In article ,
"Robert Green" wrote:



The Clinton folks presided over a good part of the sell off of large
segments of our economy to China. As long as the "daily numbers" looked
good, people didn't seem to mind the massive change in the American economy.
For a while, all was good. Cheap Chinese goods gave people the sense of
much higher disposable income. Factory owners invested the money they got
moving their factories to China and the economy boomed. There's more than
enough blood on Clinton's hands. Plenty of people were saying back then
that intercourse with China might give us financial clap. It would be great
if we still had a leading industry that could provide the economic engine to
haul us out of our financial doldrums. But where will those jobs come from
if everyone's getting squeezed? The less spending, the more people will be
jobless. Having less money to spend equals lower overall demand and still
more cutting back.

We are still doing as much mfg (adjusted for inflation) as we did in
the 70s and 80s. It is just that mfg productivity increases have been
about 2% greater per year than the rest of the economy. We have lost
many more good paying jobs to the robots than to the Chinese. Heck the
auto industry is one of the most highly automated in the US
What happened this time, unlike most of the others, is that
EVERYBODY went on a spending spree. LONG before housing busted
(although it certainly contributed) we were overleveraged on credit
cards, etc. Industry had high debt and the Feds were being tied down.
So, there was no one left to lead us out. It took us 30 years or more to
get into this mess, it will take us more than 3 to get out...(the dirty
little political secret being) no matter who is in charge.


This was inevitable given the psychology of humans. We had a very
long run of good times with even the recessions being short and shallow
by historical standards. We had good times to the point that we forgot
about bad times, and figured it would go on forever.

I understand that, but can it be that we forget so quickly? This crash
seemed to have been a particularly bad one. What really drove this last
bust to be so big and ugly? Could it be as simple as the entire world had
been brainwashed into thinking real estate prices could only rise
(meteorically)? It seems that rising real estate prices drove a lot of the
train that went off the bridge. But there were other reasons. I think in
the future we'll discover There may have to be some sort of limitations
placed on contracts that specify "the worse things look, the more you owe."

Humans think that this time is different. WHen I hear that word
more often on CNBC, I tend to sell the stocks.(grin). Part of what
drives this one, is that this expansion (overall) was exceedingly long
and large. Even the recessions (at least by Post war standards) were
relatively shallow and short lived. This lead most of us to think it
would never end, but, as the economists like to point out, no tree grows
to the sky.
It wasn't just homes, we were maxed out on credit cards and biz was
heavily leveraged, etc.


The attempt to "change the deal" unilaterally in midstream has unfortunately
become the new norm and I don't think it's a good one. I seethe whenever my
credit card issuer decides to change the three-year deal I signed whenever
it suits them. Contracts with "sliding fees according to risk increases"
*seem* to be great deals for the lenders (which is why they exist) but it
didn't really work out for them, either, since the collapse those escalation
clauses helped caused hurt everyone. Badly. Such clauses have a built in
"domino doom" factor written all over them.
So pay off the cards at the end of the month or don't use them. Then,
as long as you avoid annual fees, you don't really care what the other
stuff is.

While I never quite believed in the domino effect in SE Asia, I surely do
believe in dominoes and Wall St. There were lots of cross-riggings in
effect in 2008 that seemed to exacerbate the collapse. I believe that all
this may have happened because analysts became obsessed with "offloading"
risk to helpless third parties (-: like pension funds and apparently,
sovereign wealth funds, too.
Pension funds were among the biggest hits in the down turn.


Risk often can *appear* to be eliminated until external factors reveal that
wherever the financial markets collapse, people are going to get hurt and
that offloading risk comes back to bite the unloaders on the ass as well as
everyone else. The bad part is that it seems that in the process, they've
dragged down risk averse as well as the risk-takers as the entire economy
around them tanked.

I have always thought that the only requirement for the SEC should be
that a group of 6th graders can understand what is being sold in 15
mintues or less.

The PSR has been very bad for a long time. Worse, still, people found it
easier and easier to eat away the equity in their homes to buy a Lexus and a
plasma TV. I don't know if you've seen the rising rate of foreign
"investment" (aka ownership) in the US. But IIRC, it's growing like a
malignant tumor. Economists argue about the net effect selling our
mortgages (and promises to pay) to China and the EU. Some say it matters
little, some say it can trigger political instabilities. That's why a bunch
of bailout money went to Deutsche Bank. America is now a wholly-owned
subsidiary of China and the EU, Inc. )-: (Hyperbole alert)
This is nothing new. We were all worried about Japan buying up all
of America, then the market collapsed and we bought it all back for
pennies on the dollar. (g).


I have my doubts that many (if any) people borrowing more than they can ever
hope to repay are banking on inflation to help cushion their fall.
Me neither, especially since inflation had been tame since the early
80s. One of the reasons I did not think the behavior made any sense.


whack when both lack of growth and inflation are present. However, my own
experience in modeling a very specific situation (nuke war) tells me that
most economic models are junk. Why? To paraphrase someone, "The economy
does whatever it damn well pleases." There are just too many wildly
varying inputs into the econometric universe to get them all right. We end
up with economic projections that tend to mainly support the various and
conflicting claims of politicians.

And that has been shown in any number of instances. That is one of the
reasons I get a kick out of "scoring" things 10 years out. I am really
sure that all of the models that looked at the Tax cuts took into
account the tax consequences of the last 3 years. Right. It is true that
6 months before the surpluses most models were talking about deficits as
far as the eye could see. Six before the surpluses ended (under the
budget passed in the last Clinton year) it was still showing surpluses
as far as the eye could see (and Congress was spending them in
anticipation.

--
People thought cybersex was a safe alternative,
until patients started presenting with sexually
acquired carpal tunnel syndrome.-Howard Berkowitz