Do We Face “A Japan-style Era of High Unemployment and Slow Growth”?
Invictus here.
Interested parties were treated to a fascinating debate on the evening of November 14, as the Munk Debates assembled four estimable economic minds to debate the following resolution:
Be it resolved North America faces a Japan-style era of high unemployment and slow growth
Arguing the pro side of the resolution were David Rosenberg and Paul Krugman. Arguing the con side were Lawrence Summers and Ian Bremmer. Should the video be made available for replay, I’d suggest it’s well worth ~90 minutes of your time to watch. Felix Salmon posted on the debate here, and Paul Krugman made mention of it on his blog here.
The results tell us that Summers/Bremmer swayed the undecideds to their side:
Personally, I went in on the “pro” side and came out unpersuaded by Summers/Bremmer.
My take on the essence of each debater’s arguments:
• Krugman – There are solutions to our current issues, but our political system is — and will remain — too dysfunctional to enact them.
• Rosenberg – We are undergoing a massive, wrenching deleveraging that must run its course, notwithstanding monetary/fiscal policy.
• Bremmer – Essentially argued that the US will always be the least dirty shirt in the hamper.
• Summers – His most persuasive argument, I thought, was his closing comment that pessimism can be a self-fulfilling prophecy. The audience seemed swayed by this rhetorical flourish, though we certainly all know by now that hope is neither a plan nor a solution.
Rosie was clearly the most fact-based debater. The arsenal of facts he has at his disposal is simply mind-boggling. He could likely tell you the unemployment rate in April 1955 as easily as he could tell you his youngest son’s name.
The sad truth of the matter, though, is that we’re already mired in an “era of Japan-style era of high unemployment and slow growth.” The only real question for debate is how much longer it will last. Consider:
The unemployment rate has been above 7 percent since the end of 2008. The Fed, which has done nothing but downgrade its economic assessments for quarter after painful quarter, did so again earlier this month:
(Click through for larger)
(Source: FOMC release November 2, 2011)
Note the drastic uptick in their assessment of the unemployment rate over the next few years, and the introduction of a forecast for 2014. Here’s a graphic representation that metric:
(Source: FOMC release November 2, 2011)
If they’re right — and they’ve been too optimistic all along — and we see a 6.8% unemployment rate in 2014 (best case), that will take it down to a level last seen in November 2008, a six year round-trip up to 10.1% and back. And, by the way, let’s not even kid ourselves that 6.8% is anywhere near acceptable.
In metrics that matter most to Americans, we are simply not moving the needle. Or, more accurately, we’re moving it in the wrong direction.
(Click through all for larger)
(Source: Census.gov, Household Tables, H-6)
Takeaway: Well over a decade of stagnant incomes.
(Source: St. Louis FRED, Series SPCS20RSA)
Takeaway: Home prices are at mid-2003 levels, so we’re where we were 8+ years ago.
(Source: St. Louis FRED, Series USPRIV)
Takeaway: Private Payrolls are at about the same level they were at in late 1999 — well over a decade of stagnation here while the population has done nothing but go up.
I’ve already gone over poverty and food stamp statistics — the trends there are downright depressing, as were last week’s Census releases on children in poverty. Of the myriad statistics I look at, analyze, and digest on a regular basis, nothing saddens me more than stats on children living in poverty, be it in the United States or elsewhere. Many studies have shown that it is virtually impossible to overcome such an early disadvantage, and we should be doing all we can to eradicate this problem and ensure that our children begin their lives on a solid footing.
Bottom line: Had I been drawing up the debate resolution, I would have written it as follows: “Be it resolved North America faces an ongoing Japan-style era of high unemployment and slow growth.”
Next month will mark the fourth anniversary of the beginning of our Great Recession — December 2007. The progress we have made since then has been painfully slow and many metrics, some of which I display above, are still at levels first seen years ago. Given the glacial pace at which things have been improving, it’s hard to argue that the answer to the original debate resolution — or my modification of it — is anything but “yes.”
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November 19th, 2011 at 1:31 pm
While US may be slowing slowly but Germany and the EU bloc are facing imminent recession. Rising yields and slowing germany make the perfect storm: Capital3x( the bond traders trading room)
http://capital3x.com/think-tank/a-slowing-germany-will-bring-down-the-house/
November 19th, 2011 at 1:42 pm
Curiously the slope of unemployment recovery is exactly parallel to 4 out of the last 5 recoveries. The problem is that it starts from a higher point.
I have no idea how to post an illustrative power-point chart.
November 19th, 2011 at 1:52 pm
I can’t see how it’s possible to conclude pro or con without knowing what Congress will do.
Do we invest in industry, education & infrastructure? or do we remain generically convinced that blind spending cuts are necessary even though China is pushing their youth to go to college…do we continue being fed the idea that corporate profits from foreign trade without reciprocal job creation or revenues will somehow trickle down?
November 19th, 2011 at 2:21 pm
Perhaps we are looking at this problem the wrong way.
Perhaps we simply don’t need that many people to work to maintain a functioning society and it’s only our clinging to our old beliefs that is causing us to mis-identify the problem. Once we were hunter-gatherers and pretty much every single person needed to work all day to sustain the tribe. As we evolved, society evolved and eventually we had liesure time, etc. Now, we produce so much output per person that it’s simply not necessary to have 50% of our population working and it’s clinging to the belief that they SHOULD work that is causing us problems.
Maybe we should all work 4 days a week and employ 20% more people or maybe we should allow for a better redistribution of wealth that encourages more people to pursue careers in art, music and education. Heck we used to give Philosophers a pretty good living and God knows we could use a few moralists yelling at us from street corners!
Of course there are obvious solutions for unemployment, like the fact that this country has Trillions of Dollars worth of vital infrastructure projects that HAVE to be done eventually and we have Millions of unemployed construction workers that need jobs NOW. Maybe I’m off base here, but wouldn’t that seem like a perfect match? One that a rational society would resolve almost immediately…
November 19th, 2011 at 2:42 pm
>> [Rosie] could likely tell you the unemployment rate in April 1955 as easily as he could tell you his youngest son’s name.
…because he named his youngest son “U-6″?
November 19th, 2011 at 2:44 pm
How can we have original solutions to these problems when
we continue to describe them as “kick the can down the road,”
“the least dirty shirt in the hamper,” “lipstick on a pig,” and
many other inane trite repetitive boring phrases.
The least pundits and economists and market mavens could do
is to be original in their words. That would be a good head start
in coming up with imaginative solutions.
November 19th, 2011 at 3:35 pm
Here are some ideas to get the country working by simplifying what we have vs the complicated mess of today.
A flat tax so everyone pays taxes, period. Can be slightly progressive by income, but simple enough to put on an index card.
Define the federal government to it’s basic needs and reduce it. Strict constitutional functions, National Defense, Foreign policy, Secure borders, Interstate commerce, etc. Eliminate entire departments that don’t fit this role, i.e. Department of Education, Energy, etc.
Reinstate Glass Steagall, prosecute those that broke existing laws and break up too big to fail companies.
Strict controls on lobbying and term limits to politicians.
Eliminate all subsidies and foreign aid.
November 19th, 2011 at 3:56 pm
I voted “pro” but for Rosenberg’s reasons, not Krugman’s. Until we de-lever individually and collectively, I think it will be hard to make substantial economic progress.
http://rpseawright.wordpress.com/2011/11/15/krugman-v-summers/
Invictus: Thank you for your link. I’m sorry I missed it.
November 19th, 2011 at 3:58 pm
This latest information from the NYT may help explain: http://www.nytimes.com/2011/11/19/us/census-measures-those-not-quite-in-poverty-but-struggling.html?_r=1&ref=todayspaper
Basically, what they did was ask for the Census Bureau to tack on an extra category of near poverty to the new measurements of poverty. The results are somewhat staggering. Virtually 1 in 3 Americans fit the expanded category of poor or near poor, or about 100 million people.
It is unclear whether or not we are in a Great Depression or a Lost Decade, but it is clear that we are in a Depressing Decade and are at a loss as to how to go forward.
And to add fuel to the fire, a new poll also shows that for the first time more Americans (49%) do not think America is exceptional compared to those that do (46%).
I am of the opinion of that expressed by W.C. Fields: There comes a time in a man’s life when he must take the bull by the tail and face the situation. “Looking forward, not backward,” is not a solution but an evasion. Until the rule of law is reestablished and enforced, the rules of the influential few will reign supreme.
November 19th, 2011 at 4:08 pm
While the situations look similar, one should probably overlay some other information over the data that might be pointing to a Japan like situation. Demographically we are quite different. They have an aging population as a country, we have one of the only developed nations that is still getting younger due to birth rate and immigration (legal and illegal). This is critically different as it means in Japan the tide was going out versus here the tide is still coming in. While the boats might look similar in the water while it is there, when the tide goes out one is sitting on the rocks while the other is still floating.
Secondly, Japan is a country that is victim to location. An island about the size of California with only a certain percent usable and a need to import nearly every resource. This geographic difference causes the countries to allocate resources and finances in different ways, react to things differently, and ultimately cripples one country while the other survives and thrives in spite of itself.
While the Japan compare is interesting and compelling in a lot of ways, leaving out critical basic information will lead one to the wrong conclusions.
We may suffer for a while longer, but demographics and a geographic blessing will ultimately pull us out of our situation.
November 19th, 2011 at 4:29 pm
With apologies to “Warren” Summers (watch the video) only someone massively short and somehow certain that his counterparties will actually pay could be optimistic.
Why? Human nature has not changed oh these many years. Human nature leads us to periodically get caught up in bubbles, manias or what ever you want to call them (Galbraith in “A Short History of Financial Euphoria” calls it the periodic rediscovery of the magic of leverage). We remain in the consequences phase of what was likely the largest and longest mania in human history. It’s important to remember that the mania phase was also world wide. The consequences phase will also likely be huge, global and last a long time (How long? How huge? There are lots of predictions out there – one of them is likely to be right. Good luck figuring out in advance which one).
IMHO, one’s only choice is to flip a coin and choose deflation or inflation and adjust your life and investments for that. My coin came up deflation. I actually hope it’s wrong but based on the Japanese model, I’m sticking with it.
November 19th, 2011 at 4:44 pm
Very well articulated, mark.
November 19th, 2011 at 4:50 pm
More like Somalia, armed to the teeth.
November 19th, 2011 at 4:59 pm
A recession is simply an economy that produces things people don’t want, on the margin, and our economy was forced by Bush policies to produce housing, deman pull financing rose the price over the supply, sending the wrong signalsnfor a few years, leading to a little too much housing bought atmuch too high a price. That’s over.
We have had nine straight quarters of decent growth, record corporate profits and resulting equity price appreciation. Our marginal unemployed were in housing_related services, which we don’t need/want and which were family inefficient parts of the economy …and not too tasking on our educated work force. The vast majority of structurally unemployeed are not educated (no high school) and we continue to produce the same percent of uneducated eighteen year old year in, year out.
It is inefficient to continue to invest (spend on) in the uneducated, so the GOP is part right. The reason they are mostly wrong is, the services they want to cut go to mostly productive people. The profits from Medicare drive investment in health care. If a rich guy has another two or three percent of capital at the end of the year doesn’t change that at all.
November 19th, 2011 at 5:30 pm
Uh, Japan never had high unemployment. Neither really does America. When I think of high unemployment american style, I think of 30-40%. 9-17% percent really doesn’t cut it.
The fact is the overall economy overgrew due to the credit boom and REAL growth was weak due to spending cuts in public investment makes deleverging without a collapse impossible. Alot of people still don’t get it. They think we delever quickly, in 5 years we will have “full employment”(whatever that means) and will be living in some paradise. Hardly the case. Instead, that would permanently shrink the US economy and the health of the citizenry would collapse. Lifespans would drop and 60 would be the old 80. It would be a deevolution. For rich capital owners and rentiers profitting from the deleveraging, this may sound like a good thing. But for joe blow, it is act of war.
In this mess, you have to have a national plan for a country to follow. How is the banking system going to be remade? How to build new energy markets to replace the dying old ones? How are health care systems going to be redelivered considering the existing one is failing. If you can’t come to a agreement, the country will die.
November 19th, 2011 at 5:34 pm
Barry,
Krugman’s a musical step ahead of you on his blog: Sarah Jarosz.
New to me. Wow.
Andy
November 19th, 2011 at 5:39 pm
Here are some ideas to get the country working by simplifying what we have vs the complicated mess of today.
A flat tax so everyone pays taxes, period. Can be slightly progressive by income, but simple enough to put on an index card.
>>>>They still won’t pay taxes
Define the federal government to it’s basic needs and reduce it. Strict constitutional functions, National Defense, Foreign policy, Secure borders, Interstate commerce, etc. Eliminate entire departments that don’t fit this role, i.e. Department of Education, Energy, etc.
>>>>What is a basic need? Education came out to organize the government student loan program and energy from the energy crisis.
Reinstate Glass Steagall, prosecute those that broke existing laws and break up too big to fail companies.
>>>>Steagall was overrated. Its abolishment meant little to the crisis.
Strict controls on lobbying and term limits to politicians.
>>>>sounds good, but nothing changes. It is the mentallity that is the problem
Eliminate all subsidies and foreign aid.
>>>>Good, but subsidies will be back. Without them, foreign conquest you will get.
November 19th, 2011 at 6:06 pm
To have anything but slow growth you have to have something that will drive an increase in GDP. I see nothing except radical income re-distribution that could do that, at this time. Even if we did get some unexpected radical efficiency improvement, it would just be sucked up by the top 1% and not do much for growth in GDP. Unemployment going down has a little better chance. After all the baby boomers are getting to retirement age so even without job growth we may see a slow decline in unemployment.
November 19th, 2011 at 6:30 pm
High unemployment and slow growth are way too optimistic.
Some still call this the “Great Recession” even though we have, technically, been out of recession for some time (we do, however, look to be headed towards another, technically).
Technically, I wonder why we don’t call it what it is.
I wonder why we torture accounting standards and metrics to create the illusion that it’s not as bad as it looks, why we ignore huge and very real negatives on our balance sheet as if they will go away if we don’t acknowledge them, why we refuse to root out and correct the causes of our current problems, and why we have doubled down on many of the failed policies that got us here.
I wonder why we don’t call a spade a spade.
IMO, we’re in a Depression. Of course, no one is calling it that. If we can’t even bring ourselves to commit to the idea that we’re in a recession, the daunting idea that a rebuild of our economic system from the ground up is what’s needed or face an uncontrolled collapse, even if true, is the Voldemort of the political/economic power structure.
Depression: polite people dare not speak its name.
November 19th, 2011 at 6:33 pm
Philstockworld:
Tried that approach. Its called Europe.
JasRas:
The biggest advantage that North America has going for it is the “melting pot” concept. It is virtually unique in the world where anybody who shows up in the US is American and anybody who shows up in Canada is Canadian.
The rest of the world is largely locked into local tribes and cultures. Integration is difficult and generally not desired. New peoples take over areas through some form of warfare, not just by moving into the house next door.
November 19th, 2011 at 6:43 pm
I like to read this site to get a feel for what is going on in the minds of the FAT AND HAPPY – how do they keep living in their state of delusion ???
Sometimes this site reads like the blind leading the blind.
But more and more lately it seems like the retarded, leading the retarded.
November 19th, 2011 at 6:52 pm
Don’t read more into this than absolutely necessary. But, I’d like to point out that:
- In 1989, Japan’s Nikkei reached a PE of nearly 80. During the dot-com bubble, our broader market index reached half that.
- At nearly the same time, Japan’s housing market (with 40-year+/multi-generation mortgages) was more inflated than ours during its bubble.
Somehow, when making comparisons, we ought to consider that.
November 19th, 2011 at 6:59 pm
I’m not a fan of building bridges to nowhere. (More interested in a Manhattan Project for energy self-sufficiency.) However, I’d like to point out that the damage from malinvestment during a bubble/bust period occurs most during the bubble *expansion*. Many folks tend to wring their hands over the lousy/corrupt attempts to ameliorate busts. But, that’s sorta like blaming the crew for rearranging the deck chairs on the Titanic. The most egregious sins occur as the ship is steered towards the iceberg.
While we’re spend a decade piloting the lifeboats back to shore, we should discuss updating the navigation books and reforming maritime laws to forbid reckless sailing.
November 19th, 2011 at 7:06 pm
The reasons for the problems in both countries, a real estate bubble of epic proprtions sustained by massive credit expansion followed by massive deleveraging, are the same. The solutions chosen were the same; bail out the banks and leave them as zombies to slowly rebuild their balance sheets. So why would the outcomes be any different either?
To paraaphrase Einstein, repeating the same things and expecting different outcomes can be defined as insanity.
November 19th, 2011 at 7:33 pm
Goldfinger used a gas to overpower the soldiers at Fort Knox in his pure evil plan to render the US Gold supply radioactive and here the Bernank is using ZIRP to incapacitate and DisCredit the lifetime savers as a class. Act Two is the GS drone Corzine destroying the last bastion of US free individual entry to the financial world. The money is gone to the uber-margin call forever if even that it wasn’t somewhere else kited with currency swaps. Former VPOTUS Dreck Cheney has the tools in his arsenal to get information out of high-value targets that are matters of National Security. In this case we have the neocon alternative of Air-boarding as in the matter is Bubble-wrapped up.
Soon we’ll be playing Mrs. Watanabe loaning out out our reserve carry currency looking for spread in Estonia which is low-digit debt GNP and independent. Strength in our currency will be then based on carry currency repatriation schemes.
November 19th, 2011 at 8:45 pm
We should all pray that throughout our “lost double-decade” will have as low unemployment as Japan.
Remember, Japan was exporting to the entire world, and perhaps during the 16 of the last 20 years the world’s economy was in a super-growth (bubble creating) mode. Those Hondas and Toyotas – even those that are assembled in the States – have lots of components made in Japan and are assembled by the robots that were actually made in japan.
What are we going to export in sufficient quantities to make a difference? And to whom? Who’s not in a recession now? (Brazil and Russia will be as soon as the clock in Peking strikes “12″ and the Chinese Cinderella growth fairytale starts imploding.) Remember, our population is almost 3X that of Japan! We’d need to export 2X, 2.5X, 3X of what Japan does!
Keep dreaming, folks, we’re not Japan. As soon as during Katrina there was even a hint (just a hint!) that law enforcement was gone – there mass looting. In Japan, after the tsunami, people who lost everything (including their houses) were finding safes that people had in their houses that were washed ashore, safes full of cash and valuables, and those people kept bringing them to the police stations so that rightful owners can be found.
No, we’re not Japan. The b.s. that somehow USA is more creative, more vibrant, just “better” than japan – whatever propaganda that A-list A-hole Summers keeps spewing without any evidence to back up his views – the proof is in…. is is in the FACTS that Reosenberg quite eloquently presented.
November 19th, 2011 at 9:14 pm
Interesting, few in any income bracket outside the financial sector will debate that the financial sector has swindled massive amounts of wealth/net worth from the bulk of Americans in a tremendous shell game using MBS derivatives – wholesale wealth redistribution via deception.
Yet, some of the same individuals get incredibly defensive when the idea of taxing that group comes up, fanatically adhering to the dead idea that the investment class will create jobs for all as long as we keep cap gains lower than a single working mom pays.
November 19th, 2011 at 10:18 pm
I love comments like SOP’s giving nothing but a jab. States no thought or belief. Shares no knowledge other than an ill informed assumption we’re all fat and happy. He’s the moron in the back of the room with the straw and the spitball… Thanks for playing, now go back to your football game Bluto…
November 19th, 2011 at 10:39 pm
What I notice from coming to this site for years… is that we generally have groups of people either straight lining the positive or straight lining the negative. If only the straight line was so easy, but it isn’t.
Every action has unintended actions that follow…For instance, European instability. Emigration. To where? U.S. Canada? China collapse? Supply chain disruption. Labor subsidy disappears. Do corporations commit to employment in more stable geographies and bite the bullet on labor cost? Or do they move to the next cheapest labor source? How much infrastructure do they lose? How does that factor into the decision? European monetary collapse. Who’s hurt? (China? Russia?) Who could benefit? (Russia? U.S….)
Things that are perplexing…why is every strategist at major firms and on TV recommending Large Quality Global Corporate Stocks when they could be most affected? Wouldn’t Mid-cap, small cap with majority of revenues generated domestically be more insulated from the shock? Or is it their cash on the balance sheets? But isn’t that mostly held in foreign repositories? Is that really good?
These are the questions bouncing in my head…
Who cares if we’re Japan or not… we are likely not. But we certainly aren’t who we were before either, so does it really matter? No country experiences a financial shock like we have without leaving an indelible mark on all living generations for their remaining life. Anyone have a grandma who lived through the depression that doesn’t have 6 months of food in store??? I thought not… Oh, and doesn’t she hate debt? Thought so… No living soul will not have their behavior changed by 2008. Period. Japan. No. But nothing good , nonetheless. We will recover, differently, yet demographics will demand some similarities… Babies still need diapers, people outgrow starter homes, cars need repaired, people’s health wanes… blah, blah, blah…
The U.S. will be recover because we innovate and we incubate entrepreneurial spirit. If we don’t, we import it from our immigrants who just want a chance at the dream. No place is like that in the world but here. End of story…
November 19th, 2011 at 11:09 pm
#Japan-style era of high unemployment
excuse me… High unemployment in Japan? any facts ? could author put out chart besides just blubbering?
and of course you have to take USA unemployment figures w/ grain of salt ..
never believed much from BLS.. here’s my facts about unemployment in USA:
#1 there are almost 50 mln in food stamps here.. so we can call person on food stamp as unemployed/underemployed
#2 there are only +100 mln private jobs here, so in broad reflection TRUE RATE OF UN/UNDEREMPLOYMENT IS AROUND 30%
## slow growth in Japan
why would be any growth in Japan? does author know that population of Japan is contracting and getting older.. who should buy stuff? old guys don’t need much, besides most working Japanese are well-off , and who needs bigger house or 3rd car anyway? what is for? they are not crazy about stuff as opposite to people in here..
exports are fine , but domestic demand is weak.. I’d say its normal way of life ..
as long as Japanese gov don’t stimulate immigration.. slow growth is guaranteed
#Summers, Krugman .etc
well,, anyway what would you expect from bunch of academics/so-called experts who know nothing, cant detect bubbles in front of his nose..
pathetic
alx west
November 19th, 2011 at 11:56 pm
Agree: Rosie is tops: past, present future
@Futuredome Says: “When I think of high unemployment american style, I think of 30-40%. 9-17% percent really doesn’t cut it”. Here I have to scold you although toward the tail end of your post you have some decent points. Evidently YOU have a job or better yet you don’t need one?. Now check out the youth U in the inner cities. Ugly. Our labor force increases annually by 1 million new entrants, our population is growing and 9-17% U “doesn’t cut it”? You like 30-40%. How generous of you. Why not 60-80%? Let them eat cake? Try wading a river of 3 feet AVERAGE depth. Get it?
November 20th, 2011 at 1:08 am
Wouldn’t it be nice if voting solved the problem. More to the point people who missed the problem although I think Rosenberg saw it coming debated without representation of the one group whose predictions over the last 20 years weren’t there. Nobody likes MMT but they have been correct and have solutions but why listen to them anyway. We will just be intellectually dishonest and pretend that theydon’t exist.
November 20th, 2011 at 3:52 am
Krugman’s point about the dysfunctional political system is, I think, a very fundamental obstacle.
The financial issues (admittedly numerous and daunting) will not get resolved, really resolved, until the political system is reformed.
Big money will continue to corrupt, or threaten, the decision makers.
One area for reform: why do presidential and congressmen’s campaigns have to go on for so long and cost so much? The current system forces our politicians to kow tow to big money.
Another idea: the current political deadlock in Congress would be rendered irrelevant if we had a participatory democracy, so that the citizens vote directly on programs, policies, taxation, borrowing and spending. (A few caveats on that: there has to be protection of minorities from a tyranny of the majority, and citizens must assume the responsibility of informing themselves before voting.)
Thank you Invictus for writing in support of children growing up in poverty.
Civilization does not exist to support an economy – quite the reverse, the economy exists to support civilization.
November 20th, 2011 at 8:14 am
Chiming in from Germany to add a different angle:
1. American exceptionalism: Krugman points out very well that there will be no policy response. There is not only gridlock, but the campaign to “create the American government the enemy of all Americans” is almost complete. Your government has hardly any options left, because it is thoroughly dicredited (9% approval rating for Congress). A vocal majority prefers no policy response at all or a dismantling of the government at this point. America is ungovernable.
2. The rule of law and with it the legitimacy of the government are in question. Long term this is the greatest damage done to the U.S. by the crisis. It afflicts the very lifeblood of nations.
3. The economy of the real estate bubble is bust and will not reappear. It’s Schumpeter in action, creative destruction putting the country into recession, busting unneeded business until the goods/services mix of the economy realigns. Realignment is hampered by the indebtedness which prevents many people locked into their underwater mortgaged houses from moving, small business from hiring and consumption from happening.
4. There was not only a real estate bubble, there was also a consumption bubble financed from home equity withdrawal: Not two sectors (housing and finance), but in addition consumption and retail were overbuilt. Recession is afflicting three sectors. This is not acknowledged by many.
5. From my conversation with Americans there is an immense willingness to work and get jobs, but there are just too few to go around and those are so badly paid that people have to work two or three jobs at once, taking that work from others who might need it to have even one. Wage setting power by employers is immense due to this and jobs which might have supported a person or family no longer do so, concentrating work in the hands of the most employable (there also is a tendency to only hire people who are already holding a job. If you doubt, go out and ask).
6. Regarding Europe and Germany: Europe is in bad straights, but Germany itself currently is incredibly prosperous. Southern Germany has near full employment, people are buying real estate and spending, because they’re scared of inflation, getting all those savings moving. We can’t bail out all of Europe, but if ECB rates stay as they are (too high for Italy, too low for Germany) we’ll have an epic boom and bubble in Germany in the next 5 years.
November 20th, 2011 at 8:23 am
Small business and entrepreneurs are helping people reach their immediate and local needs. To the degree they succeed in that mission, they thrive.
Big business need people to work their system first. Big business pays the rule makers to be allowed to thrive.
Government helps big business make jobs is the current paradigm.
Do the math on people’s needs getting done without a Winter of Self-Remembering.
November 20th, 2011 at 2:18 pm
I would only add that our political “reality” can change on a dime. How many of us, in mid November of 2008, foresaw that Tea Party? I know that I, for one, thought for sure that the GOP was close to death. Naive, I know. I know it’s unlikely, but we could very well see a situation where the GOP loses big in 2012 and then finally ejects the far right wing of their party. Yes yes, and pigs could grow wings and fly. This is America though, stranger things can happen. Personally, I don’t think today’s political reality is going to persist in it’s present form more than a few more years. We The Sheeple are stupid, but I still don’t believe we’re THAT stupid.
November 20th, 2011 at 4:50 pm
ToNYC Says:
November 20th, 2011 at 8:23 am
“….Government helps big business make jobs is the current paradigm…..”
In the past, corporate efficiency has been beneficial enough to this country to make it worthwhile to make sacrifices.
We have reached a turning point, to where corporate efficiency equates to outsourcing, off-shoring cheaper labor across the world, corporate efficiency is no longer aligned with the benefit of the people in the U.S., but only aligned with the wallets of a select few in government and corporate executives.
Globalization has turned local economies around the world into a shopping mall for multinational corporations looking for the best deals, these deals are often unaffordable in terms of their ROI.
Just look at Ireland, with the lowest corporate taxes in the world, meanwhile they shave lost revenues from the people to Afford it.
The U.S. is just now at the same crossroad, the point where special interest politics (bribery) seeks to mislead and deceive the people to believe the cuts justify the gains of corporate efficiency.
There are NO tax cuts we can give CAT, GE or any multinational that will offset the lowered wages in China, whom offers socialized college and healthcare to boot.
Where a U.S. engineer makes on average $4700 a month, an educated Chinese engineer makes $250.
What type of tax break can we offer GE to offset that wage differential?
November 20th, 2011 at 8:09 pm
David Rosenberg has been consistently correct about the economy and is one of the best. His research was not always something that the generally sell side ML wanted its clients to hear. Perhaps it is not a coincidence that he is now back in Canada?