Munchausen Syndrome

[dbacks fan]

There was a comment/thread earlier about the fact that this debt crisis was manufactured as a ploy to help boost the election potentitial of both Republican and Democrat Senators and memebers of Congress as well as giving POTUS a boost for solving/comprimising the debt issues. So having seen the markets react to whats going on in DC, and the fact that we are coming up on an election cycle, is any one bothered by the fact that everyone is asking for the creation of jobs to support the economy, when you can create (not by the government) jobs all you want, but if you have a market (buyers) that are spending as little as they can because they are in fear of their own budget, and the manufacturing sector is stuck in the factg that they want to produce products for the consumer, but they are having a hard time doing so because the consumer doesn't have the discrationary funds to spend, which leeds to lower production, we are in a paralysis in trhe economy. You have businesses that have capital, but you have a market that doesn't want to spend money on basic products, and companies that produce products can't increase payroll and produce products because there is not a market.

So essentially we are hosed in the basic economics of the US. No one wants to do anything, because of what ever they do will be pushed back. (Screw Republican/Democrat/Tea Party) it should be us for our country

[AquaMan]

There was/is politics involved but I believe the reasons are more complex than some conspiracy to affect re-election. That is merely a tactic to exploit the circumstances. It isn't any one thing. Not confidence in markets, not regulations, not education, not social problems, not religion, not even the systems of governmental operation. Those are all contributing factors.

This is a long term problem with the changing demographics of the world being one element (huge bubble of population that is aging and changing its spending habits) and (for the US) the switch from a manufacturing exporting economy to a tech and services consumer based economy. The rest is just wallpaper. Ugly wallpaper.

The politicians are too shortsighted and perhaps too confused to react as a problem solving unit. They were not able during the great depression as well. Few people who have enough power to effect any change have a grasp on the big picture. The people in power just manage one crisis after another and blame each other. There is no political solution.

Perhaps I am just naive but I don't think we can much alter such huge, complex cycles. At least historically we haven't been able to. But I am confident. We can counter punch, we can adjust to new realities, we can forgive each other for our mistakes and "keep on truckin'" but business cyles are like nature. We cannot dominate them. We can work with and around them.

[Conan71]

You could do another pigeon drop from the treasury on tax payers, but I suspect most people would put that check in deep savings.  I think the government, short of going even further in debt, to create government jobs is out of options.  They are going to have to sit on their hands or become a willing accomplice in figuring out how to compete better in global markets.

At some point it might just take optimistic business people to start hiring in anticipation of an expansion, but the problem is, everyone who is in such a position is of the opinion that there are penalties down the road for doing that (Obamacare, higher tax rates, etc.).

Otherwise a new technology or technologies are about the only other solution I can see.  We became complacent about allowing other countries to do our heavy lifting because we put a higher priority on cheaper goods than keeping Americans employed.

$3.50 gas isn't helping either for those who have to choose between gasoline and buying a new iPod or school clothing.  Nearly three years into the Obama Administration and we still don't have anything close to a new energy policy which is disappointing considering that was one of the things he pointed to as a job creator.  Yet one more failure passed from one administration to the next for the last 30 years.  I don't know if the current admin believes that higher prices at the pump is going to jump-start alt fuels production, but it's not happening.

[DolfanBob]

Boy was I wrong about this thread.

[nathanm]

You could do another pigeon drop from the treasury on tax payers, but I suspect most people would put that check in deep savings.  I think the government, short of going even further in debt, to create government jobs is out of options.  They are going to have to sit on their hands or become a willing accomplice in figuring out how to compete better in global markets.

You're right, if we give money to people who aren't already tapped out, they'll just pay down debt. That was probably the biggest lesson of Japan in the 90s and early 00s. With that in mind, our two choices are pretty much to sit idly by and wait for people to resolve their balance sheet issues on their own or somehow fix it for them. One leaves us in a quagmire for at least several more years, thus losing the opportunity for more growth, while the other could be a big moral hazard issue, depending on how we went about rescuing consumers' balance sheets.

The Fed has been trying to do it through inflation, but all their efforts haven't managed to do much at all. Enough to forestall deflation, but not enough to create a robust 3-4% inflation that most economists say gets us the most economic output. If they did succeed with the job market so soft, I doubt we'd see wages keep up in most fields (Real wages have fallen a bit over the last few months thanks to the renewed commodities bubble), so it would just leave consumers worse off anyway. I guess it's good they haven't been successful.