It's the Economy, stupid - Languishing & Lingering after the Great Recession

I think it's difficult to deny that a healthy middle class is essential for a stable economy. Innovation can be funded in several ways, but without a stable middle class, there much less imperative and drive behind innovation. As an example, the Scandinavian countries are among the most innovative nations in the world. One key feature of all of them includes a mixed economy with a strong welfare state. Education, health care, job support, etc., are all a part of their social/government policies, and this helps ensure the health of their economies. Furthermore, tax dollars are used in conjunction with private sector initiatives to spur research, development, and foreign investment.

Conversely, America's leadership in innovation is at risk due to recent concerns about the nation's quality of education. Furthermore, more recent federal cuts to R&D has lead to brain drain of talented scientists and researchers who move to more innovation-friendly nations so that they can do their work relatively unhindered.

"Spending our way out of the problem" is a misleading way to look at things. On the consumer level, spending is important, but it must be balanced with incomes and debt. The main reason why consumer spending is a bit low in the U.S. is because there are issues with incomes (low pay, unemployment) and debt (2008 crisis caused a lot of damage). On the industry/government level, spending wisely will fuel innovation. It's this kind of investment that will ensure the economy is retooled in the right direction. Not enough investment may mean not enough jobs created (via investment) that may lead to more jobs created sustainably (via consumer spending). On the other hand, spending can be done poorly, as has been demonstrated many times. The net result can lead to ineffectiveness and pointless debt.

Again, all these things work together. If you look at data where the strongest economic expansions occurred, you will see a correlation with strong consumer spending (sometimes too strong). Without this component, economic expansion at a high rate is impossible.

Wealth is generated using the application of capital, resources, tools/machinery, and labour. Wealth flows in a network, not a line. It flows through each of these components back and forth, and so each of these components is important in terms of the wealth they accept and in turn provide. Most consumers are generally the holders of wealth that they generate through their labour. Problems occur when too much wealth flows away from them in comparison to the wealth that flows towards them. When their "ROI" is too low, or, worse, a net loss, the system as a whole begins to break down. Chronic problems along these lines can be traced in places like the U.S. An argument can be made that this past recession has had a long recovery cycle mainly because of the problems of not enough "ROI" among most consumers. Where more of the wealth has flowed to the top, it has become trapped, therefore making economic cycles more cumbersome and volatile—top-heavy, if you will.

So while "spending our way out of the problem" might not be the way to look at things, spending is something that would certainly help right now. The issue is that the "spenders" have little to spend, while the "savers" are saving more than ever.

 

This isn't the case because developing economies work much differently from developed economies. The advantage that developing economies have is they have yet to industrialize. Once the factors are set into place to industrialize, there is a huge potential for growth. Simply look at India and, even more so, China: They have booming middle classes in large part due to ramping up of industrialization. Despite some fits and starts after the fallout of 2008, their economies are still growing at a rapid rate, well above the industrialized average.

Developed nations, on the other hand, have the challenges that come with advanced economies: challenges to growth. Once an economy plateaus technologically and economically speaking, there needs to be a much heavier push for innovation. This is why China is so hot while America is lumbering despite America having a much more developed technological, educational, and economic infrastructure. America has to do that much more simply to keep GDP growth above zero.

What will keep places like China growing is a growing middle class with growing incomes and wealth—in other words, consumer spending.

It's easy to misjudge or be off the mark in evaluating how the Scandinavian model functions. It's essentially social democracy in action. We're not talking about cutting the same check to every citizen; we're talking about tax revenue funding health care, education from K-12 to post-secondary, etc. We're talking about a universal funding of the factors that produce stable, healthy, and functional citizens. Take a look at what happened in Scandinavia during the 2008 crisis and the years that followed. What do you notice? They were far less affected, at least at first. It was only a couple of years ago when things started to cause problems. Some handled the crisis magnificently (Sweden), while others struggled probably because they thought austerity would be a good idea (it obviously wasn't).

Comparing Ireland to Scandinavia is like comparing apples to oranges. Their economies work very differently. Also, Ireland's financial crisis was brutal. Unemployment peaked at over 14%, and austerity budgets were employed several times. Ireland's saving grace was that the austerity was coupled with a eurozone bailout program and it had a strong economic position for exports.

All told, during the global financial crisis, Ireland's is a much different case than Scandinavia's. If you drill down into the details, you will see that both operate quite differently.

Agreed. You guys should probably start by paying teachers a teacher's salary.

But, as I've said, small business loan demand has been soft for a while now. The problem is more widespread among consumer confidence than it is among small businesses seeking loans. Small business hasn't until more recently been encouraged to expand much, if at all. They've been more concerned about self-preservation and keeping their heads above water.

 

Doing better despite our leaders...

'bout friggin time.
God knows how everyone would be if leadership would start being sane.

And it seems that most of the rest of the world has the same problem, not just America.
But for much of them, their economy isn't doing as decent. (Ex. Link)

 

Some don't comprehend that there are a variety of over-arcing trend at work.

It's not all the government, moving their weight to and fro. (and yet, people except govt. "to do something" when there's an issue...I tell you, we're as bad as kids)

Bond sells are just an indicator, which can be used to interpret what is occurring.

But people aren't aware of this...or don't want to think about it.
It is easier to harp and scream about the elemental "known" topics.

You want jobs??? Get companies to get off their money pools and start spending on staff.
But how do you do that...without govt. involvement?
Catch 22

Read the whole article...not just about TIPS/bond prices...and tell me what you think.

See...that's the problem often...we vote in these people on their charisma and rhetoric...without knowing if they can comprehend what they are voting on.
And even if they do...it's still a very wearing process....considering all the variables and subtle trends.
Even if you have SMEs, subject matter experts...you are still the one doing the decision. It's on you.

There is no "Easy" button.
Welcome to the real world.

 

A minority voice has been warning about the risks of a deflationary spiral for a while now, while the average American thinks deflation is a good thing, inflation a bad thing.

This is a strong indicator of the potential negative outcomes of the current liquidity trap. It will likely get worse before it gets better.

Europe is also in a liquidity trap. Japan is still in one.

 

This potentially can turn the world upside-down.
With the rates changing, the US and Canada, with their new sources too, expanding their potential significantly.

I wonder if it will be an actual benefit to the citizens??

 

Recent news today, also about oil: Panel recommends approving Northern Gateway oil pipeline | Toronto Star

It's still a way off, and there's still many hurdles (209 to be exact), but this will increase the flow of oil from Alberta to B.C. to tankers bound to emerging markets in Asia. Sure, it'll be for export, but that takes less burden off Asia to seek oil in, say, Mexico.

 

And another thing wasting US taxpayer money...this could be a full scam...we don't know where Defense money goes.

This is both pathetic and horrendous.

And if they don't hit the deadline, then there should be consequences.
Sanctions...Upper Brass losing their jobs...perhaps even criminal.

If the IRS can put people in jail for not paying their taxes...or even doing a return.
Then we can have similar penalties for NOT satisfying a DoD audit.
All other agencies and depts. do it.

There's something fishy here.
Forget about the NSA...what's the scandal here?? Why aren't the media focusing on this mess??

I'm sure other countries have a mess too...but they don't spend more than the next 15 largest militaries combined in one department.

 

This is huge...and will likely make some significant change.
But it is if anything, another sign of stability from the govt...a good way to keep the good times rollin' and coming.

Personally, I think Obama was wrong to consider Summers...too much of a player.
Yellen will keep it steady...and quiet. Hell, she's known for it.
I do hope she raises the rate just a bit...I think it would be a good sign of confidence...and we don't have many tools left in case of emergency.

 

And people were feeling better about Europe, until this maybe: BBC News - Eurozone inflation rate falls to 0.8%

 

I believe there's going to be a big ol' square-dance this spring and summer. (at least in the US)
Economy doing decent.
Government is starting to stablize.
New year is here...holidays are out of the way...and new annual budgets are starting. (at least in mgmt's mindsets...if not in truth for the company's budget)
People are not on edge as much.

I hope this triggers a raise in wages and benefits too.
Much less reduce over productivity...meaning, wearing too many hats and too much work in one person's hands for real job effectiveness

I wonder how Europe, Japan and otherwise will do?

 

What's funny about your comments is that these "Promise Zones" are along the lines of socialism rather than trickle-down theory.

 

I agree regarding the core problems part if we're talking about trying to force industries to recover where they may not recover organically. I think a big issue regarding the American economy is that people want to go back to the way things were. That's potentially a fool's game. The trick is to forge ahead, seek new opportunities based on strengths that can support initiatives that make the most sense. If a market has eroded for reasons based mainly on external forces, it makes little sense to try to compete with those external forces if they're too overwhelming. It really depends on the zone and the economic issues that pertain most to it.

As for the broader program itself, there are aspects that make sense, especially considering it actually will focus on core problems.

 

Are we there yet???