Occupy Wall Street protest

[Stavros]

Hard4janira: I agree with a lot of whayt you say, but when you call for more transparency in the marketing of financial products so that customers are made aware of the long term risks as well as gains, you are assuming that the sellers will not be aggressive and sidestep precisely those details or assume their buyers understand the deal, have read the small print, and so on -yet this often does not happen and is often how financial products are sold -perhaps the right kind of government regulation forcing the details to be laid bare would make a difference -but in the 1980s and 1990s when these products were developed, any link to government was opposed.

Another fundamental problem is that governments can create bureaucratic jobs, but if those layers of bureaucracy are stripped out, the private sector doesn't step in to replace it; many of the so-called 'services' that government 'return to the private sector' just disappear, leaving thousands of middle class, university educated workers without an income. And yes, some of those people were working in regulatory agencies that piled paperwork onto small businesses which were not crucial to either their business or whatever the agency was there for. Regulation is essential but I think on both sides of the Atlantic it became a means of growing government rather than serving the specific constituency the agency was set up to monitor.

The European Union as Sammy says is more than a currency union, and because its origins lie in a 'new deal' for states that had been fighting each other for centuries, it offered a practical way of pooling economic resources and diluting political conflict. The founders always had a vision of a united Europe, and one that would grow into a federation of states, if not really a European 'super-state'. So there have always been people who were opposed to the growth of federalism if it undermined national sovereignty -Britain being a major dissenter in this- while some cynics see this process anyway as a Franco-German partnership. The growth of the EU into southern and eastern Europe has tended to make these divisions worse, because many people feel the poorer states are 'not ready' to join the club and actually seeks membership because they are poor and undeveloped, seeing EU status bringing with it preferential trade arrangements and, of course, access to soft loans. Even before Greece and later Poland joined, there was a 'north-south' cleavage with organised crime in Italy taking advantage of EU loan arrangements to claim millions of dollars for olive groves that didn't exist. When peple read about the astonishing number of Porsche Cayennes the Greeks have bought, apparently not all of it from the sale of olive oil or shipping contracts, they may feel the EU is one giant rip off.

Anti-Europeans argue that the admin costs of the EU are excessive, and that we would all be trading with each other anyway so why bother paying so much into a bloated, bureaucratic, often unaccountable, and often corrupt organisation? Trade, ultimately, is seen as the foundation of the EU, but I wonder if the Euro can survive, and ultimately if things go badly in Greece and Italy, people will say that there are limits to what we can afford to pay to help countries out of a mess they created themselves -particularly when German and English workers pay taxes every week when Greeks and Italians don't seem to pay them ever.

Interesting times, but the OWS protestors don't seem to be focused on the real issues, either here or in the US.

[hard4janira]

I think we agree about the need for increased transparency and regulation for complex financial instruments but your diagnosis of why unemployment is so high seems off base. Obama and Bush have done nothing but cut taxes and the economy has not grown except at the top. There is plenty of evidence suggesting that the current recession is caused by a lack of demand and not by excessive regulation or taxes. Here is just one such example.

It's difficult to say that the Bush tax cuts didn't spur the economy. The Bush tax cuts went into effect in 2001 when GDP was 0.3%. After the tax cuts annual GDP was: 2.45, 3.1, 4.4, 3.2, and 3.2% until the recession struck in 2007 because of the real estate bubble. A great many economists told Obama that he shouldn't allow the Bush era tax cuts to expire (and he didn't). He didn't cut taxes, he simply extended the existing cuts (although his new 'jobs' plan may have some new SS tax cuts in them).

Ironically, even with the Bush 'tax cuts', the Unites States still has one of the highest corporate tax rates among industrialized countries. Now, you may say that this is offset by deductions and corporate 'welfare'. While this may be true for a few large companies that have real lobbying clout I hardly think that it is true for small buisiness which employes about 75% of working Americans. I am in favor of a small, flat tax rate for corporate America (like 12%) with no deductions whatsoever. The playing field should be the same for small business and big business alike.

But now we are talking about two different thigns: Unemployment and Recession. You can have a recession with low unemployement and you can not be in a recession with high unemployement. The two are not necessarily related (but they can be). In our case, high unemployment is a symptom of the 'great recession', IMO. So what caused the recession that led to the high unemployement? You claim it is 'lack of demand'. I agree, to a large extent. In a nutshell, several things happenned:

1) People who had easy access to credit no longer had it. This took potential spenders out of the market

2) People were underwater on their mortages w/ more debt that their house was worth. These people lost thier homes or went through bankruptcy (or both). This also took a lot of spending away because people could no longer borrow against the equity in their homes to spend

3) A lot of poeple lost their jobs on Wall-Street (and main-street in companies related to mortgages/lending) when the real-etate bubble burst and the banks went south. This had a ripple effect into other industries that were dependent on housing (construction etc..)

4) People see companies slashing to preserve the bottom line. They are laying people off and cutting costs. People get scared and they start saving more because they are unsure of the future.

Add all of these things together and you have a sinking GDP and rising unemployment because everybody is tighting their belts (people and corporations). The banks have all this money but there is no demand for it. The people that CAN borrow don't WANT to borrow.

Given that this recession is due to a lack of demand then I think the government has a pretty clear warrant for fiscal spending.

First of all, recessions are healthy for an economy. If you don't have recessions then it means you haven't had growth (ask Warren Buffet - he'll tell you he hopes to live to see another recession). We need this recession to purge out the bad. Unfortunately, the Federal Goverment was responsible in large part for creating the real-estate bubble that led to the recession. The money supply was simply way,way too much - it created a culture of consumerism and debt that was not sustainable. The recession is the markets way of 'undoing' what the Federal Reserve has done by keeping interest rates artificially low for 10 years. That being said, you cannot simply revert back to a cheap-credit, borrow and spend mentality that got us into this mess and that is exactly what the Federal government is doing. Interest rates are lower than they have ever been (even if the demand for money isn't what it once was). The Federal Goverment keeps trying to force spending when they shouldn't. My gosh, if we keep this up then the real estate market is never going to find a bottom and the bad assets on the bank books will never get purged.

The argument now is not who knows how best to spend the money but who is willing to spend at all. The private sector is not spending which leads to a vicious contractionary circle unless some other agent, the government, steps in to up demand. I'm also not arguing that the government should always be in the business of fiscal expansion; when the economy is out of the ditch the government can retract its spending and leave it up to the market. There is very specific case for the need for government spending now as opposed to later: high unemployment, low demand, low interest rates, cheap materials, cheap labor, crumbling infrastructure - they all point to the same solution: more or less Obama's job bill (although it could be bigger).

Now that we've had a recession and are dealing with the unemployment, the question becomes: why are companies are not hiring. As you know, companies make capital expeditures based on decisions that are 3-5 years out in the future. If they don't know what the regulatory or financial climate is going to be (or they fear it could be worse) why would they risk capital to grow and hire? Obamacare is a big piece of this and will significantly burden businesses (unless you were lucky enough to get a crony-capitalist exemption). Other regulations are also a part of it. So is uncertainty as to the tax laws in the future as well as the possibility of rising interest rates. If corporate America isn't hiring or spending then they are sending you a messages that they've peeked into the future and they don't like what they see. Steve Wynn (the hotel magnate) had a very brutal and scathign indictment of the current administrations policies towards business and he's a Democrat. Look it up on Youtube.

[BluegrassCat]

A great many economists told Obama that he shouldn't allow the Bush era tax cuts to expire (and he didn't). He didn't cut taxes, he simply extended the existing cuts (although his new 'jobs' plan may have some new SS tax cuts in them).

Obama DID cut taxes. In reality more than a 3rd of the $800 billion stimulus was in tax cuts. And I never said Bush tax cuts had no stimulative effect, just that the gains during his tenure were confined mostly to the top.

First of all, recessions are healthy for an economy.

While recessions may be inevitable there's nothing healthy about the high level of unemployment we're experiencing. Try telling people out of work that it's good for them. And you're conflating the easy credit of the Bush years with what actually brought on the crisis: misbehavior and over-leveraging by the largest financial firms and the compliance/incompetence of their regulators. Letting the recession "run its course" sounds innocuous or even reasonable but it will cause a very real increase in human misery. Long term unemployment does long term damage to our economy both through people dropping out of the workforce and by harming new cohorts entering the workforce during the downturn. There is nothing healthy about any of this.

Obamacare is a big piece of this and will significantly burden businesses (unless you were lucky enough to get a crony-capitalist exemption). Other regulations are also a part of it. So is uncertainty as to the tax laws in the future as well as the possibility of rising interest rates.

I just don't see any evidence for this view, in fact there's plenty of evidence that this view is incorrect. Check out Larry Mishel's piece on the reasons for low demand.

http://www.epi.org/publication/regul...y-explanation/

[livepersona]

Here's a good video to watch.

[hard4janira]

Obama DID cut taxes. In reality more than a 3rd of the $800 billion stimulus was in tax cuts. And I never said Bush tax cuts had no stimulative effect, just that the gains during his tenure were confined mostly to the top.

What 'gains' are you talking about. Are you saying that the rich just got richer? If I recall, unemployement was very low up unitl the recession in 2007 so you could argue that the Bush tax cuts were instrumental in keeping unemployment low. It's hard to argue that middle income familes should be getting 'richer' when they don't save anything and are addicted to debt. Maybe that is part of the problem. (Oh and you are correct, 275 billion of the 800 billion in the stimulus was in the form of tax cuts or rebates of some kind).

While recessions may be inevitable there's nothing healthy about the high level of unemployment we're experiencing. Try telling people out of work that it's good for them.

I never said high unemployment was good (recession or otherwise). I wouldn't bother telling an unemployed person that recessions are necessary in a capitalist society - I'll leave the politicizing of recessions and unemployment to elected officials since that is what they do best.

And you're conflating the easy credit of the Bush years with what actually brought on the crisis: misbehavior and over-leveraging by the largest financial firms and the compliance/incompetence of their regulators. Letting the recession "run its course" sounds innocuous or even reasonable but it will cause a very real increase in human misery.

Here we have a fundamental disagreement. The Federal Reserve (and other Federal/State government agencies) are largely responsible for the real-estate bubble in my opinion. I base my opinion largely on several books that I have read from noted economists and numerous other articles and such. I will list them for you if you are interested but I doubt that we would agree on this. The over-leveraging by the banks and the shenanigans of the mortgage originators and credit rating agencies are a SYMPTOM of the lax lending standards encouraged by GSE's, HUD, initiatives such as the commuity reinvestment act, and financial blackmail against lenders by goverment and Federal reserve banks. This, coupled with the easy money policy of the Federal reserve was the ROOT cause of the bubble, which in turn left investment banks (and other) with toxic assets that they could not sell. This caused a panic in the shadow banking market and the dominoes began to fall. Again, I do not exhonerate the brokers and credit rating agencies that lied or the banks that lied to thier customers about what was on the books (Bear Stearns for example). Here, I am sure we agree.

Lastly, I would argue that NOT letting the recession run it's course will cause more human misery in the long run rather than just letting the system purge itself. All of this goverment intervention only makes matters WORSE in the long run. Would you rather rip the band-aid off or pull it off slowly? We choose to pull it slowly and it only prolongs our misery. GM should go through bankruptcy and emerge a stronger company. It should be a crime what the goverment is doing to the taxpayer. Crony capitalism steps in and uses taxpayer dollars to preserve union wages and lend GM money at below market rates. The Federal government stepping in to prop up the investment banks when they should go bankrupt is another example of this absurdity. Note that over 250 community banks have gone under since 2007 and the Federal Reserve hasn't saved a single one of them. I guess those jobs don't matter. The people what work there can just go pound sand I guess, while they bail out bad decision making at AIG and the rest of the clowns on Wall Street. It's an outrage. Many people have argued that re-capitalizing the banks has done no good whatsoever. The banks still aren't lending - the Federal Reserve has simply given them free money to buy long term bonds with, because they don't want to stomach any risk in the market. Many poeple have aruged that the actions taken as a result of the real-estate bubble bursting will be a bond bubble (that will eventually burst as well). Thanks to the Federal reserve, the American people can live from bubble to bubble, losing all of their wealth in the subsequent collapses. Get the goverment out of the way, let companies go bankrupt (moreover, let them know in advance that there is a moral hazzard involved with bailing them out) and you will see much more responsible behavior from them. What incentive does GM have to be more efficient and competitive when it knows that it can get a taxpayer handout whenever things get bad?

I just don't see any evidence for this view, in fact there's plenty of evidence that this view is incorrect. Check out Larry Mishel's piece on the reasons for low demand.

http://www.epi.org/publication/regul...y-explanation/

There is a LOT of evidence that uncertainty is the reason companies aren't hiring.

http://www.msnbc.msn.com/id/44006656...-more-workers/

[BluegrassCat]

There is a LOT of evidence that uncertainty is the reason companies aren't hiring.

http://www.msnbc.msn.com/id/44006656...-more-workers/

This article provides 7 reasons businesses aren't hiring, and only 1 mentions uncertainty about taxes/regulations and even this 1 assertion is not backed up by any evidence. 5 of the 7 reasons have to do with low demand and weak growth. There may be a LOT of evidence for the uncertainty view but this article isn't it.

[trish]

If you were the CEO of a multinational and you made record profits for the last three years running, why would you be uncertain? Sure the economy's screwed up for the middle class and for small businesses, but that's not you. You're making record profits. You downsized your labor force, used their own fear of the jobless economy to raise production levels, lower salaries and slash benefits. You've restructured to make higher profits with less personnel. You're not a job creator, your a profit maker and you're doing just fine.

[hard4janira]

This article provides 7 reasons businesses aren't hiring, and only 1 mentions uncertainty about taxes/regulations and even this 1 assertion is not backed up by any evidence. 5 of the 7 reasons have to do with low demand and weak growth. There may be a LOT of evidence for the uncertainty view but this article isn't it.

This is an excerpt from the article:

Many companies are reporting thatbusiness is improving, but that’s not necessarily translating into new jobs. A survey of chief executives, released in June by the trade group Business Roundtable, found that 87 percent expect sales to increase in the coming six months. But just around half said they expected to add jobs during that period.

So based on this survey last June (which admittedly is just one survey), CEO's see sales IMPROVING (which directly contradicts your assertion that poor sales is why companies are not hiring).

They go on to state (as one of the reasons):

When asked why they aren’t hiring, you’ll often hear the word “uncertainties.” Those range from not knowing whether taxes might increase at some point to worries about how health care reform could add to employee costs in the future.

[hard4janira]

If you were the CEO of a multinational and you made record profits for the last three years running, why would you be uncertain? Sure the economy's screwed up for the middle class and for small businesses, but that's not you. You're making record profits. You downsized your labor force, used their own fear of the jobless economy to raise production levels, lower salaries and slash benefits. You've restructured to make higher profits with less personnel. You're not a job creator, your a profit maker and you're doing just fine.

Most of the growth in U.S. based multi-nationals has come from sales OVERSEAS, not domestic growth. Why don't you ask Caterpiller that question: They've already said that Obamacare will cost them 100 million in the first year alone. McDonalds also said that they would have to drop health care for their employees - I wonder if these two behemoths have the lobbying clout to get crony-capitalist exemptions from the White house (oh, wait - McDonalds already has).

That means the 'uncertainty' is left to small and medium size business, who get the screw-job once again. Too small to get exemptions or corporate tax breaks, these business bear the burden of uncertainty while employing 75% of all working Americans.

ITS A SHAM, BABY!!!

[needsum]

It's difficult to say that the Bush tax cuts didn't spur the economy. The Bush tax cuts went into effect in 2001 when GDP was 0.3%. After the tax cuts annual GDP was: 2.45, 3.1, 4.4, 3.2, and 3.2% until the recession struck in 2007 because of the real estate bubble. A great many economists told Obama that he shouldn't allow the Bush era tax cuts to expire (and he didn't). He didn't cut taxes, he simply extended the existing cuts (although his new 'jobs' plan may have some new SS tax cuts in them).

Ironically, even with the Bush 'tax cuts', the Unites States still has one of the highest corporate tax rates among industrialized countries. Now, you may say that this is offset by deductions and corporate 'welfare'. While this may be true for a few large companies that have real lobbying clout I hardly think that it is true for small buisiness which employes about 75% of working Americans. I am in favor of a small, flat tax rate for corporate America (like 12%) with no deductions whatsoever. The playing field should be the same for small business and big business alike.

But now we are talking about two different thigns: Unemployment and Recession. You can have a recession with low unemployement and you can not be in a recession with high unemployement. The two are not necessarily related (but they can be). In our case, high unemployment is a symptom of the 'great recession', IMO. So what caused the recession that led to the high unemployement? You claim it is 'lack of demand'. I agree, to a large extent. In a nutshell, several things happenned:

1) People who had easy access to credit no longer had it. This took potential spenders out of the market

2) People were underwater on their mortages w/ more debt that their house was worth. These people lost thier homes or went through bankruptcy (or both). This also took a lot of spending away because people could no longer borrow against the equity in their homes to spend

3) A lot of poeple lost their jobs on Wall-Street (and main-street in companies related to mortgages/lending) when the real-etate bubble burst and the banks went south. This had a ripple effect into other industries that were dependent on housing (construction etc..)

4) People see companies slashing to preserve the bottom line. They are laying people off and cutting costs. People get scared and they start saving more because they are unsure of the future.

Add all of these things together and you have a sinking GDP and rising unemployment because everybody is tighting their belts (people and corporations). The banks have all this money but there is no demand for it. The people that CAN borrow don't WANT to borrow.



First of all, recessions are healthy for an economy. If you don't have recessions then it means you haven't had growth (ask Warren Buffet - he'll tell you he hopes to live to see another recession). We need this recession to purge out the bad. Unfortunately, the Federal Goverment was responsible in large part for creating the real-estate bubble that led to the recession. The money supply was simply way,way too much - it created a culture of consumerism and debt that was not sustainable.

this was a great post, and I want to expand on the aspect in bold. This culture of consumerism is not new. Our country was designed for this very thing at the end of the 1940's. There was a decision made to go one of two ways--to continue on the path we were on of self-sustinence, or to become a consumeristci society. The choice for consumerism was made, and we bought ourselves into this problem we currently face. as technology expands, it gets easier and easier to "afford" more and more things that were once available to the wealthy. As well, a higher demand relates to a bigger need for simpler-to-produce goods. Which creates a system where things are made cheaper so that they break and we dont' feel so bad when we have to replace them.. its an almost guaranteed system. Check out www.storyofstuff.org its amazing the shit we just don't know. I look at all the protesting, and the political garbage, the debt, the welfare, the unemployment, and all the jackwagons in power who think they can just make us feel warm and cuddly and that they have the solution.

There is no "one" solution to all this. it will take a lot of work from everone to change our way of living. We can be a consumer society and still be a productive, smart and saavy society without all the crap in between that is killing us now. the cure starts with each one of us individually.