Which is your favorite paranoid fantasy?

[Undertoad]

Right. When you climb out of the truth hole you will notice that the actual numbers don't just "sound" great, they are objectively great.

It's remarkable to see the spin. CNN and the Times eked a negative out of them too. What hard work that must be. In 2004 the total emphasis was on job creation figures because that was the worst figure available. They mentioned it every day in 2004. They don't mention that number AT ALL any more.

The spin is always that things are secretly bad, or secretly good, according to incomprehensible matters just around the corner, or by certain numbers being emphasized differently. The numbers that are important are all good today. So it's harder to spin.

The administration got the last three projections wrong. The projections are based on past receipts. The receipts went up. So? Zat BAD?

The stupid thing is they can still easily criticize the administration (and I do) because if it weren't for all the stupid spending, the budget would be balanced today and the resulting boom would be really amazing. But fie on criticizing spending.

[xoxoxoBruce]

Originally Posted by Spexxvet/WashPost

As recently as September, Medicare chief Mark B. McClellan said the new drug package would cost $534 billion over 10 years. Last night, he acknowledged that the cumulative cost of the program between 2006 and 2015 will reach $1.2 trillion,

Hmmm...If when Moses led the Israelites out of Egypt, he started spending a million dollars a day.....
....he'd still be trying to spend $1.2 trillion.

[tw]

Originally Posted by Undertoad

The economy has been very seriously booming for the last year and a half. Growth is up, unemployment is low, profits are way up and in this most recent report wages are increasing. By every measure, things are awesome.

We were arguing here in the Cellar back in early 1990s that the economy sucked. Meantime Greenspan was saying growth and productivity increases were everywhere - except on those spread sheets. Later those spread sheets finally found growth.

You may remember back in the early 90s when I posted "This is the best it gets". Years later, the spread sheets finally reported same. The growth that Greenspan insisted existed finally appeared even in spread sheets.

Shop in any grocery store to see inflation. Government reports kept claiming there was no significant inflation. Right. The Fed has long worried about inflation that somehow does not appear in those spread sheets. Even the stock market sees no booming economy. Just like those spread sheets in 1990 - today’s spread sheets only report things that occurred 4 and 10 years previously. The economy has not been booming. And now the spread sheets are finally reporting a downturn.

Major storm clouds are everywhere. Inflation is galloping as indicated by the massive numbers of dollars floating overseas - in numbers so large as to even contribute to inflation in some other nations. Yes, anyone can keep printing money - using many financial instruments - and the resulting downturn does not occur for many years later (ie Vietnam late 60s then created mid 70s downturns).

Where is all this growth? A myth created by wild government spending. Pay everyone to rip up their lawn and replant it - and those same economic numbers would claim a booming economy. Eventually economics takes punishment for such wild spending. But it takes four and more years for spread sheets to actually measure reality. We are now just seeing the punishment for Bush tax cuts - as we saw after the Kennedy tax cuts - recession.

How deep is the denial? Oil has gone from $20 per barrel to $75 per barrel - and finance fiction writers still claim this has not harmed the economy. They even hype a myth that the economy is no longer so dependent on oil. Only a fool would believe stock brokers who have little grasp of what makes the economy tick. No wonder stock brokers claim there is almost no inflation and the Fed is completely wrong. Welcome right back to 1970s Deja Vue. Major storm clouds are brewing. The PBGC fiasco just one example of wild and unjustified spending.

If the economy is booming, then why has rosy stock broker hype resulted in near zero stock growth during George Jr rein. Just like in the 1990s, it took years for those no growth spread sheets to finally discover massive productivity increases. Today it will take years for those same spread sheets to report a downturn. And yet those who are not fooled by stock broker hype are saying the downturn is already here - in the stock market. We must now pay for George Jr massive 'spend spend and enrich the rich' economics.

If things are so awesome, then why does the stock market not reflect same? On 1 Jan 2000, the Dow was at 11,500. Six point five years later and it is only at 11,200. Add in maybe a few points of inflation every year and the stock market is even worse. Where is this growth? Where is this 8% annual increase that still is not sufficient to protect those pension funds (that assumed 9% growth annully)? The only awesome in the economy is how the richest have become so much richer. With inflation, the average Joe has been losing wealth for many years now. Amazing how mental midget economics is hyped when those who best know the economy - stock markets - instead show a 6 year recession. The rich - the upper most less than 5% - are getting wealthier.

[Happy Monkey]

With the highest forclosure rate in who knows how long, even before the shoe drops on the massive numbers of interest-only and adjustible rate mortgages, we are in for some rough times.

[Undertoad]

The spin is always that things are secretly bad, or secretly good, according to incomprehensible matters just around the corner.

[Happy Monkey]

I suppose that people finding interest-only and adjustible rate mortgages incomprehensible is part of the problem. But interest rates will go up at some point, and salaries aren't going up for most of the population. It's completely out in the open and comprehensible.

[9th Engineer]

Living within one's means and not completely overextending yourself is the best way to not be affected by these up's and down's. That would mean not taking a mortgage that will take you 25 years to pay off IF you don't lose your job, IF you don't get injured, and IF the fantastic intrest rate you took your loan at doesn't change. Am I supposed to feel sorry for people who lose houses that they could never afford in the first place?

[Kitsune]

Originally Posted by Undertoad

The spin is always that things are secretly bad, or secretly good, according to incomprehensible matters just around the corner.

I think a lot of the "secretly bad" aspect comes from the underlined importance of consumer confidence and purchase of luxury items. If those are up, everything is happy. While those indicators have been up and people are spending, what seems to be overlooked is that wages haven't kept up with the rising cost of living. How can wages remain flat over five years or effectively go down and people still spend the same amounts of money? People are racking up huge amounts of debt and the consumer savings rate is negative. Consumers can spend money on big purchases, buy houses on easy loans, and continuing living at the current rate and keep the numbers happy. Everything is dandy.

And, honestly, I see everything doing wonderful right now in the economy in the short term, and I can understand why there are a lot of good reasons to be pleased about the tracked economic indicators. I just fear that if people don't start making good decisions in their finances, we could see everything come to a head very quickly and the majority of people won't be prepared to shoulder the burden of debt or pull through on loans. We haven't seen a negative rate of savings in a long time and I'm not certain it will be handled well.

But, hey, what do I know? You can spin this anyway you like, really, and maybe people are keeping their heads?

[Happy Monkey]

Originally Posted by 9th Engineer

Am I supposed to feel sorry for people who lose houses that they could never afford in the first place?

Feeling sorry for them is irrelevant. One of the strongest pillars of the economy in recent years has been the housing and home construction market, and that pillar has been made of pasteboard.

[Undertoad]

While we wait for the housing bust, predicted for the last three-four years now, and the interest rate bust, predicted for the last five-six years now, wages are now increasing (a lagging number in boom times!) and the economy has so far totally shrugged off the problem of higher fuel prices (which nobody predicted).

The economic futurism is a fun game, but having watched it for a while now, it's just a game. Economists themselves are mixed about the value of predicting the future - because they so often get it completely wrong. They wonder whether it devalues the entire profession.

Because the economy is actually so complex that nobody can model the whole thing. Because nobody can accurately predict human and societal behavior.

[tw]

Originally Posted by Undertoad

While we wait for the housing bust, predicted for the last three-four years now, and the interest rate bust, predicted for the last five-six years now, wages are now increasing (a lagging number in boom times!) and the economy has so far totally shrugged off the problem of higher fuel prices (which nobody predicted). ...

Because the economy is actually so complex that nobody can model the whole thing. Because nobody can accurately predict human and societal behavior.

The housing bust was predicted only in the past year. Did it or will it happen? Ten years are not yet up? It takes four to ten years just to design anything. That means money spent today does not create economic benefit or resulting recession for at least four to ten years. Nixon spent wildly on Vietnam with money we did not have. Therefore we had a very active economy in the early 1970s with no growth. So when did a resulting recession start? Mid 1970s. Made worse because the Fed dithered - did not raise interests rates well above 10%.

We are again in that same Vietnam era economy. We spend wildly making short term thinkers hype a mythical growing economy even though no such grow appears in the stock market. IOW we are all just tearing up and replanting lawns - or fighting a war based on lies in Iraq - same thing. It makes the economy look strong to a neo-classical economist who only plays ‘money game’ economics. But when those investments should have resulted in profits four and more years later, that is when an existing recession finally causes job losses.

Meanwhile the economy is quite complex. Just like in the 1970s, the stock market predicted a resulting recession oscillating in between 700 and 1000 for the entire decade. No growth. All this while, Nixon proclaimed the economy as healthy citing the same numbers that UT cites as proof of growth.

For the past few years, eliminating a top 5% incoming numbers, and adjusting for inflation; the American income has decreased every year. This is a booming economy? These were also symptoms of a recession - deja vue post 1970. The American wage has been decreasing for the past few years. Inflation is above 2% - and increasing. Wage increases are less.

[tw]

Originally Posted by 9th Engineer

Am I supposed to feel sorry for people who lose houses that they could never afford in the first place?

No. You are suppose to say that a so called 'booming' economy was partially due to people taking houses they could not afford. A later resulting recession created by an economy today inflated by wild and irresponsible government spending and other financial instruments that create only paper wealth. Just another reason why Fed rate increases are so necessary to soften a resulting recession.

Where are the next product innovations that will pay for those houses? Instead we spend money in Iraq on a war that was only supposed to cost $2billion and be paid for by oil revenues. "Mission Accomplished" creates innovative products? Yes, according to MBA (George Jr) reasoning. This 'flush with money' economy also makes those houses affordable today. Then when those now $450 billion bills (a number that increases about $100 billion annually) come due, who can no longer afford the house?

You don't care about anyone who loses his house. You care about everyone in an economy that is booming only because Cheney says, "Reagan proved that deficits don't matter". Eventually those bills come due. Much of them bills will be paid to China who is currently financing the "Mission Accomplished" war.

Yes, deficits don't matter when your heart will not last long enough to have to pay those bills. Another example of the heartless. And yet he and I both agree - you don't give a damn about any one homeowner. Where we disagree is what happens when the debts come due and no innovation occurred to pay for those debts.

[xoxoxoBruce]

the economy has so far totally shrugged off the problem of higher fuel prices

so far it's been a little more of the discretionary income at the pump, the trash man tacked on $5 fuel surcharge, donuts went up a quarter, really not earthshaking unless your living an income that is marginal to begin with.

But the chance of oil, or any energy product, going down is somewhere between slim and none. How can this possibly not drive the cost of everything, the cost of living, up pretty rapidly.

Even if everything is made in China, they are paying more for energy too. Then the cost of shipping has to go up, so how can the cost of living not go up substantially?

[Undertoad]

I don't know -- but the price has been up for a year now and the economy really is shrugging it off. This isn't future prediction, it's what's been happening.

Two guesses: one, the price is actually still average in historical, inflation-adjusted terms. Two, improvements in shipping and logistics mean that shipping is less of the cost per item, overall.

On other items,

One strange thing to remember about the housing situation is that each individual who makes a deal on a house is bullish about his or her own situation. People make deals like that, which affect their entire financial situation, only if they are optimistic about their own future. Nobody *expects* to be foreclosed on. Mortgage companies are similarly motivated.

The stock market is not the economy. The numbers that are important are GDP, inflation, money supply, unemployment. The stock market is ownership in US blue chip companies, and it sits next to the economy so it is usually affected by it, but it is not a measure of anything IN the economy. Perhaps people are investing more overseas. People are investing more in NASDAQ, which didn't even exist until 1971.

[tw]

Originally Posted by Undertoad

The stock market is not the economy. The numbers that are important are GDP, inflation, money supply, unemployment.

Those same numbers (GDP, unemployment, etc) in early 1990s said the economy was seriously recessionary and had no productivity increases. Greenspan was saying the economy was otherwise. But again, those ‘lagging indicators’ did not report reality for many years. During those years, the stock market increased constantly from 2800 in 1990 to 4000 in 1994. Why? UT tells us the stock market does not measure an economy? GDP and unemployment were reporting a recession when the economy was actually growing and when the stock market was reporting same. GDP and unemployment numbers did not report massive productivity and economic growth until mid 1990s just as today they would not yet report a recession.

If we have moved into a recession, then GDP and unemployment will report that economic downturn many years later. Meanwhile the stock market is reporting, at best, a stagnant economy. An economy that has negative growth when inflation is included in to those numbers.

Oil price increases last year did not affect the economy? Again, this is how short term, foolish, MBA types think. They actually believe the spread sheets report what happened this year. Back in the early 1970s, a severe impact from gasoline that eventually rose to $7 per gallon (2006 dollars) did not appear for many years later – mid to late 1970s.

Years ago, the wholesale price of electricity was in the $10 to 40 per MW hour. Today, those same prices vary between $50 and $220. Even today (Saturday night) when most industries are not operating ing, the price is about $75. So you tell me where your electric bill has doubled? Why have electric rates increased seven and five times - but your electric bill has virtually no increases? Price increases take a long time – multiple years - to trickle through an economy and to appear in GDP and unemployment numbers. Those massive energy cost increases have yet to be seen by consumers. Historically, price of gasoline is only slightly above normal. Why have such massive energy price increases been 'shrugged off'? Because price increases due to energy have not yet fully arrived. But again, UT forgets how 'lagging' those economic numbers are. UT forgets why neo-classical economics fails to measure and predict what makes or breaks an economy.

Massive energy price increases will arrive and will seriously impact those economies that most guzzle wastefully. It has only been a year? Therefore no economic data (ie GDP or unemployment) has yet to measure those consequences.

We have yet to see the downturn that is coming due to George Jr ‘spend wildly tax cuts’. But again, recessions created by “Reagan proved deficits don’t matter” rationalizations take years to develop. It too will be coming. When it does, GDP and unemployment will be some of the last data to report it.