You can listen to conflicting opinions of self proclaimed experts on government activity or lack thereof on “stimulating,” the economy, however, the reality is that the economy’s progress remains in your hands. The top of the financial food chain with the government’s help wants to prejudice your perception toward positive spending.
The American taxpayer is provided an abundance of opinions and fantasies surrounding economic progress packaged as truths, facts or principles. The certitude applied to the delivery of this inspiring radiation has maximum impact on the behavior of the audience.
The vast central swath through the middle of the American political spectrum representing a majority, seeks reasonableness from government. The majority expects its business to be conducted with some integrity, without the encumbrance of concrete boots of left or right extremism demanded by party affiliation. This expectation of common sense, and forthrightness has not been honestly accommodated by politicians. The cost of reaching elected office has so escalated that special interests have become the overwhelming force behind all thrones influencing legislative agendas. As a result, every utterance emanating from a political pulpit has become suspicious.
When Paulson and Geithner browbeat their economically illiterate, and incurious bosses, into bailing too big to fail financial firms, and to launch profligate spending programs, the taxpayers had no input, nor were they provided enough truthful information to know right from wrong. Furthering confusion came in the form of suddenly popular Keynesian economists affirming government stimulus spending. Their continual proclamation of mission accomplished, and the recession is over, has become a tired refrain.
With unemployment hovering at 16%, when you include marginally attached workers and part timers for economic reasons, the principal energy in the system is the government’s $1.25 trillion mortgage support program artificially inflating home prices, borrowed with future taxpayer sweat.
The two principal pulls at opposite ends of the government intervention string, are Financial Stimulus, and Lowering Taxes. The arguments move the cursor of political will along this confusing line with abundant force pulling effectively from both ends. Over the long term, practical evidence suggest that there is little positive impact on GDP from supposed spending multipliers, so the amount spent as financial stimulus will not find itself increased or even mirrored in the amount of the nation’s gross domestic product. From the other side of the great divide, the lowering of taxes has shown some positive affect, however long-term impact has been almost impossible to empirically quantify.
In the middle, rests the most reasonable path which mandates that government, and politics (humans guided by special interests), remain out of the equation altogether, with some leaning toward easing of corporate and personal taxes, and reducing government expenditures. As his will not occur, and as we have seen, the likely reality is for a continuation of tax increases facing the enormous deficit demanding to be satiated.
Your perceptions as consumers, and taxpayers, will impact economic activity. You will dictate the direction, which the economy takes, and through that process, minimize the influence from politicians and experts confusing your judgment with mutable notions of economic confidence. Instilling confidence is intended to move consumers to borrow and spend. Ignore the noise.
As the recession continues, and it will, we should all remain diligent with each dollar we earn, and even more so with each dollar we borrow, unlike the examples set by Washington.
The biggest financial decision we make pertains to our dwellings. We will be hearing newly energized implorations of mortgaging ourselves into evermore elaborate dwellings, or increasing the debt on those we already inhabit. The reality remains that a home’s increasing value should never become a source of newfound cash while we live in it. Perceive your home as an expense if you have purchased one. If you still rent, congratulations, you have bypassed the heavy stress that millions of mortgage borrowers have endured over the past couple of years.
As the ravages of unemployment persist, we can each contribute to a return of long-term national economic stability by viewing each dollar we earn as if it were your last one for a while. The behavior might just be contagious, and spread long enough for political representatives to assimilate the message since elections don’t appear to change much in Washington’s behavior.
Crossposted from The Pacific Gate Post
A constituent of the vast baby boomer generation with a career which has been fortunate to know the ponderous corporate worlds, as well as the intimately pressurized, and invigorating entrepreneurial domains of high tech and venture capital, I have harvested my share of mistakes meandering through corridors of enterprise from Silicon Valley, to London and endless, colourful, sometimes praetorian points in between. The voyage has provided an abundance of fodder for a pen yielding to an inquisitive keyboard, a foraging mind, and a passionate spirit.
Whether political or business or social or economic or personal, is it not all political? It is a privilege to write, and an even greater privilege to be read by anyone, and sometimes with the wind at my back the writing may occasionally be legible. I do not write to invite scorn, nor to invite respect, but if I get really lucky the writing can stimulate thinking. I also write for the very selfish purpose of animating my own processes, and engaging the best of what life offers. Above all, whether biting fire or swatting shadows, I am grateful to be gifted the freedom to write and publish whatever flows down to the keyboard. To all those who enabled this freedom, and to all those standing guard to preserve it, I am indebted.
Because of California environmental codes, combined with this admin’s signals that industry is to flail in the wind, I was laid off several months ago from my job as a R&D engineer at a semiconductor-equipment company. (The 30y/o company will likely fold within 3 months.) Fortunately, I learned from my Father to save and invest wisely for the long-term.
Coupled with several decent IPO’s over the years, along with having my own construction business, I have.
I rent from a friend who needs the home occupied, less the city of Campbell re-clasify the property as “commercial”, which would screw my friend badly by breaking him from the change in tax-load.
Now I am John Galt, with most of my holdings put into gold/commodities. I spend like I make minimum wage, and no longer have property in my name, as I sold my last piece in 2005. I do small bath/kitchen remodels only for friends and relatives, and payment is usually in barter, or non-reported cash.
I watch as this admin works to destroy capitalism, and I will not spend until I see an admin (even this one) return to sanity. I have a target on my back until they do.
I have enough for me and my 3 kids, and can (thankfully, and blessedly) hold out for their whole lives at this present rate, if necessary….All too many can not though, and that depresses me deeply.
Being of the monetarist mentality myself, James, I can agree with much you say. But I totally disagree on your perspective of homeownership. And perhaps it may be a nitpick of definitions.
An investment is a purchase done with the expectation of future return. A home most definitively fits that description, and has been a slowly appreciating asset for decades. If the home was notably improved, you got much, if not all of those improvements back in a resale downline. If nothing else, it may have yielded enough equity over the years to at least pay the closing costs and part of a downpayment on the next home.
What blew that all to heck was the rapid acceleration of appreciation due to under supply/inventory and unnatural market demand by the influx if borrowers during the EZ money years. You can’t show me a time in our history where homes were enjoying double digit appreciation annually save during this bubble era.
That said, an investment has holding expenses/costs for maintaining, or improving value. The home should never be 100% mortgaged, since you are dependent upon fluctuating market trends. However it is a worthy “piggy bank”, provided you use the equity you withdraw to put right back into home improvements. Remodeling kitchens, baths, window updates, decks, flooring, heating and cooling systems… right along with basic maintenance… are the prime uses for a home’s equity. You can’t expect a home investment to deteriorate and depreciate over the years, and still be a money maker.
Don’t blame the product, nor the concept of home ownership, for the consumer’s illogical and perhaps uneducated abuse of home equity (ala trips, toys, etc). What the new homeowners need to learn is managing their investment. Not abusing it.
PatVann… oh one with quick cyber tongue… congrats on exiting the market during the high appreciation years. I know many who rue the day they missed that boat from California.
I still hold real estate high as a slow steady investment. Lodging never goes out of vogue. If you own, and others cannot purchase, it doesn’t mean they don’t need a place to live. And I place even more stock in acreage. Improvements come, deteriorate and go, but land is forever. And in the past few years, “hobby farms” have been on the rise for self sustainability. Those looking for “off the grid” type properties is also on the rise.
Short of buying an island, it’s about the best thing you can do. Plant your fields, and wait for the harvest.
@ Patvann,
You are extremely fortunate, not for your state of finance, but for your state of mind. If the majority held such mindset, there would be no broad-based financial problem.
The unfortunate mindset of the current Administration and Congress, are not supportive of the entrepreneurial energy that has made America a leader on so many fronts. None of them, it appears, have been entrepreneurs or run corporations. Their naiveté is very destructive.
Best wishes for your continued saving, and living to innovate in R & D another day. It may take time, but it will come. This government cannot kill progress and ingenuity, it can only interrupt it.
@ MataHarley,
“However it is a worthy “piggy bank”, provided you use the equity you withdraw to put right back into home improvements.”
… Absolutely agree. It is however a matter of discipline, and as we have seen, the piggy bank was abused by millions who saw an opportunity to borrow themselves into more and more expensive “wants.”
Unfortunately the disease had infected all levels of government who saw their own “piggy bank” in the form of debt against the taxpayer’s future ability to pay.
@Mata
I think that if I had the house longer than the 8 years I did, I don’t think I would have sold it. But I knew I wanted a large piece of dirt in which to build my own custom home with my own hands…and considering I got 3X what I paid for it, what the heck.
I chalk it up to luck, more than timing. 🙂
So now I wait, watching the price of dirt come down. Eventually I’ll jump back in, but only to build and live out my days away from the city…NOT to “invest”, but to live.
-Thank you for the kind words, JamesR.
I miss inventing stuff, but hangin wit the kids is cool too…and the Camaro needs some work.:-)
Just a random observation, but, for a period of about 5 months, there was a drumbeat on this blog on how the Dow Jones was a harbinger of the economy and was being driven downward by all things Obama.
e.g. beginning:
Haven’t heard much about this, of late.
What does the “investor class” see in the economy which is being missed by the rest of us?
– Larry Weisenthal/Huntington Beach CA
@ openid.aol.com/runnswim,
I suspect from your comment that you feel there is a direct correlation between the Stock Market, and the economy, … or anything else economic.
The market is a complex game very well managed by those at the very top of the financial food chain. They make billions from it. Even large fund managers are fish in the game.
If you are invested heavily in the market, your coming year should be a fun ride. I suggest you do some thorough analysis on actual intra-day volume over the short, mid, and long term through the past decade which will ad to your own evidence on “timing.”
If you were influencing/managing $500 billion to $1 trillion in off shore funds, you wouldn’t screw with the money either. You would ensure a consistent return. You would also use such power to “influence.” Ever wonder why so many big and small players get caught, such as on expiry dates on options etc.? The market is the greatest game ever created in history of man. It is brilliant, complex, produces absolutely nothing, and those in charge are ruthless. It is a thing of beauty.
This economy is far from well, and has a very long road to go before it recovers, … even longer before the taxpayers recover.
ah, James… Larry occasionally thinks Flopping Aces is all one person, and victims of group think, instead of many individuals. So what he remembers is that a couple of authors were citing the stock market drops occuring in Obama’s wake.
Not I, said the little red hen. Nor do I place an atom of faith in the markets now. Count me in with the various business news pundits, scratching their heads but jumping for joy, that someone is crazy enough to be confident and roll the dice for the short term big bucks. As they all say, and I agree… there’s nothing in this economy that warrants the current market action. Dismal outlet for unemployment, rate hikes, and declining dollar. Last time we saw a “recovery” with rising, stable numbers, the unemployment wasn’t 9+ and rising. Sorry… history don’t cut it here.
But, ya know, there’s a lot of unemployed… probably picked up day trading as a hobby. LOL Also, as long as the government is holding up both the US banking plus housing market, and they keep devaluing the dollar to play the “let’s boost exports to get back on track” game, even the most novice of investors can dabble daily. However, the “big boys” (as ZeroHedge likes to say) are treading lightly.
So Larry… if you’re going to call out someone in particular with your stock market comments, I suggest you use names and cite some articles. Because personally, I find your broad brush of “… a drumbeat on this blog” pretty damned offensive. No one here speaks for me, and I assure you… the others feel the same way.
I look at Price-to-Earnings (among other things)…This present 10,000 is an overstretched ballon.
Also, when the price of the dollar is accounted for, the Dow is around 7400 right now.
http://www.purchasing.com/article/358118-Smart_Sourcing_Summit_Expect_solid_recovery.php
http://online.wsj.com/article/SB20001424052748703298004574459403222100882.html
@mata: there WAS a F/A drumbeat about the falling Dow Jones index; but you correctly point out that not everyone was beating this particular drum. I did cite the original blogpost which started it off, in the above post.
@Patvann: most people who drive the US economy price things in dollars and buy things in dollars. The Chinese undervalue their currency on purpose, to encourage domestic consumption as opposed to foreign purchasing and to promote their exports. The weak dollar encourages us to buy local, but makes foreign travel more expensive.
I’m not aware that the Dow/Dollar ratio is an important economic metric. If so, I’d like to be referred to the study(ies) which so establish this.
– Larry Weisenthal/Huntington Beach, CA
Then perhaps you should correct your twice-repeated characterization that an article by Mike’s A constitutes an “FA drumbeat”. As I see it, it is a single rat-ta-tat by Mike’sA. And Mike’sA is not “Flopping Aces”… he’s one of several authors.
I do so wish you wouldn’t just lump everyone into one FA jelly jar merely because one author has an opinion.
However I will say the falling index was expected with the fear mongering of this admin on the economy. I will also say that the rising index is not a reflection of a recovering economy. And if you spend any time on the financial news channels, you’ll find most of them shaking their head in disbelief at the market action, as it’s foolhardy with the deliberate decline of the dollar value, the rising unemployment, and the fact that both the banking and housing markets are being subsidized by the US taxpayer. When you take away Uncle Sam’s booty, robbed from the citizens, we have another story.
But as I said… with you, most of this will take some time to show how erroneous your joy at the “end of the recession” is.
@mata: Thoughtful comments (#12). What’s interesting about this little debate is that, unlike Global Climate Change, it won’t take decades to declare a “winner” in our little economic prognostication contest. I’ve been active on these public internet debate forums since 1995 and, if my health continues to hold, I’ll be around here long enough for one of us to crow “I told you so.”
P.S.
>>And if you spend any time on the financial news channels, you’ll find most of them shaking their head in disbelief at the market action,<<
The pundits at the financial news channels do not exactly have an unblemished record, when it comes to economic analysis and equities forecasts. It is not without good reason that economics is referred to as the dismal science, and cable medium pundits are among the dismalest of the dismal.
Where you have to give investors their due is that they are putting their money where their mouths are.
– Larry W/HB
@ openid.aol.com/runnswim,
… So please prognosticate away, … first on the Economy, and Separately on the Stock Market.
You appear to mix the two interchangeably when discussing economic analysis.
@James Raider:
Of course, they aren’t interchangeable. If I could forecast market trends, I’d have been heavily invested. I can’t and I wasn’t. But I don’t think that you can ignore the market as an indicator. At this stage in the recovery, I don’t think that many unsophisticated, individual investors are buying much. I think that the market rise has been driven by professionals who may not know the future but who are sufficiently encouraged to buy in.
So I’m not forecasting trends in equities, but I’m already on record as saying that the recovery will be strong enough by Q4 2010 to greatly limit Dem losses in the mid-terms. And I’m forecasting that the economy and the health care will both be winners for Obama, come 2012.
– Larry Weisenthal/Huntington Beach, CA
Bold statements, Larry, in the face of 2010 forecasts that even the Obama admin admits… i.e. the unemployment still on the rise for another year, or no replacement of the jobs already lost. It’s such absurdity to look at the loss of jobs at 600K a month to 300K a month as “victory”. There are only so many jobs that can be lost.
Fact is, to achieve the Obama forecast, there needs to be job creations of 200K monthly… by my math, a 300K reduction in job loss is still shy 500K of job creation.
Add to that the decline of the housing market values over 2010. The resetting of 2006 ARMS, combined with the continued job losses instead of gain, do not translate to a rosy recovery in 2010.
The economic recovery is beyond Obama magic powers, however government can slow it down.
So I’ll take your “recovery strong enough by Q4 2010″… leaving elections aside (since elections aren’t a measure of the economy either, just a measure of the discontent) and raise you by this…. by 2010 we’ll have hit bottom and start to stabilize. Providing they haven’t loaded the national debt beyond recovery, and reduced the dollar to toilet paper.
reply to #14 went to spam.
@Mata; I want to talk about unemployment as an indicator, but it will have to wait until this evening. I think that we are going to have a “new normal,” employment-wise, which is going to persist for a very long time. In the meantime, thanks for getting specific with your own forecast. Maybe, just for fun, we can lay down some actual numbers, as opposed to simply descriptors. – Larry W/HB
A “new norm” for the lagging indicator, Larry? Isn’t that moving the economic historic goal posts? LOL
For you to chew on… and hopefully I can do some blogging instead of work this eve… there is no recovery with high unemployment and housing. Both indicators now are false because both are being propped up by the taxpayer. The unemployed by extended benefits (which will then drop off the statistical map when they are unemployed, but not on the benefit radar), and the banking/housing industry. I want to tell you right now… with this $8K crap, it’s chaos out there. As a matter of fact, what I’m seeing is the same ugly syndrome that lead to overvalued homes to begin with… a vast influx of buyers overbidding on foreclosed homes, driving the prices back up. Isn’t going to last… nor should it. The bubble should not be re’iflated. It was unsustainable then, and will be unsustainable in the future.
INRE the “actual numbers”…. there’s a lot of rabbits in that “hat”, Larry. There are no dependable numbers. And as almost all economists with a brain will tell you, all the historic templates are BS right now. ala recovery with unequal measures… as in bonds/stocks movement vs unemployment, dollar index and debt.
We are in unchartered territory. Ugly part is, what’s unchartered isn’t in the positive column.
@ openid.aol.com/runnswim,
What might in fact limit Democratic losses in 2010, is not a healthy economy, but is the vast majority of the approved stimulus monster that will be held back, but will be distributed when it can deliver the best outcome through patronage and through vote Buying rather than be applied to any serious stimulation of the economy.
Most of the $787 billion has not been distributed for good reason. The scare mongering worked on the hapless Congress who approved it, and its purpose is to ensure a continuation of a Democratic majority, rather than to create jobs in the general economy. The incompetence and corruption continue.
@ MataHarley,
Unfortunately, it is also no longer surprising that most of the MSM still refuses to acknowledge that unemployment is really at 16%, … not 9%.