equipment may indeed surpass the financial benefits of extracting the remaining oil estimated to be in the field.

Let’s not forget that inflation is not immune to the price of anything and that includes oil. Using government inflation numbers, we are still far below the 1980 price of oil of around $90 in today’s dollars.

Many analysts would point out that higher oil prices are due to geopolitical factors or commonly refer to the “terror premium.” Although I don’t doubt this to be true (the comings and goings of news regarding oil producing regions has had great effects on the day to day pricing of oil,) I believe it to be very overrated, and only goes to further my belief that oil prices will continue upwards over the long term (if so much of the increase has come from geopolitical factors, less has been made of the real issues of supply and demand and inflation.)

Until the world finds a legitimate source of producing energy cheaply and renewably, these high energy prices are here to stay. And the economic growth that we have become accustomed to is what will pay the price.

Where we went wrong:

At the turn of the century, when interest rates were dropped to all time lows, the Americans had a window of opportunity to prevent an inevitable recession. They could have raised taxes substantially and focused their attention on developing a cheaper, more efficient and more importantly, easily accessible source of energy.

As we all know, they have elected to do the polar opposite. Taxes were decreased further in an attempt to boost consumer spending past their already unsustainable levels. People are encouraged to spend more.

Additionally, in an effort to secure the steady flow of oil from the Middle Eastern countries, they have entered two wars under the guise of regime change and a threat to national security.

Had they instead appropriated the more than $400 billion spent on the two wars and the money spent on security programs towards developing a renewable source of energy production (wind or solar), we would not be nearly as dependant on this foreign source and would be well on our way to energy independence.

What the future holds:

I don’t claim to be a crystal ball reader, however it helps to look at past recessions when trying to figure out what we are headed for. In times of crisis, recession, uncertainty or even economic depression, the precious metals (gold, silver, platinum, palladium) have been what people turn to as a ‘safe haven.’ The historical use of gold as money has been the driving factor behind this. It’s physical properties such as not corroding over time and it’s scarcity and difficulty of production are the causes of that.

If we look at a few examples, we will find that gold is unbelievably undervalued compared to it’s value over the course of modern history. In 1959, before the Bretton Woods monetary system (gold standard) was abolished, the price of gold was $518 per troy oz of reserve (M3 money supply of $288.8 billion divided by 557,336,000 oz). Today we have an M3 of $9.873 Trillion and 251,500,000 oz to give a gold price in relation to M3 of $37,831.

A more realistic comparison would be the price of gold during the spike of the 1980 recession ($850), when concerns over the supply of energy ruled the international markets as two of the world’s biggest oil producing countries warred (Iran, Iraq). In order to correctly gauge the price of gold 25 years ago, we need to consider inflationary pressures on the US dollar. I have seen estimates between 2 and 9 times [I would like to discuss this further to find a reliable figure, for example a new truck in the early ‘80s was $6000, now it‘s $24,000 (yeah, yeah, new bells and whistles don‘t improve my quality of life that much)] putting the price of gold in 1980 at anywhere between $1900 and $7650 in today‘s dollars.

But does the US or other central banks have as much gold as they say they do? GATA(Gold Anti-Trust Action Committee) doesn’t seem to think so, and they have pretty good evidence to back themselves up. There is evidence of a small number of investors or central banks having obscene short positions on the price of gold and silver to keep the prices down. How far short will they be willing to go before abandoning a losing strategy?

An even more bullish sentiment can be made for silver, as it is currently trading at one quarter it’s $48 high of 1980 without taking into account inflation. Additionally, silver has the added benefit of acting as a currency and an industrial metal, being used in electronics, tools, medications, photography in addition to jewellery. Typically, over the course of history, silver has traded at a 16:1 ratio to gold. It is currently trading at a 48:1 ratio.

I believe that the only safe place for money, while we approach this recession, is tangible and liquid assets. Real Estate, as explained earlier is overbought, and will again sometime be oversold. It is a tangible, but illiquid asset. Stocks and mutual funds are liquid (most of the time) but not tangible. Cash is liquid, but without a promise to pay a certain amount of something tangible, is prone to be worth nothing more than the paper it’s printed on.

The commodities markets have seen an incredible run up in the prices of other industrial metals such as copper, nickel, zinc, lead and energy goods such as oil, natural gas and uranium. Many look at this and draw an incorrect conclusion that this is therefore correlated with silver and gold prices. However, in a time of an economic recession, demand for these items will decrease, sending the price lower, or at least leaving them unchanged until supply levels catch up with demand. They are a safe place to put your money, but are at the mercy of positive growth.

I hear much about how China and India’s growth will help to ease the pressure of the US recession on the world markets. When looking at the growth in China’s economy, you will seen that of late, exports have been increasing at a rate of 30% per year. Exports also make up 30% of their total economy. That puts the rate of export growth responsible for total GDP growth at about 9% - China’s current rate of GDP growth. There is very little internal demand in China to produce positive growth. They have an additional employment problem as they have developed higher efficiency methods of production, resulting in a lower need for workers. As their export sector slows, this employment problem will continue to grow. This year alone, China needed to create 25 million jobs to accommodate migrating workers to the cities. They were able to create only 11 million.

India has a large proportion of it’s population under the age of 20. It will need to improve it’s infrastructure massively in order to accommodate the skyrocketing working population. If they cannot, millions will be unemployed and millions will starve. A revolution could set India back decades.

The problems of the world’s two most rapidly growing economies and two largest populations could, in fact do more to hurt the world economy than help it. Aging populations in the western nations and Japan are putting unforeseen burdens on their governments, and birth rates are falling as the added expense of paying for social security programs make raising children too much of a financial burden.

The Federal Reserve was lucky and crafty in orchestrating the avoidance of a major recession 5-6 years ago. However, they are left with no options. Ben Bernanke does not have the same flexibility Alan Greenspan had. If interest rates are lowered, inflation would soar, raised and a housing and credit crisis would emerge immediately.

There is no 100% safe place to put your money and I’m not advocating for everyone to sell all of their assets and buy gold and silver. There is always something that can have long and short term effects on the economic stability of something so complex as our global economy. However, I believe the market signals to be clear and I do not buy the rhetoric of cautiously optimistic market analysts.

Are we going to pay attention to the free market fundamentals of supply and demand that we have profited from, or “is it different this time?”
 
1Boldwin
      ID: 46651516
      Sat, Sep 09, 2006, 21:38 		Learn Cantonese, or Mandarin.
 
2Boldwin
      ID: 46651516
      Sat, Sep 09, 2006, 21:40 		And curse the people who let China into the WTO.
 
3Matt S
      ID: 45621302
      Sun, Sep 10, 2006, 14:13 		The Chinese are at fault? Would you care to elaborate?
 
4sarge33rd
      ID: 76442923
      Sun, Sep 10, 2006, 16:11 		"rampant paranoia" Matt.
 
5biliruben
      ID: 535193010
      Sun, Sep 10, 2006, 18:40 		You know Baldwin - it's the commies' fault.

The US Federal Reserve has been printing money at a phenomenal pace to keep up with a growing trade deficit...

You should explain what you mean by "printing money." Obviously, simply printing money doesn't effect the economy one way or the other. You have to have people borrow it, or you have to spend it on something.

Though I agree that economic optimism isn't warranted, I disagree with your dollar and inflation arguments - or at least I am skeptical of how it's going to play out.

It's not just the US that is in a precarious financial state. Many developed countries are in similar or situations debt/GDP-wise. It depends on what you are pegging the dollar against. If it's other currencies, you need to look at the economic stability of those countries' currencies.

Gold is simply silly. It has no intrinsic value at all, other than it's kinda glittery, and used industrially a few very insubstantial ways. It has a wacky attraction, but I don't think it's justified.

I think we are just as, perhaps more, likely to see a deflationary recession as inflation as the credit-bubble deflates, credit tightens and the supply of easy money shrinks. People may just be at the limit of what they can borrow. If they can't service any more debt, they stop buying. If they stop buying, demand decreases. You know what happens when demand decreases, right?

All in all, though, nice job.
 
6Boldwin
      ID: 46651516
      Sun, Sep 10, 2006, 20:39 		There is a direct connection between not being able to compete with products made with slave labor and not having any manufacturing jobs.

There is a direct connection between running an absurd trade deficit and having declining future prospects.

There is a direct connection between being the world's manufacturer, running an absurd trade surplus and having rising future prospects.

Learn Mandarin. Curse the WTO and the people who forgave the 'butchers of Bejing'.
 
7Matt S
      ID: 45621302
      Mon, Sep 11, 2006, 00:58 		You should explain what you mean by "printing money." Obviously, simply printing money doesn't effect the economy one way or the other. You have to have people borrow it, or you have to spend it on something.

Well I believe they are doing it for debt servicing mostly. Yes, I suppose I should clarify.

It's not just the US that is in a precarious financial state. Many developed countries are in similar or situations debt/GDP-wise. It depends on what you are pegging the dollar against. If it's other currencies, you need to look at the economic stability of those countries' currencies.

Very true. The EU, Canada and Japan are also in deep water. But look at the big emerging economies like China, Russia, South Korea, Australia, and Mexico. After a world recession sparked by this credit bubble in the west, these are the economies that will be able to emerge with capital for development. Regardless, I don't peg the dollar against any other currencies. I peg it against real things. Oil, wheat, sugar, rice, copper, iron, wood, coal. Things we need to survive.

Gold and silver have been used as currency to buy this stuff for 6000 years and was used as a store of wealth before that. Only for the last sliver of organized society have we relied on ourselves to declare our own level of wealth. What makes western economies wealthy? Currently, the only reason they are wealthy is because they say they are.

What's the value of a $1 bill? When you increase the money supply, you need to increase growth at a similar rate or the intrinsic value of that piece of paper decreases relative to whatever you require to exchange it for. Unless of course supply of said good decreases at the same rate or faster. But if that were to happen to, for example wheat, we would be experiencing starvation, not deflation. Fiat money is a flawed experiment.

Steven Saville does a good job explaing why we will not be experiencing deflation (at least not initially).

You know what happens when demand decreases, right?

Yes, prices will drop, making production economically impossible. But with our growing world population, how much can the demand for wheat, sugar or rice fall? 6.5 billion people need to eat. Yes, I agree *some* consumer items may initially experience *some* deflation. But I don't think the US economy experiencing a state of economic deflation is possible unless the money supply was contracted.
 
8Matt S
      ID: 45621302
      Mon, Sep 11, 2006, 01:18 		There is a direct connection between not being able to compete with products made with slave labor and not having any manufacturing jobs.

Wasn't it American companies exporting manufacturing jobs? Please tell me where US manufacturing jobs have been replaced by "slave labour". Cheap labour, yes. But these people evidently have the same skills (or good enough according to consumers) as American workers. They are willing to work for a lower wage because they require less to live (ie. don't need to spend 14% of their income on their own debt.) For you to suggest this is unfair is quite protectionist. It is also bordering on socialist. A bizarre argument for you to make, Baldy.

There is a direct connection between running an absurd trade deficit and having declining future prospects.

Yeah, shouln't of done that, eh?

There is a direct connection between being the world's manufacturer, running an absurd trade surplus and having rising future prospects.

Learn Mandarin. Curse the WTO and the people who forgave the 'butchers of Bejing'.

So you're conceding defeat? Should the WTO not have forgiven the Germans? The Japanese? The Americans for their atrocities in SE Asia? I'm confused.
 
9nerveclinic
      ID: 10526140
      Mon, Sep 11, 2006, 01:45 		Billi

Obviously, simply printing money doesn't effect the economy one way or the other.

Actually that's not true, printing money lowers the value of the dollar at the moment it's printed and almost always increases inflation.

 
10nerveclinic
      ID: 10526140
      Mon, Sep 11, 2006, 02:04 		Matt S

What makes western economies wealthy? Currently, the only reason they are wealthy is because they say they are.

Actually that's not true, Western economies are wealthy for a variety of reasons. You're discounting a lot.

The middle east has oil.
Asia has cheap labor.

The USA has
top notch farming/agriculture.
Wine
software
entertainment/media/Hollywood
video games (Actually now as big as Hollywood)
military technology
space technology
bio technology

The top 20 companies in the world are all? American. I might be wrong, there might be one or two that aren't

1 General Electric Company
2 Bank of America Corporation
3 Pfizer Inc
4 Johnson & Johnson
5 IBM
6 Wal-Mart Stores, Inc.
7 Microsoft Corporation
8 Hewlett-Packard Company
9 Citigroup Inc.
10 Dell Inc.
11 JPMorgan Chase & Co.
12 Verizon Communications Inc.
13 The Procter & Gamble Company
14 AT&T
15 The Home Depot, Inc.
16 Target Corporation
17 Cisco Systems, Inc.
18 American International Group, Inc.
19 Abbott Laboratories
20 3M Company

So I think you're data is flawed.

Never come to an academic project with a bias, unless you're sure your professor shares the bias.

 
11nerveclinic
      ID: 10526140
      Mon, Sep 11, 2006, 02:24 		Wow I blew this ...

The top 20 companies in the world are all? American.

That was actually the hoovers.com top 100 searched companies.

sheez.

 
12nerveclinic
      ID: 10526140
      Mon, Sep 11, 2006, 02:38 		Here's the top 20 in the world, still encouraging for America.

Rank Name Country Value ($bil)

1 ExxonMobil United States
2 General Electric United States
3 Microsoft United States
4 Citigroup United States
5 BP United Kingdom
6 Royal Dutch/Shell Netherlands
7 Procter & Gamble United States
8 HSBC Group United Kingdom
9 Pfizer United States
10 Wal-Mart Stores United States
11 Saudi Basic Inds Saudi Arabia
12 Gazprom Russia
13 Bank of America United States
14 Toyota Motor Japan
15 American Intl Group United States
16 PetroChina China
17 Johnson & Johnson United States
18 Total France
19 Altria Group United States
20 GlaxoSmithKline United Kingdom

11 of the top 20 are American companies

Notice none of the top 20 companies are "Arab" oil companies? Wierd Huh?

usa OIL

english OIL

dutch OIL

chineese OIL

even french OIL

why no arab oil in the top 20?
 
13nerveclinic
      ID: 10526140
      Mon, Sep 11, 2006, 02:39

post 12 was based on market value...

 
14Matt S
      ID: 45621302
      Mon, Sep 11, 2006, 02:51 		Nerve, what percentage of the US population is employed by those industries? Are they gaining market share or losing it slowly as other nations learn how to do the same? What is being done to ensure the longevity of US dominance in those industries? I don't doubt the US has been dominant in those industries. They invented some of them. Much of them depend, however, on a confident consumer, war, superior education, etc. These are not static variables.

I don't know where you got your list of companies. Doesn't even closely resemble Forbes' rankings.
 
15Matt S
      ID: 45621302
      Mon, Sep 11, 2006, 02:53 		ahh, I'm a little slow. :-) Time for bed. Til tomorrow.
 
16nerveclinic
      ID: 10526140
      Mon, Sep 11, 2006, 10:57

Matt S you made this statement What makes western economies wealthy? Currently, the only reason they are wealthy is because they say they are.

I was simply argueing that the above is a false statement.

So I don't really get your come back in post 14.

Clearly to say the only reason western countries are wealthy is because they say they are is inaccurate.

With the additional questions in post 14 you are changing the debate in a direction I wasn't even argueing.

As far as my list, it was a list based on market value. Your's is a magazines ranking. Look at the numbers across the row in your list,
Sales ($bil)
Profits ($bil)
Assets ($bil)
Market Value ($bil)

you'll notice citigroup which Forbes ranks one, isn't first in any of them. I used pure market value.

On your list Exxon doesn't have the highest market value (As it does on mine) but the list you used is from 2005 and oil has been way up in the last year obviously.


 
17nerveclinic
      ID: 10526140
      Mon, Sep 11, 2006, 11:00

MattS

Forbes top 20 by market value

link

 
18biliruben
      ID: 535193010
      Mon, Sep 11, 2006, 11:51 		Actually that's not true, printing money lowers the value of the dollar at the moment it's printed and almost always increases inflation.

Yes, it is true, though it's a stupid point. If it's printed and just sits in a gov't vault, then they it just like any other worthless piece of paper. You have to bring it into circulation somehow. Pay someone with it. Loan it to someone.

At any rate, the actual printing of money isn't our current problem with inflation, defined by some who don't like looking at prices of the basket of items, as the expansion of total money and credit. As you can see from the graph, actual printed money is only a small portion of "money" in the system:

Money Supply.

You can see that MO, printed money is very small in relation to all the other components of M3, and hasn't really been going up to any significant degree.

And even that isn't really the main problem we are currently having. It's the expansion of credit.
 
19biliruben
      ID: 535193010
      Mon, Sep 11, 2006, 11:53 		Actually, that graph doesn't even show M0. It would be even less significant.
 
20The Treasonists
      Donor
      ID: 171572711
      Mon, Sep 11, 2006, 12:29 		Not sure how they got M3 numbers to June, 2006 when they quit calculating M3 in January or March. The government doesn't think we'll be needing that information anymore. Actually, the defintion of inflation is an increase in the money supply.

Gold is simply silly. It has no intrinsic value at all

Nothing has been a better store of value thru time than gold, or silver. I guess that Wiseman was stiffing Jesus with that present of gold.
 
21boikin
      ID: 400291013
      Mon, Sep 11, 2006, 13:03 		well matt i know to call if i need an essay written.

i think you make some good pionts and generally agree with you but i think you miss understand why china is a problem and The US trade deficit stands at around $519 Billion dollars per year. This is $519 Billion US dollars going into foreign banks every year. is quite missleading since you do not know where the money goes from the inbalance in trade. As usual the two main reasons for everything that goes wrong in the world is at play here. Over population/growth and the inablity and/or the unwillingness of people to look long term.
 
22Frick
      ID: 345202714
      Mon, Sep 11, 2006, 13:37 		Just my $.02, nothing personal, just some comments to help you rework the paper

The phrase "Printing money" makes for great sounds bites, but as biliruben noted, actual printed money is not the major concern. The Federal Reserve Bank (other countries have similar institutions) control how much "money" is in circulation, most of is only in electronic form. I would suggest rewriting that to make the comments more factual and use less "sound bite" type remarks.

I think part of your analysis is faulty, due to the fact that India and China's economies (especially China and other SE Asian countries) are tied to the US. Do some research on how much of the Chinese are holding in US Treasury Notes. If the dollar collapses, so does a decent portion of the Chinese capital reserves. If the US economy complete tanks, where does China sell the majority of their goods to? Could other nations fill the void as far as consumption?
 
23Perm Dude
      ID: 14842118
      Mon, Sep 11, 2006, 13:40 		I think it should be said that China, South Korea, etc. buy t-bills because it is in their best interest to carry our debt, particularly for the reasons Frick notes.
 
24boikin
      ID: 400291013
      Mon, Sep 11, 2006, 13:44 		part of the analysis maybe faulty but i think he is on the right track. i think that chinease economy is more likley to be the first to go not the second. I am not really sure how that effects us.
 
25Matt S
      ID: 18635717
      Mon, Sep 11, 2006, 14:56 		I was simply argueing that the above is a false statement.

I agree to a large extent and will reword that. Somehow I cut out the first paragraph in that post last night. Sorry for the confusion. My point is thus: The US and most western nations have an unproportional amount of their GDP alotted towards consumer consumption. This to me suggests some of the wealth is artificial. By no means all, you are right.

Bili - Your "printing money" argument is a valid one. However, with so much electronic money, is it not quite easy for the public to lose confidence that the money in their savings accounts and term deposits actually exists? If inflation started to run away from the Fed, can we be completely confident that people will not rush to convert their gradually declining dollar assets to physical assets, such as gold? How long before the banks start saying, "sorry, we don't have any money to give you, sir." Financial crisis?

boikin - Central banks foreign reserve holdings have gone up more or less proportionally to trade surplusses. I don't know where else these dollars could be going.

Frick - Thanks for the feedback. I believe this is more than just a US dollar problem. It is a problem with fiat currencies in general and weakness in the dollar will cause devaluation relative to hard assets in all currencies. No, the Japanese, Chinese and EU (three largest foreign USD holders and trading partners - outside of NAFTA) do not want the dollar to collapse. But they're not stupid either. When the writing is on the wall and it becomes apparent their export industries will be crippled eventually anyway, they will liquidate their dollar holdings.

A good article from last May.
 
26boikin
      ID: 258571114
      Mon, Sep 11, 2006, 16:08 		matt it depends on how you define trade deficet. Depending on the definition it can be misleading. I used the basic defintion of exports exceeding imports in which case the profits made allong the way could just as easily be being send back to the US as some other country.

matt i still say that the chinease will face a recession first and i am still looking on any thoughts as to that effects.

i see that everyone like to post links from gold related sites, which love to piont to end of world as it helps them. i was thinking i might be better to go into the blood diamond business.
 
27Frick
      ID: 345202714
      Mon, Sep 11, 2006, 16:15 		Re: your comment to Bili

I tend to think that most citizens (at least Americans) at least partially grasp all of the electronic money. How much of your paycheck do you ever see in physical form? I'm probably at an extreme here, but I probably see less than 10% of my paycheck in actual dollar bills. The other 90% is all spent electronically with debit cards and bill payment through my bank.


Re: the comment directed at me.

If China, Japan, and the EU all try to dump their holdinds at once (probably if any of them did it individually) the value would drop significantly and those nations would take a huge beating.


I'm curious if you have the data. You stated that if you include SS and Medicare to the US deficit the amount approaches 65 Trillion. If you took most European countries and calculated their health care costs in a similar method would the % of debt be similar?


One last point, in the last years of the Clinton administration, the deficit was falling at a pretty fast rate. One of the concerns at the time was if there was no federal paper circulating what would companies (and bond traders) use for short term cash deposits?

When I thought of the previous comment, I wonder how many companies would take a huge hit if the dollar tanked. I haven't looked in awhile but Microsoft at 1 time had over 40 Billion in "cash" most of that "cash" is actually government treasury notes.
 
28Perm Dude
      ID: 14842118
      Mon, Sep 11, 2006, 16:34 		One last point, in the last years of the Clinton administration, the deficit was falling at a pretty fast rate. One of the concerns at the time was if there was no federal paper circulating what would companies (and bond traders) use for short term cash deposits?

A bigger concern at the time was what the government would invest Social Security monies in. By law they have to be put into t-bills, which are only generated to cover the debt (or, as Madman once put it, the t-bills are the debt).

Thankfully this Administration has solved both problems at once!

: )
 
29Matt S
      ID: 18635717
      Mon, Sep 11, 2006, 17:40 		If China, Japan, and the EU all try to dump their holdinds at once (probably if any of them did it individually) the value would drop significantly and those nations would take a huge beating.

Fear and greed rule the psycological market. If the fear of future depreciation outweigh the greed of wanting full value (or 2, 5 years' ago value) for their dollars, they will sell.

I'm curious if you have the data. You stated that if you include SS and Medicare to the US deficit the amount approaches 65 Trillion. If you took most European countries and calculated their health care costs in a similar method would the % of debt be similar?

I don't have the data, but I would love to see it. I know that most EU countries have major problems with aging populations and paying for the growing cost of this. While living in Germany I read of something to the effect that the average German worker in 20 years will be paying 40% of their income towards SS ALONE! EU countries notoriously have higher tax rates to fund these programs however.

I see less than 10% of my income in the form of cash also. But what happens when we have inflation of 12% or more? Those that would normally convert a portion of their paycheck to a term deposit (therefore requiring no paper money) may elect instead to buy gold to protect themselves against a guaranteed 12% loss. It has happened before in times of high inflation, why wouldn't it happen again?
 
30Matt S
      ID: 18635717
      Mon, Sep 11, 2006, 18:02 		boikin - I could say the same thing about CNBC or FOX, who spout optimistic views of a rosy economy; they have much to lose in a major recession.

boikin - in order for the Chinese to experience a recession, their export sector would have to fall off quite a bit (over 30%, in fact). For that to happen, those importing their goods would have to stop buying, which would be a by-product of their own recessions. Unless, the Chinese slowly orchestrated their own recession intentionally in expectation of a more damaging sudden US recession (I wouldn't put it past them :).
 
31nerveclinic
      ID: 10526140
      Tue, Sep 12, 2006, 02:16

Bili At any rate, the actual printing of money isn't our current problem with inflation,

Bili is there a current problem with inflation?

Aside from the cost of oil being high, most other indicators look pretty good. Where's the problem?

Again I'm not talking about specifically in Seattle, I mean nationally, I don't doubt that areas like Seattle and San Fran have a bigger inflation problem then many other places in the US.

Inflation is still below 3% on an annual basis. Hardly a problem...yet.



 
32biliruben
      ID: 535193010
      Tue, Sep 12, 2006, 03:57 		It depends on how you measure it, nerve.

Personally, I think that credit has been much too loose, and it's expansion is worrisome. That also happens to be the definition (along with the expansion of the money supply) that some use for inflation.

But you are right. I am not particularly worried about future inflation as measured by the CPI and PPI.
 
33boikin
      ID: 59831214
      Tue, Sep 12, 2006, 15:39 		boikin - I could say the same thing about CNBC or FOX, who spout optimistic views of a rosy economy; they have much to lose in a major recession.

i agree with you there, but still you have to agree your arguments would go much further if you used sites that not known to be biased.
 
34boikin
      ID: 59831214
      Tue, Sep 12, 2006, 15:50 		boikin - in order for the Chinese to experience a recession, their export sector would have to fall off quite a bit (over 30%, in fact). For that to happen, those importing their goods would have to stop buying, which would be a by-product of their own recessions. Unless, the Chinese slowly orchestrated their own recession intentionally in expectation of a more damaging sudden US recession (I wouldn't put it past them :).

matt you need to reassess the chinease situation. yes it is great that they have large imbalance in trade but numerically this has nothing to do with a country going into recession. right now china is much the same situation as the real estate bomb in america last year. they are betting that exports will continueing to grow and accordly they are investing heavily in extra production capacity. Now what happens if exports level off or even drop? they are left with over capacity which means they will have to either have to fire off workers or the goverment will have to support compianes and plants that are not going to make it. either way these are ingrediants for a recession.
 
35Madman
      ID: 114321413
      Tue, Sep 12, 2006, 18:04 		Ugh. First, ditto to most of br's and nerve's points.

Who knows why, but here are some thoughts, interspersed in red ...

... The economic boom the world has experienced since 1991 is coming to a close and the turning point is just around the corner. 1991???? ... The US Federal Reserve has been printing money at a phenomenal pace to keep up with a growing trade deficit, current account deficits and to allow for foreign governments to support US consumer debt. printing money???? You're talking about the Treasury here? And any connection between the Treasury's behavior and the deficits you mention is not self-evident. Yet market analysts continue to disregard such extremes evidence for the word "extremes" here? and instead suggest the US may have a ‘soft landing’ or completely avoid the ‘R’ word for the fear of coming across as a pessimist or being “un-American” ascribing motives to unnamed analysts is always a safe play ...

US Debt:

US Federal Debt currently stands at $8.5 Trillion dollars. This number, as Lawrence Kotlikoff pointed out in this article, can be very misleading, as when you include the US commitments to Medicare and Social Security for the current generation, their debt is closer to $65 Trillion dollars. A number that is 5 times their current GDP. No, no, no. You cannot compare an infinite-time horizon model-driven deficit figure like the $65T to a single year's annualized GDP. THAT is misleading. See the American Academy of Actuaries The UN has a debt threshold level of 60% of GDP before they say correctional hyperinflation will occur. Citation? A number of countries are outside of this threshold without hyperinflation. What UN agency determined this? What study did they rely on? This doesn't pass the sniff test.

The US public debt as of the last calendar year is $11.5 Trillion dollars. 8.5, 11.5, 65, who's counting, anyway ... For the average working man or woman this amounts to about $59,000 each. US Consumer Debt servicing Ratio is approaching 14%. That is the percentage of the average American’s income that goes towards paying their own debt. This is not the percentage of their income paid towards mortgages, car loans, etc. This is just what the banks are taking. No. A good fraction of this debt is own by US-owned corporations and private entities. Therefore, the interest payments you talk about are ALSO income to Americans. It is only to the extent the debt is owned by foreigners that this argument even begins to make any kind of sense ...

The US trade deficit stands at around $519 Billion dollars per year. This is $519 Billion US dollars going into foreign banks every year. what is your infatuation with banks? The trade deficit is not a financial deficit; it is the difference in monetary value between imports and exports. Therefore, banks could have everything OR NOTHING to do with it. They hold these dollars in their banks as a reserve currency and it does not re-enter the marketplace unless the holders of these dollars begin to feel nervous about their value. Huh? if the banks are holding these as reserves, then THEY hold them ... ... Numerous oil producing countries have elected to sell their oil in Euros, making the cost of oil more expensive as the US dollar loses strength against the Euro. plot the price of oil in Euros versus dollars. The last time I saw that plot, about a year and a half ago, the price rise was attributable to fundamental commodity demand and not currency valuation. Maybe things have changed; it's easy enough to demonstrate ... or refute.

Inflation:

The value of a US dollar is not immune to the supply and demand factors of any other commodity such as wheat, copper or oil. When there is more of them, demand will decrease, sending the price lower. Until 1971 this was not the case, as the amount of US dollars circulating was set as a certain ratio to US gold reserves. Effectively, this meant the US dollar was a promise on paper to pay a certain amount of gold to it’s holder. There is currently no such promise, allowing for the US dollar to fluctuate on nothing other than supply and demand factors. One thing that has always fascinated me about these gold-standard believers ... why is the "government's" word so believable when they promise to exchange a dollar for a given amount of gold but otherwise the government systematically hides things from us and deceives us?

... As of February, 2006 the year over year increase in M3 was about 8%. The indicator hasn’t been published since, and the Federal Reserve stated it will not be published again. Right, b/c it was not a value economic policy tool. If you can blindly assert that it was the best we have, I can blindly assert that it was meaningless gibberish.

The US Federal Reserve instead thinks it is better to judge inflation by it’s Consumer Price Index. "instead"? Quality estimates of inflation have little to do with quality estimates of the money supply. ... It feels the drop in the price of a computer or a toaster can help to even out rising costs of rent, energy and food. The CPI doesn't "feel" anything, it has no emotions or motives, it is simply a calculation. And it would take a bazillion toasters have a humongous drop in price to offset rising costs of energy, food, etc. Granted, it weights items based on their frequency of use or purchase, however this weighting is done in accordance to a base year that is changed regularly. If this year happens to be one of economic prosperity (or hardship), the entire index becomes useless. One word: bizarre. And usage has nothing to do with the calculation, either. I'd recommend browsing BLS.gov.

The US government may indeed be trying to hide the fact inflation is growing by about 8%, but the free market laws of supply and demand are not to be fooled. That sound you hear is John Maynard Keynes rolling in his grave. The US dollar is losing it’s purchasing power overseas, and it is doing so at an accelerating pace. Ok, after the next paragraph, I'm done. This is insanity. You can calculate your own inflation index; people do it all the time. And to the latter point, it has NOTHING to do with the CPI, which is based on prices of products sold domestically.

A lower US dollar would mean that imported items would become more expensive to US consumers, making it impossible to buy these items for what we could previously. Considering consumer spending accounts for 70% of the US economy, even a slight reduction in this measure (5%) would send the US economy into recession. Absolutely backward. Imports are net *subtraction* to GDP. If people retained the same dollar amount of consumption, GDP would rise by the amount imports were reduced; alternatively, people might save some of the money and drop their consumption; this would likely funnel into the investment component of GDP and likewise boost it. Either way, the likely *direct* impact of a reduction in imports is an increase in GDP, not a drop, because imports consumed wipe out, dollar for dollar, money spent on consumption. A larger reduction in consumer spending of 25-50% (consider how much we buy that we really don’t need for our economic survival) would destroy the economy altogether.

If you seriously believe a 50% drop in consumer spending is a rational possibility, there's no point in me going further. Not even sure why I did this ...
 
36Matt S
      ID: 33644316
      Tue, Sep 12, 2006, 18:10 		boikin, you are repeating me. I stated that China would go into recession if exports drop.

Q:What would cause China's exports to drop?

A:Decreased buying from importing countries

Q:What would cause that?

A:Decreased consumer confidence, credit bubble collapse, loss of equity, etc...
 
37boikin
      ID: 41745118
      Tue, Sep 12, 2006, 21:10 		matt i said they are betting that exports will continueing to grow and accordly they are investing heavily in extra production capacity. Now what happens if exports level off or even drop? and by drop a little not hard. the piont was that only leveling off in expoorts needs to place for them to go into recession and slight drop would just speed up this process. i would not be surprised that they might allready be leveling off or starting to drop right now. for two reason on the demand side since you US is facing higher fuel prices leads to drop in descisionary spending is probably allready hurting china a little. secondly on the supply side china is facing competition from countries like vientnam that have production costs similiar to theirs.

I guess to sum up and to answer your question you can have a drop in chinease exports and not be in an economic recession.
 
38Pancho Villa
      ID: 366352418
      Tue, Sep 12, 2006, 22:00 		What would cause China's exports to drop?

Energy crunch. As it gets more and more expensive to ship goods around the world, manufacturing will move closer to the consumer base, because the higher price of workers will be offset by the higher price of fuel.

That could end up saving the American manufacturing segment, although NAFTA might make Mexico the even bigger winner. Imagine the mass exodus of illegal immigrants heading across the border where the jobs are.

 
39Boldwin
      ID: 46651516
      Tue, Sep 12, 2006, 23:09 		You take the difference between USA wages and Chinese slave labor +/or ultra low general wages and you can sail a container ship a long long way on the fuel you can afford.
 
40Matt S
      ID: 45621302
      Wed, Sep 13, 2006, 01:43 		Thanks MM, for your time. I'll look at the links you provided and get back to you.

Boldwin: Can you please provide some backup to your Chinese slave labour assertation? You still haven't addressed my concerns regarding your apparent protectionist stance on the issue.

Commie.
 
41Matt S
      ID: 45621302
      Fri, Sep 22, 2006, 00:07 		plot the price of oil in Euros versus dollars. The last time I saw that plot, about a year and a half ago, the price rise was attributable to fundamental commodity demand and not currency valuation. Maybe things have changed; it's easy enough to demonstrate ... or refute.

I'm talking about demand for dollars as a world currency. Supply and demand controls the value of one's currency against another, no? By selling oil in euros, banks such as Iran and Syria will have no need for dollars as part of their foreign reserves, and will begin to sell them on the market. Therefore lower USD.

One thing that has always fascinated me about these gold-standard believers ... why is the "government's" word so believable when they promise to exchange a dollar for a given amount of gold but otherwise the government systematically hides things from us and deceives us?

Can I not ask for both transparency and a currency based on something tangible?

Right, b/c it was not a value economic policy tool. If you can blindly assert that it was the best we have, I can blindly assert that it was meaningless gibberish.

M3 is a valuable tool because it measures the amount of credit being created.

instead"? Quality estimates of inflation have little to do with quality estimates of the money supply

Ok, after the next paragraph, I'm done. This is insanity. You can calculate your own inflation index; people do it all the time. And to the latter point, it has NOTHING to do with the CPI, which is based on prices of products sold domestically.

We could debate inflation/deflation theories, causes, or definitions for days. Supply-side economics makes the most sense to me. Fixing the currency to gold and measuring the amount of credit created to base the value of the currency against another seems like responsible central banking. If money and credit need to be expanded, the central bank should buy more gold or note the discrepancy and allow the currency to adjust itself.

By allowing the expansion of credit further, unsustainable levels of borrowing are compounded, leading to a multitude of problems.

If people retained the same dollar amount of consumption, GDP would rise by the amount imports were reduced; alternatively, people might save some of the money and drop their consumption; this would likely funnel into the investment component of GDP and likewise boost it. Either way, the likely *direct* impact of a reduction in imports is an increase in GDP, not a drop, because imports consumed wipe out, dollar for dollar, money spent on consumption

Madman, if imports decreased substantially, due to the reduced purchasing power of the USD, millions of Americans would lose their jobs. Therefore, they would not have the money to invest and support GDP levels. And what of the 66% of homeowners that don't own their homes. What are these people going to go when they lose their jobs, and then their homes?

If you seriously believe a 50% drop in consumer spending is a rational possibility, there's no point in me going further

You strike me as a deflationist. You don't think that is possible in a deflationary environment?

Most of the rest of your comments I can more or less agree with, at least to the extent that some holes in my writing need clarification, citations, etc.
 
42Matt S
      ID: 45621302
      Fri, Sep 22, 2006, 01:35 		quoting poster 'ShatteredCrystalBall' from Michael Shedlock's blog:

Truth is, none of us know for sure whether the current egregious imbalances will resolve in inflation or deflation. The answer will be driven by the psychology of panic: if the majority panic over their dollars losing value, inflation will appear first; if they panic over declining asset values and repayment of their debts, then deflation will be first.

But, both inflationists and deflationists will be right in due course, for whatever occurs first, it will likely be followed by an even more severe dose of the other

A tragic score that only a maestro could arrange
 
43biliruben
      ID: 535193010
      Fri, Sep 22, 2006, 09:51 		I highly recommend reading Mish's blog for the contrarian point of view. I have found his anectdotes from real estate industry folks on the ground particularly fascinating.

Don't forget about the mainstream point of view, however.
 
44Matt S
      ID: 45621302
      Fri, Sep 22, 2006, 16:53 		mainstream? Like this guy?

Sifting through his entertainment style of writing can be tedious, but week in and week out he produces good information.
 
45BIZMANONE
      ID: 46231521
      Sat, Sep 23, 2006, 01:43 		Matt

I've been investing for a long time and went through my " the world is coming to an end" stage in the early 90's. It didn't help my returns and caused me to miss some very good opportunities. The dark side always looks like the smart side but you need to find more balance to be a solid investor. Not just now but for the next 20-30 years. Doom and gloom has been around as long as investors have been around and this is not the first time things looked like they could have a dire outcome.

Your head is full of all the things that can go wrong but sometimes you need to back up and ask yourself what can go right. Remember that every trade you do has another player on the other side of it and that guy is not always the idiot. Sometimes you are the idiot.

I've been on the gold trade since 2002 and just sold out of it 4-5 months ago. Don't get married to your positions. You just gave back a bunch of cash on your gold and gold shares and are at risk right now of giving back another 20%.

Markets go up then they go down then they do it all over again. The world will still be spinning around 20 years from now and the US will still be here.
 
46boikin
      ID: 59831214
      Tue, Jan 08, 2008, 17:07 		i think this belongs in here some one posted this on another board and probably here at some piont and reads like some good old myth to me but here you go:

“Capital must protect itself in every possible way, both by combination and legislation. Debts must be collected, mortgages foreclosed as rapidly as possible. When through the process of law the common people lose their homes, they will become more docile and more easily governed through the strong arm of government applied by a central power of wealth under leading financiers. These truths are well known among our principal men who are now engaged in forming an imperialism to govern the world. By dividing the voter through the political party system we can get them to expend their energies in fighting for questions of no importance. It is thus by discreet action we can secure for ourselves that which has been so well planned and so successfully accomplished." - 1924 US Banker’s Association Magazine

with the up coming election i like how it mentions the use of the 2 party system to hold down "ordinary people".
 
47sarge33rd
      ID: 99331714
      Tue, Jan 08, 2008, 17:12 		where does the quote say "2 party" system? It simply says "political party system". That however, doesnt take away from the insidiousness of the quote.
 
48Boldwin
      ID: 18643169
      Sun, Jul 22, 2012, 20:20 		I didn't find the perfect place to put this post. So I am putting it here to give Matt S props for the prescient thread and make sure we don't see it scroll out of existence.

We’re Not Even Close to a Robust Recovery
Here are five reasons why.

By Nouriel Roubini
a painful process of balance-sheet deleveraging—reflecting excessive private-sector debt, and then its carryover to the public sector—implies that the recovery will remain, at best, below-trend for many years to come. For several reasons, growth will slow further in the second half of 2012 and be even lower in 2013—close to stall speed.
---
automatic tax increases and spending cuts set for the end of this year—will keep spending and growth lower through the second half of 2012. So will uncertainty about who will be president in 2013; about tax rates and spending levels; about the threat of another government shutdown over the debt ceiling; and about the risk of another sovereign rating downgrade should political gridlock continue to block a plan for medium-term fiscal consolidation. In such conditions, most firms and consumers will be cautious about spending—an option value of waiting—thus further weakening the economy.
---
In 2013, as transfer payments are phased out, however gradually, and as some tax cuts are allowed to expire, disposable income growth and consumption growth will slow. The US will then face not only the direct effects of a fiscal drag, but also its indirect effect on private spending.
---
four external forces will further impede U.S. growth: a worsening eurozone crisis; an increasingly hard landing for China; a generalized slowdown of emerging-market economies, owing to cyclical factors (weak advanced-country growth) and structural causes (a state-capitalist model that reduces potential growth); and the risk of higher oil prices in 2013 as negotiations and sanctions fail to convince Iran to abandon its nuclear program.
---
A significant equity-price correction could, in fact, be the force that in 2013 tips the US economy into outright contraction. And if the U.S. (still the world’s largest economy) starts to sneeze again, the rest of the world—its immunity already weakened by Europe’s malaise and emerging countries’ slowdown—will catch pneumonia.
The winner if the presidential race inherits another rotten mess that his party risks getting hung for in perpetuity.
 
49Perm Dude
      ID: 3210201915
      Sun, Jul 22, 2012, 20:56 		Dr. Doom!

He could very well be right. And I believe he is exactly right for blaming the GOP for making the current problem worse, as he has elsewhere, over a long period of time.
 
50Perm Dude
      ID: 3210201915
      Tue, Jul 24, 2012, 22:39 		One of the reasons financial experts should just be ignored..

Apple makes a profit of $9 billion in just three months and their stock drops 5%.
 
51Frick
      ID: 14082314
      Wed, Jul 25, 2012, 08:37 		Apple has never paid dividends so the basis of the stock is future growth. If revenues don't grow as fast as predicted, the value of the stock should drop.

Also, Apple is sitting on something like 100B in cash. There are rumors that they might pay a 1-time dividend or start regular dividends. But, of the 100B in cash, about 2/3 of it is not in the US and would be taxed at around 30% to bring back into the country.
 
52biliruben
      ID: 59551120
      Wed, Jul 25, 2012, 09:23 		It's going to be hard to sustain 70% growth. That said, I've been wrong about Apple before. Jobs is dead now of course.

I'm guessing that google will start to eat their lunch on the phone side.

There was a good article discussing google's openness vs. Apple's sealed, proprietary philosophy.

You can actually fix a Nexus yourself that's broken, and they help you do it. An Iphone you usually have to throw away.

As an aside, I'm going take my broken 3GS apart today I think.
 
53Perm Dude
      ID: 3210201915
      Wed, Jul 25, 2012, 12:48 		Apple has never paid dividends so the basis of the stock is future growth. If revenues don't grow as fast as predicted, the value of the stock should drop.

This isn't about dividends. This is about stock price. What is happening is the same short-term thinking about building up fake expectations, then selling or buying based upon whether the PR expectation was met.

 
54scoobies
      ID: 161532715
      Wed, Jul 25, 2012, 17:11 		Just for the record, from Apple:

On July 24, 2012, Apple's Board of Directors declared a cash dividend of $2.65 per share of the Company's common stock. The dividend is payable on August 16, 2012, to stockholders of record as of the close of business on August 13, 2012. The ex-dividend date is August 9, 2012.

 
55sarge33rd
      ID: 12554167
      Wed, Jul 25, 2012, 20:02 		Sandy Weill says "ooops" re the repeal of Glass-Steagall
 
56Boldwin
      ID: 198562318
      Sun, Sep 23, 2012, 21:33 		Bump
 
57boikin
      ID: 532592112
      Mon, Oct 01, 2012, 16:46 		I think this was mentioned in the Technology development thread but I think this follow up belongs here: technology slowly making us obsolete.
 
58biliruben
      ID: 21841115
      Mon, Oct 01, 2012, 17:03 		I rode a school bus today (don't ask), and the driver was quite simply irreplaceable.

Fortunately, we spend less on our kids than on our dogs, so his job puttering around in a 40 year old diesel-spewing death trap should be safe for the foreseeable future.

Picture "The Dude", but with a bit more unwarranted superiority complex, mixed with a good dose of mysticism (apparently my strong bond with my boy was due to the full moon. Who knew?).
 
59nerveclinic
      ID: 4711362616
      Mon, Oct 01, 2012, 18:05

I rode a school bus today (don't ask), and the driver was quite simply irreplaceable.

Fortunately, we spend less on our kids than on our dogs, so his job puttering around in a 40 year old diesel-spewing death trap should be safe for the foreseeable future.

Picture "The Dude", but with a bit more unwarranted superiority complex, mixed with a good dose of mysticism (apparently my strong bond with my boy was due to the full moon. Who knew?).

When I was in grade school I had a hippie bus driver, he had a 8 track tape player that he played the Guess Who (Bus Rider which I found ironic since we were bus riders). He had a mohair Jacket and very long hair. I was 10. Apparently made an impression on me since you just jarred my memory. What does your bus ride have to do with this thread Bili? ;)

Bus Rider by the Guess Who



 
60Biliruben
      ID: 358252515
      Mon, Oct 01, 2012, 21:04 		Driverless cars! They just legalized them in Cali.

Since they buy new buses twice a century, "Mr. Busdriver", as he insisted I call him, has a secure job.
 
61boikin
      ID: 532592112
      Fri, Oct 19, 2012, 15:17 		not sure if this is place to put this, but it looks like social mobility in Sweden might have been overstated.
 
62Seattle Zen
      ID: 3310162612
      Thu, Jan 31, 2013, 12:46 		Are lawyers becoming obsolete? Law School? Well, law schools are certainly becoming far less popular...

Law school applications are headed for a 30-year low, reflecting increased concern over soaring tuition, crushing student debt and diminishing prospects of lucrative employment upon graduation.
As of this month, there were 30,000 applicants to law schools for the fall, a 20 percent decrease from the same time last year and a 38 percent decline from 2010, according to the Law School Admission Council. Of some 200 law schools nationwide, only four have seen increases in applications this year. In 2004 there were 100,000 applicants to law schools; this year there are likely to be 54,000. In recent years there has also been publicity about the debt load and declining job prospects for law graduates, especially of schools that do not generally provide employees to elite firms in major cities. Last spring, the American Bar Association released a study showing that, within nine months of graduation in 2011, only 55 percent of those who finished law school found full-time jobs that required passage of the bar exam.

There is also discussion about permitting students to take the bar after only two years rather than three, a decision that would have to be made by the highest officials of a state court system. In New York, the proposal is under active consideration largely because of a desire to reduce student debt. "In the '80s and '90s, a liberal arts graduate who didn't know what to do went to law school," Henderson of Indiana said. "Now you get $120,000 in debt and a default plan of last resort whose value is just too speculative. Students are voting with their feet. There are going to be massive layoffs in law schools this fall. We won't have the bodies we need to meet the payroll."

I went to a public law school and I don't think any of them are going away, but I do imagine some private law schools going under, especially the ones who have recently financed expansions with crazy debt loads. I don't encourage people to go to law school for a wide verity of reasons and the cost today is so ridiculous, I can't imagine it pencils out in a cost/benefit analysis.

If you really want to pop the "law school bubble", change the student debt rules dramatically: end government guarantees to law student loans, alter the dischargability of these loans - the loans would dry up and the number of students who could afford these outrageous tuitions would plummet. The states and federal government would have to pour money into the public schools so they could drop their tuitions and more than half of the private schools would fold, and that may not be a bad thing.

Oh, and scrap the bar exam...
 
63C1-NRB
      ID: 451120913
      Thu, Jan 31, 2013, 13:16 		change the student debt rules dramatically: end government guarantees to law student loans, alter the dischargability of these loans - the loans would dry up and the number of students who could afford these outrageous tuitions would plummet. The states and federal government would have to pour money into the public schools so they could drop their tuitions and more than half of the private schools would fold, and that may not be a bad thing.

This could be said for ALL higher education.
 
64sarge33rd
      ID: 4609710
      Thu, Jan 31, 2013, 13:32 		indeed, the endorsement made in 63, re 62...is I think, spot on.
 
65Seattle Zen
      ID: 3310162612
      Thu, Jan 31, 2013, 13:37 		I don't know that I agree, C1 and sarge. There are plenty of smart economic reasons to encourage people to graduate from college and many graduate programs. Small, manageable student debt is frequently the only way lower and middle class students can get into and graduate from college and it certainly pencils out in a cost/benefit analysis.

Law schools have gotten perverse and are an exception, in my mind.
 
66sarge33rd
      ID: 4609710
      Thu, Jan 31, 2013, 13:42 		Even a "run of the mill" BA these days, has gotten insanely expensive. Tuitions MUST be made to come down, or I fear we are going to be losing the battle of the minds, in the R&D marketplace.
 
67boikin
      ID: 430211013
      Thu, Jan 31, 2013, 13:55 		I disagree, first off the cost of BA at a puplic school is not insanely expensive, secondly what needs to be asked is what students spending there money on? Did they spend 10k to study abroad?(a 4 month vacation in foreign country). Don't get me wrong there are alot of problems with our higher education system, but the main problem is that college is being viewed more as delaying tactic, then as away to educate yourself for the job market.
 
68Tree
      ID: 130583112
      Thu, Jan 31, 2013, 13:58 		Tuitions MUST be made to come down, or I fear we are going to be losing the battle of the minds, in the R&D marketplace.

one thing that is changing is that many companies are seeking students with associates degrees - particularly from trade schools and in fields employers are specifically looking for - are sought after.

i am definitely not a "company guy" where i work, so i'm not trying to put forth any "my company rocks" kind of stuff, but we have graduated many students with Associate's Degrees to places like Intel, Lockheed-Martin, The DoD, Schlumberger, and so forth, into entry level positions with fairly high starting salaries. (and by that i don't mean a notch above minimum wage - significantly higher)
 
69sarge33rd
      ID: 4609710
      Thu, Jan 31, 2013, 14:15 		link


$6700/yr tuition for residents, 19k for non-residents. Plus books, etc etc.

Yes, that is insane.
 
70boikin
      ID: 430211013
      Thu, Jan 31, 2013, 14:29 		that really seems like a value to me, educations for the price of car? (instate that is) I am not sure how Iowa works but I am assuming you don't have to go all 4 years there and could go JR college for the first year or two, then transfer. And if you are really ambitious you can take IB and AP courses in high school and then you cut college down to 3 years.

I will make one comment, I like the fact that Iowa seems to price there classes based on the degree being sought. An engineering degree will cost you more than English degree.
 
71Tree
      ID: 130583112
      Thu, Jan 31, 2013, 15:10 		$6700/yr tuition for residents, 19k for non-residents. Plus books, etc etc.

Yes, that is insane.

i think you're being sarcastic with the "insane" comment.

if that's the cost, that's REALLY reasonable.
 
72Frick
      ID: 2193319
      Thu, Jan 31, 2013, 15:43 		Ed.Gov

A bachelors degree will, on average, earn you $15k more per year from ages 25-34. That seems like a pretty good ROI.

I have a nephew who is considering attending a private school that a number of my friends graduated from. While most of them agreed that paying the full $55k/year wasn't worth it, getting financial aid sufficient to graduate with less than $100k in debt would be. The main reason was the average starting salary for a new graduate was around $60k.

Tuition rates keep going up for rapidly, but very, very few students at private schools today are paying full price. And the ones that are paying full price are effectively subsidizing all of the other students. Essentially it is a tax on the rich. That isn't as true at state schools, but their sharp increases can be tied to two things, the increase in private schools and the decrease in funding from their states.
 
73sarge33rd
      ID: 4609710
      Thu, Jan 31, 2013, 18:44 		but when graduates are facing only a 50% placement probability, sitting on 60k debt and no job, is not a good "investment".
 
74Frick
      ID: 2193319
      Fri, Feb 01, 2013, 08:44 		Getting a degree that doesn't prepare for a job after graduating isn't a good investment, regardless of the cost.

Are you saying that all majors have a 50% placement probability?
 
75sarge33rd
      ID: 4609710
      Fri, Feb 01, 2013, 09:39 		some have better, some have lesser. But recent grads, are running at or under 50%, in their fields.
 
76Frick
      ID: 2193319
      Fri, Feb 01, 2013, 10:13 		As I said, not all fields, but most engineering fields look pretty solid. And Iowa State still seems like a very good deal.

Iowa State Engineering Placement
 
77biliruben
      ID: 41431323
      Fri, Feb 01, 2013, 10:20 		While I think not having a college education is a massive handicap in our economy, I agree with Sarge that ROI is no longer a slam dunk.

University of Washington has increased tuition by double digits each of the 4 years, and the state has basically all-but ceased to fund the school, dropping their portion down near 25%, from well over 50% 5 years ago and over 80% in the 80s.

This has made even in-state tuition sky-rocket, so that just tuition is around 50K for a 4 year degree. When you take into living expenses, an out of state degree can end you are 200K in loans when you graduate. These are supposedly public schools.

Those debt loads, depending on the field you end up in, range from very difficult to pay back to near impossible.

Talking with students graduating with a BA, it is very difficult to find a job that is not behind a cash register. In that situation, 50K quickly doubles to 100K, making some debt-slaves for their entire working life, unable to pursue the jobs they want and the jobs our economy needs.

With that debt load, you don't get the entrepreneurs who are the life's blood of our economy and are the vast engine of our job-growth. You get beaten down slaves.
 
78boikin
      ID: 430211013
      Fri, Feb 01, 2013, 11:41 		While I think not having a college education is a massive handicap in our economy, I agree with Sarge that ROI is no longer a slam dunk.

I guess the question is in comparison to what/when? Are we comparing to 50 years ago? When the supply of college degrees was low but the demand was high? Also when we say ROI are we adjusting for effort put in? its not fair to say well farming has terrible ROI when all you did was through the seeds out in the field but never watered them.
 
79biliruben
      ID: 41431323
      Sat, Feb 02, 2013, 09:25 		When you see tuition double in 5 years, that's concerning.

It's been both a long-term and short term thing. In 1990 I paid $700 a semester to attend a good state school.

To some extent, parents and kids could often work it out in the past.

It seems like we are reaching a tipping point recently, whereby I'm seeing a lot of kids who can no longer work it out. They come out of school with good grades and a degree in science, and they work at The Gap because of the economy and no good jobs. Their already huge debt balloons, and their life is pretty well fcuked.
 
80boikin
      ID: 430211013
      Mon, Feb 04, 2013, 10:29 		I think the problem was that schools were not charging enough in tuition and finally reality caught up with them. A college education is still a bargain for the most part in the US. And in reality they should probably be charging even more in order to give out more scholarships to deserving.

 
81Perm Dude
      ID: 201027169
      Mon, Feb 04, 2013, 10:47 		Tuitions are going up for the same reason health care is: The costs for a vast numbers of the users are paid for by third-parties, and there are very, very few paying full price.

There is no real incentive by the users to demand changes so long as they can cobble together other sources of revenue to pay, and most of the cost is given at deep discounts anyway. That disconnect allows tuition costs to adjust without the natural barrier provided by the users' active interest.
 
82Biliruben
      ID: 358252515
      Mon, Feb 04, 2013, 11:37 		That may be true some places, particularly private colleges, but it isn't true here. Less than 20% receive scholorships. It's all about the state failing to increase revenue to maintain an adequate level of support for the university system.
 
83Perm Dude
      ID: 201027169
      Mon, Feb 04, 2013, 11:55 		That certainly might be true that states aren't increasing aid to schools enough, but at least part of that is that schools continue to cost more and more for the revenue (in whatever form) to cover.

I don't think there is any single answer since there are a lot of factors involved and (as you point out) there are probably strong differences between private and public schools. But there are few market forces coming to bear on tuition costs, that I can see.
 
84Boldwin
      ID: 8154410
      Mon, Feb 04, 2013, 12:08 		Glenn Reynold's Instapundit is all over this story almost daily. He's a law professor as well as the world's greatest blogger.
 
85C1-NRB
      ID: 451120913
      Mon, Feb 04, 2013, 12:58 		That certainly might be true that states aren't increasing aid to schools enough, but at least part of that is that schools continue to cost more and more for the revenue (in whatever form) to cover.

"aren't increasing" doesn't do the facts justice. Almost ALL states are actively decreasing funding. Colleges are attemtping to make up the differences and tread water by raising tuition. And even at that are slowly falling behind.

The intent of my original comment in [63] was to second the idea that by "drying up" third party loans, the states and feds would need to go back to subsidizing higher education if they truly want an "educated electorate," whatever that means.
 
86Perm Dude
      ID: 201027169
      Mon, Feb 04, 2013, 13:18 		It doesn't happen in a vaccum, however. States are cutting back in response not only to their own tighter budgets, but on demands by colleges to continue to fund them at rates far above inflation.

More than half of states cut aid to schools (an amount only partially made by increases in federal aid). Admittedly, this mixes up both college and pre-college education, but the point remains that college tuition and fees continue to rise above inflation.

While I have no doubt that some of the current increase costs are attributed to decreases in funding elsewhere, college costs have gone up every single year for a long time, even when state funding was fine. The current excuse strikes me as colleges trying to keep up with the revenue side while never really taking a hard look at their costs.

During the last campaign, Obama made several calls to colleges to control their costs, and told them specifically not to rely on tuition increases only as state aid drops off. I dunno if they got the message.
 
87Frick
      ID: 2193319
      Mon, Feb 04, 2013, 14:48 		I don't think they have. The Chronicle for Higher Education had an article this summer talking about how the administrative side of University's is increasing, while the number of faculty has been staying (roughly) the same. Most Universities operate much like a government entity where kingdoms increase, and very rarely do lay-offs occur. It happened for the first time at most schools during the last crash as state funding decreased and endowments that schools had also decreased substantially in value.

I've been involved in a project that is trying to determine if Universities as a whole pay more for construction projects then similar commercial projects. It doesn't appear that way, but some of the factors that lead to higher costs are not strictly necessary, but are wanted and appear reasonable. Universities also tend buildings with a longer term usage plan then commercial buildings.
 
88Biliruben
      ID: 358252515
      Mon, Feb 04, 2013, 15:28 		PD- can you show some support for your contention college costs are rising much faster than inflation ? Clearly, simply showing tuition increases misses half the story. If, like Washington, states are cutting their support in half, costs could be continuing to decline, yet 20% tuition increases annually are still essential just to keep the doors open.

UW has had salary freezes in place for the last 5 years.
 
89C1-NRB
      ID: 451120913
      Mon, Feb 04, 2013, 15:46 		...fund them at rates far above inflation.

That depends. In my state, tuition was "degregulated" in the late '90s. Tuition rates skyrocketed (but are still among the lowest in the nation.) The reasoning (if I may use that term loosely), was that the state was freeing up funds for other purposes with the understanding that students would be expected to "take up the slack." Which they did through increased unforgiveable student loan debt.

several calls to colleges to control their costs, and told them specifically not to rely on tuition increases only as state aid drops off. I dunno if they got the message.

Is there administrative bloat? Yes. Can much of it be contributed to "strings attached" funding from "We're here to help" government sources? Yes. So the government is saying, "Stop creating jobs with the money we gave you because it costs too much for you to continue these programs once we stop giving you money for them"? (Full disclosure: I had a government-funded grant job. When the grant stopped, so did the job. I knew what I was getting into and there are no hard feelings. In fact, I respect that college for NOT keeping the position around, unlike others I have experience with. Ahem.)
 
90Perm Dude
      ID: 201027169
      Mon, Feb 04, 2013, 21:31 		Good point about the student loan debt. That's driving a lot of this in ways that are difficult to get around.
 
91Building 7
      Leader
      ID: 171572711
      Tue, Feb 05, 2013, 07:41 		The federal governnment took over the student loan program.
They also changed the bankruptcy rules so that one can not get rid of a student loan by going bankrupt.
The feds do not scrutinze loan applications as much as a bank would.
A C average with a major of women's gender studies.... You get a loan. Especially if you don't have any money. Whereas a prudent bank would reject it, or charge higher interest, or monitor progress.
.............
Another source of revenue for colleges is research. Most of this emanates from the federal government. There has been no shortage of money from that source.

I think they raise tuition because.....they can. And it's not just tuition. It's also fees. Those have gone up even more.
 
92Khahan
      ID: 39432178
      Tue, Feb 05, 2013, 09:11 		I think they raise tuition because.....they can

This says a mouthful. They do it because they can. I believe that is the major driving force behind the bulk of the increases. Yes, higher teacher salary, higher cost of everything contributes. But they 'can' is the main reason.

It is the nature of capitalism. I do think capitalism is great. But I think it needs controls in place.
 
93C1-NRB
      ID: 451120913
      Tue, Feb 05, 2013, 09:25 		I think they raise tuition because.....they can.
For private schools, yes. But, at least where B7 and I are, sign o' the times in the '90s was deregulation. See 89 above.
 
94sarge33rd
      ID: 4609710
      Tue, Feb 05, 2013, 09:41 		A C average with a major of women's gender studies.... You get a loan. Especially if you don't have any money. Whereas a prudent bank would reject it, or charge higher interest, or monitor progress.

I dont think this is entirely true. Doctors and Lawyers, have amongst the highest student loan default rates from what I have read over the years.
 
95biliruben
      ID: 59551120
      Tue, Feb 05, 2013, 09:57 		If you think private banks pay attention, you haven't taken a loan with them. They let me sister run up over 100K getting her acupuncture degree. If led to a job, but not one that could ever pay back 100K and 8 1/2 percent.

 
96boikin
      ID: 430211013
      Tue, Feb 05, 2013, 11:30 		I think they raise tuition because.....they can

I disagree for the most part raises in tuition are out of necessity. There are some exception especially in the online business grad degrees they raise the price there because they can.

It's also fees. Those have gone up even more.

This is where they get you and nobody talks about this. They defiantly do this because they can and the real kicker is that most of the time the fees don't go to the actual education program. At some state schools fees are almost as much at tuition itself.
 
97C1-NRB
      ID: 451120913
      Tue, Feb 05, 2013, 12:25 		This is where they get you and nobody talks about this. They defiantly do this because they can and the real kicker is that most of the time the fees don't go to the actual education program.

True, but if you read the fine print you can occasionally get some of those waived, depending on the circumstances and the school. I was able to get a Health Fee waived because I had a full-time job with benefits. You may not have to pay a Building Use Fee if you are taking online classes only. Savvy colleges get you somewhere else, though, with Distance Learning fees, etc.
 
98Perm Dude
      ID: 201027169
      Tue, Feb 05, 2013, 12:54 		Great suggestions, C1. And too many students haven't a clue that some of those charges are ones that can be challenged.
 
99Building 7
      Leader
      ID: 171572711
      Wed, Feb 06, 2013, 07:34 		They can because the market will bear it. Students will just get a bigger loan, or another loan. Scholarships will have to increase. Higher tuition, no problem. New fees, put it on my tab. Now, they're reaching the point where it may not even be worth it to borrow a bunch of money and leave the workforce for four years, to get a college degree.

IMO college was a big waste of time. I shouldn't say this, since I work for a big University. Your first two years, you just take a bunch of crap unrelated to your major, to fill in your requirements. Or, maybe figure out what you want to do. Junior year, you take a bunch of classes in your college, related to your degree, and some classes in your major. Senior year, you take some classes that may help in what you may actually be doing in real life. But, a lot of employers won't even look at you unless you have a college degree. And the unemployment rate for those with a college degree is like 4%.
 
100biliruben
      ID: 59551120
      Wed, Feb 06, 2013, 08:46 		Now, they're reaching the point where it may not even be worth it to borrow a bunch of money and leave the workforce for four years, to get a college degree.

That's my impression as well. Unless you are going into finance or engineering, you better have rich parents or bag a rare scholarship. Otherwise you are looking at 20 years of pain.

Does it behoove our country to only have stock brokers and engineers?
 
101Frick
      ID: 2193319
      Wed, Feb 06, 2013, 09:18 		Not really, but we have set the expectation that everyone should go to college. Increased demand has resulted in increased cost. The education reform movement has puts more and more emphasis on getting kids prepared for college. How about getting them ready for life, including the possibility that college may not be the right choice.
 
102biliruben
      ID: 41431323
      Wed, Feb 06, 2013, 17:03 		Agreed. We should definitely work on a non-stigmatized path to vocational schools that can lead to a living wage. No doubt.
 
103Frick
      ID: 2193319
      Thu, Feb 07, 2013, 11:04 		We also need to decide what is a living wage, and what standard minimum living conditions we want. The amount of living space per person that we think of as acceptable has increased dramatically from the past. How many of our parents or grandparents grew up where they didn't share a bedroom with multiple siblings. Maybe it was growing up with large families, but hear stories about putting a baby in a dresser drawer were not uncommon. Radios were rare, let alone TVs. We have a much higher standard of living today, then 50 years ago in general.

What are the basics that a person/family should have? I don't know if we should include health care in this, because while that is a very related subject, also changes the definition substantially.
 
104Perm Dude
      ID: 201027169
      Thu, Feb 07, 2013, 11:15 		I can't see how we can't include health care in that--it muddies the waters but is surely a necessity.
 
105boikin
      ID: 430211013
      Thu, Feb 07, 2013, 11:53 		But the same question can be asked about health care, does that mean unlimited? If not what are the limits?
 
106Perm Dude
      ID: 201027169
      Thu, Feb 07, 2013, 12:20 		Frick is specifically talking about the basics. I think, definitionally, this is limited.
 
107Frick
      ID: 2193319
      Thu, Feb 07, 2013, 12:43 		If anyone is interested in carrying out this thought experiment, I say that we leave health care out of the equation. Once we have figured out what a living wage is that is sufficient to meet our definition, we can add health care later.

What are the basic necessities? Housing, food, clothing? There are going to be different costs associated with some of these depending on the area, so let's not concentrate on the actual costs, but how we define the minimum need for the necessities? For example, for housing, should every person be able to afford their own home? Or is an apartment sufficient? How much space for each person?
 
108Biliruben
      ID: 358252515
      Thu, Feb 07, 2013, 15:06 		Definitely an apt. I'd say somewhere between the 1st and 2nd quartile of rent for a 2 bed, for the area 5 miles around where you get a job.

Food - $200/head/mo

Phone/utils - 200

The real expense is a car. We have, as a country, so underfunded infrastructure for transit, walking and biking that a car is almost mandatory for a working person in most places.

And that averages over 10k a year.

 
109boikin
      ID: 430211013
      Thu, Feb 07, 2013, 15:57 		so what does that add up too?

one car per household or person?

so for a single person, about 2k a month so 24K a year? what does that work out to hourly 11.50 an hour? though I was pretty liberal on the expenses not sure cost of vehicle is 10k a year? maybe on the low side of 8.50, 16k a year.

the math gets more complicated if you are a family.
 
110Biliruben
      ID: 358252515
      Thu, Feb 07, 2013, 16:18 		Clothes, retirement, at least money to go on vacation every few years. Some minimal entertainment money - go to a movie or something now the again.

We are humans not robots after all. Our sole purpose isn't (hopefully) to work sleep and die.
 
111Biliruben
      ID: 358252515
      Thu, Feb 07, 2013, 16:20 		In Seattle I would put around $15/hr.

Rent is tough to find below $1000/mo.
 
112boikin
      ID: 430211013
      Fri, Feb 08, 2013, 12:32 		It would seem like it is very location dependent number. I know people who survive quite well on $10 an hour though they don't live very extravagantly. They are also paying rent in neighborhood of $300-$350 range, which would save them 7200+ over Seattle.
 
113Frick
      ID: 2193319
      Fri, Feb 08, 2013, 14:06 		That is why I wanted to leave specific dollar amounts out, cost of living factors could be added to the base amount. Housing would definitely need one, what about transportation. Do urban residents "need" a car, or is public transportation sufficient? Again, we are trying to define what should we consider the minimum needed for the minimum living wage.

For our hypothetical, let's assume a family of 4. What should be the minimum residence they need? One bedroom, 2, 3?
 
114boikin
      ID: 430211013
      Fri, Feb 08, 2013, 18:05 		maybe SQ ft would be better number then number of bedrooms?
 
115Nerveclinic
      ID: 410331010
      Thu, Feb 14, 2013, 01:50
Bili around 50K for a 4 year degree. When you take into living expenses, an out of state degree can end you are 200K in loans when you graduate.

I don't understand your math. 150K in 4 years of living expenses? That's 37K a year? When you are in college you rent a room in a house with 3 other people and you eat a lot of peanut butter and tuna. There's no reason living expenses should be that high. Next you get a job while in school. I delivered pizza, I waited on tables. I always worked in college. Then if the kids poor, there is financial aid. My nephew is middle class and so far he's over $12,000 free aid and counting and he has just started applying. (He is HS Senior)

Maybe some of your math is skewed because you are in Seattle? At UGA in Athens Georgia 4 kids rent an old house and each one gets a room. You don't have a car. You can live really cheaply this way.


They come out of school with good grades and a degree in science, and they work at The Gap because of the economy and no good jobs. Their already huge debt balloons, and their life is pretty well fcuked

We are in the middle of the worst financial crisis since the great depression. Lots of people are screwed, not just recent college grads. Until we are out of this mess this will be the case. But this too will pass. It only feels like the world is coming to an end.

The people with student loans, it's very low interest and you can take a long time to pay it back. The economy will get better and they will get better jobs. Or are you that hopeless?

Frick: Not really, but we have set the expectation that everyone should go to college.

And with good reason. Have you seen the difference in unemployment rates between college grads and non grads? I don't have the exact numbers but the gap is significant every time I see it sited. How much is that worth?

Also how much more does a college grad make then a non grad on average?

 
116biliruben
      ID: 41431323
      Thu, Feb 14, 2013, 04:09 		The 50K was in-state tuition (12K at UW) vs. out of state (30K) plus living expenses. UW estimates total costs per year at between 43-48K.


Yeah, I delivered pizzas in undergrad too. And washed dishes, painted houses, canvased houses and worked in a computer lab in summer and holidays. Taking into account car repairs and gas, I'm guessing the pizza job was about a wash, though they were fun guys to work with. Of course my tuition was only $700, so who cares.
 
117Frick
      ID: 2193319
      Thu, Feb 14, 2013, 08:24 		Comparing college grads vs non-college grads is kind of a self-selecting population. Would you agree that people (in general) who go to college are harder working and smarter then people who chose to not go to college, or due to poor HS grades not able to get into college. Is it then surprising that they are able to parlay their hard work and greater intelligence into higher paying jobs? Again, I'm only speaking in generalities.

Do you consider a trade school equal or the same as college? I wasn't equating them, but even then, there are plenty of professions where a college degree is nothing more than 4 years of debt. Could a college degree help the person? Possibly, but I'm not sure it is worth the cost. Going to college and taking some business classes might be useful to any number of people I went to HS with who know have their own businesses. But, the majority of the information they learned would not be useful to them. Most of the information that would be useful to them is available locally or at the state level about how to start and run a small business. Or they will learn from their mistakes in the real world.
 
118biliruben
      ID: 41431323
      Mon, Feb 18, 2013, 19:37 		No doubt. I'm only advocating providing opportunities that don't turn into traps. We want those smart and hard-working enough to benefit from college, and in-turn benefit our nation with innovation and productivity, to have just as much opportunity to do so, whether their parents are rich or poor.

They won't ever have the access and support that will allow them to have exactly the same opportunities, but we have been going backwards, as a nation. It is now significantly harder to pull yourself out of poverty than it was 25 years ago. We compare horribly to those "elitist blue-blood" nations of Europe in providing stepping stones to allow the talented to thrive. We are effectively turning the American dream into the American nightmare. We have to reverse course.
 
119Boldwin
      ID: 221322014
      Wed, Feb 20, 2013, 18:13 		I am not a goldbug, but if you are, here's a headsup.

I don't trust the goldtrade farther than I can throw a brick, and I don't know how significant that info is in the mid and longterm.
 
120Boldwin
      ID: 45151272
      Wed, Feb 27, 2013, 19:24 		This really belongs in the 'Silver Linings' thread but someone decided we didn't need a good news thread.
The Dollar Gets Stronger, Stumping Our Chattering Classes

There are times when, between fiscal cliffs, sequesters and the ever-growing piles of unfunded entitlement commitments, it looks as if Washington, DC, is doing its best to wreck the economy.

But the dollar is blessed with weak competition. The euro is a disaster, the yen is a mess, and the renminbi isn’t ready for prime time. Compared to the rest of the world’s currency, the dollar looks pretty good; it’s the healthiest patient on the floor.

The people who continually and habitually undersell the United States usually have a point when they note American weaknesses that could cause us trouble down the road. But they forget to weigh in the weaknesses and liabilities of the competition.

Take the Europeans, who spent the last decade dissing America’s economic and political mistakes only to discover that in their vaunted euro they had created one of the truly great policy disasters in the economic history of the human race. Against gold, the dollar has been a disaster, falling from about $350 an ounce in the Clinton years to near $1600 today. But against other fiat currencies, the dollar continues to offer more stability, deeper markets and more competent and predictable stewardship from a better managed central bank. - Philip Ball writing for Prospect
Yeah, well I'd love to put my trust in that, but I notice he didn't discuss Russia, and that was where he made his mistake.

Russia has zero national debt, a tax rate of 13% on most income, and pays out very little in socialized benefits. Forget that 'Cadilac health plan'. They don't even have a 'Trabant health plan'. Pensioners without dependents get a monthly pension of 2,522 rubles, or converting that, $82.76.

Give them another decade and they will be blowing our doors off. Probably in less time than that.
 
121biliruben
      ID: 41431323
      Thu, Feb 28, 2013, 01:18 		So, your elderly eating catfood is a good thing?


Also, what's good about a "strong" dollar again? The word strong sounds macho? We can buy more plastic crap from Malasia to throw in the landfill?

You know our exports boom when the dollar is "weak", right?
 
122Boldwin
      ID: 22130283
      Thu, Feb 28, 2013, 04:33 		You do have some inkling of how bad losing 'world reserve currency' status would be for us, right?
 
123biliruben
      ID: 41431323
      Thu, Feb 28, 2013, 08:40 		You seriously think rubles will start being the currency of choice?

 
124Perm Dude
      ID: 201027169
      Thu, Feb 28, 2013, 08:47 		The Right is doing everything they can to trash the dollar, yet seem genuinely alarmed that the effect of their messing around with the economy here might mean the dollar isn't the solid currency of choice anymore.

A bunch of petulent children they've turned into. "I spilled my milk again! Waah! What do you mean we are almost out of milk? Waah!"
 
125Boldwin
      ID: 261462818
      Thu, Feb 28, 2013, 20:00 		Actually throwing a temper tantrum whenever the family doesn't spend twice it's annual income buying you what you are bawling for, is your behavior.
 
126sarge33rd
      ID: 4609710
      Thu, Feb 28, 2013, 21:08 		actually, it is not. That, is yet another boldwin fabrication and projection...aka ...lie.
 
127Boldwin
      ID: 8324919
      Wed, Apr 10, 2013, 08:35 		Things are booming.
 
128biliruben
      ID: 59551120
      Wed, Apr 10, 2013, 09:49 		These things are not new. They existed even before the recession hit. They existed during the 90s economic boom.

They only exist for you now because their is a democratic president you are trying to vilify.
 
129Tree
      ID: 40328723
      Wed, Apr 10, 2013, 10:44 		this book came out in 1995.

as bili said, this is nothing new. new, to you, because of your selective vision.