The New Reality

[Embar Angylwrath]

It appears more and more lilkely that any type of recovery in the unemployment numbers will require a new economic model for the US. OUr previous-based consumption model just can't work when people don't have the means to consume. I think we are staring at a lost decade in the history of the US. From 2010 to 2015, unemployment is going to stay very high, and probably won't hit normal levelsuntil 2020. And by unemployment, I don't mean the monthly unemployment number, which doesn't capture those that are under-employed or who fell off the rolls or just gave up looking for work (which is near 20%, not the 9.5% we hear reported).

With that level of unemployment, the likes of which we haven''t seen since the Great Depression, its impossible to jumpstart a consumer based economic model. I don't know what the answer is, but I suspect it's going to take an adjustment of expectations on the part of all Americans about material consumption, and a large investment in infrasturcture to get people back to work. I've never seen the US economic outlook so bleak.

[Lurker]

Who should make the "large investment in infrasturcture to get people back to work" and how should it be paid for?

[Embar Angylwrath]

Who should make the "large investment in infrasturcture to get people back to work" and how should it be paid for?

Only the government can make that kind of investment, ala the WPA. And I hate saying that.

And of course since its paid for by the government, that means it's paid for by the taxpayers. But I find it a better expense than just issuing a check that might be spent on televisions made in China.

And glad to see you're back Lurker, was beginning to think something bad happened.

[Lurker]

I agree infrastructure investment is needed and that only the government can do it. Can you be more specific about how you want it paid for? I understand that it's ultimately paid for by the "taxpayer", but do you want the investment funded by deficit spending or by shifting money from other areas of government or by tapping some new revenue source or by some combination of those?

[Embar Angylwrath]

I agree infrastructure investment is needed and that only the government can do it. Can you be more specific about how you want it paid for? I understand that it's ultimately paid for by the "taxpayer", but do you want the investment funded by deficit spending or by shifting money from other areas of government or by tapping some new revenue source or by some combination of those?

I think it has to be a combination of those, with deficit spending the choice of last resort. Start with re-prioritiznig the military, move to Medicare and Social Security reform and thiose will give the best bang for the buck. Eliminate redundant departments in the government, chop Homeland Security waaaay back, and cover the rest with deficit spending. Taxing people does no good during this time, it just exacerbates the problem.

Then spend the money on infrastructure, both physical and our future (education)
Modernize schools across the nation
High speed rail
Investment capital for renewable energy research

Just investing in those three areas would generate a large number of local construction jobs, especially from the modernization of schools, and also generate higher paying research and development jobs as well, plus, if we win the race to renewable energy technology, maybe we can start exporting again.

Finally, it has to be accompanied with a realization that what happened in the last decade, when people were living way beyond their means and felt entitled to instant gratification... that must never happen again.

[Partha]

I realize stats aren't your strong suit, Embar, but u6 in the early 80's was higher than it is today. So that covers your claim that this is the worst since the Great Depression.

[Fallakin Kuvari]

U1: Percentage of labor force unemployed 15 weeks or longer.
U2: Percentage of labor force who lost jobs or completed temporary work.
U3: Official unemployment rate per ILO definition.
U4: U3 + "discouraged workers", or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.
U5: U4 + other "marginally attached workers", or "loosely attached workers", or those who "would like" and are able to work, but have not looked for work recently.
U6: U5 + Part time workers who want to work full time, but cannot due to economic reasons (underemployment).

http://www.shadowstats.com/alternate_da ... ent-charts

[Freecare Spiritwise]

I'm not sure I buy the whole bleak outlook thing. I wouldn't exactly call this the boom times, but I can't think of a single person that I know who's unemployed. No one's who's anywhere near destitute. Closest I can think of is my wife's brother who got laid off and they screwed him out of some of his retirement bennies and he had to take a job with less pay and longer hours, but he and his family is doing fine.

I'm not sure how your shop is doing or how many people you had to lay off, but our shop has more work than we can handle. Our biggest problem, and I'm sure we're not alone, is too many projects and not enough staff. Everyone is working a few extra hours, but I'd hardly call that bleak.

All the people I know working in technology are doing great, and the people I know doing blue collar work are getting by like they always do. Nothing really new there. For a while I was thinking of doing some moonlighting but we decided we'd rather have the extra time together than the extra money, and my son is starting varsity football and I'd rather have the time to be involved in what he's doing.

I know there's people not doing so great, especially in small towns with hard-hit industries, but I would think that if this was another great depression then I would at least know *someone* who's down and out. I know a couple people like my dad and my friend's dad who recently said "screw it, I'll just retire" but that was more of a strategic decision than one made out of desperation. My dad is going to travel the country with his 4th wife in his new RV.

One thing I think you are right about is that people are being much more cautious with their finances. I don't know anyone running out buying beemers like 5 years ago, but I know lots of people who are buying Hondas. I know lots of people who used to live beyond their means who aren't doing that any more. So yeah, I think there has been an adjustment, but I see that as a good thing.

/shrug maybe I've just always been an optimist.

[Embar Angylwrath]

I realize stats aren't your strong suit, Embar, but u6 in the early 80's was higher than it is today. So that covers your claim that this is the worst since the Great Depression.

U6 figures have only been fully compiled since about 1990...

U6 "estimates" for the Great Depression were about 25%. I think we stand at, what, 17%-18% now? Certainly there are other factors in play ... an enhanced welfare system not the least of them which helps dampen the effect of the depressive effects on the population (starvation isn't much of an issue today, although housing is). Also, the US economic model has changed sine the 1930s. We went from production and diversified agriculture to consumerism, do you disagree? A consumer based economic model is much more vulnerable to unemployment factors, surely you can see that. Less jobs, less money. Less money, less consuming. Are you really postulating that this econmic crisis isn't the worst you've seen in your lifetime? And I'm assuming you're at least (and probably older) than me.

[Partha]

Embar, let me put it this way. When I was 12 the unemployment rate (NOT the u6) was 25.5% in my town.

http://blogs.wsj.com/mainstreet/2009/01 ... istration/

Reaganomics gutted this town, and the School Board follies only exacerbated it. Yes, this is bad. No, for people like me old enough to remember it, it's not worse than 1981-1983, and we actually are better equipped to deal with it now than we were then. We also have been stripped of any idea that business leaders actually care about their workers any more than a cat cares about mice, which makes it much less likely we're going to trust anyone heading a company to have our interests first. Get shit on the first time and see how many of us keep our heads down.

[Kulaf]

Just curious, but what exactly did Reagan do that "gutted" Rockford? He got elected in 1980 and you say it hit in '81. You sure Carternomics didn't "gut" Rockford?

[Embar Angylwrath]

He'd like to blame Reagan, but it's a non-sensical argument. The real reason that town collapsed was because of the unions. Refusal by the unions to concede wages and benefits drove a lot of the jobs overseas. That, and tehy made Chryslers for crissakes. One of the shittiest car brands in America. This was a time when Toyota was kicking the ass of American car manufacturing. Unions continued to focus on bloating wages and benefits instead of producing cars that didn't break down. When people don't care about the product they build, don't expect other people to care about it either.

[Partha]

Sorry, you two, Reagan spearheaded the breaking of the unions, not Carter.

[Ddrak]

I think China's economy is going to move ahead by leaps and bounds in the next decade, which will be a significant problem for the rest of the world. Despite Germany's currently good numbers they'll either have to break from the EU or be dragged down by PIIGS. The US is going to be relatively stagnant whatever happens (though infrastructure investment wouldn't be a bad idea). Australia is too small for anyone to give a shit about and we have to see our real estate bubble burst soon (the average house is 7 times the average yearly income at the moment, and rising) as if anyone cares.

I'm not even convinced foreign investment in China is a good idea given that the Chinese Government can happily annex whatever foreign ownership they want and quite frankly not give a shit because the world needs them more than they need the world.

Gonna be an interesting ride...

Dd

[Fallakin Kuvari]

Sorry, you two, Reagan spearheaded the breaking of the unions, not Carter.

Read: it was Carter's fault that things got out of hand and Unemployment in Rockford in the early 80's was 25%.

[Kulaf]

Sorry, you two, Reagan spearheaded the breaking of the unions, not Carter.

Everything I read about Rockford said that your companies sold out to larger out of state firms who then closed down your plants and outsourced your work. How is that Regan's fault?

[Embar Angylwrath]

http://www.ledgerdata.com/unemployment/ ... 980/april/

Illinois' unemployment data. Pretty much shows that the Reagan tenure reveresed an unemployment trend that started with Carter, and the first Bush era was pretty good too. (As was Clinton's era).

The unemployment rate in Rockford is largely attributed to job out-sourcing, which started in Carter's era, and have little to do with politics, and more to do with unions. The focus of unions on benefits instead of quality workmanship (which gave Toyota, Sony, Samsung, etc. a beachhead in the US) was the driving factor to push jobs out of the US.

The alternate can be seen in places like Wichita, a large union town (much aircraft manufacturing done there), but they know they have to compete with the likes of Airbus.. so they try to put out a product that can't be beat. (In all honesty, they are losing the fight for much the same reasons Rockford lost...their focus is on wages and benefits instead of putting out a good product.. Boeing is a good example)

When unions get back to focusing on making an excellent product, protecting their work product instead of protecting individual workers and focusing on just benefit and wages... the US might stand a chance in the world market. Until then... fuck the unions, which drag down the whole economy of the US. I'm all for unions if they produce and inspire better and more trained, educated and skilled workers. But that hasn't been the case since the 70s

[Partha]

Everything I read about Rockford said that your companies sold out to larger out of state firms who then closed down your plants and outsourced your work. How is that Regan's fault?

Interest rates between 1980 and 1982 jumped to over 20%, making the dollar so strong that overseas investment became incredibly attractive. Add to that Reagan's union-busting (which made it easier for GM to start the maquiladora migration to Mexico of high-tech jobs) and general deregulation of business, and you can see why a place built on high-wage manufacturing jobs would get hit. It was Reagan who first pushed the idea of NAFTA in his campaign...sadly, it would be Clinton who actually signed the final product.

And I love the way that Embar puts the emphasis on the product development on the unions - last I heard, business executives were the ones who decide what products they're going to make.

[Embar Angylwrath]

Everything I read about Rockford said that your companies sold out to larger out of state firms who then closed down your plants and outsourced your work. How is that Regan's fault?

Interest rates between 1980 and 1982 jumped to over 20%, making the dollar so strong that overseas investment became incredibly attractive. Add to that Reagan's union-busting (which made it easier for GM to start the maquiladora migration to Mexico of high-tech jobs) and general deregulation of business, and you can see why a place built on high-wage manufacturing jobs would get hit. It was Reagan who first pushed the idea of NAFTA in his campaign...sadly, it would be Clinton who actually signed the final product.

And I love the way that Embar puts the emphasis on the product development on the unions - last I heard, business executives were the ones who decide what products they're going to make.

Business execs decide the direction of the organization.. but they don't assemble the products.

No matter how great the business plan, if the workers are more concerned about jockeying for pay/benefits and less on the product they produce... expect the buying public to less motivated to purchase a product that is half-assed. The unions brought it upon themselves. No doubt about it. If Chrysler was the superior product, Americans would have bought it.

Tell me this Pwntha, why do you think American car manufacturers lost market share to the Japanese? Especially when we controlled the entire US market at one time?

[Freecare Spiritwise]

Tell me this Pwntha, why do you think American car manufacturers lost market share to the Japanese? Especially when we controlled the entire US market at one time?

Because their eyes are closer to the components. Caucasians are just too damn tall!