Cause For Optimism Amid Gloom

Real Clear Markets ^ | 02/23/09 | Joseph Calhoun

[LifeComesFirst]

Productivity, which fell in the bad recession of 1981-82 and during the Great Depression, was up 3.2% in the fourth quarter. Incomes, adjusted for the recent deflation in the CPI, are rising. And while the Keynesians among us fret about the paradox of thrift, I find the rising savings rate comforting. Higher savings is exactly what we need to repair the damage done to our economy by excess consumption fueled by easy credit. And besides, retail sales were up in January.

[LifeComesFirst]

Great article, read the whole thing. Unlike some here, I do not think that "America is over," we are all doomed, etc. I think we're in for a long period of stagnation, and real 80s and 90s style growth won't return for some time, but I do not think we're looking at food riots. For crying out loud, the misery index isn't even what it was in the 80-82 recession. Obama's bill is huge on paper, but it's nowhere near the level of central planning with the economy that the New Deal was.

[saganite]

Those higher savings rates the author takes comfort in will be under assault in a number of ways, Inflation, higher taxes and possibly a tax or even outright seizure of 401K’s ans IRA’s.

[Cloverfarm]

From the article: “...the gloomy mood that surrounds the Obama administration is either manufactured for some political purpose or completely unwarranted. The idea that only government can come to the rescue at this point is not only entirely too convenient for an administration determined not to waste a crisis, but also false. Whether one is speaking of the economic condition or the response to it, we are not experiencing unprecedented events right now. ...”

Yeah! What he said!

[LibLieSlayer]

You must not own any businesses because those of us that do, have to look at the daily bleeding of our life savings being destroyed as it is used to pay overhead and keep our employees paid to date and their bills paid to date so that life goes on for them without much pain... but that pain is coming because millions of us small business people that fuel this economy will close the doors if things do not turn around. What I am telling you here is 100% gospel.

LLS

[roaddog727]

Excellent article.

Thanks for then post.

[roaddog727]

Change in tagline

[SolidWood]

Obama's bill is huge on paper, but it's nowhere near the level of central planning with the economy that the New Deal was.

Yet.

[randita]

I can identify with what you’re saying. On the other hand, I do think that as people pay off debt and get a little cushion of savings, the spending being deferred for the present, will start again.

People who were going to buy a new car this year and finance it, will instead pay off other debt and sock some money away. Then they’ll buy the new car next year, putting a good bit of money down or paying for it outright.

Same with other things like computers-electronics-appliances-furnishings, etc.

We’re all making do with what we have for now, but the pent up demand will come back once people have less debt and a cushion of savings to fall back on. I feel confident about that.

We’re not a third world country and we’re not going to live like we are. That’s my take.

[jwparkerjr]

Seems to me like productivity would be up when so many people are being laid off. Few people doing more work for fear of joining the exit parade. It's no secret that companies tend to really pad the payroll during boom times, but start cutting the fat when times get worse. It's especially evident in government agencies, although they are much less likely to shed the pork when times get rough. Government programs work on a ratchet basis, always one way never the other. And that way is always up, up, up.

I would love to see a panel of 20 or so owners of small businesses given the opportunity to go through the line-item budget of a large school district. Bet they would ‘find’ lots of money to be used to educate The Children!

Most recessions aren't deep enough or long enough to get to government, but that what it's going to take. Even the Great Depression wasn't enough to depress government, in fact we came out of it with more government than when we entered it. And thereby hangs the tale!

[LibLieSlayer]

We became a turd... I mean third world economy when pelosi and reid took over two years ago. Two years from now we will all be suffering greatly... this economy will not heal for decades. We are not there yet... but our bleak future will make the catah years look prosperous. I base my projections on what these socialist programs have done in every situation in which they have ever been tried.

LLS