Well, it might be a good idea to tighten our belts.
It's been reported that consumers represent over two thirds of this country's Gross Domestic Product, and it's becoming increasingly apparent that these n'er-do-wells have gone AWOL.
The Reuters/University of Michigan Survey of Consumers reported that its preliminary index for April fell to a 26-year low, well below economists' median expectations.
And it's little wonder. The consumer is seeing his home equity falling, or disappearing altogether, at the same time that his cost of living is rising and his job security is getting increasingly shaky.
The L.A. Times reported on Wednesday that the median home price in Southern California has now fallen by $120,000 in the past eight months, and a flood of anticipated foreclosures is expected to only increase the downward pressure further.
Wachovia, the nation's fourth largest bank, is just one of the many major financial institutions shackled with bad loans. Meredith Whitney, an Oppenheimer & Co. analyst said this week that $18 billion worth of Wachovia's mortgages now exceed the value of the underlying homes.
And across the country, about 8.8 million borrowers have home mortgages that exceed the value of their property, as reported last week by Moody's Economy.com. That's one out of every ten homeowners.
As payments continue to increase under the terms of the adjustable rate mortgages, the situation can only deteriorate further. Analysts at Citigroup Inc. said this week that $460 billion of adjustable rate mortgages are scheduled to reset this year. And when they do, it will not be unusual for the payments to escalate by as much as $20,000 to $30,000 per annum.
Bloomberg reported this week that foreclosure filings jumped 57% and bank repossessions more than doubled in March from the same month in '07. RealtyTrac Inc. reports that 234,000 properties are currently in some stage of foreclosure and, according to analysts at Lehman Brothers Holdings, about 2.5 million foreclosed properties will be on the market this year and next.
Bloomberg also carried a report by PMI Group Inc. this week predicting that, by next year, home values will be falling at an annual average rate of 20% nationwide, with California, Florida, Arizona and Nevada leading the way.
In the face of this scenario which, from the standpoint of the real estate market, is the worst we've seen since the 1930's, consumers are struggling to be able to afford the higher prices they are seeing in the supermarkets and at the gas pumps.
So far, the so-called core rate of inflation, which excludes food and fuel costs, has remained fairly low, but the significance of eliminating two of the most needed categories is lost on most consumers.
Here in Southern California, the average price for regular gasoline is right now poised to pierce the $4.00 level, and with the recently recovered $114-per-barrel crude still on ships at sea, prices across the nation are sure to escalate further next week.
Understandably, the first area to feel the brunt of the consumer-led recession is the retail sector. March was the weakest for store sales in 13 years. Chains such as Gap, Inc., Old Navy and Banana Republic have reported declines of 18% to 27%. As a result, vacancies at the regional malls are increasing significantly and you will see many more empty store fronts in due course.
The only bright spot is that the low-cost chains of Wal-Mart and Costco are hanging onto small gains.
The stock market is trading within a range on the Dow between approximately 12,000 and 12,700. It has so far been unable to suppress its joy over falling interest rates as the economy continues to tank. Not the best leading indicator available, it's been said that the market has predicted 12 of the last four recoveries. Of course, it should also be kept in mind that Main Street and Wall Street do not necessarily run in the same direction.
So, I'll bet you're saying, at this point, "hey, there's nothing to worry about - the government is riding in, like the cavalry, to save the day."
Well, if the recent Senate version of the pending legislation is any indication, what they may be saving is the skins of a number of large corporate interests, all of whom have been lobbying hard to get on board the latest gravy train. The Senate's version of how to solve the housing crisis is to give billions of dollars in benefits to automakers, airlines, alternative energy producers and other struggling industries, as well as home builders.
Somehow, Congress will eventually come up with something to address the problem, but because of the extreme fiscal mismanagement by the Bush administration over the past seven years, rescue efforts must now be limited, and whatever our legislators devise will necessarily be much too little and far too late.
Of course, the candidates also have their own cures. The statements from Obama and Clinton are like a version of "Can You Top This?" And by the time any new president takes office and eventually gets some sort of program going Elvis will have long left the building.
It's of some interest, however that, as far as McCain is concerned, he's proposing a summer-time rescission of the 18 cent federal gas tax. That's approximately equivalent to the price increase we've seen in the past month, so it doesn't seem to be much of a stimulus.
McCain's plan also calls for keeping the Bush tax cuts, which he denounced as a giveaway to the rich when he originally voted against them. He's also proposing to double the dependent exemption and reduce the corporate income tax from 35% to 25%.
In this respect, it was reported in Parade Magazine last Sunday that 61% of American corporations, including 39% of large companies, paid no corporate income taxes between 1996 and 2000. Furthermore, the article said that "last year, corporations shouldered just 14.4% of the total U.S. tax burden, compared with 50% in 1940."
In summary, we are seemingly spinning out of control into a recession that looks more and more like a bottomless pit, with a government that is so beholden to the moneyed interests that it can't even effectively address the problems of ordinary people.
Kenneth Rosen, chairman of Rosen Real Estate Securities LLC, a hedge fund in Berkeley, California and chairman of the Fisher Center for Real Estate at the University of California at Berkeley put it this way: "At least 2 million jobs will be lost because of this recession, so we'll get a cumulative negative spiral.''
Maybe all we can do is tighten our belts.
Dave McGill, News Correspondent
Dave's column, "The Contrarian," generally published every Friday, to Gather Essentials: News will sometimes present a contrary view to various aspects of the news, or an alternate take on the conventional wisdom of the day, and will occasionally appear on other days of the week
Dave has been a senior officer of a large eastern insurance company, involved in economic projections and investment strategy, president of a Midwestern mortgage banking company, and a financial consultant in Southern California, serving clients in the field of commercial real estate development
You can find all of Dave's "The Contrarian" columns at: http://gather.com/thecontrarian...... Keep up with Dave's other postings and Gather activity by joining his Gather network - just click here: http://atadaskew.gather.com........ You'll find Dave and other News Correspondents, plus celebrity content and plenty of other News experts at News.gather.com.
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Comments: 88
Of course the corporati will cry foul, and the Home Economics Teachers in the middle schools will tell students that it is impossible to become a millionaire, while people continue to become millionaires, but then propaganda is what got us in this mess. Maybe I should call it ADVERTISING, but it amounts to propaganda when the ads offer painless purchases with nothing down and all you make for the rest of your life.
We need some genuine thinking outside the box to get past this, and the first step is to REGULATE the credit market top to bottom.
The moneyed interests have a mortal lock on our political process, which is our underlying problem, and it's hard to see how this can be changed overnight.
In time, ....maybe
Costa Rica has way more challenges than the US, but they have a government and a people who seem to have a clue. Costa Rica has the highest literacy rate in the world, I think, or among the highest ...
here is a link to some quick facts about Costa Rica
When I think that a country of few people with many languages and a pretty tough political history got their act together and I look at the US these days, there is something hugely wrong here. Whatever it is, it is hidden, we either do not want to see for ourselves what it is, or we are being kept from seeing it, perhaps by the media.
Costa Rica thinks energy independence is important, so they live within their means and do not import much foreign oil. They use solar, sugar cane, wind energy, and much of the geothermal energy they have in their 6 active volcanos.
Costa Rica pays for schooling for all its children, it is mandatory, and they subsidize higher education. They have a growing number of expert medical people who are starting to build a health care industry to serve the first world, medical tourism, the new thing.
They have progressive taxes to pay for all of this.
Americans have got to be ignorant mean idiots to think we can have a country and not have it cost a cent, of we can ship jobs overseas to cheaper labor and never demand a price break on the products sold her. We are so busy arguing and being right about things that we are about to self-destruct. At the core America is a great country, but we have a growing number of ignorant "bitter" people, to quote Obama, that have been scaring me for a long time.
You know Dave all your talk about the moneyed interests ... you are wrong there. There are lots of people with money, and lots of companies that do great things in this world. In the US we do nothing to distinguish. We give tax cuts to people who are rich in hopes that they invest in the country .. they don't. We do not require they invest the money here, or invest it at all. We feel like there is no need for regulation and then gasp at the magnitude of the disaster that regularly befall us. There are people insinuated into his government, country, economy that seem to want it to self-destruct so they can use their leverage to clean up after the crash.
When are we going to learn. We need to start acting like we are in the world, and we care about others who are in the world with us in the same country, and the same world.
In Costa Rica they seen to care more about whether people have enough to eat, rather than caring that they supply is to plentiful to make a killing on short prices. In the US and the capitalist world we give a small elite with the power and money to know where to gamble/invest the ability to abuse the people of our own country to generate billions and trillions while average people do not even know what is going on - nor do they seem to care or to be looking for a problem.
The debate the other night was shameful in its almost total disregard for issues affecting Americans instead of shilling for a group of egomaniac figureheads.
Americans are so far from knowing what to do about what is coming on we might as well be dinsaurs trying to figure out how to divert a plantkiller asteroid.
We have eliminated almost all the financial waste in our lives. So far, the financial "difficulties" our economy is facing haven't had much impact on us.
* Eliminate the frills in life ( the frills 'ill kill ya )
* Assume responsibilty for your future ( banking on an employer is too risky )
* Spend you time building a life (rather than spending your money trying to have a life)
It's a simple plan that requires hard work.
Historically, every agricultural and industrial society has these economic disasters from time to time. Every single one. The reason is that they all have the same kind of money and that kind of money makes such things inevitable. You can't solve the problem without changing the nature of our money.
Without belaboring the points, your Article is very well written Dave.
Blessings ~
René
Is it inflation or the de-valued dollar that is causing the problems with the prices of commodities?
The reason that the dollar has dropped so far is that the war in Iraq was not paid for by the US it was financed by selling bonds. The primary reason for the dollar drop is the lack of revenue for the US Treasury and not cutting the spending by the US Congress. Not enough revenue, too much spending, made the dollar lose over 40% of it's value in the last seven years, or since the Bush tax cuts.
Is it possible it won't and we slip into recession? Sure. But, to claim we are in recession as of April 18, 2008 is supposition at its best and disingenuous at its worst.
Good article.
The U.S. will also never have the Communist redistribution of income that will satisfy you either, and you will never learn that income redistribution destroys the incentive to work, and thus a country's economy. Canada is your best chance of an English speaking country that believes in "from each according to his means - to each according to his needs".
Yep, heading north sounds like your best alternative.
Thanks for the article.
You know, as much as I hate to admit it, in order to watch sports, I'd like to have an HDTV (just a little 37 inch model would be about all I could fit in our small rooms). But (a) I don't want TV to become more attractive for my kids, and (b) I am very worried about saving vs. spending. I definitely think things will get worse.
Many people have much of their life savings tied up in the value of their homes, and these values have crashed, making retirement much more difficult at a time when companies are eliminating or reducing pension plans and making retiree medical benefits very expensive (over $1300 a month in some cases I know).
Of course, some people will be buying tons of property that has been foreclosed, and will ultimately be powerful land barons. The funny thing is, one has to have money to do that. Why is it that normal people never have money to take advantage of investment opportunities? Because we never have much money, ever, and some of use spend it too fast if we do get it.
Meanwhile, 3.4 billion dollars in a year to a private equity fund manager???? I heard about that pay on Marketplace (NPR) the other night. It even made people who support high CEO salaries blanch.
The problem with trying to boycott Chinese goods is you can't buy 1/6 of a car at 6 places and put them all together to get one car.
I guess we should all be proud that we, rather than those negligent companies, are supporting the country through our taxes (even if most of the money goes to China to pay interest on National Debt or to exploding devices and other war-related paraphernalia).
A fine mess we are in, Ollie.
What the tax-cutters fail to realize is that government spending drives the economy in many ways, and makes possible the private drivers of the economy. The emasculation of government, the reduction of services the prevent people from falling into destitution whenever an interruption of earnings occurs, the crumbling of the infrastructure that makes the economy possible are a recipe for disaster.
Strong, effective, pro-active government is a REQUIREMENT of a healthy, vibrant society in which a reasonable sharing of the wealth can occur.
Letting the rich have everything so that they poor can hope to gain some of the scraps from their table leads to a small cabal of super rich and growing legion of dispossessed.
In other words, in a trickle down economy, when the rich don't piss on you, you die of thirst.
2 things, You don't watch the news and you believe what the liar bu$h says. That's all.
CLICK FOR GRAPH
In each case, the economy was already AT THE END or near the end of the recession.
In the current case, the PRESENT-- we still have not had ONE MONTH of negative growth, much less the SIX MONTHS required for a recession to have occured.
And by the way--- if we're looking at the "decline" in the housing market, shouldn't we also look at the "boom" that preceeded it ???
An existing home, bougt in the year 2000 for 120,000 in 2007 was worth about 200,000. So, not quite the 120,000 decline in "value" like the one cited in Demagogue David's example, but that was just Californication, and my example is for the entire nation.
So the value of the average home rose 80,000 bux in the last 7 years, eh ??? wonder why Demagogue David doesn't tell us THAT ???
Could it be this is just a CORRECTION, just like the markets often go through ??? Could it be that this correction doesn't lead to a recession??? Well, yes, but Demagogue David doesn't want to sell you THAT, he wants to sell you FEAR instead.
Not only that, there are good indications it wasn't a "bubble" at all, BUT A REAL EXPANSION of unprecedented growth.
If we don't see the massive drop back to "normal" levels then the run up in prices should be described as a shift to a new equilibrium - much as happened during World War II - see the chart. (It's an important question to ask what changed and why?). In the shift to the new equilibrium there was some mild overshooting, especially due to the subprime over expansion, but fundamentally there was no housing bubble.
Another fact Demagogue David doesn't mention is Wachovia has $48.9 billion in mortgages
He also doesn't tell you things aren't all bad for Wachovia, due to their own diligence in guarding their shareholders' investment in over 1.9 billion outstanding shares currently trading around the 27-28 dollar mark.
And across the country, about 8.8 million borrowers have home mortgages that exceed the value of their property, as reported last week by Moody's Economy.com. That's one out of every ten homeowners.
The 8.8 million people represents about 1.5% of the total number of borrowers.
And let's talk about Californication's problems for a second, shall we???
The real issue in today's housing markets is that prices currently sit at levels that are unaffordable given income levels in our state. Take Los Angeles County, where the median price of a house peaked higher than $530,000. With a 6% interest rate and assuming a 10% down payment, the total annual cost of owning such a house would be $35,000 for the mortgage alone and $43,000 if taxes and insurance are thrown in.
This would eat up roughly 75% of gross annual income of your median homeowner in the county -- much more than twice the maximum affordability rate used by Fannie Mae and Freddie Mac when making loan decisions. Prices are going to fall one way or another; it's only a function of time. They simply aren't sustainable at their current levels.
So what caused prices to go so high? Home bubbles are nothing new. We had one in the late 1980s, another in the late '70s and certainly many others before then. The bubbles are characterized by people buying an asset, in this case a home, and thinking they can sell it at a higher price regardless of the fact that the price being paid is completely out of whack relative to fundamentals such as income. At their root, all bubbles are driven by individual greed -- the desire to make money.
So why should there be a bail out??? Most American's don't believe there SHOULD be a bailout.
the article said that "last year, corporations shouldered just 14.4% of the total U.S. tax burden, compared with 50% in 1940."
Well, I shouldn't even have to tell you why THIS is silly to compare. When the "income tax" was first started less than 2% of the people paid into the fund. Even by the 40s, very few people actually PAID an "income tax." Corporations paid the vast majority of ANY FORM OF TAXATION during this period of hyper commie pink-0 crapola.
It isn't so much that taxes on corporations have gone down, as it is taxes on individuals has DRAMATICALLY increased in both size, and the number of people required to pay.
Poor Demagogue David, has such a terrible product to sell--- FEAR, and yet, so many people seem so willing to buy into the doomsday scenarios laid out by a peddler of paranoia.
Hard to imagine why.
I then stopped to buy gas at Kroger, because I get save ten cents/gallon if I spend $100 (like that's not a MINIMUM trip to the grocery store.) I paid almost $40 to fill up my Saturn!!! This time last year, it cost me $20.00 or under!
Tighten our belts indeed!
jJack, Citi Group announced today they were laying off 9,000 workers. I'll bet those 9,000 think we're in a recession.
Mary M. I went to get gas today at a exxon station. It was 3.54 per gallon. I left and went to a Citgo and it was 3.45 a gallon. Thank God for Hugo.
Dr. dummy (I may be dumb, but I'm not stupid) B., Apr 18, 2008, 8:14pm EDT
I'll buy you and yours a one-way ticket to Venezula. Just say the word.
how many times do I have to say it about obammie??? meeeeeeeCain is a nutjob
the cheapest gas I can now find in my neighborhood is $3.71, most at $3.77, and I did see a station in Pasadena with their regular at $4.03. It's here, my friends, $4 gas.
So you got that much money just laying around. That explains your attitude.
''how many times do I have to say it about obammie??? meeeeeeeCain is a nutjob''
Man, that cracks me up. Good for you!!
I believe that you are correct t in that the "official" definition of recession requires something of the GDP which has not occurred. that is a classic problem, we can always define anything to make it look better than it actually is. The average person knows this is a serious recession because our households can't spend that GDP to buy gasoline and groceries. That's the same as removing all poverty by declaring the poverty level to be $1 per year. Almost everyone can achieve that.
Throw away that handbook defining things which are irrelevant to the public and look instead, at real life situations, and then you will find "recession" written all over the faces of people struggling to make ends meet! The GDP will be meaningful to the average citizen, when that citizen can tap into the GDP to pay his mortgage.
Great article, which expresses some of the problems in our economic futures quite vividly.
just throw away the definition of words and make them up as you go along *ROFL*
I wonder, is this mysterious "average person" anything like a "typical white person"????
The problem with polls, is this-- you are basically asking people about their EMOTIONS and not a fact they can point to, define, and prove. The average person IS THE GDP, as bone head pointed out--- 2/3s of GDP is the consumer spending MORE MONEY THAN HE HAS.
It matters very little if the sun is shining, if everyone insists it is raining.
But do you also wish you could have our gas mileage too. While you, in the EU, have standards that require 30-40 MPG, we here in the US are driving care that get 10-25 MPG. Now that's not too smart.
James, there's no "official" definition of recession and then some amorphous "unofficial"definition. A recession has been defined for a very long time ... and we haven't met the definition as yet.
But, why let facts get in the way. We're in the midst of a trough of the normal business cycle. Whether the trough is deep enough to actually lead to a recession is yet to be seen.
It amazes me when folks use a very technical term to try and strengthen their false argument based on ancedotal evidence. When that is pointed out, we hear, "Well! You're just being technical!"
Yes, I am. Which is appropriate when we're dealing with the technical workings of the economy.
Guilty, guilty, guilty.
Thanks once again Dave for keeping your thumb on this. I only pull in my horns and try to stay very quiet until the storm is gone. I have heard some ideas such as buy oil stock because it will rise and help with the other things going down like my savings account but I just can't step up to this type of mentality. Guess I will continue to hide.
Apparently, there i indeed an official definition based on your comment. That is the only definition you will allow, so it must be official! My point, in case you didn't get it, is that no one in the citizenry cares two whoops about the definition or a recession. The do care how much trouble they have earing money and making ends meet, or getting a job. The word has come to be used for depressions that are mild if you want to put it that way, correct or not. You are about the only one who cares. And you probably wouldn't except you cling to that official definition, that doesn't exist, to tell everyone that the economy is great when common sense tells them it is not!
Okay, we're not in a recession, name it what you will. The economy is still in bad shape and getting worse. And that comes from sources much more reliable than you or I either one.
Not everyone who has money is working against the country - PERIOD. To say that phrase like it has meaning if it is not qualified in some way I am finding really offensive. After 40 years of hearing everything blamed on the rich, welathy ... hey, I do it myself, it is obvious that this line of thought is fruitless, barren.
There are good rich people, there are bad rich people. There are corrupt people, and criminals, and it is about finding out who is what.
The problem is that no one knows or cares enough to be able to make or demand laws that prevent these kind of perversions of the country by corruption and greed.
My quality of life is lessened for no damn reason with my country cannot run itself efficiently or well. I do not like paying $4 for a gallon of gas when there is no shortage, we are not running out, and the Saudis pay $1.50 to pump it up.
This is about sucking the welath and power from a group of people worldwide to clear the road for more social enginerring or the type that will make the Nazis look like Romper Room if people do not start getting galvanized.
When you buy into and are dismissed from standing up and being counted by the "technical" argument of D.B. and JJM. you are simply allowing your being to be dismissed by crackpots who like to pretend they are someone so they can intimidate people.
Read these two people's posts and ask yourself have they ever had a nice or human comment or shown concern for people, or do they always insult, badger, drive off topic of employ twisted rhetoric to win an argument ... and do they have any solutions? Not a one.
Somewhere in the US there are people who actually have ideas and do not need to plsy these BS games because they know what they are taling about and have decent goals that included everyone in the US in them ... wonder why those people are not saying much or running for office?
That is exactly why you are paying $4 per gallon without a whisper of a windfall profits tax except from the one candidate who spurns PAC money and lobbyists' interests.
That is why many people pay far more than they need to for drugs while companies like Pfizer squirrel away $40 billion in cash.
That is why we have a foreign policy based on military action. The defense and oil industries and pro-Israel PAC's are all putting constant pressure on our legislators to seek military solutions. There is no money to be made from diplomacy.
You name a problem in this country, and I'll show you how our insidious, money-based political system has either caused it or greatly magnified it.
And the system has impacted on the current state of the economy in multiple ways that will make our lives more and more miserable over the forseeable future...
Thanks for coming by and I appreciate your comments, bruce, but I just wanted to clarify what I mean when I constantly refer to the problem related to the moneyed interests...
Here is my hypothesis on what the problem is and why it is
to intractable and not so simple to solve.
To a great extent those who have money know how the world
works - the big interests. There is a big system set up as will
happen no matter who has money or influence, and that system
tells the politicians what they need to know to advance the
economy.
The problem is that there is a lot of information passed on by
these interests that ain't so. Look at Monsanto's vision of
the world, or Diebold, or the medical insurance companies.
The problem is not money, it is the misuse of money, it is
the failure of the media, it is the economic system that
incentivizes people to break the law for economic gain
and to not consider other people, the environment or
what is right.
For so many years, decades, we have had a morality
in the US that is greed and any cost, and it is all
through our society. To single out a particular group
for scapegoating, when we do not even know who
that group is or what they have really done does not
help.
implantable in Americans that can get us on the same page with
some of the same goals. We are all guilty of personalizing the
big things we see wrong with the world, but we need to develop
a wider grammar maybe.
This is one of the things I like about Obama, he seems to be able
to start up these discussions, not that they are very useful at
this point, of very advanced, but I think the failure of Obama to
get "swiftboated" by the right over Reverend Wright is evidence
that he has people listening and that he is saying something.
This problem is so much more complicated than just rich people,
or the "moneyed interests" it is like trying to talk about curing
cancer by saying we just have to kill the cancer cells.
When people think about what we need to kill this cancer,
most of them will be afraid to fix it becuase most of us are
somehow part of the disease or supporting it in some way.
The FACT is, things in the USA are better than in most of the other countries of the world, so if "we" are in bad shape, "they" are in much worse shape.
After all, the rest of the world depends on the USA staying healthy, they have a vested interest in doing so, as the purchase of our monetary units attests.
The FACT is, only two segements of the economy are experiencing any REAL problems, the sub prime mess, and the banks associated with it.
That's it really--- otherwise, the fundamentals here are pretty sound, just as Bush said months ago in his widely ridiculed speech about "storm clouds" being on the horizon.
It was true then, and it's true now, our economy really isn't all that bad of shape.
> the other countries of the world, so if "we" are in bad
> shape, "they" are in much worse shape.
If this this the moron's argument for accepting the present elite's new world order you can shove it back where you pulled it out of.
The sky is not falling. Remember how we used to laugh at Japanese transistor radios, and now we have Sony ... and now Sony stuff is nice, but other companies make stuff just as nice and much cheaper. Things change and we had better get used to it, because it is not slowing down any.
It makes it very critical for all humans on the planet to start to realize we line on one planet. Lots of Americans fear this one world idea, as do I in some ways, but I fear more a continuation of what is going on now, and denial of change by governments and the contiunuation and escalation of war. We need to discuss and get down this idea of the new world order so it is palatable to all, and then start to fix the planet ... that is what worries me.
Why is it that "tax cuts" are always blamed for economic troubles? How does the government not taking as much money out of the economy ever get blamed for harming the economy?
When government taxes, it removes money from the economy; and it can never put back in the same amount it takes out (it never would even if it could). Taking money out of the economy by taxation can only do one thing: hurt the economy.
If a common thief tried to justify his actions to his victims by claiming he was "stimulating their economy" by spending the stolen loot in their retail stores, he would be rightfully ridiculed. He would probably be punished worse than otherwise, for insulting the intelligence of his victims on top of his theft of their property.
So why is it that when politicians use this same tactic, they are lauded as wise and benevolent benefactors of the public?
He was against torture before he was for it too. Time to start paying the price, people.
Regards,
Doyle I <~~~~~
An example of this can be found in an article I recently wrote @ Domestic Emergency Supplimental funding request?
Very few care, apparently none are on Gather !
great article by the way....but is tightening our belt really the only way to go?? Why haven't we been in the streets rioting in droves to oust Bush???
"In Rich Dad's Prophecy, author Robert Kiyosaki tells how his rich dad foresaw sharp declines of the stock market and upheaval of corporations and their 401K retirement plans. More importantly, he believes one of the biggest stock market crashes in history is yet to come and that it will wipe out the retirement savings of millions of employees. But this is not something to fear. Rich Dad's Prophecy reveals not only the best ways to safeguard wealth but how to actually prosper from the events to come. The fears, dreams and actions of the baby boomers will control our economic future."
Basically, he says that as Baby Boomers retire the economy will collapse as they attempt to sell their stock, and eventually their homes, to retire.
A CONSPIRACY THEORY (for those who want another one): Perhaps those running 'The Military Industrial Complex' want to lessen the blow of the 'tidal wave' destined to hit our economy. To that end, some of the 'flood waters' have been released early, to lessen the pressure on the levies and 'encourage' individuals to prepare for what will come in a few years.
Well, I must disagree.
What do you think the government does with the money they take from all of us in taxes? Do you think it is squirreled away at Fort Knox?
Now, they run programs with it. For example, they rent office space (putting money in the pockets of the building owners), they hire employess (who receive a paycheque for the job they do and pay taxes and spend money at stores all around the neighbourhood), they buy goods like desks and office equipment (putting money into the pockets of office equipment retailers, creating jobs manufacturing desks and what-not, generating economic activity at the retail, wholesale, manufacturing and transportation levels).
Government spends money on things like police, meaning they hire new recruits, train them, equip them with police uniforms, kevlar vests, badges, guns, nightsticks, radios, tasers and all kinds of stuff. Some of them even get cars to ride around in. All of this is economic activity from the young recruit who is hired and trained to the trainers who are paid to teach them to manufacturers and distributors of all the items the police need from badges to cars.
Government spending does indeed create economic activity and jobs. Many millions of people work for governments at the federal, state/province, county or municipal level and many others work for some agency or organizations upported by government funding (like public libraries, schools, etc.).
Tax cuts can create jobs in some cases by increasing consumer spending marginally, thus increasing demand for goods and services marginally. They can also generate economic activity at the high end through increased investment in business.
However, the tax cuts (both the Reagan ones and the Bush ones) favour the wealthy, giving far more in tax savings to them than to the ordinary consumer. And the wealthy don't always invest in business at home. In fact, many of them invest in business overseas where the costs of running the business are cheaper and the profits margins can there for be higher. Some of these wealthy with windfall tax cuts also simply put the money in offshore, tax sheltered savings institutions so that their interest income from this money is sheltered from further taxation down the road.
So tax cuts often mean money taken directly out of the country by the very wealthy who enjoy the greatest benefits of them.
Government expenditures, however, are almost 100% here at home. The exception being war related costs and other foreign military activity. Diplomacy and embassies and the like actually account for a very small portion of government budgets.
Some of our challenges here have to do with the purchase of regulatory agencies by the corporations who are supposed to be regulated. The influence of the corporations makes the agencies into arms of the corporations. What ordinary person reads the fine print from the FDA anyway? I don't recommend it.
If you have to grow your own food, you may be healthier for many reasons. Basil can be grown in water in the windowsill. There are good books on growing salad greens inside.
Portland, Oregon, has a Tour de Coops each year that is very interesting. People all over town are keeping chickens. Whether long-distance transport is shut down for a lack of fuel or for weather reasons, some people will be sort of ready.
Growing food in town looks good too--not so boring as monocultures of fertilizer- and mowing- hungry grass.
rubes....
For you, I copy and paste the opening passages of Chapter 3 of Frederic Bastiat's masterpiece "That Which is Seen, and That Which is Not Seen." The title of the chapter is "Taxes.":
Have you never chanced to hear it said: "There is no better
investment than taxes. Only see what a number of families it
maintains, and consider how it reacts upon industry: it is an inexhaustible
stream, it is life itself."
In order to combat this doctrine, I must refer to my preceding
refutation. Political economy knew well enough that its arguments were not so amusing that it could be said of them, repetitions
please.
It has, therefore, turned the proverb to its own use, well convinced
that, in its mouth, repetitions teach.
The advantages which officials advocate are those that are
seen. The benefit that accrues to the dispensers is still that which
is seen. This blinds all eyes.
But the disadvantages which the taxpayers have to bear are
those that are not seen. And the injury that results from it to the
providers is still that which is not seen, although this ought to be
self-evident.
When an official spends for his own account an extra hundred
sous, it implies that a taxpayer spends for his account a hundred
sous less. But the expense of the official is seen, because the
act is performed, while that of the taxpayer is not seen, because,
alas! he is prevented from performing it.
You compare the nation, perhaps to a parched tract of land,
and the tax to a fertilizing rain. So be it. But you ought also to ask
yourself where are the sources of this rain, and whether it is not
the tax itself which draws away the moisture from the ground and
dries it up?
Again, you ought to ask yourself whether it is possible that the
soil can receive as much of this precious water by rain as it loses
by evaporation?
There is one thing very certain, that when John Q. Citizen
counts out a hundred sous for the tax-gatherer, he receives nothing
in return. Afterwards, when an official spends these hundred
sous, and returns them to John Q. Citizen, it is in exchange for an
equal value in corn or labor. The final result is a loss to John Q.
Citizen of five francs.
It is very true that often, perhaps very often, the official performs
for John Q. Citizen an equivalent service. In this case there
is no loss on either side; there is merely an exchange. Therefore,
my arguments do not at all apply to useful functionaries. All I say
is—if you wish to create an office, prove its utility. Show that its
value to John Q. Citizen, by the services which it performs for
him, is equal to what it costs him. But, apart from this intrinsic
utility, do not bring forward as an argument the benefit that it
confers upon the official, his family, and his providers; do not
assert that it encourages labor.
When John Q. Citizen gives a hundred sous to a Government
officer for a really useful service, it is exactly the same as when he
gives a hundred sous to a shoemaker for a pair of shoes.
But when John Q. Citizen gives a hundred sous to a Government
officer, and receives nothing for them unless it be annoyances,
he might as well give them to a thief. It is nonsense to say
that the Government officer will spend these hundred sous to the
great profit of national labor; the thief would do the same; and
so would John Q. Citizen, if he had not been stopped on the road
by the extra-legal parasite, nor by the lawful sponger.
Let us accustom ourselves, then, to avoid judging of things by
what is seen only, but to judge of them by that which is not seen.
We live in an apartment which forbids outdoor planting of "fruit-bearing" plants, and we are also not allowed to put up a clothesline.
I can't wait until we are able to buy a home, but despite there being so many homes for sale, the possiblity of getting a loan is VERY low.
We will probably be homeless by this time next year if things don't improve- even with only two people making a total of 64,000 a year!
Do you really think they want crippled 50 year olds ?? *ROFL* you really are stupid you know.
and berry berry, always posting as if I'm not even here *double chuckle*
rubes
A child broke a baker's window and a crowd gathered to listen to his angry rant. The baker was mad about having to pay a glazer to fix the window and how his money was being wasted in such a way. Many in the crowd sympathized with him until a lawyer spoke up.
"Actually, this is a benefit for the town. The money you pay the glazer will be spent yet again to buy his family clothes and food. Some of that money may come right back to you when he buys bread. This ripple effect will benefit many people when that money is put to use"
The crowd wondered at this wisdom and agreed the child had done all a favor by breaking the window. The lawyer smiled and accepted their words of praise as they all walked away.
The baker watched them go and turned to wife. "A favor huh? What about what I wanted to do with that money? I was thinking of hiring another helper or buying OUR children new clothes...that money is now lost to US"