What are the potential impacts of public confidence on the economy's recovery?

[russ_watters]

What's your rationale that 'the plan' is working? And is the economy still lousy or not? Which is it?

Edit: When is fair to complain about 9.5% unemployment and jobs?

The best thing about Obama, to his supporters, is that he's a great talker. He says things they want to hear. When he made his unemployment prediction a few months ago, complete with that pretty graph, the effect of the stimulus sounded great. It didn't matter that nothing on that graph had anything to do with reality. But here we are 6 months later and Democrats are still talking the same way! It doesn't matter to the True Believers that Obama simply has no clue what the economy is doing or how to fix it (or even if it needs him to fix it).

But to everyone else, in 2012, it just might.

 

[Office_Shredder]

The GDP was down 1% in Q2 and Obama says the improvement is at least partly due to the stimulus: http://www.usatoday.com/money/economy/2009-07-31-gdp-economy_N.htm

So how much stimulus money was spent in Q2? Exactly how much of that can we really attribute to it?
[edit] Answer: http://voices.washingtonpost.com/federal-eye/2009/07/eye_opener_july_8_2009.html Let's say 2/3 of that was in q2 or about $10 billion (sorry, I don't have monthly numbers). Our GDP is about $14 trillion, so that's 0.07% of our GDP. In Q2, the GDP was down 6.5%, so the stimulus was almost exactly 1% of the improvement. The other 99% must then either have happened on its own or been the result of the actions of those in power last year. Either way, it wasn't Obama and the Democratic congress.

It should be obvious the argument is that the stimulus, y'know, stimulated the economy. I.e. got people not receiving economic stimulus funds to spend more money, or even just encouraging the people who did get those funds to spend more than just that money. Your argument that the stimulus package can only contribute to the economy its face value is wrong.

 

[mheslep]

Obama's recovery continues:...

Yes Help Us Obi Wan Obama, You're Our Only Hope

 

[mheslep]

It should be obvious the argument is that the stimulus, y'know, stimulated the economy. I.e. got people not receiving economic stimulus funds to spend more money, or even just encouraging the people who did get those funds to spend more than just that money.

Why? Because Obama signed a piece of paper with 'stimulus' written on it and announced it with fan fair on the news? Because some guy two states away got some money, I'll go out and spend more? This essentially argues that the government can just announce "I stimulate you, I stimulate you, I stimulate you" three times and we'll all go out and spend more. This was the second recent stimulus by the way. The first one, the Bush 2008 stimulus, was ~http://www.msnbc.msn.com/id/22725498/" One could go argue, as we hear now, that the 2008 money kept things from getting worse, it 'saved X jobs', but I am not buying it.

A reasonable assumption based on cause and effect, is that the sometimes stumbling actions of Bernanke, Paulson, Geitner[1] and the TARP guarantee money from 2008 through now eventually stabilized the banks and credit markets. So though the free fall has stopped, it is quite possible credit won't get much better, as lenders now have a valid fear that their loans will inflated away given the run away spending.

[1] Geitner I'm less sure of, as he calculated the best way to sell his own long sitting house was http://gregmankiw.blogspot.com/2009/07/some-people-wont-accept-price-cuts.html"

 

[Ivan Seeking]

Obama's recovery continues:

The cash for clunkers program a raging success!
https://www.physicsforums.com/showthread.php?t=328229

 

[russ_watters]

It should be obvious the argument is that the stimulus, y'know, stimulated the economy. I.e. got people not receiving economic stimulus funds to spend more money, or even just encouraging the people who did get those funds to spend more than just that money. Your argument that the stimulus package can only contribute to the economy its face value is wrong.

So...then what is the point of the $700 billion? Are you saying that the point of the stimulus wasn't to spend money to stimulate the economy but was to cause people to stimulate it themselves via cheerleading?

Should I point out that that's not what Obama or his supporters (see poster above me) claimed was going on?

 

[rootX]

So...then what is the point of the $700 billion? Are you saying that the point of the stimulus wasn't to spend money to stimulate the economy but was to cause people to stimulate it themselves via cheerleading?

Should I point out that that's not what Obama or his supporters (see poster above me) claimed was going on?

I don't see them rejecting that argument either. The only point of the government injections is to
(1) create confidence and
(2) give economy a tiny push

1 and 2 are not mutually exclusive.

 

[russ_watters]

I don't see them rejecting that argument either. The only point of the government injections is to
(1) create confidence and
(2) give economy a tiny push

1 and 2 are not mutually exclusive.

Indeed, they are not mutually exclusive, but republicans are contributors to the economy too - bigger contributors than democrats, I would suspect. And his plan to spend $700 billion doesn't give them confidence, it scares them. So if this was all a trick, he at least half succeeded: he was able to trick democrats and republicans like into thinking that he really intended to spend $700 billion, instead of this "tiny" amount. But as a result of that trick, democrats got confidence and republicans got convinced he didn't know the first thing about economics.

So that doesn't even make Obama a good cheerleader.

And could we clarify this, please: do you and Office Shredder believe that Obama never intended to spend that money?

 

[russ_watters]

Obama's recovery...

I suppose with that stance, you would also give Bush credit for turning the biggest crash in the stock market since 1929 into the softest recession we've ever had? You believe Bush prevented another great depression in 2001, right?

 

[OmCheeto]

All of my stocks, bonds, and funds are in the black.
Of course, without the market collapse, I'd have never been interested in the first place, and would probably have gone to my grave without having ever directly invested a penny.

Has anyone else noticed that stock prices seemed unreasonably deflated over the last 8 months, and decided to pump money in?

 

[Skyhunter]

Indeed, they are not mutually exclusive, but republicans are contributors to the economy too - bigger contributors than democrats, I would suspect. And his plan to spend $700 billion doesn't give them confidence, it scares them. So if this was all a trick, he at least half succeeded: he was able to trick democrats and republicans like into thinking that he really intended to spend $700 billion, instead of this "tiny" amount. But as a result of that trick, democrats got confidence and republicans got convinced he didn't know the first thing about economics.

So that doesn't even make Obama a good cheerleader.

And could we clarify this, please: do you and Office Shredder believe that Obama never intended to spend that money?

Republicans follow economic indicators just like Democrats.

It is not the stimulus that is scaring the Republicans... it's the noise machine.

 

[kasse]

Will somebody answer my questions in the liberalism thread more thoroughly?

 

[Ivan Seeking]

So...then what is the point of the $700 billion?

Jobs, infrastructure, energy conservation, expansion of programs like wind power, future growth to help reduce the ratio of debt to GDP.

Why is it that Republicans always seem willing to do nation-building everywhere but here in the US?

For a nice review of the progress and who gets the credit,
http://abcnews.go.com/thisweek

Their main veiwer isn't working yet for me, but you can select the individual segments at the top of the page, beginning with Geitner.

 

[Ivan Seeking]

It is also interesting to note that when Bush took over, our debt to GDP ratio was at about 60%. Under Bush it rose to about 78% with a nearly vertical ascent during the last part of his Presidency, and now the Republicans are complaining that it will go above 80% under Obama - the guy who was handed an economy spiralling out of control and about to collapse.

The hypocrisy is beyond belief!

 

[Office_Shredder]

Indeed, they are not mutually exclusive, but republicans are contributors to the economy too - bigger contributors than democrats, I would suspect. And his plan to spend $700 billion doesn't give them confidence, it scares them. So if this was all a trick, he at least half succeeded: he was able to trick democrats and republicans like into thinking that he really intended to spend $700 billion, instead of this "tiny" amount. But as a result of that trick, democrats got confidence and republicans got convinced he didn't know the first thing about economics.

So that doesn't even make Obama a good cheerleader.

And could we clarify this, please: do you and Office Shredder believe that Obama never intended to spend that money?

Democrats and Republicans have nothing to do with it. We're talking about generic people here. If Obama spends more government money, more money is being spent. This is fact. This is undeniable. If more money is being spent, more people are being paid. Fact. If more people are being paid, more people can then spend their own money. And the cycle continues.

Somehow you seem to have confused Obama's confidence boosting for the economy with political maneuvering

 

[mheslep]

Democrats and Republicans have nothing to do with it. We're talking about generic people here. If Obama spends more government money, more money is being spent. This is fact. This is undeniable. If more money is being spent, more people are being paid. Fact. If more people are being paid, more people can then spend their own money. And the cycle continues.

Somehow you seem to have confused Obama's confidence boosting for the economy with political maneuvering

Office_S, Obama is not the great and powerful Oz. The money has to come from somewhere. Where do you think that is? Consider the logic of your argument: If spending in and of itself was all that was needed to create a bigger economy, then we could simply have the government spend us all into vast wealth. Visibly it doesn't work that way.

 

[Office_Shredder]

Office_S, Obama is not the great and powerful Oz. The money has to come from somewhere. Where do you think that is? Consider the logic of your argument: If spending in and of itself was all that was needed to create a bigger economy, then we could simply have the government spend us all into vast wealth. Visibly it doesn't work that way.

That's fine, but has nothing to do with political affiliation. A small business owner whose getting paid more because one of his clients received stimulus funding isn't going to say "Well, I'm a Republican, so I'm going to burn this cash in my backyard"

We're not talking about how he got the stimulus passed, or the political ramifications of it, we're talking about the effects of the stimulus on the economy. You still haven't demonstrated where political affiliation comes into play for this

 

[russ_watters]

Jobs, infrastructure, energy conservation, expansion of programs like wind power, future growth to help reduce the ratio of debt to GDP.

It doesn't matter how many times how many people say it: He barely spent any money, so the stimulus could not possibly have made a significant difference yet. Every effect needs a cause and he did virtually nothing to cause the improvements seen over the past two months.

All this turnaround shows us is that his stimulus spending isn't necessary and should be cancelled.

Why is it that Republicans always seem willing to do nation-building everywhere but here in the US?

Why do democrats only complain about deficit spending when it is a Republican doing it?

There is nothing wrong with doing some infrastructure. There is nothing wrong with promoting wind power. But to disguise those as "economic stimulus", when they really just are his pet projects that he wanted whether there was a recession or not is dishonest. Obama was given a blank check when he got into office due to with recession and he's going to do his best to spend as much as he can, regardless of if what he's doing is what is best for the economy.

It is also interesting to note that when Bush took over, our debt to GDP ratio was at about 60%. Under Bush it rose to about 78% with a nearly vertical ascent during the last part of his Presidency, and now the Republicans are complaining that it will go above 80% under Obama - the guy who was handed an economy spiralling out of control and about to collapse.

The hypocrisy is beyond belief!

Should I pull out more of your quotes from the past few years where you talk about the deficit/debt being too high? Look in the mirror, Ivan!

And by the way - how can you possibly believe any of Obama's economic predictions when his unemployment prediction was way off, just a month after he made it? And the GAO says his numbers on the debt are just rediculous. But I guess reality can't get in the way of your beliefs.

Also, the "vertical ascent"? That's the financial bailout last year. And guess what: we're getting that money back! So it's a pretty misleading picture we get from that graph you like to post. Obama is just plain spending money. Bush was investing it. Yeah, turning a profit wasn't of high importance, but the odds are good his spending will turn a profit. Obama's is pure debt, like he put it on a credit card.

 

[russ_watters]

Republicans follow economic indicators just like Democrats.

And indicators follow improvements - so Republicans and Democrats still have to make the improvements happen before the indicators will show them.

It is not the stimulus that is scaring the Republicans... it's the noise machine.

Says you. I am a Republican and I'm very nervous about doubling our national debt. The ironic thing is that we had lots of threads about the national debt over the past few years and most of the democrats on this forum were worried about Bush's spending too! The inconsistency is telling - this forum is full of partisans; reality be damned.

 

[russ_watters]

All of my stocks, bonds, and funds are in the black.
Of course, without the market collapse, I'd have never been interested in the first place, and would probably have gone to my grave without having ever directly invested a penny.

Has anyone else noticed that stock prices seemed unreasonably deflated over the last 8 months, and decided to pump money in?

Unfortunately, I didn't have any to put in except for my 401K, but yeah, at the beginning of the year, I really wanted to dump a lot in. After the crash last fall, the stock market was severely undervalued.

 

[russ_watters]

That's fine, but has nothing to do with political affiliation. A small business owner whose getting paid more because one of his clients received stimulus funding isn't going to say "Well, I'm a Republican, so I'm going to burn this cash in my backyard"

We're not talking about how he got the stimulus passed, or the political ramifications of it, we're talking about the effects of the stimulus on the economy. You still haven't demonstrated where political affiliation comes into play for this

Political afiliation comes into play because Democrats are closing their eyes while Obama swipes our credit card. They are acting like the stimulus money is free money when it isn't.

Besides - need I remind you that you just claimed the stimulus could stimulate without spending money?:

It should be obvious the argument is that the stimulus, y'know, stimulated the economy. I.e. got people not receiving economic stimulus funds to spend more money, or even just encouraging the people who did get those funds to spend more than just that money.

 

[WhoWee]

Political afiliation comes into play because Democrats are closing their eyes while Obama swipes our credit card. They are acting like the stimulus money is free money when it isn't.

Besides - need I remind you that you just claimed the stimulus could stimulate without spending money?:

I haven't posted since May 22 - and the economy has not gotten any better in this time.

If you recall, the signing of the stimulus bill was so important and so urgent that our elected officials did not have time to read it. The money had to flow out to those "shovel ready" jobs immediately or the economy would collapse...

It was BS then and it's BS now.

The same can be said of the save or create jobs line. A government job (especially jobs created to count the census) is not helping the economy to recover. To pay for a government job - the government has to borrow, tax or print money. Lost private sector jobs means lost tax revenues.


I've been working on a wage credit project. Last year over $9 billion went unclaimed - this year the number could be $30 billion. Basically, there are tax credits available - incentives to hire certain workers at a rate of $1,500 to $9,000 per worker. There are hundreds of different programs nationwide. The best credits are provided for hiring minorities, youth, ex-felons, and welfare recipients. The most lucrative incentives are in inner city "Empowerment Zones".

The problem is the credits (which are actually REDUCTIONS - dollar for dollar reductions of an income tax liability) can only be used if the business has a tax liability. The majority of the small businesses in the "EZ's" are not profitable. Instead of hiring workers and taking advantage of these incentives, many of the businesses are laying off workers or closing.

Businesses run on revenues - sales drive business. Wages are not possible without sales revenues. Taxes come from sales, wages, and profits. Government runs on taxes.

No sales - no taxes - no legitimate government spending.

 

[OmCheeto]

Housing prices have dropped to what appear to be appropriate non-bubble levels

http://mysite.verizon.net/vzeqrguz/housingbubble/united_states.png
http://mysite.verizon.net/vzeqrguz/housingbubble/"

Perhaps that's why

http://news.yahoo.com/s/nm/20090818/bs_nm/us_usa_economy"
Tue Aug 18, 5:44 pm ET

WASHINGTON (Reuters) – Ground-breaking for new U.S. single-family homes rose for a fifth straight month in July and producer prices tumbled, keeping hopes for an economic recovery alive.

...

The economy is recovering, this is the turning corner. We will have positive growth this quarter, but not a lot of strength. It very much looks like a U-shaped recovery rather than V-shaped,

...

The housing market, the main culprit behind the worst U.S. economic downturn in 70 years, is being closely watched for signs of recovery after a three-year slump.

70 years! Wow. No wonder everyone's all in a huff about it.

And one of my staff members told me yesterday that our company no longer has a hiring freeze.

And my portfolio is up 19%. Woo Hoo! I've made $164 in only 8 months. Bwah hahaha... move over Mr. Buffet, OmCheeto's in town.

 

[bleedblue1234]

OMCheeto I don't understand why you go around spewing this nonsense. You grossly assume that your situation applies to all 300+ million Americans in this country, which is complete nonsense.

The U.S. economy has not improved at all, and in fact we are faced with drastically larger issues down the road. Sure, if you pump trillions upon trillions of dollars into any economy, you will buy a short term bounce, but it is silly to assume that growth rates of an economy can be maintained in such a way.

The budget committee just released estimates of a $10 trillion dollar deficit extending out 10 years, and that will bring the national debt WELL above 150% of GDP, and as such we will face massive issues trying to finance and sustain economic growth as well as finding a way to pay our obligations to other nations.

You also fail to realize that stimulus is buying at best a one year bounce, and at worst an even shorter time frame. I will propose that by November of this year we will once again be facing "economic catastrophe" just as it was last year. We have not fixed the banks in any meaningful way, we have not turned this country around in any drastic way, the only thing we are doing is buying a one year bounce with an incredible amount of stimulus dollars. We need to completely change the way this economy works, and I am simply not seeing that happening, and until we do we will not see a 'recovery' and we will only continue sliding off into the economy abyss.

The home market is still much to saturated with excess housing, and if you look at the housing report, 50% of the houses purchased in July were attributed to new home buyers which is most likely bolstered by the government $8,000 tax credit on down payments, which further distorts actual demand. You cannot tell me we are growing at a rate to sustain 50% of housing sales to first time home buyers.

Secondly, you fail to see the stock market is simply in another bear market rally...

Here's an example:

During the crash of 1929, you see a 60% rebound in stock prices (we are at approx. 53% today vs. March lows), followed by a steady decline interspersed with several rallies, but the inevitable conclusion is that the market continues to decline. Now in the situation we have today, the market could actually gain nominally in value, but because the dollar has been so weak (it is extremely close to making record lows once again), the actual realized value will still be lower.

 

[russ_watters]

OMCheeto I don't understand why you go around spewing this nonsense. You grossly assume that your situation applies to all 300+ million Americans in this country, which is complete nonsense.

You're kinda new in the politics forum, so I'll be nice here and say you just need to calm down and take a breath. Of the things in OMCheeto's post, only one was a situation specific to him. The things that apply to the economy in general:

-Housing prices
-The stock market
-Home building

There were a few good points in your post, though, such as the problem of the deficit and the possibility of a double-dip recession.

 

[OmCheeto]

OMCheeto I don't understand why you go around spewing this nonsense.

What in my post struck you as nonsense?

The home market is still much to saturated with excess housing

Then why is anyone bothering to build new ones?

I will propose that by November of this year we will once again be facing "economic catastrophe" just as it was last year.

I propose that by November of next year, my portfolio's profit will still be around 20%, given that I invest monthly. As was pointed out by Mr. Karl, we appear to be in a U shaped recovery rather than a V shaped recovery. I'd have preferred an L shaped recovery myself, as I have 8 years to continue investing before I retire. But that's just being greedy.

 

[russ_watters]

"...worst U.S. economic downturn in 70 years..."

When it ends and we get some distance betwen us and it, we'll see how economists actually rank it. A good, recent candidate that could be considered worse:

Early '80s. The NBER says there were two recessions in the span of three years. That's rediculously short and they should probably be seen as part of the same economic crisis. Regardless, the 2nd recession was the worse and might on its own be a candidate for being worse than the current crisis. It included a 20% prime interest rate, and 10.8% unemployment to go with 4 nonconsecutive quarters of negative gdp growth with two of them being consecutive at -5 and -6%. The 20% interest rate chased away the 10.3% inflation from 1981.

http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

People often list the length of the current recession as being the reason it is so bad, but the economy essentially plateau'd for a year before the recession really took off in the beginning of this year (precipitated by the stock market crash and bank failures last fall). So the length is not a good measure without proper context.

 

[OmCheeto]

"...worst U.S. economic downturn in 70 years..."

When it ends and we get some distance betwen us and it, we'll see how economists actually rank it. A good, recent candidate that could be considered worse:

Early '80s. The NBER says there were two recessions in the span of three years. That's rediculously short and they should probably be seen as part of the same economic crisis. Regardless, the 2nd recession was the worse and might on its own be a candidate for being worse than the current crisis. It included a 20% prime interest rate, and 10.8% unemployment to go with 4 nonconsecutive quarters of negative gdp growth with two of them being consecutive at -5 and -6%. The 20% interest rate chased away the 10.3% inflation from 1981.

http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

People often list the length of the current recession as being the reason it is so bad, but the economy essentially plateau'd for a year before the recession really took off in the beginning of this year (precipitated by the stock market crash and bank failures last fall). So the length is not a good measure without proper context.

hmmm... Your link somehow led me here:

http://en.wikipedia.org/wiki/List_of_countries_by_past_GDP_(PPP)

Interesting how 200 years ago we were a pauper nation, 100 years ago we were number 2, and now, at the depths of a catastrophe, we come to the following graph

It's no wonder McCain said there was nothing fundamentally wrong with our economy. I actually agreed with him. I wish everyone else had.

 

[mheslep]

...
It's no wonder McCain said there was nothing fundamentally wrong with our economy. I actually agreed with him. I wish everyone else had.

It all depends on what one calls the fundamentals. On what I call the fundamentals I think he was generally right, but politically it was a dumb thing to say with this many people losing jobs and the banks in dire trouble. He should have further clarified.

 

[russ_watters]

It also doesn't help that he made is statement just before the recession and bank failures gained steam. The one thing (and it is big) that was fundamental and wrong at the time was financial regulation. Just about everything in this recession can be traced to the financial system's problems.

 

[mheslep]

It also doesn't help that he made is statement just before the recession and bank failures gained steam. The one thing (and it is big) that was fundamental and wrong at the time was financial regulation. Just about everything in this recession can be traced to the financial system's problems.

Agreed.

 

[OmCheeto]

It all depends on what one calls the fundamentals. On what I call the fundamentals I think he was generally right, but politically it was a dumb thing to say with this many people losing jobs and the banks in dire trouble. He should have further clarified.

In September 2008, when he made the comment, the unemployment rate was only http://www.davemanuel.com/historical-unemployment-rates-in-the-united-states.php" . Hardly the thing of nightmares.
And he did acknowledge the financial turmoil:

You know, there's been tremendous turmoil in our financial markets and Wall Street and it is -- people are frightened by these events. Our economy, I think, still the fundamentals of our economy are strong. But these are very, very difficult time.

And the market may have been down, but wouldn't http://blogs.abcnews.com/moneybeat/2008/10/the-stock-marke.html" for another 3 weeks. So it really only became politically dumb in hindsight. If the crash hadn't occurred, he'd have been correct, and no one would be talking about the comment.

 

[Astronuc]

http://finance.yahoo.com/banking-budgeting/article/107575/rise-of-the-super-rich-hits-a-sobering-wall.html

Putting the recovery in perspective -

But economists say — and data is beginning to show — that a significant change may in fact be under way. The rich, as a group, are no longer getting richer. Over the last two years, they have become poorer. And many may not return to their old levels of wealth and income anytime soon.

For every investment banker whose pay has recovered to its prerecession levels, there are several who have lost their jobs — as well as many wealthy investors who have lost millions. As a result, economists and other analysts say, a 30-year period in which the super-rich became both wealthier and more numerous may now be ending.

Last year, the number of Americans with a net worth of at least $30 million dropped 24 percent, according to CapGemini and Merrill Lynch Wealth Management. Monthly income from stock dividends, which is concentrated among the affluent, has fallen more than 20 percent since last summer, the biggest such decline since the government began keeping records in 1959.
. . . .

Perhaps some are poorer, and others are not getting richer as fast as they were.

. . . .
In one stark example, John McAfee, an entrepreneur who founded the antivirus software company that bears his name, is now worth about $4 million, from a peak of more than $100 million. Mr. McAfee will soon auction off his last big property because he needs cash to pay his bills after having been caught off guard by the simultaneous crash in real estate and stocks.

“I had no clue,” he said, “that there would be this tandem collapse.”

. . . .
Over the last several years, Mr. McAfee began to put a large chunk of his fortune into real estate, often in remote locations. He bought the house in New Mexico as a playground for himself and fellow aerotrekkers, people who fly unlicensed, open-cockpit planes. On a 157-acre spread, he built a general store, a 35-seat movie theater and a cafe, and he bought vintage cars for his visitors to use.

He continued to invest in financial markets, sometimes borrowing money to increase the potential returns. He typically chose his investments based on suggestions from his financial advisers. One of their recommendations was to put millions of dollars into bonds tied to Lehman Brothers.

. . . . [But - then came the bust]

In 2007, Mr. McAfee sold a 10,000-square-foot home in Colorado with a view of Pike’s Peak. He had spent $25 million to buy the property and build the house. He received $5.7 million for it. When Lehman collapsed last fall, its bonds became virtually worthless. Mr. McAfee’s stock investments cost him millions more.

One day, he realized, as he said, “Whoa, my cash is gone.”

His remaining net worth of about $4 million makes him vastly wealthier than most Americans, of course. But he has nonetheless found himself needing cash and desperately trying to reduce his monthly expenses.

He has sold a 10-passenger Cessna jet and now flies coach. This week his oceanfront estate in Hawaii sold for $1.5 million, with only a handful of bidders at the auction. He plans to spend much of his time in Belize, in part because of more favorable taxes there.

Next week, his New Mexico property will be the subject of a no-floor auction, meaning that Mr. McAfee has promised to accept the top bid, no matter how low it is.

“I am trying to face up to the reality here that the auction may bring next to nothing,” he said.

In the past, when his stock investments did poorly, he sold real estate and replenished his cash. This time, that has not been an option.

. . . .

. . . .
Perhaps the broadest question is what a hit to the wealthy would mean for the middle class and the poor. The best-known data on the rich comes from an analysis of Internal Revenue Service returns by Thomas Piketty and Emmanuel Saez, two economists. Their work shows that in the late 1970s, the cutoff to qualify for the highest-earning one ten-thousandth of households was roughly $2 million, in inflation-adjusted, pretax terms. By 2007, it had jumped to $11.5 million.

The gains for the merely affluent were also big, if not quite huge. The cutoff to be in the top 1 percent doubled since the late 1970s, to roughly $400,000.

By contrast, pay at the median — which was about $50,000 in 2007 — rose less than 20 percent, Census data shows. Near the bottom of the income distribution, the increase was about 12 percent.
. . . .

 

[Astronuc]

It also doesn't help that he made is statement just before the recession and bank failures gained steam. The one thing (and it is big) that was fundamental and wrong at the time was financial regulation. Just about everything in this recession can be traced to the financial system's problems.

It was actually just before people became aware of just how troubled the economy had become. All those uncovered liabilities were in place one or two years before. Defaults and foreclosure had been on a steady rise since mid 2006 - most of which were in the subprime market.

Bush's statement regarding the sound economic fundamentals, and McCain's echoing that statement, is just an indication of how out of touch both were about the economy.


The subprime mortgage crisis was part of the problem. There was an underlying problem:
Weak Regional Labor Market Conditions (slide 13)

Parts of the industrial midwest have experienced job losses, particularly in the manufacturing sector.

• Michigan’s rate of non-farm employment growth was -4.6 percent from the fourth quarter of 2001 through the second quarter of 2007.
• The corresponding figure for Ohio was -0.9 percent.

From the second quarter of 2005 through the second quarter of 2007,

• Michigan had the third largest increase in the total number of foreclosure starts (behind California and Florida).
• Ohio had sixth largest increase in the total number of foreclosure starts.

Slide 23 - Mortgage fraud

[Alarm bells were going off in 2007]
December 3, 2007 - Rapid Reporting
FBI Report Shows Mortgage Defaults and Foreclosures Linked to Borrower Fraud
http://www.mortgagemag.com/news/2007/1201/1000008650070.htm
70 percent of early payment defaults linked to misrepresentations in mortgage loan applications



If the GDP is increasing, it is because the government is borrowing and spending - which is an unsustainable situation. At some point, the debt has to be repaid.

 

[russ_watters]

Bush's statement regarding the sound economic fundamentals, and McCain's echoing that statement, is just an indication of how out of touch both were about the economy.

That would have more teeth if other politicians predicted that another shoe was about to drop, but they didn't. Obviously, even if he knew it would happen, it would have been suicide for Obama to say "Over the next year this recession will deepen into the worst we've ever had." He had no idea. Heck, he still has no idea what the economy is doing!