Originally Posted by
bionicarm
http:///forum/post/2833799
You tell me. You sound like an economist. Why is the economy in such a downturn now? What's the logic behind it? Why are businesses dropping like flies, and unemployment is creeping higher and higher each month? Actually the economy has be going down for the last 2 or 3 years - around the same time the Democrats took control of Congress. So is that because the Demos totally screwed us over, or is it because, again, the Republicans became so paranoid that they would start another Carter Regime, they all slowed down their spending? Better to hang onto it than let the Democrats take it in taxes. Can one political party have that much influence on the economy? If you say yes, then it's time we disband them altogether.
I'm waiting for the magical solution. It doesn't make any sense to me. In the last 6 - 8 months, this country has been on a downward spiral that doesn't appear to have the ability to recover. I was hoping that it was because of this stupid Presidential election, and that it would start turning around after it was over. Apparently that's not the case. I don't have a clue what it will take to flip the switch the other direction. You guys seem to think you're the experts. You got the answers, head to Washington and change the rules.
It isn't in that bad of shape. And it is not one of the options above. Second, take a little gambit through history. We today are no where near the the numbers we had during the depression with 25% unemployment. Or during the 70's with double digit inflation and unemployment.
There is no immediate magic solution. What you are starting to see is government involvement in industry starting to take its toll. For instance in the home lending industry. The federal government created two "companies" that purchased high risk home loans. They didn't pay a whole lot as far as interest. But basically guaranteed they'd buy them. So brokers and lenders made the loans. Since they didn't get a whole lot for them interest wise and there was lots of competition likewise almost no risk for them. They made the loans. The problem was, since they had almost no risk they priced it accordingly. While these two quazi-government entities bought more and more. Congress and other regulatory bodies turned a blind eye to the accounting practices of these two companies not in the business of making money for the company. Then these 2 companies started selling securities bundling these high risk loans and calling it a risk less investment. And priced it accordingly. They cooked their books so it looked like they were worth more than they were. Banks bought the risk less investment. Insurance companies insured the loans. The problem was the "homeowners" couldn't pay their loans. So these risk less securities where worth nothing. Banks were left holding nothing but paper. And these two quazi-government companies got billions in bailout money. Their CEO's walked out of there with their golden parachutes, their board members have been appointed to high levels of government, advised presidential candidates.
All the while doing almost the exact same thing as Ken Lay. Only Enron was small fish compared to this.
Then you get a culmination of the media complaining about the economy for the last 8 years. The banks won't lend money. There won't be any credit. This will destroy retailer. So the average american says well I'm not going to even try. (perception of a shortage will make people hoard)
There is no magic bullet the free market must be allowed to correct the market failure caused by artificially changing risk in the market. And not pricing the product to allow for failure. It takes some time.
As for unemployment, 6.5% isn't horrible it isn't great but isn't horrible.
Business fail every day. Lots of them, more fail than make it. It is part of the game. Demands change the markets change, and business who don't stay ahead of the curve and fail to change with it fail.
I'll head to washington but I'm not old enough to run for federal office yet...
Now Circuit City they are just in a mature industry that won't support that many retailers. It has very little to do with the economy.
, really, I don't think anyone would ruin the country to prove a point), or anything else that has been stated above. If the economy was doing SO good in the first quarter, why was there an economic stimulus plan??? You don't stimulate an economy that doesn't need it! It is true that we are not "technically" in a recession, that will be at the end of the next quarter when GDP is negative...Again. But, really, why do we put so much emphasis on GDP? Its quite out-dated. As we move from a production economy to a service economy, why base our definitions on something that only encompasses part of the economy? Our definitions need to be updated. This is especially true when you look at unemployment numbers for the year....but yet, by definition, we aren't in a recession. Crazy! Also, the toll of $4/gallon gas had a devastating effect on disposable income, including summer time vacation travel in which a ton of people pump up tourist area economies.
