Americans are pathetic!!

[just me]

Umm, perhaps you are not aware of this, but it is ratepayers that pay electric bills, not government taxes.

Umm, perhaps you're not aware of who bought the electricity from the corps producing it outside of the State when SoCal Edison & PG&E filed for bankruptcy & the outside Corps wanted cash on the barrelhead?

"In two devastating acts the state government has jumped into the business of buying and selling electricity. As one power executive said, "I sure hope you guys know what you're doing. It takes just a small misjudgment to lose an awful lot of money."

Of course, the state doesn't know what it's doing. One capitol wag compared Gray Davis buying power to a day trader going up against Goldman-Sachs. So far, that analogy hasn't been fair...to day traders. Three weeks ago, Gov. Davis signed SB 7x. It appropriated $400 million of taxes to purchase power on the spot market. It took Davis 10 days to spend it. He has now blown through nearly a billion dollars in this manner, averaging $120 for every family in California.

You can tack that cost onto your January electricity bill. Davis has been buying power for as much as 70-cents per kilowatt-hour, and selling it for seven cents. This gives ratepayers the illusion of cheap power, but the 1 of 4 reality is inescapable: 7-cents shows up on your electricity bill, but the remaining 63-cents is hidden on your tax bill. (In this case taken out of the previously collected tax surplus) Using tax money to subsidize rates creates wildly perverse results. The taxes paid by a family that has done everything it can to conserve electricity end up subsidizing a spendthrift household's bill. Since individuals pay most taxes and businesses use most electricity, families end up paying businesses' bills. And consumers in municipal utility districts end up paying for their own power on their electricity bill, and for somebody else's power on their tax bill.

Davis and the legislature have found this arrangement so appealing that they have now approved AB 1x. It gives the Governor a blank check to enter into long-term contracts with energy producers, with no idea how much power will be purchased, or at what rates, or how long consumers will be bound to these contracts."

http://www.atomicinsights.com/Guests/McClintock2.html Feb. 6 2001

Start from that & see where the $13billion in budget (taxpayers money) surplus went. The $$$ the State is sueing for will go back into the General Fund, not our pockets. There are Consumer Actions in the Courts for our pockets tho'. 8)

Enjoy,

 

[DemoCoder]

No one denies that the trade deficit could become a problem. The key word is "cannot continue indefinately". The US currently holds $6 trillion in foreign holdings, and foreigners hold $8 trillion. At $450 billion per year, this balance of assets will diverge much quicker, but a deficit of $50b or $100b could be sustained much longer.

Edit: Remember the nightmare of the $300b deficits of the 80s and the harping on the $4t debt? In just a few short years, the budget was balanced and it went to surplus. That $2t difference in asset holdings could be vaporized in a decade if the trade swings the other way.

There will not be a crash, given the way the financial markets work and what the US government and EU governments would do to ameliorate it, but I maintain that Bush's and Europeans to adjust interest rates and strengthen the dollar will merely make any "correction" worse when it comes.

The natural course of action is to let the dollar float, as it adjusts downwards, US imports will slow. Even if the US doesn't increase exports, this will make the current account smaller. Moreover, something must be done about cheap consumer access to credit. Americans need to take a bite out of their foreign consuming for a few years.

The problem is, the US government, from Bush to Clinton to Bush is trying to prop up demand by making it easier for Americans to borrow. The problem is, they are spending too much of this money on foreign goods, so it is not helping employ Americans in the manufacturing sector. (chiefly, it helps in the housing sector)

In any case, a natural correction is coming, either through dollar weakness, or through consumer debt, Americans can't keep up the rate of consumption they have with the current weak economy. This will translate into a natural lowering of the trade deficit. Meanwhile, any moves in the stock market will merely lower the return on foreign capital, which will also lower the current account.


I still don't see this as "empire" or "parasitic". Manufacturing sectors are declining althrough the Western world, and the US isn't the only game in town when it comes to exploiting cheap labor. The EU just happens to have their own Mexico in their backyard, eastern europe.

As recent as 1986, the investment flow from surplus from US to EU, does that mean the EU was an empire?

If the US wasn't a declining parasitic empire (defined by trade and investment flows) up until the 90s, how could a shift happen so quickly?

Simply put, I don't believe such short term shifts are symptomatic of an underlying disease. If you're still on this board in a few years when the pendulum swings back, I wonder what your explanation will be.

 

[pax]

Considering consumption is the only thing keeping the economy afloat I dont know what is supposed to pick up the slack and avoid a deep recession in seeing a need for reduced consumption. There is a need for a return of manufacturing to the US and the lower dollar will make some of that happen.

I mean demo, you are agreeing with those 'nutty left wing envorinmentalists' now?

I dont think there is excess consumption. In fact average age of cars has being going up. They are more reliable but they are also much more expensive than in the past. I think if anything there is only bad management. But thats for environemental issues. For profit management has excelled. Quality of most everything else has been going down however. I have 45 year old maytags here but I see friends who have to buy new appliances every 5-10 years as they break down sooner now. That goes a certain ways to explain the increased consumption. Not to blame corporate amercia too much on that... market has always wanted lower prices but only in the short term.

But neo feudalists dont care or want consumption of the masses anymore than the ultra left. They only care about the consumption of the elites... Thats why I keep reading books about lip service to those environment types who want lower consumption at any cost. From Prince Philip to Ted Turner and Donald Trump. Books by european monarchs and american billionnaires...

 

[DemoCoder]

pax, key phrase "foreign consumption" and "consumer debt". I have no problem with consumption, as long as its consumption paid for with money.

Consumption paid for by borrowing is wrong most of the time. Borrowing should be for investment.

 

[stevem]

pax, key phrase "foreign consumption" and "consumer debt". I have no problem with consumption, as long as its consumption paid for with money.

Consumption paid for by borrowing is wrong most of the time. Borrowing should be for investment.

Why? What's the fundamental diff...? You permanent income life-cycle hypothesist, you...? Notwithstanding, I rebuke the title of this thread...

Edit:typo...

 

[pax]

Well lowering foreign consumption in the current political and economic environment is probably as bad as returning factories here since we are not very intent on manufacturing for consumption of other than north americans.

We are as interested in seeing a healthy economy abroad as here. Though we could be independant if we wanted, its not a good thing if we did. People buy on credit not because they overconsume but because they dont earn enough. Either way it will stop soon as even loan sharks have their limits. This will lead to the necessary correction which is deflation of prices.

Now the trick will be to maintain wage deflation less than price. However if the powers that be dont care anymore about the mass market then like in the 30's wagesd will fall faster than prices making the situation that got us there much worse. Then itll be time to ask which mechanisms work in the eocomy and which dont.

How bad can it get before things get changed? I live potato and wood country. Having just run as a candidate for the NDP in my riding in the last provincial election I got to talk to a lot of the people involved in these mostly export markets. Even though they are staples they are currently going thru a serious downturn. Dollar can account for part it now but the downturn started way before the dollar dropped. When people cut down on staples and we've been selling those staples here in an increasing fashion for the last 50 years -until now- I think we ccan start worrying a little.

My position as candidate? We are too dependant on exports in Canada relying on it to provide for 35-40% of our economy. We need to do the right thing in gov policies and make sure the local economy is as healthy as can be.

Consumer debt has always been bad. I dont see any attempt from much of the right to identify its cause tho. Overconsumption as a reason to me sounds pretty weak. And any lowering of consumption will gut whats left of the growing economy. You seriously think that can happen without political repercussions?

 

[stevem]

Pax, you're a real optimist, eh...?

Consumption=bad, trade=bad, FDI=bad? What's next? LS-IM-BP being gospel? Damn, I feel like the last of the mercantilists...

 

[DemoCoder]

The problem is keynesian economic policies. Demand falls, government tries to stop the fall in demand. It lowers interest rates, alters reserve ratios, makes borrowing money easier.

People then buy on credit, demand rises, economy looks good again. Eventually, consumers hit debt ceiling and debt servicing cuts into their consumption. Demand goes down again, but this time consumers are already indebted? Solution? Make credit even cheaper.

The only way you can continue taking on more debt is if you income is rising as fast as your debt, that way you maintain a constant debt-to-income ratio. But since incomes have not risen as fast as debt, people are deeper into debt.

The end result of this is that at some point, the government can handle out rebates, cut taxes, and ease borrowing, and demand still doesn't rise because people are using most of the extra money to payoff debt.

Debt in and of itself isn't bad. I am credit card debt free and have no car payment. But I have a mortgage. That mortgage bought a house. The house was an investment. It appreciated and I also get to live in it. When I am done, I will sell it. The money that I borrowed over my 30 years future income went to pay constructor workers, plumbers, electricians, architects, lawyers, real estate agents, and hundreds more. A debt that builds a factory so people can work is good.

Even consumer borrowing to buy goods which they could not afford out of savings or income isn't bad (say, car, or computer, wash machine, etc) since they will derive benefit from those over many months or years, and they wouldn't have purchased them otherwise.

However, a deeply indebted consumer who is borrowing just to eat at restaurants, by high priced textile luxuries, etc probably isn't doing themselves or the economy any favors.


The problem is, if you want to artificially keep demand high, it's a short term fix. I don't mind 3-4 years of recession if thats what it takes for people to pay off their debt,rebuild consumer confidence, and for corporates to take a breather from the heavy investments they made in the 90s. If we come out of it much stronger and ready for another big expansion.

I object to short term "stimulus" techniques which attempt to create artificial demand from people who are already bent over backwards. It's just another form of voodoo economics.


And like I said, the current crop of consumer credit based spending is not indebting Americans to future Americans who will be paid via debt payments (basically, a form of transfer payments from one generation into the next), it is indebting Americans to Japanese, Europeans, and Chinese. That is not neccessarily bad, it's just a form of transfer payment from the rich baby boomer generation to new developing economies.

However, it's not the transfer payments or debt that I'm worrying about, it's the structural changes happening to the economy because of the foreign consumption, and while a certain amount of de-industrialization is bound to happen, the manufacturing sector drop was too quick relevant to other nations. Like with currency, interest rates, etc it's best to be reasonably in-sync with other western nations. And while Japan, Europe, etc are also shrinking manufacturing and increasing services, I think the US acceleration in this area sets up an imbalance.

I urge you to lookup what happened to Japan in the 80s and compare it to what happened to the US in the 90s. Three words: massive credit expansion. Then compare what happened to Japan after '89, and look at what's happening here at '00. The US financial system isn't as inflexible as Japans, so recovery will be easier, but politicians should learn, you can't deficit spend your way to recover if you are already deeply indebted.

 

[DemoCoder]

BTW, Europe has it's own set of unique problems because of the exorbitant welfare statism and graying demographics, falling population, and birth rates, the youth are heavily indebted to the old.

http://www.guardian.co.uk/eu/story/0,7369,974986,00.html

Not doing the right thing now will make changes in the future way way more painful.

 

[Bambers]

People need to work longer imo, we do live longer now.

Also, the uk government needs to drop the stupid idea that loads of people should go to university when they don't need to. Dumbing down of gcses/alevels doesn't help mind.

 

[pax]

Pax, you're a real optimist, eh...?

Consumption=bad, trade=bad, FDI=bad? What's next? LS-IM-BP being gospel? Damn, I feel like the last of the mercantilists...

You havent read me too much have ya ... Consumption isnt bad its good. Ive always said that. We should consume what we produce plain and simple. And maximizing production for mass market items as much as possible whithin as socially acceptable framework (keeping time for some quality of life). Trade is good if the playing field isnt too skewed. But the only healthy economies that ever came about were those that protected their markets while developping themselves.

The overall problem is, according to the mass market, we are overproducing. If we didnt buy on credit what is being produced production would drop sharply following the drop in demand. Replacing that production with what other economic activity to avoid the serious problems ahead is what Id like to see proposed.

Saying we need to save more means we will buy less. If we buy less what incentive will we have to save as % bottom out? What will we (or many of us) earn to save in the first place if we seriously slowdown buying?

What economic model is supposed to placate a significant downturn in the consumer economy?

I pretty much see the economy as a whole here. Not just local US or Canadian economy...

There are understandable cycles in the economy then there are very severe dislocations whhic traumatise investor and consumer alike. I think the level of consumer debt and increasing debt will mean more than just a recession. In severe recession there is the possibility of a snowball effect. The more we insist on refusing workers a diminishing return on their average productivity the less that worker can afford to buy what he makes.

A 3-4 year recession would also make it hard for people to pay back what they borrowed...ect

Is it really necessary for such severe recessions to occur? Was the great depression necessary?

 

[RussSchultz]

The overall problem is, according to the mass market, we are overproducing. If we didnt buy on credit what is being produced production would drop sharply following the drop in demand. Replacing that production with what other economic activity to avoid the serious problems ahead is what Id like to see proposed.

I'm not sure what else you can do. If you try to correct over production, then you lose jobs, which then buy less, which then leads to more "over production", etc.

What kind of economic activity are you suggesting?

 

[pax]

Im simply saying there was not only no excuse for average indebtedness as production was extremely high and we had no lack of any ressources to make what we need or like to buy.

Demo proposes a 4 year recession. To correct what? The tech bubble is over. Such recession can cause as many problems as it 'helps'. And I dont see consumer indebtedness go down durung recessions of the last 20 years. Its steadily gone up in good times and bad.

I want an economic model that makes the consumer come out of his current indebted situation. One that respects fundamentals such as levels of productivity. Saying we need less economic activity when we have no lack of any resssources as far as I can see isnt an acceptable answer to me.

I think we can come up with answers without traumatizing both mass market investors who can be notorious for abandoning such investing for very long periods if the pain is too great and consumers alike.

 

[pax]

The overall problem is, according to the mass market, we are overproducing. If we didnt buy on credit what is being produced production would drop sharply following the drop in demand. Replacing that production with what other economic activity to avoid the serious problems ahead is what Id like to see proposed.

I'm not sure what else you can do. If you try to correct over production, then you lose jobs, which then buy less, which then leads to more "over production", etc.

What kind of economic activity are you suggesting?

Any answer cant be simple or need be brutal. I think the lower dollar is part of the answer. That will defenitely happen between the effect on portfolios of people and nations divesting a bit with the euro and the trade deficit and the return of some manufacturing (tho god only knows how much as China is such a cheap place to do business). I think gov mandated minimum wage increase pegged to inflation is a very modest thing to do.

Any tax reductions (not a fan here in the face of such huge US gov debts but Canada can cut a bit as we still have surpluses) should al be directed to the consumer from the bottom best seen in persdonal deduction increases.

Anything that permits higher consumption or at least preserves that which exists.

I used to think that big buiz was a real culprit then I recently read of the income per employee of small and medium sized biz which usually avoid unions and exempted gov regulations. They can be 2x as profitable per employee as many large blue chips. I aim the minimum wage pegged to inflation at them.

Large corps are increasingly a weaker factor in employment as they are the most to invest in the most advanced tech which means the biggest job losses.

Less gov subsidy and tax breaks that funds such job elimination in the short term isnt a bad thing. Good for reduced consumer taxation too.

Ultimately as Lou Dobbs put the retaking of the helm of corporations by investors over management that has raided the pot for far too long already. I dont see gov in this tho. Its up to investors to agree to put a stop to the huge pay scales of their white collar employees. Bring things back down ot a more reasonable degree.

The biggest issue being the insane rate of wealth discrepancies that has occured in the last generation or so. Again you cant legislate this people from investors to consumers have to agree its not right to have a sky is the limit society. I dont expect such sociallly motivated changes short of a depression tho. It took serious pain to gut the conservative gov in the last election here in this case with 96% premium rate increase in the last 2 years for auto insurance. Serious pain in the form of a bad recession will help but it can also hinder the social or political process.

 

[Fred]

The pay scale of the white collar ceo is a function of supply and demand, so in a sense I don't have a problem with it. Problem is, it keeps spiralling upward, and at one point the board must intervene to protect the sanctity of their corporation. So what one expects is a massive correction to their income at one point, particularily in a recession.

We haven't seen that form of correction yet (at least not to the percentages that the dow has suffered), which makes you wonder about the integrity of the boards across major corporations throughout America. Thats the major argument IMO! 'Are we seeing a white mens club to the detriment of a corporation'?

But hey, if you get a CEO and he turns a company around (like say Mr Jobs) from one minute to the next, then im all for paying him what he's worth, even if it seems exorbitantly high.

The difference in income between CEO and janitor is irrelevant to me, however the profitability of a company is whats the crucial selling point.

 

[Pete]

(Note: I only read the thread starter. Apologies if I'm repeating something, but I really want to say this

I could care less if Americans knew about a pop singer and a soccer/football player. In fact, I could almost say I was proud they didn't recognize "celebrities," or a couple so vain that they'd actually pay to be "famous." I use those terms in quotes because they're being used in a vapid context, rather than for notable achievements. I like sports as much as the next guy, but I don't consider someone stupid if they don't follow them.

In any case, I'm not sure how pop culture knowledge is related to intelligence, at least in a postive way.