Kat_Somm_Faen

Phaedrus,

Again, you have the basic premise here and you keep rejecting it.

I ask you, how is it possilbe to have THE GREATEST wealth CONENTRATION during the last boom cycle? You were saying that investment serves to distribute wealth. You simply ingored my proposition and went to say I dont understand basics of economics. I agree with the fact that growth = more jobs when you think "common sense". But again, I say you are ignoring FACTS for "common sense". The fact still stands - we have had tremenduous growth during the last boom - it resulted in some of the greates income and wealth concentration in history. Explain "wealth distribution" in terms of fact not extrapolation or "common sense" which has been proven to be WRONG.

BTW, you still did not propose how does investment does the two things you suggested initially - distribution of wealth and more jobs. Bussines investment is made to create wealth for the investor. If jobs and "distribution of wealth" ( I guess this is the famous "trickle down effect" ) happen that is just a side benefit.

"Simple fact, as demand grows, companies need more people to execute tasks." You say "HE HE" to this and I shall demonstrate this is blatantly false!


After the American Revolution (1775-83), 95 percent of the population was engaged in farming. Today that figure is less than 2 percent. Can you deny that the population of USA has grown, our diets are more diverse and we consume more calories per capita yet how many of us actually produce all this food??? Just about 2%!

The need for food has grown steadily yet we have seen steadily declining number of people employed in farming. More consumption, more production - LESS JOBS!!! And to this you can only say "but look at common sense". What common sense??? You have hard data and you keep ignoring it. The above statement is a statement of FACT not extrapolation or a thought experiment. I wish to explain the impact of technology which you simply brush aside saying "Technology's impact on the economy and productivity levels is a well-known fact, but till what extent does technology help a company, can a particular firm keep 'investing' in technology and sacking people as it sees them as useless?"

But that is exactly what I keep telling you and you keep rejecting! Not to the extent you had put forward namely that people suddenly become redundant but rather that technology has allowed for productivity per employee to outpace growth. See, improvements in technology and from there productivity are not tied to economic growth! Even in a recession productivity keeps rising! And our growth is stagnant or slow at best. So here you have, again, the exact opposite from what your "common sense" is telling you. More productivity without sufficient growth = jobs destroyed while still maintaining some growth in the economy!

Please respond. I wish to see can you explain this fenomenon of ( albeit a slow ) growth = jobs are constantly being destroyed. You can look up figures or latest news on Yahoo Finance if you want to. We have growth ( granted small one ) and we are seeing rising unemployment.

Again, I put forward a notion that for the current economy to catch up to technological development - it has to grow by leaps and bounds, it has to double rapidly.

It took from the time of the first century BC to the fifteenth century AD for one doubling of mankind's total knowledge base. The next doubling of knowledge was completed before the American Revolution, the next one by 1900, the next one by 1950, and the next one by 1960. The pattern is obvious. Now this figure stands at about 5 years! The trend is clear. In 2 decades - will have this rate at 6 moths? And then double our economy every year???

Five years to double our knowledge? For our economy to keep pace even granted that half of this knowledge is useless our economy has to double every ten years!!! And remember, it just has to keep growing.We cant have cycles, bubbles or a slowdown. To keep jobs we have to follow without missing a beat. To have job growth economy has to outpace productivity.

Information revolution caused growth to populate our homes and workplaces with information systems. How much did it take for our productivity to fill the demant to the point of overproduction? How old is Microsoft? 20-15 years is all it took. Yet this marvelous technology is still continuing to destroy jobs without creating the demand to make up that same loss and growth to produce more markets for the unemployed. In essence, it destroyed jobs.

And it is just continuing. We can not put the geenie into the bottle and I certainly have no desire to do so.

Your remarks about Luddites are not well founded. A person without income has free time only to kill himself or starve to death.

...

Gurdur : You are right. But I meant that as a response to Phaedrus' "all we need is business investment". I dont accpet that and I say we need consumer spending with real basis to continu growing too. Anyway, how does one have business investment when consumer spending ie. the ULTIMATE MARKET FOR ALL INVESTMENT is falling?

But you are right with respect to what you wanted to comment on.

...

Ruy Lopez: Another example of how counter-sensical, counter-intuitive and counter-common sense may be exactly what is happening in reality.

phaedrus

Kat,

You were saying that investment serves to distribute wealth. You simply ingored my proposition and went to say I dont understand basics of economics. I agree with the fact that growth = more jobs when you think "common sense". But again, I say you are ignoring FACTS for "common sense". The fact still stands - we have had tremenduous growth during the last boom - it resulted in some of the greates income and wealth concentration in history. Explain "wealth distribution" in terms of fact not extrapolation or "common sense" which has been proven to be WRONG.

My statement was "I dont want to go over the basics of economics here...... ". What you infer from it, is upto you

Now, what do you mean by wealth distribution - it means wealth is being created and on a whole the average per capita income is on the rise. (I am not sitting here and debating how the rich got richer and the poor got poorer, inequitable distribution of wealth wasnt the issue with my original statement, i was referring to 'distribution' of wealth and if you want to debate about the pros and cons of free enterprise and capitalism, you can always start another thread). If you still dont get it, i cant help it

BTW, you still did not propose how does investment does the two things you suggested initially - distribution of wealth and more jobs. Bussines investment is made to create wealth for the investor. If jobs and "distribution of wealth" ( I guess this is the famous "trickle down effect" ) happen that is just a side benefit.

Have already dealt with 'how' business spending helps an economy. In a free economy, that is what is supposed to happen my friend, every individual/firm tries to do the best for him/herself and as a result the whole economy benefits. You dont happen to think "business investment" happens whenever the investor wants to make money???? The owner/management of a business will be ready to invest only when they think demand is on the rise and they think there is a requirement for additional capacity to meet the additional demand. Simple economics.

After the American Revolution (1775-83), 95 percent of the population was engaged in farming. Today that figure is less than 2 percent. Can you deny that the population of USA has grown, our diets are more diverse and we consume more calories per capita yet how many of us actually produce all this food??? Just about 2%!

The need for food has grown steadily yet we have seen steadily declining number of people employed in farming. More consumption, more production - LESS JOBS!!! And to this you can only say "but look at common sense". What common sense??? You have hard data and you keep ignoring it. The above statement is a statement of FACT not extrapolation or a thought experiment. I wish to explain the impact of technology which you simply brush aside saying "Technology's impact on the economy and productivity levels is a well-known fact, but till what extent does technology help a company, can a particular firm keep 'investing' in technology and sacking people as it sees them as useless?"

Umm...maybe you should read up on Alvin Toffler for all this. Some old copies should be somewhere, check them out.

YAWN and anyhows...it is a very basic fact and common knowledge how the economies around the world go through (or have gone through) the cycle of agrarian, manufacturing, services and knowledge. As the contribution of a particular sector towards the GDP of a nation changes, so do the number of people who are employed in that sector. If technology improves productivity to that great an extent and makes human beings redundant, then the unemployment rate should have been rising right all these centuries?

But that is exactly what I keep telling you and you keep rejecting!

You make your own statements and when i say i didnt make them, you can say i rejected them...nice logic. Where do you come from?

See, improvements in technology and from there productivity are not tied to economic growth!

And someone stated other wise?

Please respond. I wish to see can you explain this fenomenon of ( albeit a slow ) growth = jobs are constantly being destroyed. You can look up figures or latest news on Yahoo Finance if you want to. We have growth ( granted small one ) and we are seeing rising unemployment.

Sigh you didnt even understand about the excesses made in 90s do you? Companies made huge investments by getting caught in boom mania and now are saddled with excess capacity which can more than compensate for the anemic growth in the US economy and they have been 'sacking' people/jobs that are not critical to their business, since they have to cut costs to remain profitable. Simple logic, comprende?

Again, I put forward a notion that for the current economy to catch up to technological development - it has to grow by leaps and bounds, it has to double rapidly

If you tried to provide some rational notions, am afraid i dont see them. Why should the economy grow to catch up with the technology?

Information revolution caused growth to populate our homes and workplaces with information systems. How much did it take for our productivity to fill the demant to the point of overproduction? How old is Microsoft? 20-15 years is all it took. Yet this marvelous technology is still continuing to destroy jobs without creating the demand to make up that same loss and growth to produce more markets for the unemployed. In essence, it destroyed jobs.

Err, how in the world technology is supposed to "create" demand? What are you blabbering about?

Your remarks about Luddites are not well founded. A person without income has free time only to kill himself or starve to death.

If any person suddenly faces the prospect of losing a job because he/she didnt upgrade skills in face of changing economic scenario, they cant just sit and crib about technology. They should be nimble...will leave you with a toffler quote which is apt here...

Btw why just talk about technology, one can crib about the outsourcing trend which is now affecting the white collar jobs in the US as companies shift their back-offices and other works to places where labour with same or better skill sets will work at low wages. (but as i said earlier, technology/outsourcing and its impact on jobs, can be easily discussed in another thread, lets stick to what increased business spending means to an economy)

I dont accpet that and I say we need consumer spending with real basis to continu growing too. Anyway, how does one have business investment when consumer spending ie. the ULTIMATE MARKET FOR ALL INVESTMENT is falling?

How will the consumers continue to spend when everyone is losing jobs? You need to be aware it is all a self-perpetuating cycle and everything/entity is interconnected and dependent on each other with differing layers....consumers spend more => demand increases => manufacturers increase their business spending as they see more demand and profits rising => more jobs and more money for employed => these guys go back to spend.....The problem is not many countries/economies have attained the equilibruim of this circle, human beings dont learn and hence we have all the booms and recessions. What i have pointed out (and what gurdur says) is simple, the current spending and refinancing could lead to a debt trap which will prove to be cataclysmic for the US economy.

jp

paul30

Certain economists with a grim sense of humor have called this a "jobless recovery."

That's like saying a foodless feast.

As phaedrus has rightly noted, job loss continues.

That means consumer demand is going to continue slow or slower.

Excess capacity to produce means nothing if there are not enough consumers to buy.

That's what happened in the Great Depression: overproduction and underconsumption.

Bush's largesse to the wealthy will not help this: there is no reason to think the wealthy will spend us all back into jobs. They have never done it before.

Calzaer

The first sign we need to see before we can really say the economy is recovering is Wal-Mart lifting its hiring freeze.

Because when Wal-Mart puts down a hiring freeze, you KNOW we're in trouble.

Kat_Somm_Faen

Phaedrus,

That quote you put us is soooo appropriate. Yet I think it applies to someone else


Lets go then:

"it means wealth is being created and on a whole the average per capita income is on the rise."

'every individual/firm tries to do the best for him/herself and as a result the whole economy benefits. "

"How will the consumers continue to spend when everyone is losing jobs? You need to be aware it is all a self-perpetuating cycle and everything/entity is interconnected and dependent on each other with differing layers....consumers spend more => demand increases => manufacturers increase their business spending as they see more demand and profits rising => more jobs and more money for employed => these guys go back to spend....."

A very good common sense explanation.

Why then we have consumer spending on the decline and historical debt levels? You say that wealth is on the increase! Why then is consumer spending going down? Also, you mention "equilibrium" - umm there is no equilibrium in a self-perpetuating cycle. If something is self-perpetuating one cant have it in "equilibrium" it is like saying a perpetuum mobile has equilibrium. It does not.

By which wonder has increased business investment seized to create more consumers?

Why did this cycle of "consumers spend more => demand increases => manufacturers increase their business spending as they see more demand and profits rising => more jobs and more money for employed => these guys go back to spend....." stop? By your logic there should be no end in sight. Exactly this kind of thinking was the basis of NEP or New Economic Paradigm yet it failed to materialize. Why?

Paul gives you the obvious answer - overproduction. Our ( or the market's ) capacity to produce overtakes the markets capacity to consume. Vary basic. So what is failing us? We have increased wealth creation, increased number of jobs ( as if ) and still consumer demand can not keep up with production increase.

"If technology improves productivity to that great an extent and makes human beings redundant, then the unemployment rate should have been rising right all these centuries" ( BTW you are thinking in 1s and 0s - humans becoming COMPLETELY redundant. I say it is happening gradually so we need to look for the longterm )

Yes, but the economy is not a closed system. It is an open one i.e. improvements in technology create new products. The New World ( economic boost by creating more cheap resources AND enabling demographic expansion ) has been replaced by new products like computers, Internet, DVDs and on. Also, much of the growth has been boosted by the growth in the human population, which make up this lag by increasing demand with rising numbers of people. Also, many of the world�s economies have been opened up to our monetary policies. WTO anyone? China anyone? By opening the former Eastern Block markets to our productivity we WERE able to find new markets to our ever-increasing productivity. What are you seeing now is the markets again being not sufficient to make up for production. Also increasing markets by this method fails since the Earth can not take infinite demographic expansion.

"have been 'sacking' people/jobs that are not critical to their business"

And what makes the following people, as you put it not critical, non-essential? What makes them redundant? What makes a business decide an employee is not needed? After all, an employer is not a welfare institution. That employee has been hired due to some real need and something he has provided to the company. You answer is probably - less demand! But, again, how does more spending and more investment create less demand???

"it is a very basic fact and common knowledge how the economies around the world go through (or have gone through) the cycle of agrarian, manufacturing, services and knowledge. As the contribution of a particular sector towards the GDP of a nation changes, so do the number of people who are employed in that sector. If technology improves productivity to that great an extent and makes human beings redundant, then the unemployment rate should have been rising right all these centuries?"

A very basic fact!!! Look above for the "new markets" explanation. But also you neglect what was done in the industrial revolution. While those 95% farmers were working 14-16 hour days and slaves did 7x24 workweeks, you neglect that Industrial revolution has had steadily reducing WORKHOURS! The last reduction has happened in the 1930 - 44-hour maximum workweek for 1938, a 42-hour maximum workweek for 1939, and a 40-hour maximum workweek for 1940. And then it stopped. Need I explain the fact that even longer hours have been in effect before? Everyone is aware of the even longer working hours of the industrial revolution that were gradually reduced and then that reduction stopped in the 1940s. But the workweek was even longer during the pre-industrial revolution period - as I said slaves had 24-hour workdays without pay. And that was reduced by the Emancipation Proclamation.

...

Paul30:


You have the basis down. You are right but you need to take your thinking a step further.

How is it possible to have reducing consumption of goods and services with increased investment???

The business investment slowed down only AFTER the bubble had burst! Not that business investment slowed than the consumption slowed down.

"As phaedrus has rightly noted, job loss continues."

I have been saying the same thing. We only differ in the reasons and the mechanisms of WHY it happens. While he says all we need is business investment because the consumption has slowed down. Consumption will go up once we increase business investment ( through new jobs created). That is asking too much - for business investment to even happen WE NEED CONSUMERS!!! Plain and simple and therefore we need consumer spending up before bussines investment will even happen!

I say its due to our ever-increasing production capability, combined with a labour glut that drives consumer markets down. Once the initial build up of capacity has happened we are able to EXTREMELY RAPIDLY saturate the market. Faster than the consumer market is growing due to increased productivity. The productivity and technology serve to reduce our ability to consume it since technology also destroys jobs. Labour glut means less wealth de-concetration since the market forces punish the excess of a commodity - namely the labor surplus. Labour surplus mean downward pressure on the consumer markets and even greater wealth concentration at the top. This top-heavy concentration is not able to keep consuming on the rise - marginal utility of wealth.

"Excess capacity to produce means nothing if there are not enough consumers to buy."

Exactly! Now take it a step further? Why is this happening? Overproduction can not happen without investment, can it? See THE cause of overproduction is more goods than consumers. Again this is why new technology is rapidly cheaper every year, CDRs, Camcorders, VCRs, computers. At introduction markets are not saturated and production is low. It just gets worse since we go to produce more while the consumer markets shrink.

But there are two ways to go about fixing this - spur demand ( which is nowhere to be seen due to our dogmatic economic theory ) and destroying capacity. But how do you go on destroying capacity in a sufficient manner when we are always increasing efficiency? The reduction in capacity can not be finite since if it is a one time occurrence - our productivity will again make it too great! E.g. lets say there is overcapacity by a factor of 2 in producing commodity A. This year we destroy ( by market forces ) our capacity to half what it was thereby destroying overcapacity and reaching equilibrium! Perfectly good!

But in a year or two our productivity catches up again!!! We again have overproduction due to the fact that we are getting more and more automation in production of commodity A. We have to destroy capacity again since the market has reached saturation before! Destroying capacity did nothing to increase markets since the need for commodity A has only come to the point where simple replacement due to failure is needed. Every1 who wants commodity A has one at home and it does it job fine so there is no need for extra As. That is what is happening with ANY commodity out there where the consumer markets can not make enough demand to our ever increasing productivity.

Phaedrus' dogmatic economic view would state that an equilibrium will eventually be reached - BZZZZZZZ WRONG! Market is already saturated while our efficiency is not affected and is rising regardless of market saturation! A business in the making of commodity A is still trying too squeeze more and more profits in an environment where the market is not expanding! The way to do that is to raise production efficiency. And there you have it. Technology destroys more jobs than it creates. Jobs lost then in turn destroy the ULTIMATE MARKET FOR ALL ECONOMIC ACTIVITY ON THE PLANET i.e. the consumer market. ( If anyone doe not think consumers are the ultimate reason for all economic activity - it can be easily proved ). Destroying the consumer market leads where it is leading now!

"the current spending and refinancing could lead to a debt trap which will prove to be cataclysmic for the US economy." I could not agree more Phaedrus!

"Bush's largesse to the wealthy will not help this: there is no reason to think the wealthy will spend us all back into jobs. They have never done it before."

"That's what happened in the Great Depression: overproduction and underconsumption."

Right and right you are Paul!

But please take it a step further.

phaedrus

Kat

I know you are challenged, but you can atleast make an effort And now you exhibit your skills with regard to comprehending english.

Why then we have consumer spending on the decline and historical debt levels? You say that wealth is on the increase! Why then is consumer spending going down? Also, you mention "equilibrium" - umm there is no equilibrium in a self-perpetuating cycle. If something is self-perpetuating one cant have it in "equilibrium" it is like saying a perpetuum mobile has equilibrium. It does not.

Consumer spending is on the decline?? Really? Historical debt levels because US consumer has been using credit to 'spend'. Go and read The problem is not many countries/economies have attained the equilibruim of this circle, human beings dont learn and hence we have all the booms and recessions. => simple english ....no one has achieved equilibrium

Why did this cycle of "consumers spend more => demand increases => manufacturers increase their business spending as they see more demand and profits rising => more jobs and more money for employed => these guys go back to spend....." stop? By your logic there should be no end in sight. Exactly this kind of thinking was the basis of NEP or New Economic Paradigm yet it failed to materialize. Why?

Again get out of that self-induced shelld and go and read what i wrote


Paul gives you the obvious answer - overproduction. Our ( or the market's ) capacity to produce overtakes the markets capacity to consume. Vary basic. So what is failing us? We have increased wealth creation, increased number of jobs ( as if ) and still consumer demand can not keep up with production increase.

Sigh, looks like you have to keep proving your challenged self. Go and read above in my posts... you will find things like ...

You didnt get the part about excess capacity from these points didnt you, or maybe you dont understand the terms. It is same as overproduction...

What are you seeing now is the markets again being not sufficient to make up for production. Also increasing markets by this method fails since the Earth can not take infinite demographic expansion.

Sigh it is called demand/supply....people caught up in the 90s mania increased capacity by too much (best case in point being the telecom/technology sector which had the worst forecasts) and when they realised they were wrong...the downturn began.

And what makes the following people, as you put it not critical, non-essential? What makes them redundant? What makes a business decide an employee is not needed? After all, an employer is not a welfare institution. That employee has been hired due to some real need and something he has provided to the company. You answer is probably - less demand! But, again, how does more spending and more investment create less demand???

Errr....changing market scenarios make people redundant....they have been hired since the company had a demand projection and when the demand didnt materialise, they sacked them. You dont know anything about demand/supply do you? If supply outstrips demand, there has to be a correction.

A very basic fact!!! Look above for the "new markets" explanation. But also you neglect what was done in the industrial revolution. While those 95% farmers were working 14-16 hour days and slaves did 7x24 workweeks, you neglect that Industrial revolution has had steadily reducing WORKHOURS! The last reduction has happened in the 1930 - 44-hour maximum workweek for 1938, a 42-hour maximum workweek for 1939, and a 40-hour maximum workweek for 1940. And then it stopped. Need I explain the fact that even longer hours have been in effect before? Everyone is aware of the even longer working hours of the industrial revolution that were gradually reduced and then that reduction stopped in the 1940s. But the workweek was even longer during the pre-industrial revolution period - as I said slaves had 24-hour workdays without pay. And that was reduced by the Emancipation Proclamation.

Sigh, have you even understood what i wrote? Read it again...it is a very basic fact and common knowledge how the economies around the world go through (or have gone through) the cycle of agrarian, manufacturing, services and knowledge. As the contribution of a particular sector towards the GDP of a nation changes, so do the number of people who are employed in that sector. If technology improves productivity to that great an extent and makes human beings redundant, then the unemployment rate should have been rising right all these centuries?"

jp

Kat_Somm_Faen

Allright.

Why am I trying to bring forth a Theory of Everything in Economics for you? You keep going on about basic Econ 101 and on about some other stuff.

We are just getting in deeper and deeper without getting the issue resolved.

Remeber how it all started?

6. And yes, the yet elusive business/capital spending which is a msut for growth. Companies have been able to show profits mainly due to cost cutting, if demand doesnt pick up soon, where will they get their profits from? Rising prosperity and rising living standards do not come from existing factories, but from new factories. It's not productivity that creates wealth. It's investment spending alone and not consumer spending that propels economic growth. The wealth effects of free enterprise have always accrued through the building of factories, not through the stock market or reckless consumer borrowing and spending.

To which I said that you can not count on bussiness investment to pull us out of this hole. Due to the incresed productivity our growth may not neccesarily lead to growth in employment! Simple statement.

Read up on this http://www.nathannewman.org/log/archives/000955.shtml

And here are some quotes from that :

5/29/2003

Looking longer - Why for many this recovery feels more like a recession - As economy expands slowly,
payrolls keep shrinking; Downside of productivity..., by Jon Hilsenrath, WSJ, front page.

Economist Robert Hall has been puzzling over a thorny question for nearly a year: What do you call
an economy that has started expanding again but keeps destroying jobs?

Mr. Hall heads a committee at the National Bureau of Economic Research, an academic group
in Cambridge MA that declares when U.S. recessions begin and end. In May of last
year, Mr. Hall and his colleagues believed the latest recession might be over.
Consumers were spending more and economic output was rising. All that the
committee members needed to see was a few months of uninterrupted job growth to
announce the end of the recession.... But Mr. Hall is still waiting.

Since March 2001, when the recession began, the U.S. economy has lost 2.1 million jobs.

The total number of people unemployed - including discouraged workers who would
prefer to work but have stopped looking - is about 9.2 million. And the number
of people who are working part time because they can't find full-time work is
4.8 million, up 46% since 2001, according to the Bureau of Labor Statistics.

A common definition for a recession is 2 consecutive quarters of contracting GDP.
The nation's GDP...has expanded at an average annual rate of 2.7% since 4Q01.
During the same period, the productivity of the nation's workforce - which is defined
as its output per [man]hour of work - has expanded at a much faster rate of 4.2%. While worker
productivity often increases in the early stages of a recovery, this time the mismatch
between productivity and overall economic growth is unprecedented.

At the beginning of 8 recoveries between 1948 and 1982, GDP grew faster than productivity.
In those cases, companies had to add workers to meet demand for their goods and
services During the recovery of 1991, productivity grew slightly faster than
output in the early stages, but the difference wasn't as stark as it is now.

...

So you see how productivity has a negative impact on job growth even form annual growth of the economy of 2.7% average annual rate. The productivity has outpaced it. Period. The spuring of business investment has been the target of Bush 1st tax cut. It spurred growth but is keepeing on destroying jobs! I am saying that this trend has a verly large probability of repeating with the Bush' 2nd tax cut so increasing business investments has a real chance of failing again and in the future due to the effect of technology on productivity ie. increasing output and reducing jobs at the same time. We might not regain growth sufficient enough to beat growth in producitivy for some time due to the stuff I tried to say up there many times. In fact, if productivity keeps growing at a faster pace we might not be able to do this at all in the future. Bush is not to blame. He is trying to solve the problem supply side and that is the conventional wisdom.

We have growth! Bush 1st cut has given us spending and business investment. Second one is still trying to do the same thing... the first failed and the secodn one is gonna fail and proppin business up to solve this is gonna fail. Why?

Now the way the business investment is supposed to get us out of this hole is by "common sense" conventional wisdom of the type you have been putting forward namely more busines spending = more jobs for and money for consumer =ore market consumption = more profits for business = more business investment.

I am simply trying to say that this chain has been brought into question by our rising productivity and the pickup in spending ( if any - 'cause it aided artificially by credit and fundamentaly not sustainable long-term ) may not be enough to prop up the consumer enough for the business investment to work in manner described above. And as the recession is prolonged by relying on this thinking to get us out of it our jobs keep being destroyed depressing the consumer market and it leaves us with consumer credit as the only thing propping up the economy. Long term steady jobs and increasing wages is what can sustain the consumer.

The more we wait ( the recession prolongs ) the more productivity is going to keep destroying jobs and it will be harder to get our by increased business investment which will not be creating enough jobs to spur consumer demand to the level where it will create conditions to get us out of recession. All hapening by the above by the proposed mechanism.

I shall leave it at that. Take it or leave it - it does nothing to change the reality.

I feel there is very real ( I am afraid it will in fact happen for sure )
possibility for the Fed to eventually exhaust the rate tinkering by going down to 0. I think the Japanese are there right now with their equivalent of the Fed Reserve rate at 0 and their recession/slum whatever you call is is going on for more than a decade.

If anyone wishes to opine on this except Phaedrus and me - I would like to hear it.

I am sorry, I do not want this to go too far. I dont want it to go into name calling and where you attack my lack of knowledge of the basics or me attack you. This is my oppinion of what is happening and why this recession is going to stay much longer around, be deeper and keep lingering if we fight it conventional wisdom way of - keep the bussines investor happy and make them have more money that they can invest to get us out of the hole. I am not happy about that and say that increased productivity may spell failure for this kind of thinking ie. Reaganomics, supply side, pro-bussines whatever you call it.

It is my opinion. Say I dont understand the 'basic". Have it your way. Again, I wish some other people would voice their own opinion about this fenomenon and how to get us out of recession.

Thank you and I apologize if I have insulted you in any way!

phaedrus

Kat

Why am I trying to bring forth a Theory of Everything in Economics for you? You keep going on about basic Econ 101 and on about some other stuff.

We are just getting in deeper and deeper without getting the issue resolved.

Remeber how it all started?

There is no resolution because there is no issue here, just misunderstanding of the economic/business cycle

Anyhows getting to the bottomline is important and should clear some air.

To which I said that you can not count on bussiness investment to pull us out of this hole. Due to the incresed productivity our growth may not neccesarily lead to growth in employment! Simple statement.

That is the whole reason i asked you originally, "what do you think investment spending is?" Business spending is not just spending on machinery or computers....it is also applicable to hiring more people !!!

Coming to productivity, the problem with your statement is i had already stated It's not productivity that creates wealth. So what is the issue here?

Read up on this

Read the WSJ article and also others about the jobless recovery, but i am not really convinced whether the sub-par recovery is sustainbale in the first place and also if such recovery is good enough to spur investment spending. If you read the WSJ article carefully.....it will be clear that the author is not just blaming "increased productivity", but also acknowledges the effects of "globalization" and jobs shifting to cheaper places across the globe, ergo.....OUTSOURCING, which i mentioned earlier in this thread.

The spuring of business investment has been the target of Bush 1st tax cut. It spurred growth but is keepeing on destroying jobs! I am saying that this trend has a verly large probability of repeating with the Bush' 2nd tax cut so increasing business investments has a real chance of failing again and in the future due to the effect of technology on productivity ie. increasing output and reducing jobs at the same time. We might not regain growth sufficient enough to beat growth in producitivy for some time due to the stuff I tried to say up there many times. In fact, if productivity keeps growing at a faster pace we might not be able to do this at all in the future. Bush is not to blame. He is trying to solve the problem supply side and that is the conventional wisdom.

We have growth! Bush 1st cut has given us spending and business investment. Second one is still trying to do the same thing... the first failed and the secodn one is gonna fail and proppin business up to solve this is gonna fail. Why?

You must be joking, investment spending is on the rise????? Where did you get that from? Why will companies spend more when they already have extra capacity due to their indulgence in the 90s?

Now the way the business investment is supposed to get us out of this hole is by "common sense" conventional wisdom of the type you have been putting forward namely more busines spending = more jobs for and money for consumer =ore market consumption = more profits for business = more business investment.

I am simply trying to say that this chain has been brought into question by our rising productivity and the pickup in spending ( if any - 'cause it aided artificially by credit and fundamentaly not sustainable long-term ) may not be enough to prop up the consumer enough for the business investment to work in manner described above. And as the recession is prolonged by relying on this thinking to get us out of it our jobs keep being destroyed depressing the consumer market and it leaves us with consumer credit as the only thing propping up the economy. Long term steady jobs and increasing wages is what can sustain the consumer

Errr....in case you didnt notice, i pointed out to you that all these factors dont work in isolation but are part of a circle and are dependent on each other. Increased business spending will ONLY HAPPEN WHEN CORPORATE AMERICA THINKS THERE IS GOING TO BE A SUSTAINED INCREASE IN DEMAND WHICH WARRANTS ADDITIONAL INVESTMENT. As of now whatever anemic growth the US economy has exhibited and the consumer spending has been easily met by companies through their existing capacity, which is under utilised. (A case in point being yesterday's numbers on industrial production which have revealed that capacity utilization is still at 74.3%. As pointed out by Schumpeter - weak
industries and companies had to be destroyed in order
for thriving ones to take root. He called it a "perennial gale of creative destruction." This is part and parcel of the economic cycle.

But the problem here is the structural deficiencies that the US economy is facing and the refusal by the government to take some painful decisions, because it could cost them the election. There is no conventional wisdom or cure since this is a new stage the US economy is facing, "jobless" recovery. The policy makers need to take some hard decisions instead of crappy ones like the tax cuts which only bloat the deficits and do nothing to alleviate the common man's situation. The politicians want to just post pone the problem so that they can win the election and leave it to others down the line to take those decisions. Will it be too late? Time only will answer that...maybe a japanese type situation will arise, but for japanese companies, there was a big market called US....what happens when both US and japan face degrowth?

jp

Gurdur

Hey Calzaer !

Good point !
I like it especially since I collect such practical rules-of-thumb for economic analysis.

In return, I'll give you one I recently learnt:

In the UK, flourishing new large handyman stores are now taken by professional analysts as reliable indicators for booming blackmarket building work in those regions.

These micro-economic indicators are always fascinating in their own way.

paul30

First, thanks to Kat Somm Faen for agreeing with me and thereby showing immense wisdom.

Second, to all, go to http://www.thenation.com/doc.mhtml?i...&c=4&s=greider

It's a longish article on the problems of the US and world economy now.

Greider is basically a Keynesian (I am, too; insofar as I agree with capitalism at all, which is not much), and says that the government must take bold steps to get money moving.

He says, rightly, that the Democrats are wrong to worry about deficits, and we need to do some serious deficit spending to get the economy jump-started. Bush is doing this on a minimal level, and going about it from the wrong end: what should be done is to spend on the least wealthy, for those people are sure to put the money right into circulation.

He also has a very nice proposal for the government to bailout not LARGE debt failures (as it did with the S&L bailout) but small, individual debt failures. What a concept!

He also says the gov can buy up (i.e., guarantee to pay) debt from failing companies so they can resume operation.

Worldwide, he says the whole shape of globalization needs to change. This is the message of the anti-globalizers, and they are right.

First, rights of workers and the environment need protection. Second, there needs to be higher pay for all workers so that there will be enough consumers for all the things they produce.

Current globalizers only favor production and not consumption. They are like people who like locks but don't like keys.