On The Economic Crisis

[Hill_YesWeWill]

I just wanted to ask all you DUers, how bad exactly is the economy?

I keep hearing candidates and surrogates talking about the economy crisis, but I personally have not been affected.

I know a lot of people are losing their homes due to the sub-prime mortgages, but didn't that actually start months and months ago?

Also, I don't have money invested in stocks, so maybe that's why I haven't been affected by the downturn in the stock market, but doesn't the market always have valleys and peaks, I mean, it can't always be at a peak, that couldn't be healthy!

I agree we need a democrat in office to bring back fiscal responsibility and to get rid of the deficit, but I think Obama and Clinton would both do a good job as I'm sure either one will have the best of the best advisors.

Also, has anyone else thought about the fact that Bill's presidency was during the Internet Bubble and perhaps that might have something to do with the positive turns in the economy during his presidency?

[Hill_YesWeWill]

1. I hear crickets

[grasswire]

2. check your grocery tape

...and thank your lucky stars that you aren't feeding a family. Cuz if you were feeding a family, you would be feeling the effects.

[november3rd]

3. You must be loaded

If you haven't noticed that your money buys about 1/2 of what it did 5 years ago, then you must really be pulling in the coin!

Have your property taxes gone up lately? Oh, and what additional services are you getting as a result? None? Services are being cut?

Go figure!

[Hill_YesWeWill]

4. yep, you're right, I'd definately be having a much harder time if I was feeding a family

but is the economy any worse than it was say 3 months ago?

[TexasObserver]

5. I've taken the time to answer each of your questions. Now you'll know.

Question:
I just wanted to ask all you DUers, how bad exactly is the economy?

Answer:
Bad. If you will look at the Dow Jones Industrial Average, you will see that since Bush took office, the DJIA has risen (in dollars, not real, inflated dollars) under 9%, or a little over 1% per year. This is pathetic, even if there were no inflation and no diminution in the value of the US dollar.

What this means is that you if you invested $1000 in the DJIA, on average, on January 20, 2001, the day Bush took office, and let it ride for 7 years, you would now have $1090 to show for it in value.

If you had invested your $1000 in something really safe, like tax free bonds, paying maybe 5% per annum, you would have over $1350 in value now, and in fact, given your ability to reinvest the the $50 it was throwing you each year, you'd have closer to $1400. When really safe bonds are outperforming the stock market that badly, the economy is really bad.

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Question:
I keep hearing candidates and surrogates talking about the economy crisis, but I personally have not been affected.

Answer:
Then you must not be paying your own gasoline, insurance, rent, groceries, medical, and health insurance. Gasoline has more than doubled since Bush took office, and all things that rely on energy costs have seen concommitant increases in costs. Because the economy has been sick, Americans, like their government, have gone precariously in debt. In the past three years, Americans have had their debt exceed their savings, the first years that has happened since the early 1930s.

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Question:
I know a lot of people are losing their homes due to the sub-prime mortgages, but didn't that actually start months and months ago?

Answer:
It started years ago, as the Federal Reserve Board (the FED) kept interest rates artificially low, and the government allowed lenders to offer Adjustable Rate Mortgages (ARMs) which gave consumers below market rates with a step up at a point in the future. Those loans started rolling over last year, and consumers couldn't pay the stepped up rate. To further complicate the mess, bonds were created to finance such lending, and those bonds were insured. Now the lenders, the bonds, and the bond insurers are all fiscally on the ledge because the properties supporting the original loans are over-leveraged, and many are going into default. There will be at least a million home foreclosures this year, and that means 3000 familes on the street every day from foreclosure.

Nothing can stop it. The problem cannot be fixed because true wages in the US have fallen, and in real dollars, the average person has less buying power. They can't stop paying for food, or gasoline, or car note, or medical bills, or health insurance, or clothes, etc. They can default on their home loans and move into something smaller for lease.

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Question:
Also, I don't have money invested in stocks, so maybe that's why I haven't been affected by the downturn in the stock market, but doesn't the market always have valleys and peaks, I mean, it can't always be at a peak, that couldn't be healthy!?

Answer:
You have been affected, you just don't know it. As stock values fall, so do the financial statements of individuals who hold those stocks. The entire value of the holdings of US citizens drops, and that drop reduces the security banks have, and that makes banks nervous. The Comptroller of the Currency sends bank examiners to banks to determine their bad loans, and they require those loans to be written off against each bank's capital. A bank can loan money based upon a multiple of its capital, so when the capital is reduced, the loans a bank can make or have out are reduced by a factor approximately ten times the amount of the loan written off. As banks experience this, they literally have less money they can lend.

Because the FED has tried since last August to artifically keep the DJIA and other indices above recession levels, the US dollar has fallen badly in its currency exchange rate with foreign currencies. As an example, the Canadian dollar has risen 65% against the US dollar since Bush took office. If you had simply taken $1000 the day Bush took office and bought Canadian dollars, they would be worth about $1700 US dollars today.

If you had bought gold on the first day Bush took office for $1000, it would worth close to $3000 today. These examples I am giving you are designed to show just how badly our economy is really doing.

The number of uber rich have grown. The number in poverty have grown. The middle has shrunk.

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Question:
Also, has anyone else thought about the fact that Bill's presidency was during the Internet Bubble and perhaps that might have something to do with the positive turns in the economy during his presidency?

Answer:
That is a straight up rightwing talking point. Let me knock it down. The tech boom was one aspect of the success of the Clinton era economy, but it's much more than that. The balanced budget gave the economy a strong base, and made the dollar strong. Avoiding nasty wars in the mideast kept oil prices below $30 a barrel, and that kept all costs down, since energy costs are built into everything. We had a peace dividend from the end of the Soviet Union, and that allowed us to save money on defense items. As the economy remained solid, more Americans had more money, and real disposal income increased, unlike under Bush.

The internet bubble, as reflected in the NASDAQ, one major index, began its decline in summer 2000, but the drop in the DOW didn't occur until Bush took over in 2001 and began his tax cut for the wealthy. This meant we would have deficit spending, and meant the government would have to borrow more money to cover that deficit, which is both inflationary and makes the US dollar less sound. The decline began, and was exacerbated in August by the fall of Enron, and by 9/11 the next month. The 9/11 losses were quickly recouped, however. It was the 2003 invasion of Iraq which really set things on the wrong path.

The Iraq war simultaneously drove spending UP, the deficit UP, and the cost of oil UP. All of these together hurt the US economy.

Because the US dollar has been weakened by the various Bush actions, it has lost value against the Euro and other currencies, which make the US dollar less attractive as a currency to hold by foreign countries.

In summary, Bush has made a mess of the US economy, the value of the DOW and NASDAQ, in real dollars, is greatly reduced from what it was 7 years ago, the number of wealthy and the number in poverty have grown vastly, and ordinary Americans have less disposable income and less in real dollars.

We are worse off than we were 7 years ago, a lot worse.

[Hill_YesWeWill]

8. Oh My God!

ok now I'm freaked out, I didn't know it was That bad!

Well, my real question was, why is it that the Clinton camp think Hillary will do a better job with the economy, I mean, obviously they think she'll be better at everything, but is there a specific reason?

[TexasObserver]

11. I really wrote all that because they're good questions, and I want DUers to know the answers.

They are questions that many Republicans, whose knowledge of such matters is meager, like to talk as if they understand. They listen to morons on Fox News or BizNet radio, and think they understand the economy.

Unfortunately, many Democrats are weak on these points, and I hope that by writing about them, I can help prepare DUers to counter their friends, relatives, and co workers who try to play the "I know the economy and you don't" game.

The Clinton camp thinks Hillary can do better with the economy because they're eaten up with hubris. Bill's economic gurus are working for Obama.

[lapfog_1]

6. I'm out of work and have been for 8 months.

Does that count?

IT professional with 28 years of experience. Have been group lead, manager, CTO, and CEO. And individual contributor. I have authored numerous papers, served on a standards committee, and refereed papers for big, well known conferences. I also hold 3 patents in my field.

Right now, it's hard to find anything that matched my skill set... and people are afraid to offer me a salary which would be "insulting" given my resume (mid 100's was my last). Right now, I'd take anything over $100K (I know that sounds outrageous, but for silicon valley, it's very pedestrian). I would even take a temporary by the hour contract at $50/hour (which, if I pay both sides of FICA and my own health insurance... is waaay less than $100K a year).

So far, nada... I get a few call backs but no offers.

So yeah, the economy sucks right now and has since June of last year.

[Hill_YesWeWill]

10. I'm sorry!

but do you have any idea why the Clinton camp says that Clinton will do a better job with the economy?

[WillYourVoteBCounted]

7. we're waiting for another DOT Com bubble like in the 90's

meanwhile, Hillary wants more HB1 visas so tech people can be imported
to work at lower wages than US people.

Oh, thanks for the Dot Com bubble.

[Hill_YesWeWill]

9. does she really? that's horrible nt

[izquierdista]

12. It's easy to be a turtle

If your job is a stable one, and you have been in your house for a while with a fixed interest loan, it is easy to say the things you say. It is when you have to change jobs or move to a new house that you will see how bad the economy is. There really are no white collar jobs left for people over 40, they have all been outsourced overseas or given to people who won't ask for as much money (20somethings and H1-B visa holders). If the white collar job really requires a person with lots of experience, he is brought in as a "contract worker" and let go the minute his task is done, all the while not paying him any benefits. There really are no manufacturing jobs left, it is a giant game of musical factories, with 500 less chairs every time the music stops.

If you look at economies of lesser developed countries, you will see many, many, many people working as vendors, selling some paltry inventory of food or clothing or other merchandise to make ends meet. Some have real shops, some have a stall at the marketplace, some just have a tent, and some just spread their wares on a blanket on the ground. They spend long hours waiting for people as poor as they are to come by and buy a couple items, and they may turn a few dollars profit for the day. That is where the US economy is headed and you can see the vanguard of the new movement at swap meets and garage sales, trying to scrape up a few dollars to make ends meet.

Yes, the Clinton presidency benefited greatly from the development of the Internet. It wasn't a bubble in the classical sense, because we still have an Internet that is growing in importance; after the Dutch Tulip Bubble of the 1700s, all they had were a lot of pretty flowers. But you have to give George credit for taking a balanced budget and a debt that was starting to get paid down and giving tax cuts to the rich while pouring resources into a pointless war. The two reasons for the Iraq way are (1) to cause instability in the price of oil, thereby making huge profits possible for the oil companies and (2) to create a scenario whereby Halliburton, Bechtel, Blackwater and others can feed at the government trough.

Along the way, the manufacturing base has left in the United States. Spain and Germany are the new centers of expertise in wind technology; China leads the way in low-cost manufacturing; Brazil is the most technologically advanced at turning biomass into motor fuel; France has the best health care system for its citizens and every other country has more garment workers than the United States. It is impossible to start a manufacturing business in the United States today. There are no more local suppliers of parts and materials, just distributors for the Chinese importers. If you want a prototype made at a shop, you might as well get on a plane and go to China because that is where you will have to fab the prototype and further develop it.

It's bad, very bad, and the only way to turn it around is for the US to invest in itself, in public transportation and renewable energy. Repair the infrastructure, make health care available to all, provide social services to those that need them and you would be surprised at how vigorous the economy will become.