Wednesday, September 2, 2009

More frustration...

A blog reader just emailed me to remind me that much of the stimulus is still to come in 2010. I very much appreciated his encouragement.

This is what I wrote back...

Yes, that's true and it's one of the reasons why I am remaining optimistic, however, will the Administration "sterilize" the back end of the stimulus with deficit-reducing measures in the meantime?

It's clear to me that we favor some level of fiscal conservatism in this country over job creation and maximizing our output.

We have not seen real earnings of workers or, industrial utilization, anywhere near 1960s and early 1970s levels even with Reagan's big tax cuts.

There is a lot of talk about the "working class" around every election cycle, however, it is just talk.

One could just say, "Fine, that's the way it is here in America so stop thinking like a worker and think more like a capitalist."

Okay, I accept that. And what do people do? They invest in stocks or buy real estate and endeavor to accumulate assets like capitalists.

Then what happens...

The whole thing goes down the toilet and the government sits there and lets it happen even though it pretty much forced everyone to do these things because of current tax, income, trade and regulatory structures.

The only people who win are the elite, "finance capitalists" of Wall Street who have influence on the political system. They get bailed out or get sweetheart investment deals backed by the government, while everybody else drowns.

It's amazing! And it happens whether it's a Democrat or a Republican. Doesn't matter.


Brantley said...

"The whole thing goes down the toilet and the government sits there and lets it happen ......"

The Gov. isn't just letting it happen.... the consumer is tapped out with debt. DONE.

The load has finally overcome the masses and the MATH of debt, revolving debt, compounding debt (that according to you may not ever create a financial hardship reality to the US Gov) but certainly has punished the consumer that must pay or default.. debt interest has finally exceeded their ability and even taken their reserves.

Maybe the fact that the corporate chieftains have put so much of the wealth (MONEY) in their pockets while work forces (pharm reps, transportation workers, educators, ...) have had wages cut or stagnant for years, leaves no money left to spend while interest payments compound.

Yes, many costs went down but property taxes went sky high, energy costs, food, insurance-- the things people must pay - and pay every month.

I read yesterday that 40% of the unemployed would take their job back for 30% less money, 5% would take 40% less and 3% would take 50% less-- just to have a job. Good luck paying off debt and if you have a job, good luck getting a pay raise.

The Gov can try and blow more bubbles but in the end the consumer must pay their debt and credit expansion COSTS have been taking a larger portion of their money.

The discussion (question) seems just to keep going on and on about Gov spending or rather not spending. If you say that fiscal responsibility is the drag to the debt ceiling high enough... why not just do away with all taxes and raise revenue with debt.

Mike Norman said...

You're wrong here. The Fed's Financial Obligations Ratio, which measures debt service as a percentage of disposable income is down sharply. At a multi-year low.

Brantley said...

Mike, I don't know where you got your numbers but here are mine --

They DON'T agree AT ALL with your comment "..debt service as a percentage of disposable income is down sharply. At a multi-year low."

This shows debt at all time highs (09q1).
BUT if your numbers are correct, I would only say that the numbers are calculated using smoke and mirrors because looking at the economic environment from 2006 to today, there are 10 fold (a guess) foreclosures, millions on unemployment benefits and credit card companies killing card holders’ accounts and banks killing home owners’ lines of credit. The government has ways/rules of excluding data that obscure the truth. (Example: unemployed people dropping off the list because benefits stopped.)

Brantley said...

correction..... that would be debt ratios where I put "This shows debt at all time highs (09q1)."

Mike Norman said...

Precicely. Go look at your numbers. Those ratios are down from the peaks in '07.

Matt Franko said...

For perspective, if you take the $2.5T total consumer and subtract the $400B used as checking account surrogate; and then divide the remainding $2.1T by the 110M US households; that equates to about $21,000 per household of consumer debt. If you read the Fed's statement notes, that INCLUDES auto loans, student loans, credit cards and mobile home loans...$21,000 per household sounds like a decent amount to me, but not the doomsday type of number that others may argue..., Resp,