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Realistic expectations regarding economic recovery

By bergenfx ·
With the upcoming elections, a lot of ink is being spread about the state of the economy and the anger of the electorate over our government's failure at economic recovery.

Am I alone in this recollection ... Two years ago (in a couple of weeks) we were at the closest thing I have seen to economic panic than any other time in my life. I don't know where you were or what your perceptions were, but it seemed people were calling this the start of Great Depression 2.0. I watched helplessly as my plans for retirement were getting flushed. I happened to be visiting someone who sits on several Boards of Directors that fateful week, and he spent hours on the phone with other directors authorizing large-scale liquidation of paper assets as mandated in their by-laws based on catastrophic market signals. They had no choice. Over the ensuing months, leading economists were in universal agreement that the breadth of this recession could easily take us into 2012 and beyond.

So, it is 2010. Things are not back to 2007 levels, and probably never will be, but there has been a significant improvement. My retirement plan now only asks me to be creative, not desperate. The NBER (National Bureau of Economic Research) just confirmed what many analysts and economists have been saying for over a year: The recession ended (by the numbers) in the summer of last year. Corporate earnings have been making a steady climb up for awhile now. Most economic indicators are showing steady growth. The two dark spots that remain are housing and unemployment. Unemployment, of course is a lagging indicator. In this recession I expect it will lag longer than in other recessions, (FUD). Housing needs better consumer sentiment to get off its inert dime. It took several years of questionable fiscal practices to get us into this mess. Why should we assume we can just waltz out of it in a brief period?

My point being this ... Are we really being realistic, thinking that a recession so severe as to have us quaking in our boots two years ago, can so quickly be washed away? What may it have been like without intervention from Central Banks and without stimulus packages of the past two administrations? Are our expectations that we should be out of this by now realistic?

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"really" and "realistic"

by santeewelding In reply to Realistic expectations re ...

Other than those two words, you handled it in suitably cold-blooded fashion.

How, for instance, do the gorgeous creations of steampunk in a nearby thread, the guy who does it, and the people who can pay for it, fit into "reality"?

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cold-blooded dismal science and hot-blooded art

by bergenfx In reply to "really" and "realistic"

Believe me I could have been as hot-blooded as the next. That would be easy ... I've got a beautiful collection of finely ground axes.

I may not be following where you are leading, but the gorgeous steampunk creations fit into this reality, in that hard times, economic and otherwise, do not squash creative spirit, energy or expression. More specifically, creators do what they do, can't help themselves, regardless of adversity. And while we may think of them as hot-blooded ... (see "can't help themselves") ... and that is really, really real.

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"really" and "realistic"

by santeewelding In reply to cold-blooded dismal scien ...

And, "reality" and "actual" and their ilk -- I'm known to **** an eye and bear in when they are used in far lesser concerns here. What you were talking about may be a coming ugliness that will concern all of us.

In which case, I insist on cold blood. The science of being requires nothing less.

In all other cases I'm being only snotty and troublesome.

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I had to go back and look.

by bergenfx In reply to "really" and "realistic"

Lucky ... only one abuse. It is easy to tack a "really" in front of X ... I mean if X weighs 100 lbs, then really X must way at least 180 and really, really X -- wow, that must weigh something like 375. Who can resist magnifying their argument by that ... and with only one extra word, used twice? Pretty good return on word usage.

In all other cases ... mostly fun, frequently thought-provoking, sometimes catalytic and always cryptic.

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We all want it to be over, but it isn't realistic

by AV . In reply to Realistic expectations re ...

Economically, we as a country have sinned a lot and there was a heavy price to pay for all of us. The government prevented the total collapse of our system with TARP and the stimulous package.

Was it enough? No, but at least we didn't go over the cliff.

Recession, no, I think it was Great Depression 2.0. If we didn't have social programs in place, we would have had bread lines. It was brought about by pure greed and accentuated by the McMansions that were built everywhere.

America was in love with credit, be it home equity loans or credit cards, many people lived way beyond their means. Those people lost their shirt, and rightfully so, but in the process they took down the rest of us.

Our government, no matter who is in power, doesn't have a magic wand. There is still FUD and thats going to be hard for all of us to overcome. People need to realize its going to take many years for our economy to recover.

AV

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I'll go a step further ... We all want it ...

by bergenfx In reply to We all want it to be over ...

to be over, but if it happens too fast, it isn't real. (And I say that as a member of the afflicted class).

I would love to see an immediate recovery ... like right now; but if that were to happen I would know in my heart of hearts that it was just another bubble of one kind or another ... dot come, housing, what's next? It is going to take awhile for the ship to turn around.

I see four things crucial to our long term economic health:

First, moderate, if needed continuation of economic stimulus. I mean, isn't public works and the critical need for infrastructure improvement a match made in heaven? (Remember, over a thousand bridges were identified as structurally deficient following the bridge collapse in Minnesota a few short year back).

Second, realizing when it is time to stop stimulating the economy and start with fiscal restraint.

Third, (and most impossible), for members of our esteemed congress to exercise that fiscal restraint, but first they have to grow 535 pair. I am most skeptical about this. I don't think they will ever belly up.

And Fourth, that this country (us -- you and me) aided and abetted by our universities, government and culture, do not lose our ability to innovate. We will always lose some our industry to developing nations -- not just textiles, IT, etc; but looking forward, junior architects, radiologists, even deeper into the medical realm, etc, etc. Our only hope to maintain what we have known as prosperity is continuous innovation.

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Two cents

by santeewelding In reply to I'll go a step further .. ...

Today I had this very discussion with another. He is, as I am, a business owner.

"How you doing?" I asked.

"Picking up a little -- nothing to write home about."

The significance of the conversation was that he and I are members of an exceedingly small minority. Exceedingly small.

Come to think of it, we are outnumbered vastly by employees: CEOs, members of Congress, the Senate, the President, and so forth -- all employees; the lot of them.

They cast their solution in terms of, "jobs". What else can they do? They do jobs. They can be brought on as well as dismissed. Understandable.

The only way my compatriot and I can be dismissed is to kill us, or we dismiss ourselves with less than a wrinkle of the nose.

Come to me and talk about "jobs" and I have no idea what you are talking about.

So, saying to my compatriot, "I have just made you czar with a checkbook of trillions. What are you going to do about the fix we are in?"

His answer, and mine, was surprisingly like yours.

Innovation.

Maybe, I said to him, something like a mother of all X Prizes. A bounty. How to bell the cat.

Our conversation trailed off into how, as new electric vehicles will cost ~ $40,000, he has ordered the parts for an electrified Toyota pickup (old). Tricked out (he has the plant and wherewithal of experience), maybe $7,000, to go 150 miles on a charge.

Like you said...innovation. Neat thing is, you can be anybody to do that.

Jobs? Meh.

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a bargain at a large multiple of the price

by bergenfx In reply to Two cents

I think you distilled the essential ingredient for a fledgling country.

It is like one is focusing on the spigot hoping the flow of water will improve, and the other focused on the bounty of the well. In human terms, it only goes dry from lack of use.

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Infrastructure improvement is needed everywhere, but

by AV . In reply to I'll go a step further .. ...

The problem is that those jobs are temporary, unless it is a long term road project.

The stimulous needs to target small business in such a way that companies will hire people long term. The recent bill Congress passed for $30B+ will supposedly give them access to loans and tax credits, but realistically, companies are waiting for the next shoe to drop just like the rest of us.
http://www.politico.com/news/stories/0910/42629.html I think, too, that companies are apprehensive about the cost of the new healthcare changes. The Democrats need to explain more to the rest of us how this is saving money and not driving us further into debt. I want to know, too, how its going to affect me personally, now that it is law.

Its all about FUD. We all took such a devastating financial ****, no one is particularly in the mood for risk-taking. Personally, I'm saving like never before because I don't know when my job might be over.

That lack of security certainly doesn't put me in the spending mood. I know I'm not alone in that philosophy and so the vicious cycle continues.

The latest $30+B spending bill is a real shot in the arm for small business, but if it doesn't spur long-term growth, uh-oh. That means we have even deeper problems and now we're in even deeper debt.

The funny thing is, I think a silver lining to the Great Recession has surfaced. People are innovating. They're learning to live with less. They're buying less and doing more with less. Living smaller, smarter and cheaper. Less is more. Its really the birth of innovation again in our country again, I think, out of necessity.

That mindset will rebuild the economy of the future. Its a global market, but we can compete. Its going to be a long road back though.

AV

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I suppose part of it ...

by bergenfx In reply to Infrastructure improvemen ...

comes down to one's political / economic philosophies, but I only see stimulus projects, as playing a kind of pump-priming role.

Whether it is enough or not will be (has been) debated, but I think the design is that with increased public-sector jobs, things will begin to thaw, more consumer spending, more business spending, more hiring ... leading to more confidence (less FUD). Then, as the public jobs are diminishing, the private sector has righted itself and taking up the slack. Anything this coarse-grained is bound to be imprecise, but it beats the alternatives of doing nothing to prime the pump, or going too far the other direction and over-committing.

The main point I wanted to make is that the government does not have to create "make-work" projects to do this. There already is plenty of need for jobs for the public good ... roads, bridges, grids, etc ... not to mention DARPA-like commissioning of advanced technologies to solve our 21st century (peace-time) problems.

Regarding the brief comment about health care, I would much rather have seen them tackle (understand) the reasons health care costs in our country is so huge compared to others, independent of national plans and address that issue. The cost of health care hurts both individuals and commerce regardless of public and private options.

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