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Why Jobs Haven't Come Back - Weak Demand Is the Problem
NY Times ^ | January 17, 2011 | Laura Tyson

Posted on 01/18/2011 6:33:28 PM PST by neverdem

Will high unemployment remain a constant feature of the new economy?

So far the pace of recovery from the 2008-2009 recession, the deepest since the Great Depression, has been agonizingly slow, barely enough to absorb the monthly growth in the labor force and not nearly enough of offset the job losses that have occurred. Weak demand rather than structural changes in the composition of output or a mismatch between worker skills and jobs is the primary cause of continued high unemployment.

Even if demand strengthens enough to create 300,000 jobs per month, three times the average monthly rate in 2010, employment will not regain its pre-recession level until 2015 at the earliest. And this is very optimistic.

Consumption and construction are usually engines of strong recoveries, and both remain troubled. Households are still rebuilding their balance sheets and reeling from losses in wealth, and foreclosures and unsold property are impeding a rebound in construction. Small and medium-sized businesses that usually account for most new jobs still face weak, uncertain demand and credit constraints.

Even if demand strengthens significantly in the next few years, job growth is likely to lag output growth even more than it has during the last two “jobless” recoveries. Continuing a 20-year trend of polarization in the labor market, employment losses in the 2008-2009 recession were more severe in middle-skill white and blue collar jobs than in either high-skill, white-collar jobs or low-skill service occupations.

Strong productivity gains driven by labor-saving technological and organizational changes mean that many of the lost middle-skill jobs are gone for good. Many of the displaced workers, especially those unemployed for long periods of time, do not have the training and experience required for new high-skill jobs. Nor will new entrants to the labor force with just a high-school education...

(Excerpt) Read more at nytimes.com ...


TOPICS: Business/Economy; Culture/Society; Editorial; Politics/Elections
KEYWORDS: thegreatrecession
Laura Tyson is the S.K. and Angela Chan Professor at the Haas School of Business at University of California, Berkeley. She was the chair of the Council of Economic Advisers and the National Economic Council in the Clinton administration and she is a member of President Obama’s Economic Recovery Advisory Board.

This rat has just made a pretty good economic argument against illegal aliens and amnesty, IMHO.

1 posted on 01/18/2011 6:33:32 PM PST by neverdem
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To: neverdem

Note how she conflates industrial, commercial and institutional construction with residential construction. No one is building anything, let alone houses.


2 posted on 01/18/2011 6:38:50 PM PST by MontaniSemperLiberi (Moutaineers are Always Free)
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To: neverdem

Nothing proves the laws of supply and demand better than this current unemployment situation.

There is great supply and little demand.

Read a newspaper column bemoaning the fact that employers have a plethora of applicants and do not have to offer excessive perks and higher pay to find very qualified people to fill the open jobs.

Who’d a thunk?


3 posted on 01/18/2011 6:39:48 PM PST by Jvette
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To: neverdem

4 dollar gas and the coming 5 dollar gas will weaken demand.


4 posted on 01/18/2011 6:42:22 PM PST by NoLibZone (Five time DNC backed candidate Fred Phelps: "God sent the shooter".)
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To: neverdem

Well that’s sort of begging the question. The real reason is that regulations have destroyed the profitability of American companies.


5 posted on 01/18/2011 6:45:19 PM PST by Brilliant
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To: neverdem

Weak demand is why Obastard’s plan of giving a $3000 tax credit to employers who hire someone who has been laid off for an extended period had no chance of working. Why hire someone when you have no work for them?


6 posted on 01/18/2011 6:47:05 PM PST by Blood of Tyrants (Islam is the religion of Satan and Mohammed was his minion.)
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To: MontaniSemperLiberi

There were still about 400,000-500,000 housing starts in 2010. Presumably, they are building houses in places where there is not a lot available.


7 posted on 01/18/2011 6:47:46 PM PST by proxy_user
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To: neverdem

People taxed to their asses with or without jobs stifles demand. You dont need a Phd to understand.


8 posted on 01/18/2011 6:57:28 PM PST by samadams2000 (Someone important make......The Call!)
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To: neverdem
Households are still rebuilding their balance sheets and reeling from losses in wealth, and foreclosures and unsold property are impeding a rebound in construction.

Those families with safe investments recovered a year ago--growth is steady... aso those who had sound well managed diversifed investments recovered.

Foreclosures are not as plentiful in my area as was not overbuilt and builders, subcontractors are booked for months ahead. The homes I knew about that went into foreclosure had families that were walking a tight rope beforehand--divorces, just walking away etc. The homes being built now are of more upscale in the marketplace and not speculative. If you piced up a For Sale brochure, you would never say--wow that place is really inexpensive!!

Property I have eyed when listed, sold within a short period of time as was on precious property and priced reasonably and was not forced situations. Location and pricing was key. One family I know had their property on the market several years ago and could not sell--this time sold within the month to a new arrival into the state. They in turn bought two properties, one local and the other retirement in Florida (a deal). We did not ever have massive building of sub divisions, as a "vacationland" NE state where year round outdoor activities are part of the package. Second homes etc are located here. Also with a new Republican governor who with a strong business background, mayor of a city that brought growth to the city as well--gave us the first Republican governor in over 40 years. And I might add he was homeless and on his own at 11 leaving an abusive family behind. Won spending about $160,000. The only negative has been the federal government deciding to spread ship building contracts and like subcontracting around to other states where they are now behind in orders and cost over runs when before delivery was on time and no cost over runs (BIW General Dynamics). But the federal government wanted to spread their wealth--unions had some input, of course.

9 posted on 01/18/2011 6:59:11 PM PST by fight_truth_decay
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To: neverdem
Tyson is another Keynesian, and this is just more Keynesian claptrap. Creating money out of thin air, in the hope of "stimulating" demand failed in the US in the 1930s, and in Japan in the 1990s.

However, it's not a new fallacy. William Jennings Bryan's famous "Cross of Gold" speech was a call for inflation as a means of "stimulating" the economy.

10 posted on 01/18/2011 7:01:04 PM PST by JoeFromSidney
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To: neverdem
Strong productivity gains driven by labor-saving technological and organizational changes mean that many of the lost middle-skill jobs are gone for good.

Not to mention the flight of many factories to Mexico (NAFTA) and thence to the Far East (Mexico implodes, leading many to leave for under-the-table work in the US).

Many of the displaced workers, especially those unemployed for long periods of time, do not have the training and experience required for new high-skill jobs.

And with a large share of the factory jobs in Asia, what are the factory workers going to live on? Permanent unemployment? Hmm, can you say "lower demand" and "higher government costs"?

And speaking of "higher government costs" can you say "Illegal Central American immigrants going to the emergency room for primary care?"

As far as training and experience? I remember when companies PAID for the training they wanted their employees to have. Not to mention the unspeakable greed of Bill Gates etc. in pursuing H1-Bs and offshoring for tech work (Microsoft was once sitting on $50 billion in cash: invested in T-bills it would have thrown off $1 billion /yr "risk free" without affecting the principal or the cash flow from continuing operations. But no, they had to go with Brian Valentine's "Think India! Two for the price of one!" bullsh*t.)

NO cheers, unfortunately.

11 posted on 01/18/2011 7:07:52 PM PST by grey_whiskers (The opinions are solely those of the author and are subject to change without notice.)
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To: grey_whiskers

YEP...I know a guy who worked for Microsoft and trained his replacements (East Indians)...but, he’s still a big LIB


12 posted on 01/18/2011 7:11:57 PM PST by goodnesswins (Socialism is organized stupidity.)
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To: neverdem

Is this the same Laura D’Andrea Tyson who used to be so enamored of top down, command economies [as in the case of her favorite commie thug regime, Romania under Nicolae Ceausescu]? In her scissors and paste job for the NY Slimes the little tyrant wannabe never mentions confiscatory taxes, insane over-regulation and ObungaCare as the primary causes of the present mess. Hasn’t learned a thing since her hero Nicky had that rough day at the office back in 1989 or so.


13 posted on 01/18/2011 7:16:50 PM PST by Bedford Forrest (Roger, Contact, Judy, Out. Fox One. Splash one.<I>)
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To: neverdem

Naaah. It’s because those who generate the private sector jobs are sick of being punished for being entrepreneurs.


14 posted on 01/18/2011 7:19:59 PM PST by RKBA Democrat (Palin 2012: Renew, Revive, and Restore)
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To: neverdem
The Employer Mandate

ObamaCare’s employer mandate is among the new laws most anti-growth provisions. When implemented, it will force most American business firms to offer government-approved health insurance to their employees or else pay new federal taxes for not doing so. This costly new requirement will make it more expensive for firms to hire workers in the future. Consequently, it will destroy jobs, and many firms are likely to slow down on hiring in anticipation of its implementation.

ObamaCare’s employer mandate will discourage business development and growth. Small firms with 50 or fewer workers will have very strong disincentives to expand. These businesses can avoid the new penalties by staying small; growth will simply add new costs and burdens. Many businesses with low profit margins are unable to pay the substantial cost of providing comprehensive insurance to all of their employees or the new taxes under ObamaCare’s employer mandate.

15 posted on 01/18/2011 7:20:42 PM PST by smokingfrog (Do all the talking you want, but do what I tell you.)
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To: neverdem

Obama has added Trillions in new debt, Obamacare, and is proposing hundreds of new regulations, outside his Constitutional authority. These regulations and associated debt create financial risk and uncertainty that make prudent business planning impossible.
In the face of this uncertainty, business WILL NOT expand!
When Obama challenges companies to spend their idle cash, the execs should respond, “We would, if we could be certain how much of it you plan to steal”.


16 posted on 01/18/2011 7:21:53 PM PST by G Larry
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To: neverdem

Why Jobs Haven’t Come Back? One word.

Obama.

Most smarter business owners know he is Mugabe.

The morons in America just watch TV and get brainwashed.


17 posted on 01/18/2011 7:30:01 PM PST by Frantzie (Slaves do not have freedom only the illusion of freedom & their cable TV to drool at)
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To: neverdem
how..”UNEXPECTED”....

Until we are de-regulated and de-taxed...America is closed for business.

The Federal burocracy...the regulatory class is strangling the country.

18 posted on 01/18/2011 7:34:25 PM PST by mo
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To: neverdem

I read this women’s bio in Wikipedia. She has spent most of her life in school in one way or another. She is considered an expert on business and yet she has never been directly involved in running one. She is a perfect example of what is wrong with the Intelligentsia. Elitists making pronouncements about something they have never been directly involved with. But then again maybe she stayed at the Holiday Inn.


19 posted on 01/18/2011 7:35:16 PM PST by MCF
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To: Jvette
There is great supply and little demand.

Let's look at a great example of success in recent times. Apple has a created a great deal of supply that didn't exist ten years ago. Demand has followed supply and created a great number of jobs. (Without any government subsidies I might add.)

Compare what Apple's done with all the demand side stimulus by the government, which has had the net effect of creating a huge amount of debt and a 10% unemployment rate.

20 posted on 01/18/2011 7:43:53 PM PST by Moonman62 (Half of all Americans are above average. Politicians come from the other half.)
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To: neverdem
Fear mongering by the NYT?
21 posted on 01/18/2011 7:46:24 PM PST by blam
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To: Moonman62

They created the demand otherwise their supply would have been too much and the product would have been devalued or the company would not have succeeded.

I agree they were hugely successful, but without offering a product that people wanted to buy i.e. demand, they would never have had that success.

Just look at any second hand or 99cent store to see the flood of useless products no one wanted.

Right now there is a huge surplus of supply in labor and very low demand. That is why employers are in the catbird seat when it comes to wages and perks.

It’s the same with housing. Huge supply, little demand. That is called a buyer’s market.


22 posted on 01/18/2011 7:50:00 PM PST by Jvette
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To: Jvette

“Just look at any second hand or 99cent store to see the flood of useless products no one wanted.”

Newt Gingrich’s books?


23 posted on 01/18/2011 7:53:41 PM PST by Frantzie (Slaves do not have freedom only the illusion of freedom & their cable TV to drool at)
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To: neverdem

As long as offshoring of high-wage jobs continues, demand will continue to weaken.


24 posted on 01/18/2011 7:54:21 PM PST by devere
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To: Moonman62

Compare what Apple’s done with all the demand side stimulus by the government, which has had the net effect of creating a huge amount of debt and a 10% unemployment rate.

Giving money to banks doesn’t really build demand.


25 posted on 01/18/2011 7:55:03 PM PST by freedomfiter2 (Brutal acts of commission and yawning acts of omission both strengthen the hand of the devil.)
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To: neverdem

Reagan ended the recession of the late 1970’s with his tax reductions. The roll backs of high marginal rates resulted in higher disposable income for consumers who spent on consumer goods. At the time the US produced these consumer goods in this country so the demand for toasters, televisions, autos, and apparel resulted in more demand for US factories who in turn hired more workers creating more demand.

Today priming the pump through government transfer payments or tax reductions does not have the same multiplier effect as it did decades ago for one very good reason. The factories producing consumer goods are now outside the US. Spending by a US consumer results in demand in China, India, Bangladesh, or Vietnam. The job and income multiplier effect occurs in those countries, not our country.

Until we bring manufacturing back to this country we will have sluggish GDP growth, high unemployment, and continued decline of the middle class. Wealth is not created by borrowing, it is created by production. The citizens of producing countries become wealthy. Those of borrowing countries becomes slaves. History tells this story. We are living it again today.


26 posted on 01/18/2011 7:58:07 PM PST by Soul of the South (When times are tough the tough get going.)
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To: Jvette

Do the multi-million bonuses on Wall Street suggest there is little supply and great demand for investment bankers?


27 posted on 01/18/2011 7:59:53 PM PST by Soul of the South (When times are tough the tough get going.)
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To: neverdem

If Obama gets re-elected, Americans will look back on 10% unemployment as the good old days.


28 posted on 01/18/2011 8:02:33 PM PST by Iron Munro (When a society loses its memory, it descends inevitably into dementia - Mark Steyn)
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To: Soul of the South

No, they are the results of results.

It is no different than the fact that Kobe Bryant or Lebron James, or Tom Brady or Curt Schilling make millions per season when there are others playing on the same teams who don’t even make one.

Or no different than Brad Pitt or Angelina Jolie or Sandy Bullock making $20 million for a movie and the actors in the smaller supporting roles getting significantly less.

The best gets paid the most(usually)


29 posted on 01/18/2011 8:12:55 PM PST by Jvette
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To: Soul of the South
Do the multi-million bonuses on Wall Street suggest there is little supply and great demand for investment bankers?

It suggests there is little supply and great demand for investment bankers that can generate profits.

In every position you ever hold - your compensation is directly related to the value you bring to the organization. Nothing more, nothing less. There may be outliers, but that is the standard plain and simple.

30 posted on 01/18/2011 8:13:27 PM PST by !1776!
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To: RKBA Democrat
Naaah. It’s because those who generate the private sector jobs are sick of being punished for being entrepreneurs.

Winner. Simple. Accurate. Well said.

31 posted on 01/18/2011 8:14:38 PM PST by !1776!
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To: devere

Actually it was the middle class jobs in the form of manufacturing that have been shipped overseas. Also, the customer service type call center jobs.

Someone with a highly valued skill or service are okay in this economy.

The unemployment rate among college grads is only about 5%.


32 posted on 01/18/2011 8:21:42 PM PST by Jvette
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To: !1776!

Bingo. Til they realize this, the politicians will only be job killers.


33 posted on 01/18/2011 8:23:27 PM PST by Jvette
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To: neverdem

The “underconsumption” theory was propounded by FDR throughout the 30s. It was thoroughly debunked then and is meaningless blather today unsupported by common sense or economics.


34 posted on 01/18/2011 8:26:03 PM PST by ProtectOurFreedom
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To: Jvette
They created the demand ...

But how did they create it? Did they do it the way the government does it? You actually supplied the answer already:

offering a product that people wanted to buy [in other words, creating supply that didn't exist before]
I remember during the economic downturn of 2002-2003, everybody was complaining about too much supply of dark fiber. The solution was to create a new supply of online content, faster computers, and faster networking equipment. Thanks to all that new supply, there is plenty of demand to fill what used to be an oversupply of dark fiber.

We need more investment, innovation, and more supply of things people want. That's what will get our economy going again and create jobs, not more demand side stimulus and subsidies from the government.

35 posted on 01/18/2011 8:28:46 PM PST by Moonman62 (Half of all Americans are above average. Politicians come from the other half.)
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To: Blood of Tyrants
"Because you should hire them to pull us out of recession. And because it is the morally upright thing to do." So sayeth Barky, Nancy, Harry, et al. Why doesn't the market just listen to the wisdom of our leaders?
36 posted on 01/18/2011 8:29:35 PM PST by ProtectOurFreedom
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To: Moonman62

I was not advocating for more government.

Actually, I thought I was supporting and advocating the free market system we sometimes have in this country.

What you described is what has raised the living condition standards of everyone in this country.


37 posted on 01/18/2011 8:31:54 PM PST by Jvette
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To: ProtectOurFreedom

That is the problem with Keynesian economics. They think that spending drives the economy and if they can just get enough free money flying around and enough people getting paid to produce nothing, the economy will just magically repair itself.


38 posted on 01/18/2011 8:45:51 PM PST by Blood of Tyrants (Islam is the religion of Satan and Mohammed was his minion.)
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To: Blood of Tyrants

FDR thought it was as simple as establishing price control boards for everything to force prices up. His logic was that, with government-mandated price hikes and wage hikes, people would have more cash in their pockets buy stuff. He threw lots of people into prison for rejecting his imposed price increases. The companies which complied lost money and had to lay off many workers.

FDR really was a simpleton and totally naive about economics — much like the current occupant.


39 posted on 01/18/2011 8:49:34 PM PST by ProtectOurFreedom
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To: samadams2000
Yes, tax increases plus they have scared the begeebies out of baby boomers who are afraid to spend anything now that it looks like all these retirement funds and programs they paid for are likely severely diminished or gone.

Boomers were the engine of this economy. They are being replaced by a slew of third world immigrants who were not beneficiaries of the melting pot American culture like previous immigrants.

I am not a pessimist by nature but all the bad ideas conservatives worried about and tried to resist and change is coming to rotten fruition now like a freight train. It's scary.

40 posted on 01/18/2011 9:39:08 PM PST by SaraJohnson
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To: neverdem; All

This was Clinton’s so-called “Economic Advisor”...whose idiot ideas (Free Trade with Communist China, NAFTA) is why we have such economic problems

However, Tyson is no different than the Liberal Commie Free Traders in both parties who have shipped American jobs out of the country.

End the Commie Free Trade nonsense....and the jobs will come back.


41 posted on 01/18/2011 9:40:14 PM PST by UCFRoadWarrior (Whenever something is "Global"...it means its bad for America)
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To: neverdem; Lazamataz; stephenjohnbanker

#1: the entire world is awash in over-capacity and over-suppy. Too many factories, too many shopping malls, too many office towers, too many homes, too many cars, too many ships, everything...

#2: too many regulations. This is *especially* true at the local level. What city bureaucrats will approve are new individuals doing the exact same business as a prior (often closed) location. For everything else (read: innovation), the system requires onerous approval processes that typically span 6 to 60 months, with votes going to polls on many.

#3: too many lawsuit lotteries. High court awards for dubious fault drive up the cost of insurance and drive down the risk-taking of entrepreneurs. Playing defense to potential lawsuits means that doctors give unnecessary tests and businesses avoid otherwise profitable side ventures.

#4: taxes. At the business level, the AMT means that a businessman can’t deduct more than 2% in losses from a new venture. Losses in a new business are typically prevented from being credited to the entrepreneur’s other, successful businesses. This constricts entrepreneurship.

On the personal level, consumers are hammered by property, sales, and income taxes that can span local, county, state, and federal levels.

#5: Demographics. There are 77 million Baby Boomers who have been hitting retirement age since 2007, and who will continue to hit retirement age through 2025.

#6: Debt. City governments, state governments, federal governments, corporations, and consumers are all saddled with massive amounts of debt.

Debt is deflationary, the opposite of credit. Run up more debt, get more deflation.


42 posted on 01/19/2011 1:32:00 AM PST by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: JoeFromSidney
However, it's not a new fallacy. William Jennings Bryan's famous "Cross of Gold" speech was a call for inflation as a means of "stimulating" the economy.

Howzabout that. There were two Bryans: Bryan the inflationist and Bryan the anti-Darwinist. Bryan the anti-Darwinist is perpetually mocked, but Bryan the inflationist is the legitimate grampaw of every political economist who sees inflation as a valid policy tool.

One more note: Bryan supporters who called Darwinism "Evil-ution" did so before Hitler's Social Darwinism manifested itself in compulsory sterilization of the "unfit." The Holocaust built on that Social Darwinist policy.

43 posted on 01/19/2011 1:38:42 AM PST by danielmryan
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To: proxy_user

[Presumably, they are building houses in places where there is not a lot available.]

Au contraire. They are still building here in Vegas!


44 posted on 01/19/2011 3:18:24 AM PST by DaxtonBrown (HARRY: Money Mob & Influence (See my Expose on Reid on amazon.com written by me!))
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