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  • Self-Sustaining Growth "No Longer Exists"

    Do you believe in the statements below?



    First of all, it’s very clear that the United States government is not constrained externally, and it’s clear that quite apart from the stimulus package, the automatic stabilizers and the financial rescue, which greatly ballooned the public debt of the United States, have had no effect on the ability of the United States government to fund itself and no effect on the interest rates that the government pays.

    So, it, I think, follows from that logically and straight-forwardly that we have nothing to fear from additional efforts as long as they are necessary. And they’re obviously very clearly necessary. So the question is: what should be the structure of those efforts?

    I’ve always taken exception to the constant reference to “stimulus” as the policy objective, because implied in that word is the idea that all one needs to do is to undertake one or more relatively short term spending sprees, on whatever happens to be available at the moment, and that this will somehow return the economy to its pre-crisis state, putting it on a path of what economists like to call “self-sustaining growth.” I maintain that in the present environment there is no such thing as a return to self-sustaining growth. There will be no return to the supposedly normal conditions, which were in fact, from a historical point of view, highly abnormal, of the 1990s and 2000s.

    What one needs is to set a strategic direction for renewal of economic activity. We need to create the institutions that will support that direction. Those institutions are public institutions, which create a framework for private activity. This is the way it is done. It is the way countries have always developed in the past and, to the extent that they are successful, they will always do so in the future or they won’t succeed. Seventy years ago when we were in the Great Depression, they built a national infrastructure: roads, airfields, schools, power-grids - this kind of thing was the priority. In the post-war period, the creation and maintenance of a large middle class with social security, with medical care, with housing programs, universities - these were the priorities of the post-war period.

    Now we clearly face an enormous challenge with energy and climate. It’s a challenge that requires us to think in very creative ways, in very ambitious ways about how to change how we live, so as to make life on the planet tolerable a century or two centuries hence. This is a huge challenge. It requires design, planning, implementation, something with enormous potential for providing employment because things have to be done, enormous potential for guiding new public and private investment because one has to provide people with the means of making it realistic for individual activity to support this larger objective. And that is the way to move toward a renewed economic expansion. This strikes me very far from being a stimulus proposal. It is a proposal for setting a new strategic direction for the economy and doing so over a relatively long time horizon with a view that you’re sustaining effort for 15, 20, 30 years. That’s the way I think you need to think about this.

    Just to wrap up a long answer to a short question: Why can’t we go back to the pre-crisis period? The answer is that restructuring of the private household debts is an enormous task which necessarily takes a very long period of time. During that time, the pre-crisis pattern of increasing debt will not resume. The asset against which the American household sector collateralized its debt for 15 to 20 years, its housing, has radically fallen in financial value. The houses are still there but you can’t sell them for nearly as much as you could have three years ago. And that is a structural impediment to returning to the previous pattern of economic expansion. And that impediment isn’t going to be removed in any short period of time for the simple reason that the houses remain there as an excess supply on the market and they remain therefore as a drag on housing prices.



    Source:


    That article is a very involved read. If you're heavy into the hows and whys things in the economy are the way they are, this article is one persons view, but a very insightful one.
    Last edited by DUNBAR PLUMBING; 02-06-2010, 05:34 PM.
    Northern Kentucky Plumbers Twitter Feed | Plumbing Videos

  • #2
    Re: Self-Sustaining Growth "No Longer Exists"

    I smell a fight
    sigpic

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    • #3
      Re: Self-Sustaining Growth "No Longer Exists"

      Here's my thoughts on this subject matter.


      A friend of mine, an investor of one of my companies sent me an email two days ago. He's constantly predicted "what happens next" and at this point he wishes he'd be wrong.

      The words "Self-Sustaining Growth" means a lot to a lot of people, whether you're rolling in the dough or barely surviving.

      In my area, I believe (reports were saying this) that homearama was cancelled this year for the first time in 48 years. I haven't confirmed this yet but I'll find it soon enough.

      The statement made to me was "start collecting canned food and cartridges" and the first thing I thought is WTF is he talking about.

      I'm an extremely small pea in the pod, but I can see how I'm affected by this, one way or another.

      Here's something that a lot of you haven't discussed in years *3 to be exact*...


      What do you think the success/fail rate of starting a new business now?

      It was 90% failure rate in "good" times. Can you imagine the numbers now?

      Hold on to what you have, be prepared for the long distance run that won't be what was "before".
      Northern Kentucky Plumbers Twitter Feed | Plumbing Videos

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      • #4
        Re: Self-Sustaining Growth "No Longer Exists"

        The author assumes that "precrisis" and "Normal" meant our economy was alright, and it was not, has not been for a real long time in my opinion.
        Pre credit card days, most folks bought what they could afford. Big things like homes and cars involved payments, but folks lived within their means. Our government "spent" within it's means, depending on tax revenue.
        I can't believe the author of that article even used the term"self sustaining" in any serious manner. How can anyone describe our economy that for the last forty years has been losing businesses and jobs, expanding personal and governmental debt, and inviting a collapse, as "self Sustaining".
        Building infrastructure now won't do a dam thing to turn our economy around. Businesses won't come back to an environment of EPA and OSHA rules, or a work force with our standard of living and financial needs and tax responsibilities.
        I would say that article and author are about fifty years too late.

        Comment


        • #5
          Re: Self-Sustaining Growth "No Longer Exists"

          Originally posted by DUNBAR PLUMBING View Post
          Here's my thoughts on this subject matter.


          A friend of mine, an investor of one of my companies sent me an email two days ago. He's constantly predicted "what happens next" and at this point he wishes he'd be wrong.

          The words "Self-Sustaining Growth" means a lot to a lot of people, whether you're rolling in the dough or barely surviving.

          In my area, I believe (reports were saying this) that homearama was cancelled this year for the first time in 48 years. I haven't confirmed this yet but I'll find it soon enough.

          The statement made to me was "start collecting canned food and cartridges" and the first thing I thought is WTF is he talking about.

          I'm an extremely small pea in the pod, but I can see how I'm affected by this, one way or another.

          Here's something that a lot of you haven't discussed in years *3 to be exact*...


          What do you think the success/fail rate of starting a new business now?

          It was 90% failure rate in "good" times. Can you imagine the numbers now?

          Hold on to what you have, be prepared for the long distance run that won't be what was "before".
          I'd say collecting cans and cartridges is good advice and no joking matter.
          Fewer folks are laughing at such statements and taking heed. Can any rational, thinking person really say there will be a turnaround? If not, then we'd better be prepared for very hard times. I don't know how hard, or how bad, but use your imagination.
          I think we will reach a breaking point, a point at which our economy and society simply stop working. You think scifi movies are far fetched? Just imagine no more deliveries of goods, food, no more power? How long would it take for civil obedience to fall apart?

          Comment


          • #6
            Re: Self-Sustaining Growth "No Longer Exists"

            Frank,

            Whats your favorite can of food to stock?

            Just curios

            My Grandma always would have lots of REDpack and flour, some coffee as well.

            You remind me of her, You over 65 by any chance?

            Just seems that way , no disrespect or anything, but when your 36 like me, the kids don't give ya a chance to stock anything - LOL
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            • #7
              Re: Self-Sustaining Growth "No Longer Exists"

              Oh, I just wanted to touch on one more thing,

              As you get older, you tend to "stock up" on things more,

              I would think its the same reason as you get older your not partying all night anymore.

              I can remember when I was 18, I would just eat what I wanted to eat , not save any more, because "tomorrow was another day"

              But as you get older, those days become harder due to health, age, stress etc.

              So I thinking stocking up is good for the baby boomers, but when your young its really not a need, I mean, younger people sometimes haven't even bought homes yet, and they might live in apartment complexes that might allow then to horde cans etc.

              So I guess what I am trying to say, that everything has its ying and yang

              Juts live life the best you can, Think positive and the sun will bring a new day.

              Life is to short to be worrying how many cans of string beans are in the closet :-)

              Just my opinion.
              Last edited by PlumbingSkool; 02-06-2010, 06:33 PM.
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              • #8
                Re: Self-Sustaining Growth "No Longer Exists"

                Originally posted by PlumbingSkool View Post
                Frank,

                Whats your favorite can of food to stock?

                Just curios

                My Grandma always would have lots of REDpack and flour, some coffee as well.

                You remind me of her, You over 65 by any chance?

                Just seems that way , no disrespect or anything, but when your 36 like me, the kids don't give ya a chance to stock anything - LOL
                I'm honored you think I remind you of your Grandma. Gonna be fifty seven in July. I like Spam and soups. I always have a few big canisters of protein powder in the closet. The scenario here is not old folks hoarding food because they can't get out, or young folks not because they don't have room. The situation is survival when things get really messed up, which could happen. Hey, if I'm wrong and I hope I am, I'll have some extra Spam to eat.
                The protein is always used to keep my muscles big and strong.

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                • #9
                  Re: Self-Sustaining Growth "No Longer Exists"

                  I hear Twinkies can last up to 25 years
                  Rod
                  MT. Washington Sewer & Drain Cleaning
                  Serving Berlin, NH and North Conway, NH areas
                  http://unclognh.com
                  http://mtwashingtonseweranddrainclea...m/default.aspx

                  Charging less does not mean more call volume it just means you have to work harder to reach your goals.

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                  • #10
                    Re: Self-Sustaining Growth "No Longer Exists"

                    Originally posted by UnClogNH View Post
                    I hear Twinkies can last up to 25 years
                    In my house a box of Twinkies only lasts three days!

                    Comment


                    • #11
                      Re: Self-Sustaining Growth "No Longer Exists"

                      Originally posted by Frankiarmz View Post
                      I'm honored you think I remind you of your Grandma. Gonna be fifty seven in July. I like Spam and soups. I always have a few big canisters of protein powder in the closet. The scenario here is not old folks hoarding food because they can't get out, or young folks not because they don't have room. The situation is survival when things get really messed up, which could happen. Hey, if I'm wrong and I hope I am, I'll have some extra Spam to eat.
                      The protein is always used to keep my muscles big and strong.
                      I hear ya, Its always good to have extra in stock

                      Originally posted by Frankiarmz View Post
                      In my house a box of Twinkies only lasts three days!
                      AGREED !!! 10000%%%%%

                      My little guy could eat like 3 of those at once and he is only 5 and not fat, just very active
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                      • #12
                        Re: Self-Sustaining Growth "No Longer Exists"

                        Originally posted by PlumbingSkool View Post
                        Just seems that way , no disrespect or anything, but when your 36 like me, the kids don't give ya a chance to stock anything - LOL
                        actual it is not that hard to stock up and it is not that expensive, you many times may have to change one's ways, and some what think like a pioneer, (or I do not know if you have watched any of the Haiti food hand outs), it is not Micky-D's hamburgers, it is sacks of grain and some basics, it is not even ground from what I have seen.

                        raw grains if stored in a dry environment can last hundreds of years,

                        the problem is many do not know how to work with flour alone grains, and learning how to work with flour and grains can save one loads of money,

                        when our kids were home my wife baked bread we ground from wheat berries, ever week, 6 to 12 loafs is what I remember, we have a garden and canned and still can much, some time when things are in season she will buy a few bushels of some thing or the other and can them.

                        one other thing when buying canned goods wait for sales and buy in quantity,

                        also the frequency in the times you buy groceries will make a major difference on what one has, for the most part if you buy daily you will hardly have a day worth of food on hand,
                        and you will spend much more, (yes you may have to buy perishables weekly), but if you buy your staples on a weekly to a bi monthly and work up to buying monthly you will save money and you will develop some food in the pantry, (we go grocery shopping once a month for the most part),

                        one thing one needs to do is buy what you use and use what you buy, to go and get 100 pounds of wheat will not do you any good if you do not know how to grind or have a grinder, and if you do not know how to bake bread or make it into other bread items,
                        (also before going out and buying a 50 or 100 pounds of some grain, get a small quantity and work with it and see if your body can take the change, most of us are not use to whole grains, and some times a major change in diet can cause some problems for some,
                        I personally liked the bread better if mixed with boughten flour about 50%).

                        food grade plastic buckets with lids can make excellent storage containers

                        having yeast and oil,
                        some of the best pizza is home made,

                        yes it takes more work, but many times the savings is remarkable,

                        for Christmas last year my Daughter wanted 50 pounds of pinto beans, so I went to the bean processing plant and bought two 25 pound bags of beans for less than $30, I supply her with wheat and a few years ago I planted some naked oats, (with out hulls), but all can be bought at health food or natural food stores, or really reasonable prices,

                        what I am saying is if you go and buy "Raw" foods not processed, one can eat very low cost, (and I can assure you there income is way below the poverty level), and they have never gone hungry and eat healthy, (and they do not take any government or other assistance), and they have kids as well.

                        yes they do have stocks of food, and there two full size chest freezers are full of meats,

                        but a lot of it is using what they have and knowing how to do it, and buying wisely,

                        but if one is buying processed and value added foods it will take a large chunk of your income,

                        my other Daughter family is better off than the first one talked about, but they have 5 kids under 10 years of age and they have freezers full of meats and stocks of food in there home, but it is by doing a lot of baking and using raw foods and not the value added to stretch the food dollar, (and I can tell you they go through the groceries),

                        one of the things I think of is one of the things one of my kids said growing up I just thought every one had a freezer full of food, then when I got into collage I discover that few do,

                        a lot of it is a mind set and a way of life, there are few who do not have some in the pantry or cellar, but no one is saying Oh I need to prepare for the end of the world, it is the way most live in our area, yes we have our own natural problems, blizzards where one can get snowed in for a week or more, and that is a reason but many do it to cut the cost of the food bill,
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                        • #13
                          Re: Self-Sustaining Growth "No Longer Exists"

                          Normal is a relative measure. I actually prefer the normalcy of the 90's to what we have had for the past three years.

                          What I think Galbraith is speaking to is how the repeal of Glass-Stegall, in place since 1933, allowed banks to get into the investment banking business.

                          Then we add in the fraudulent lending practice where credit and mortgages were given to virtually anyone. The lower the credit rating, the higher the interest rate/fees. These artificially inflated mortgages were thrown into a package with both good solid mortgages and many other not so good. Because the face value was inflated they could sell these bundles for even more than if the bad mortgages were not included. Brilliant idea. Dastardly certainly, but brilliant none the less.

                          And as if one layer of evil genius wasn't enough, then they offered an insurance policy on these securitized bundles in case the value declined. These credit default swaps were not regulated because technically they were not an insurance policy. Even though they looked like, walked like and talked like an insurance policy.

                          Had these credit default swaps been regulated, the banks would have been required to actually have the capital on hand to pay up on any of the claims that might end up being filed. Of course the fee's they generated on selling the credit default swaps were never set aside to service any such claims.

                          Last I heard there was somewhere in the neighborhood north of $50 trillion covered by the unfunded credit default swap programs. No one knows how many of these bundles will go bad. It's ticking time bomb.

                          We need to fundamentally change our horizon of expectations. We need to think of return on investments in terms of decades not quarterly returns. I don't hold much hope that this will change with anything less than a complete collapse of our financial system.

                          I'm sure if our financial system were to have collapsed last year we would have all been gathered at the town square with pitch forks and torches calling for the bankers heads on spikes. And we would have demanded the failings of the system that enabled these crimes to take place be remedied.

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                          • #14
                            Re: Self-Sustaining Growth "No Longer Exists"

                            in response to would you want to start a new biz right now. if i had not been in biz for 17 years, i would not do it. there are to many if's.

                            we opened an Ashley furniture store in Aug 2006 in June 2007 when people were hearing rumors of what is to happen it was an almost over night death trap. it hadn't even hit here but it was a self fufilling proficy as people clamed up there spending (i'm not talking about excive spending) the economy went down hill from there. we lasted 7 more months then closed. i still owe big bucks for that and paying for it. 10.5 more years and i'll have it all payed for.
                            Last edited by Jerad; 02-06-2010, 08:41 PM.
                            the only dumb question is the one that is not asked!

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                            • #15
                              Re: Self-Sustaining Growth "No Longer Exists"

                              A majority of a population and a country can only be ran on borrowed funds and low GDP for so long. The U.S. has made an incredible run at it.

                              Now it's time to pay the piper. I am not worried.

                              The ones that should be worried are college graduates that are not in the top percentile, specialists, or the absolute best in their field. I don't think the majority of them will even come close to doing as well as those in the past.

                              Could be wrong. Hope they do better than what I forecast.

                              J.C.

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