No, dufus, it's BEEN the economy.
Let me explain. Wait, no I won't explain--I'll rant.
Subprime mortgage crisis. Who knows what the hell that means? I'll tell you what it means: a lot of shit. Some economics, some finance, some politics... and A LOT of psychology. Personally, I like the economics wedge of the pie the best, but that's because it's my hobby-of-sorts. The part that has played out most prominently in America is the psychology part. Oh, that voodoo science is back at it again, dancing merrily down the path to destruction with the God of War, Presidential Election '08. The two really don't have anything, but in combination they have given me a deep and resounding sense of ennui. Or something like that.
Yes, there are a lot of smart and (more importantly) highly paid people out there telling you how it is and how it's going to be. Let this ignorant and unpaid brute of a pundit tell you how it really is. Consumer confidence is going down. Home prices are falling. This is the 'A' and the 'B' that add up to the 'C' that is a recession. Maybe a Recession, you know, with a capital 'R'. Consumer spending was floating the economy. The good old tradition of buying shit we don't need was keeping the machine running. Well, we don't have as much money anymore. That stems from jobless rates, a decline in the real wage, and tight credit worldwide. That leads to everybody tightening their belts. Less money flowing around-->less shit bought-->less output-->decline in jobs and GDP-->recession. Seriously, it's not that difficult.
Central banks and companies that slosh money around have an effect. Of course they do: they have the money. The thing is, goods and services are bought by people. (Companies too, but we've been through that little procession, now haven't we?) The shit that people are buying less and less of is those very same goods and services. No mani/pedi for Toodles, the family poodle and LaTonya down at the pet salon gets laid off. Despite what many might like to think, the economy does have a trickle-down nature to it. (Don't infer any condoning of Reaganomics on my part, there happy-intellectual-trigger-finger person.)
There is a recession on the way. And that's it.
I'm not the only one who thinks so, b.t.w.. For corroborating opinion and other interesting information on the coming economic plague, visit Robert Reich's commentary for NPR's Marketplace.
-S.W. America
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Well, it's hard to argue with the logic that is your rant... but I do think you left some things out.
Specifically, I believe the real problem is that the markets got caught doing exactly what companies like Enron did. They've been playing a shell game, moving $ around to hide the realities of actual consumer spending by producing and selling a product called debt, and bad debt at that. That's why lowering the Fed works so well and so quickly. It's not that less money is actually floating around, it's that more risk is.
Trickle-down is a joke; it creates this upside down pyramid of debt trickled out over time, but with the right crisis circumstances the pyramid crumbles, and the collapse is not a trickle. It's an avalanche building speed as it goes, unless someone like Bernanke props it back up.
And why do you have to pick on LaTonya? She's good people.
-Chris
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I haven't studied Trickle Down Economics (R) enough to argue about it. What I did say, and still believe, is that the economy does have a trickle down effect to it. That's why the Fed are a bunch of hyper-informed fiscal nerds who meet in their man cave and decide the fate of the world over brandy and cigars. They have to be hyper informed. I think there's more science to crystal balls than there is to fiscal governance. There's a gazillion variables, and taking into account 99% of them, with the best of intentions, means that a bazillion variables are left hanging.
One of the reasons why federal tax policy is such a complicated demon… well I guess it is The Reason… is that very same trickle down effect. The AMT is a good example… best intentions gone awry. You try to target growth in a particular sector, or benefit to a select socio-economic group, and tax-weasels find loopholes. I happily do so myself, though perhaps I am the very person they want to benefit—one can never know because tax law is so arcane that I’m dancing with jail time every time I do my taxes.
Again, for those who are spin-afflicted and clear-speak impaired: “Don't infer any condoning of Reaganomics on my part, there happy-intellectual-trigger-finger person.”
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Bernanke and the Fed screwed the pooch when they dropped the benchmark last week. Wall Street and their international ilk have been a fast and loose game of monetary street stickball. They have been breaking the neighborhood old ladies’ windows for many months now, and Bernanke et. al. have been going around apologizing for their children’s bad behavior and paying for repairs (shoddy ones at that) but not giving the ruffians the good switching they deserve. Why? Well, because they’re also the neighborhood bullies, and what they receive they dish out in kind, tenfold, then return to the afore-mentioned stickball. Translation: the money-changers still do their dirty work, and still go home rich. The markets flop and twitch and the little person’s investment portfolio takes a hit.
It makes me sad to say it, but it is a confidence game. It’s not necessarily a con, though. You have to choose wisely when you invest. You have to choose a good company or advisor to throw your money around, or you yourself have to do it intelligently. All of these take time, intellect, wherewithal, effort, and a myriad of resources. Not everyone has all, some, or any of these things. Thus, the market is not for everyone. If you invest in a game of risk, which is what the markets are, and you lose: get over it. It’s the nature of the beast. Just because other people win, and people working on behalf of the losers win, doesn’t mean that it is a bad mean world that’s out to get you. (It is, but in a general sense, and any apparent vindictiveness of the markets is only an effect of that nature.)
Yes, the little guy is a victim when actual fraud takes place. But when things go south in a given market, be it heavily regulated, not regulated at all, or anything in between, the proper response is not to compensate for loss due to the behavior of the market, but to compensate for loss due to fraud. If there was no law against some nefarious conduct, then there is no loss due to fraud. The investor is punished for ignorance and naïveté. Again, it is a bad world and it is out to get you…
Steve... you need to let go of that teenage angst already!
I actually wasn't really arguing with you over trickle-down. I agreed there is an aspect of it, but my main point is that what trickles is not money, but a lack of risk, which by the nature of the beast often means "money" in some form or other. The problem is that the two are NOT actually equal, and when reversed the slope changes dramatically. There's no good formula which equates the two or accurately predicts how they might be related, which is why we pay people for their educated opinions on the matter. My lowly little Macro-Economics class in college was quite sobering; specifically, realizing that I was both the only person in the class who didn't intend to be an Econ major and the only one who understood even basic calculus. Those are the people who expect us to trust their judgement in investing our hard-earned dollars? I happen to like gambling in small doses, but when the stakes are high I admit I usually count cards or get the hell out! ;-)
Well, you’re a poopy-head. A runny-poopy-head. Con tuercas.
~My main point is that what trickles is not money, but a lack of risk, which by the nature of the beast often means "money" in some form or other.~
I’ll drop the arrogance for a bit and say that we’re getting to the point where we’re defining the word “the.” I’m not in for Clintonian skullduggerish avoidance, so I’ll get to it: you’re throwing the term “risk” around a little too sluttily and stuffily for my tastes. I’ll credit you with talking about the economy as a whole (and as being somewhat succinct and accurate) as opposed to talking about the realities of Joe and Jane Consumer’s day to day checkbook.
~The problem is that the two are NOT actually equal, and when reversed the slope changes dramatically.~
Um, no. But yes. Again, with Joe and Jane, working their dead-end jobs, living paycheck to paycheck, and not investing in any retirement accounts—they’re essentially isolated from short-term risk, and can (for the most part) see long term risk coming like a freight train on a slow track. Fiscally, they do experience the tail end of the trickle down (as previously defined). But considering the absorptive nature of the economy concerning the phenomenon, they experience the least fiscal benefit.
So, depending on what you’re using for your axes, sure, the slope is whatever the hell you want it to be. In this case I’ll grant you that at their end of the scale, there is little risk and little benefit. I would argue however, that there exists the potential for the greatest risk at the Rockefeller end of the scale. The bitch of it is that the potential for the least risk exists there too. Rich folk have options: CDs, annuities, and the like; or they can take Rick Shmaganelli’s stock tips and throw their money down the drain.
My point: it’s freaking complicated, and I’m just here to bitch about it. After some time in the game theory and higher level economics classrooms of the world, I might have your dam-ned formulae. Just not today. Today I’m busy watching “Henry, the Internet Junky Monkey” and Judge Judy.
You seem to be under the illusion that the average American lives paycheck to paycheck. This is just not true. They live precisely within the means of their credit limits. There is no chance of investment once that ugly cycle starts, and the abusive fees and predatory practices of the credit industry are a major part of our current predicament. Lowering the Fed works temporarily, but imagine if we actually went back to forcing reasonable usury rates and prohibited most of the fee practices. That would provide a true stimulus to most Americans. Yes, many would still get themselves in just as much trouble as they are now, but many who have learned the difficult lessons of debt would finally be in a position to get out of it and into investment. Better still, what if the ridiculous pseudo-monopoly of credit scoring agencies was corrected/abolished and your credit worked the old fashioned way, requiring that you personally convince a lender?
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