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Thread: weekend commentary - 2010 economic predictions from Karl Denninger

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    Default weekend commentary - 2010 economic predictions from Karl Denninger

    (snip)"here's what I believe we're looking at for 2010... ready or not, here it comes!


    •No, this is not a new Bull Market; the market will be lower on December 31st than it is on January 4th, quite possibly by a a hell of a lot. We may not break the March 2009 lows - but I also don't believe for a second we're going back to 1576 on the SPX. Not without the leverage - and we can't get the leverage. I believe we will end the year down from where we begin on January 1st. McHugh calls it "Wave 3 Down"; I call it "aw crap." Either way "irrational exuberance" is back for now but cash flow always wins in the end. I'll be a "generational buyer" of stocks when dividend yields are over 5% and P/Es are in single digits. We didn't get there last year and yet those are the historical metrics that mark true Bear Market bottoms. With that said, I would not be surprised if we hit 1220 on the SPX some time earlier in the year - but it is by no means a lock, contrary to what virtually everyone in the "pundit community" expects (most of which are looking for 1350 or more!)


    •The Long end of the Bond Curve is going to move higher on yields. We have completed a long-term (multi-year) inverted Head and Shoulders pattern. The probability of the targets set by that pattern being achieved is extremely high. The target? 6.9% on the 30 year "long bond" - a rate that puts 30 year mortgage money at least to 7%. This prediction assumes that we do not get a panic-style sell-off in the Stock Market - if we do get one (and I think it's 50/50 on that) then I withdraw this prediction.


    •House prices will fall another ~20% - whether as a consequence of the rate back-up or utter destruction in the markets generally. Sorry folks, the housing mess is not over. The math on this is simple; a $200,000 principal loan at 4.75% for 30 years produces a P&I of $1039.18. That same payment with a rate of 7% produces a principal financed of $157,107.95. If, for whatever reason (engineered or not) the stock market collapses then you get your housing price crash anyway.


    •Banks will "give up" on holding their real estate as rates start to backup and will dump their foreclosure inventories. Why? Because the regulators may let them to play games with alleged "values" when people can get mortgages at 4%, but at 7% there's just no way the numbers work and the fraud becomes too difficult to countenance. There are rumors of major banks dumping hundreds of thousands of homes on the market next year - this is likely the backstory on "why."


    •Credit will not ease for "ordinary people." All the exhortations about "lending more" have been going on now for more than two years yet have gone nowhere. The jawboning will continue but the results will not come, simply because there is no more good collateral left against which to lend. This will in turn lead to.


    •A massive second wave of small business bankruptcies will sweep the nation. We've seen the first part of it. The second will be worse - far worse. With long rates backing up and the 30% credit card sweeping the land those who have relied on credit to operate in the small and mid-sized business world will get relentlessly squeezed. Many will fall.


    •Unemployment will appear to be stabilizing - for a while - but that will prove illusory. We finish 2010 over 10% - no material improvement. If things get real bad we might see 12-14%. Yes, U-3. I won't stick my neck out that far as a prediction but I believe ending the year at or above 10% is a lock.


    •The "revolting" call for last year was early - but not wrong. There will be at least one major coup or other violent overthrow of a government in 2010 tied to economic instability - either directly or via a war it spawns.


    •The states will go to the government well for handouts, they will probably get them, but it won't matter. They'll get some assistance at least, but in the grand scheme of things it doesn't make any difference in a world where long rates are rising precipitously. California and Arizona are in the biggest trouble, with Michigan, New Jersey and New York right behind. The public employee unions will have a kitten but again, it won't matter - that which isn't there isn't there, whether you want it to be or not.


    •A "double dip" will be recognized by the end of the year. Between taxes and rising rates - or an intentionally-detonated stock market to stop the long end of the bond curve going bananas - you can bet on it.


    •China will lose control of their property and plant bubble - with horrible consequences. They're good at the game, but that which can't go on forever won't. I bet it blows up before the end of the year. If so, Australia's property market better watch out - they're levitating on the strength of China's commodity demand and pricing there is California-style.


    •The Canadian Real Estate Market will show signs of cracking - especially in places like Vancouver. They may have another year before it all goes to hell, but the time approaches. Beware.


    •The Fed's games will "leak" and credibility will be shaken severely. There's too much pressure. Something will give, somewhere. Washington DC is too hostile a place for the "hold hands and head for the cliff together" game to work with an election coming up......


    •The Democrats lose big in the House. Time is probably too short for a viable third party to emerge for the midterm elections, and I don't expect the Democrats to lose House control. However, I do expect them to lose their filibuster-proof majority in the Senate, and to lose enough seats in The House to trash their "steamroller" approach to legislation. This might be bullish for the markets late in the year and into 2011 - maybe (divided government is generally good for the markets.)


    •Congress continues to try to spend its way out of the recession - and runs head on into rising rates. Watch the TBAC reports. Those will be your "tell" along with the TIC data.


    •One or more of the PIIGS (Portugal, Ireland, Italy, Greece, Spain) either defaults technically or is forced into austerity by the ECB. Further, Eastern Europe becomes dangerous destabilized. There is a real possibility of outright hostilities in that part of the world next year. Let's hope not. The ECB has a nasty problem on their hands; I have said for quite some time that the Euro is likely to trade at PAR down the road. This year is probably not the year for it, but the cracks in the dam that ultimately could destroy the European Union should become very apparent in 2010.


    •Contrary to virtually EVERY "investment pundit" on the street today return OF capital will once again assert itself as the primary consideration. Sentiment indicators as of 12/31, along with 52-week highs, all are at levels that have been associated with tops on a historical basis. Treasury has to issue $2.5 trillion this year, while we all cheered when they issued $1.5 trillion last year - and got away with it. China has housing trading at 80x average incomes, Australia and parts of Canada have housing markets at 10x or more average incomes and the banksters and "investors" alike appear to have learned nothing, with "reaching for yield" coming back in force. Ponzi ponzi ponzi! Add to this geopolitical event risk and things get interesting. That which can't continue forever won't - we merely argue over timing, not outcome. I'll lay the marker on one or more of these timers reaching zero in 2010."(snip)

    from

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Economic predictions from the 8th Annual Economic and Forecasting Conference.

    The recession is over, it just does not feel that way.

    Job losses or at least stagnation in job creation through 2010. We lost 7 million jobs in this recession. In the last deep recession, 1982, we lost roughly 2.5 million jobs.

    Foreclosures, it will take five years or longer to work through the foreclosure crisis.

    After health care reform passes, the Obama administration will try to pass a jobs bill.

    Corporate profits are going to slowly grow, especially among retailers. Retail constitutes 70% of GDP, yet consumers are barely spending. Consumer spending is up only a tiny amount over last years deeply recessed number. Export growth will contribute more to corporate profits for a while, perhaps a long while. (Look for a cheap dollar for years to come.)

    Banks currently are sitting on $1.1 trillion of excess reserves. This is exceptionally bad news as that is money that is not being borrowed to do productive things in the economy. It is there because credit demand is low and to shore up bank balance sheets.

    Individuals' balance sheets still look horrible and won't improve in 2010. Individuals and businesses are still having a hard time accessing credit.

    Look for an even greater move from credit cards to debit cards.

    M&A activity will increase.

    Commercial real estate is all but dead.

    Those are my raw notes from the conference. At least the ones that don't contain anything proprietary to my business.

    HTH
    Z

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Here's some predictions for 2009 that Melonie posted last year:

    http://forum.stripperweb.com/showthread.php?t=129420

    Crude will trade at $25 as demand slows due to the worst global economic contraction since the great Depression.

    S&P will hit 500 in 2009 because of falling earnings, vaporizing housing equity and increased cost of funds in the corporate sector.

    Chinese GDP growth drops to zero. The export driven sectors in the Chinese economy will be hurt significantly by the free-fall economic activity in the Global Trade and especially of the US.
    Last edited by eagle2; 01-04-2010 at 10:39 PM.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    ^^^ for context, a disclaimer was included in that post ( and other posts involving Saxo ) that this bank is known for 'outrageous' predictions, and that the accuracy of said 'outrageous' predictions is only on the order of 50%.

    Nevertheless, from previous levels of ~$100, crude oil did fall to $34 in 2009. Would spot crude oil prices have fallen even further had international speculators not come upon the unprecedented idea of long term leasing oil supertankers to 'store' crude oil for months while waiting for prices to rise again ?

    Nevertheless, from previous levels of ~1400, the S&P did fall to 666 in 2009. Would the S&P have fallen further without the FED's / US Treasury's unprecedentedly providing hundreds of billions of taxpayer dollars worth of 'free' TARP money / 'free' FED window loans to Wall St. banks that comprise a major sector of the S&P ( much of which was used by said banks to purchase S&P shares on their own behalf ) ?

    As to Chinese GDP growth stagnating, this did happen if you're referring to 'private sector' GDP. Like the US, the Chinese gov't unprecedentedly kicked in many many billions of dollars worth of 'stimulus' spending in order to inflate GDP from the 'public sector' side. But unlike the US, the Chinese gov't actually had 'real money in the bank' to spend for this purpose.


    PS thanks Zofia for sharing your notes from the annual Economic and Forecasting Conference. Considering that the content is intended for a 'mainstream' business audience, it's really not a major departure from Karl Denninger's prognostications in many fundamental areas.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by eagle2 View Post
    Here's some predictions for 2009 that Melonie posted last year:

    http://forum.stripperweb.com/showthread.php?t=129420

    Crude will trade at $25 as demand slows due to the worst global economic contraction since the great Depression.

    S&P will hit 500 in 2009 because of falling earnings, vaporizing housing equity and increased cost of funds in the corporate sector.

    Chinese GDP growth drops to zero. The export driven sectors in the Chinese economy will be hurt significantly by the free-fall economic activity in the Global Trade and especially of the US.
    Number 1 - I predict that YOUR reading comprehension will not improve in 2010. Not until you give your ideological biases a well deserved vacation. Melonie made it very clear that those were not her predictions.

    Number 2- Where are YOUR predictions ?

    Mine ? Oil is going UP; as I predicted. My other commodity based stocks are doing very nicely. Gold is going up again after a minor correction; as I predicted. Interest on the 10-year went up some 60 basis points in one month alone and is up about a full % point over the past year.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by Melonie View Post
    •China will lose control of their property and plant bubble - with horrible consequences. They're good at the game, but that which can't go on forever won't. I bet it blows up before the end of the year. If so, Australia's property market better watch out - they're levitating on the strength of China's commodity demand and pricing there is California-style.
    I had breakfast this morning with a couple of economists. The conversation turned to the People's Republic. The consensus is, no one really knows how the PRC will fare when it has to endure a recession. Personally, I am not signing off on any new investments there. Taiwan, the Republic of China looks better every day.

    •The Canadian Real Estate Market will show signs of cracking - especially in places like Vancouver. They may have another year before it all goes to hell, but the time approaches. Beware.
    I don't think your source really understands how differently the Canadian banking system is regulated from how ours, the British or Euro-land's is. The Canadians avoided most of the innovative products that nearly brought the US, UK and Euro-land to our collective knees. (And bankrupted Iceland.) Canadians generally have much more equity cushion in their homes. In the rest of Euro-land, Greece is the number one problem, followed closely by Ireland and some of the eastern European countries. Russia, always a danger, could foment dissent, or cause outright problems by cutting off natural gas supplies. These are geo-political issues that are far beyond the realm of this site. I mention it just because these are some issues weighing on my decision making.

    HTH
    Z

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    agreed to some degree on the limited relevance of Canadian housing risk. However, is definitely worth a look ... as it draws a clear correlation between Canadian gov't 'encouragement' of low income home ownership via the Canadian Mortgage and Housing Corp. and US gov't 'encouragement' of low income home ownership via Freddie / Fannie / FHA both creating systemic 'moral hazard' by freeing banks from default risk.

    As to China's ability to deal with a major recession in regard to their export industries, China has two 'tools' available that western countries do not. First is the existance of at least 2 trillion dollars worth of Chinese gov't surplus funds which can be spent for stimulus without a need for borrowing. Second is a degree of 'disgruntled population control' options that far exceed anything a western gov't could palatably attempt.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by Eric Stoner View Post
    Number 1 - I predict that YOUR reading comprehension will not improve in 2010. Not until you give your ideological biases a well deserved vacation. Melonie made it very clear that those were not her predictions.
    I never said they were Melonie's predictions. I said those were predictions that Melonie posted, just like the ones in this thread. Of course the only thing Melonie ever posts is doom and gloom, and the doom and gloom predictions that Melonie posted last year were way off.

    Quote Originally Posted by Eric Stoner View Post
    Number 2- Where are YOUR predictions ?

    Mine ? Oil is going UP; as I predicted. My other commodity based stocks are doing very nicely. Gold is going up again after a minor correction; as I predicted. Interest on the 10-year went up some 60 basis points in one month alone and is up about a full % point over the past year.
    Over the short term, I don't know what's going to happen. Sometime in the next few years I expect we will start seeing decent economic growth again.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by eagle2 View Post
    I never said they were Melonie's predictions. I said those were predictions that Melonie posted, just like the ones in this thread. Of course the only thing Melonie ever posts is doom and gloom, and the doom and gloom predictions that Melonie posted last year were way off.



    Over the short term, I don't know what's going to happen. Sometime in the next few years I expect we will start seeing decent economic growth again.
    Decent economic growth based on WHAT ? More government spending ?
    How do you define "decent" ? Reagan's post-recession recovery ran at about 7 % and hit as high as 8.5%. The most optimistic predictions and projections are for 4%, at most, for MAYBE a year before we slide into stagnation.

    Where is the capital formation supposed to come from to support this "decent" growth of yours ? Taxes are set to go up, up, UP ! Government spending shows no sign of slowing down requiring continued borrowing at increasing interest rates. Even the rosiest optimists like Kudlow, Orman and Cramer ( who is WRONG a lot more than he's right btw) all say that we'll have a short term rebound followed by an inflation driven period of stagnation and then maybe a period of solid growth maybe 5 to 7 years from now. What are the unemployed supposed to do in the meantime ?

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    steering back on topic, the following blurb has links to virtually every major 'professional 2010 prediction' available ...




    while there is no outright common thread to be found, a majority of the Wall St. 'crowd' is looking to the BRIC segment of emerging markets for the highest potential gains in 2010 ( well, as measured in US dollars at least ).

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by Eric Stoner View Post
    Decent economic growth based on WHAT ? More government spending ?
    How do you define "decent" ? Reagan's post-recession recovery ran at about 7 % and hit as high as 8.5%. The most optimistic predictions and projections are for 4%, at most, for MAYBE a year before we slide into stagnation.

    Where is the capital formation supposed to come from to support this "decent" growth of yours ? Taxes are set to go up, up, UP ! Government spending shows no sign of slowing down requiring continued borrowing at increasing interest rates. Even the rosiest optimists like Kudlow, Orman and Cramer ( who is WRONG a lot more than he's right btw) all say that we'll have a short term rebound followed by an inflation driven period of stagnation and then maybe a period of solid growth maybe 5 to 7 years from now. What are the unemployed supposed to do in the meantime ?
    One of the main reasons economic growth has slowed is because people aren't spending money. Eventually, people are going to start spending money and the economy will start growing again. People need cars and places to live. Eventually people are going to start buying cars and houses in the same numbers they do in normal times. The number of drivers in this country are increasing, yet the number of cars on the road has decreased. 2009 was first year since World War 2 that more cars were scrapped than sold.

    You have this mistaken idea that the only way to grow the economy is to implement the policies you support, a strong dollar and low taxes. There isn't just one answer for everything. Before and during World War 2, tax and government spending were both going up, up, and up and so was economic growth. The last time the dollar was this weak against the yen was 1994, right when a major economic expansion was starting. The President who's policies you seem to support the most, Ronald Reagan, had worse economic growth during his presidency than every Democratic president since World War 2, except Jimmy Carter, who was slightly behind Reagan.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by eagle2 View Post
    One of the main reasons economic growth has slowed is because people aren't spending money. Eventually, people are going to start spending money and the economy will start growing again. People need cars and places to live. Eventually people are going to start buying cars and houses in the same numbers they do in normal times. The number of drivers in this country are increasing, yet the number of cars on the road has decreased. 2009 was first year since World War 2 that more cars were scrapped than sold.

    You have this mistaken idea that the only way to grow the economy is to implement the policies you support, a strong dollar and low taxes. There isn't just one answer for everything. Before and during World War 2, tax and government spending were both going up, up, and up and so was economic growth. The last time the dollar was this weak against the yen was 1994, right when a major economic expansion was starting. The President who's policies you seem to support the most, Ronald Reagan, had worse economic growth during his presidency than every Democratic president since World War 2, except Jimmy Carter, who was slightly behind Reagan.
    Here you go again. You wouldn't be trying to make up your own facts, would you ? . To save time and spare the reader, I'll just post a reminder that Melonie and I have already debunked your ideologically driven version of history. Particularly your version about the Reagan years with the ACTUAL numbers on too many occasions to count. His numbers aren't all that great over all because he started with a severe recession. But the economic growth numbers for 1983 and especially 1984 and 1985 were excellent. Closer to your heart, your memory of the Clinton years is both inaccurate and highly selective. You refuse to compare the economy BEFORE and AFTER Clinton's tax cuts. You also refuse to acknowledge that FDR's economic growth was based on WAR Production and under JFK and LBJ it was fed by TAX CUTS !

    All that being said, I hope you're right because if you are, the country will do well. I think you're wrong and here's why : As I've explained ( as has Melonie ) in other threads, you are literally betting on a series of historical firsts to almost magically work out. Conceptually possible but highly doubtful based on economic history.

    Before people can spend money, they have to have it. They need a job and the ability to accumulate wealth. Forget about the hundred thousand or so folks with plenty of existing wealth who were not seriously hurt by the Market Crashes. I'm talking about the MIDDLE CLASS. Banks and lending institutions have , for the most part, returned to sound lending practices for BOTH home and auto loans. A lot of people will not qualify for either at present or in the near future.

    There is still an oversupply of housing and credit for home financing is restricted. The good old days of Fannie and Freddie buying or guaranteeing the mortgage of anyone with a job and a pulse are OVER ! The Fed is already signalling banks that rates are going to go up sooner rather than later. The most optimistic projections and predictions have housing staying flat for AT LEAST two more years. Most economists and analysts are predicting a double dip in the housing market meaning that the worst is far from over.

    Employment is still stagnant. December just disappointed as expected job increases did NOT materialize and unemployment stayed steady at 10%.

    In the face of the coming tax increases from Uncle Sam, coupled with the tax increases many states will be forced to implement to keep their budgets balanced, where is the disposable income for all those cars and homes supposed to come from ? One reason demand was high after W.W. II was that there was full employment and high savings because war production eliminated civilian car and appliance production as well as housing construction. Why do you think many cities instituted rent control ? High demand as war workers moved to the cities and stagnant supply. Try reading about where people had to live in N.Y.C. , Philly and elsewhere as war industries hired everyone in sight. People had money but nothing big to spend it on. Where is the similar pool of savings just waiting to be spent on car and home down payments ?

    Btw if states and cities don't raise taxes then they will have to at least freeze wages for several years and/or lay off workers. The Obama stimulus money went overwhelmingly to them to shore up their budgets. When it runs out, then what ? Many states have unemployment much higher than 10 % yet their tax base continues to deteriorate.

    So to keep this simple and as germane as possible would you please explain how and why you anticipate small business creation and expansion ? THAT is the source for something like 2 out of every 3 NEW private sector jobs. Please name one, just ONE Obama-Dem policy that will help small business to hire people.
    Last edited by Eric Stoner; 01-08-2010 at 01:42 PM.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    ^^^ extremely good point for review, Eric ( i.e. a Teachable Moment re US financial history ).

    The 'great depression' economic recovery that took form during the early 1940's was based on many Americans earning comparatively high wages ( from defense plant work or GI paychecks ) in combination with extremely few options being available on which to spend that money ( no civilian cars / electronics / housing being produced, rationed supplies of domestic gasoline / food / other commodities etc.). When combined with the 'permanent removal' of some 400,000 'unemployed' American males from the US work force ( via WW2 deaths ), this resulted in a postwar situation of American consumers being flush with cash ( thus banks flush with capital ), clear of debt, credit-worthy for home / auto loans, and 'hungry' for all manner of consumer goods which had been officially denied to them for the previous 5 years. Also, the production capacity ( factories ) of foreign competitors had been bombed into non-existance ( along with tens of millions of their former work force ), leaving the US ( and to a lesser degree the UK ) as the 'only game in town' in regard to the production of consumer goods ( as well as the only workforce capable of producing consumer goods for not only domestic consumption but the rest of the world as well).

    Contrast this to today's situation. Obviously there are no net 'new' opportunities for high paying stable domestic jobs ... if anything aggregate employment levels for existing high paying domestic jobs are still declining. And employed or unemployed, most Americans are already carrying 'unserviceable' levels of debt ... as evidenced by the ongoing rise in personal bankruptcies. Most American consumers are no longer credit-worthy ( in the absence of gov't guarantees / subsidies anyhow ). Since American consumers have resorted to emptying their savings accounts ( before going further into debt via credit cards ), banks are short of capital ( in the absence of gov't guarantees / subsidies anyhow ) thus extremely reluctant to lend. But at the same time all manner of ( mostly imported ) consumer goods are widely available to 'suck up' every extra dollar the American consumer can still manage to lay their hands on ( while providing few if any American jobs related to the production of those consumer goods).

    Talk about apples and oranges !

    I would also add that tax increases are fact not speculation. With the first week of 2010, states from NY to CA are implementing state income tax rate hikes. With the first month of 2010, increased property tax escrow withholdings are increasing existing fixed rate mortgage payments. And all manner of new 'stealth' tax based price increases are now going into effect, affecting the price of everything from utility bills to tires to beer / soda. And while certain future 'tax increases' have yet to be absolutely finalized, it certainly appears that a significant hike in federal income tax rates is a foregone conclusion for 2011 ( with the GWB tax cuts being allowed to expire ). It also appears that businesses and middle class Americans will face a new 'national health care' tax in one form or another beginning in 2011.

    On the flip side, there are essentially zero increases in pay rates to offset these increasing taxes. Well, with the possible exception of CSEA / UAW contracts with COLA provisions anyhow. And the latest unemployment figures PLUS emergency unemployment benefit expirations certainly indicate that America is still losing jobs, despite a population that is still growing both from domestic birth rate as well as from immigration ( legal or illegal ). Thus in the aggregate, the amount of real money available to Americans which is able to be spent on consumption items to theoretically boost the US economy ( versus spent on mandates / necessities ) is still declining. And even in cases where the gov't has attempted to 'give away' taxpayer money to encourage Americans to spend some of their own money ( i.e. cash for clunkers, first time home buyers ), in most cases any economic recovery effects ended when the 'gov't handouts' ended, and many of those Americans who benefitted from the gov't 'giveaway' of taxpayer money are STILL unable to service the resulting new debt.

    In the way of a final comment, Americans cannot spend money which they do not have the capability to earn in the first place, Americans cannot spend money they do earn that the gov't 'takes away' from them before they are ever able to touch it, and Americans cannot spend borrowed money when lenders refuse to make new loans ( based on the inability of those Americans to service additional loan repayments in light of declining net after tax incomes ) ! In other words, there is essentially a zero percent chance of an American consumer / private sector driven economic recovery to take root in 2010.

    In reference to the other classic agent of economic recovery, i.e. gov't (public sector) spending, unlike China or Japan the US gov't obviously has zero in the way of real surplus funds to spend. The $787 billion 'stimulus 1' law resulted in the gov't having to print up unprecedented amounts of new US dollars and new US treasury bonds in order to 'finance' the stimulus spending. And as Eric pointed out, the lion's share of this spending actually went to US states ... for the immediate purpose of continuing unemployment check payments, for continuing social welfare benefit payments, for continuing gov't worker employment etc. Thus the 'lion's share' of this stimulus money actually wound up being spent on 'necessities' instead of on 'consumer goods' ... with the expected almost total absence of any real economic stimulus effect ! Nevertheless, this stimulus money got counted into official gov't statistics for GDP / economic growth - even though 'real world' US economic growth continues to be stagnant / negative.

    This unprecedented gov't printing of new US dollars and new US treasury bonds in order to fund gov't stimulus spending plus increased gov't spending for bailouts / social welfare benefits / unemployment benefits etc. is also 'quietly' increasing pressure for higher US interest rates and higher US dollar denominated prices for virtually everything. Arguably, rising US interest rates and rising US dollar denominated prices will become a major new negative factor for the 'real world' US economy in 2010. In fact, there are now rumblings of the gov't adding a 'stimulus 2' package, which would require yet more printing of new US dollars and new US Treasury bonds to finance ( leading to yet more tax increases, yet more loss of US dollar purchasing power, and yet more years of US economic stagnation / negative growth ) ! While I won't attempt to stretch this into future year impacts, suffice it to say that the pile of potential negative economic developments that could affect the US private sector economy in future years is NOT the least bit conducive towards inspiring existing US private sector businesses / industries to expand their operations, to add American jobs etc. in 2010.


    ~
    Last edited by Melonie; 01-09-2010 at 10:14 AM.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by Eric Stoner View Post
    Here you go again. You wouldn't be trying to make up your own facts, would you ? . To save time and spare the reader, I'll just post a reminder that Melonie and I have already debunked your ideologically driven version of history. Particularly your version about the Reagan years with the ACTUAL numbers on too many occasions to count. His numbers aren't all that great over all because he started with a severe recession. But the economic growth numbers for 1983 and especially 1984 and 1985 were excellent. Closer to your heart, your memory of the Clinton years is both inaccurate and highly selective. You refuse to compare the economy BEFORE and AFTER Clinton's tax cuts. You also refuse to acknowledge that FDR's economic growth was based on WAR Production and under JFK and LBJ it was fed by TAX CUTS !
    No, you and Melonie have not debunked anything I've said. All you and Melonie do is make stuff up based on your ideology. That's why you never post references. If you did, it would show you are wrong. You never post references showing economic growth during Clinton's presidency, because that would show the economy was already growing at 4% before Clinton's tax cuts. You want to believe tax cuts are the solution to everything, so you make up stuff to go along with your belief.

    FDR's economic growth was based on GOVERNMENT spending. Who do you think paid for the WAR production? A significant amount of economic growth during LBJ's administration came from government spending on both the war in Vietnam and a dramatic increase in spending on social programs. Of course since this goes against your ideology (acknowledging government spending grows the economy), you pretend they don't exist.

    BTW, your snide, condescending remarks like this are the reason why I don't bother to respond to most of what you say.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by eagle2 View Post
    No, you and Melonie have not debunked anything I've said. All you and Melonie do is make stuff up based on your ideology. That's why you never post references. If you did, it would show you are wrong. You never post references showing economic growth during Clinton's presidency, because that would show the economy was already growing at 4% before Clinton's tax cuts. You want to believe tax cuts are the solution to everything, so you make up stuff to go along with your belief.

    FDR's economic growth was based on GOVERNMENT spending. Who do you think paid for the WAR production? A significant amount of economic growth during LBJ's administration came from government spending on both the war in Vietnam and a dramatic increase in spending on social programs. Of course since this goes against your ideology (acknowledging government spending grows the economy), you pretend they don't exist.

    BTW, your snide, condescending remarks like this are the reason why I don't bother to respond to most of what you say.
    You really are a scream. I am the one who tries to AVOID personalizing ! Who repeatedly asks YOU not to personalize ! Talk about the pot calling the kettle black !

    You've never been able to show a single thing that Melonie has made up.
    Me ? Once or twice I've been guilty of intellectual carelessness and/or scholarly sloppiness which ( Unlike YOU ) I ALWAYS acknowledge and take my lumps for. Like an adult. Btw, what if anything immunizes YOUR ideas from the taint of "ideology" ? What exactly are YOUR sources of pristine knowledge ?

    More than once I've caught you citing or source or linking to something that does NOT say what you claim it does. I've lost count of how many times I seriously called into question whether you even read your own link. Remember ? I've posted plenty of references. It's not my fault you prefer to keep your mind clamped shut and only expose yourself to ideas you already feel good about.

    Yes. I believe in tax cuts. They have been PROVEN to work. You believe in government spending. How do you think it's working out so far ? Do you agree with Krugman and Reich that we should have more ? How much more ? For how long ? Just how much more debt would you like to ring up ?

    Yes, there was government generated growth under FDR and LBJ. You conveniently forget that LBJ and the country as a whole reaped the benefits of JFK's tax cuts.Since FDR RAISED taxes there was no private sector boom that LBJ was able to enjoy. Have you looked at total government spending as a % of GDP under LBJ and compared it to the current numbers ? Please don't throw FDR's W.W. II numbers at me UNLESS you advocate we try to achieve prosperity by engaging in a major WAR !

    Would you like to compare Clinton's PRE- tax cut growth numbers and unemployment to those AFTER his tax cuts took effect ?
    Last edited by Eric Stoner; 01-26-2010 at 09:12 AM.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by Eric Stoner View Post
    You really are a scream. I am the one who tries to AVOID personalizing ! Who repeatedly asks YOU not to personalize ! Talk about the pot calling the kettle black !
    Try reading your condescending comments about my reading comprehension or "making up my own facts", even though what I said is true.

    BTW, Reagan didn't start his presidency with a severe recession. The economic growth rate when Reagan took over (1st qtr 1981) was 8%, and this was without any tax cuts. If you don't believe me, look it up.

    http://www.data360.org/dsg.aspx?Data...=274&count=500

    Quote Originally Posted by Eric Stoner View Post
    You've never been able to show a single thing that Melonie has made up.
    Me ? Once or twice I've been guilty of intellectual carelessness and/or scholarly sloppiness which ( Unlike YOU ) I ALWAYS acknowledge and take my lumps for. Like an adult. Please give it a try sometime. Btw, what if anything immunizes YOUR ideas from the taint of "ideology" ? What exactly are YOUR sources of pristine knowledge ?
    I've pointed out countless times when Melonie made something up. I've even listed them once or twice.

    I don't follow any ideology. I don't claim there is one solution for everything. There are times when tax cuts do make sense and there are times when tax increases make sense. There are times when increases in government spending makes sense and there are times when reducing spending makes sense.

    Quote Originally Posted by Eric Stoner View Post
    More than once I've caught you making it up as you went along. I've lost count of how many times I seriously called into question whether you even read your own link. Remember ? I've posted plenty of references. It's not my fault you prefer to keep your mind clamped shut and only expose your self to ideas you already feel good about. And of course information from sources that have a "Loony Left Seal of Approval". Like the Daily Kos or Media Matters.
    No, I don't make things up and I provide references for what I post, unlike you.

    Quote Originally Posted by Eric Stoner View Post
    Perhaps I shouldn't be surprised yet I confess that I am. More and more you've proven yourself to be a coward and an intellectual bully. And whenever sopmebody stands up to you and calls "Bullshit" all you can do is namecall and launch personal attacks. And you also demonstrate that nothing ignotes greater scorn from the Left than when their cherished ideas go down in flames when exposed to too much light.
    There you go with your snide, condescending remarks again.

    Quote Originally Posted by Eric Stoner View Post
    Yes. I believe in tax cuts. They have been PROVEN to work. You believe in government spending. How do you think it's working out so far ? Do you agree with Krugman and Reich that we should have more ? How much more ? For how long ? Just how much more debt would you like to ring up ?
    Tax cuts have not been proven to work. Please tell me what we have to show for Reagan and Bush's tax cuts besides $11 trillion in debt. Thanks to Reagan and Bush's "supply side economics" which drained money from the government, our infrastructure is falling apart, and as I said before, the economy grew at 8% 1st qtr 1981 before Reagan cut taxes.



    Quote Originally Posted by Eric Stoner View Post
    Yes, there was government generated growth under FDR and LBJ. You conveniently forget that LBJ and the country as a whole reaped the benefits of JFK's tax cuts.since FDR RAISED taxes there was no private sector boom that LBJ was able to enjoy. Have you looked at total government spending as a % of GDP under LBJ and compared it to the current numbers ? Please don't throw FDR's W.W. II numbers at me UNLESS you advocate we try to achieve prosperity by engaging in a major WAR !
    Again, there was already strong economic growth before JFK's tax cuts went into place. The economy grew at a rate of 6-8% the last 3 quarters of 1961 (see chart again)
    http://www.data360.org/dsg.aspx?Data...=274&count=500

    If our government spent the same amount of money on a military buildup or something else that was as labor intensive, without going to war, the results would have been the same.

    Quote Originally Posted by Eric Stoner View Post
    Would you like to compare Clinton's PRE- tax cut growth numbers and unemployment to those AFTER his tax cuts took effect ? Didn't think so.
    Yes I would, especially the five years before his tax cuts and the five years after.
    Last edited by eagle2; 01-25-2010 at 10:04 PM.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Please don't make this a snide remark thread! If you are not offering anything but throwing mud at each other, feel free to re-edit your remarks with calmer tempers now. I value both your opinions, but not to keen on name calling.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by eagle2 View Post
    Try reading your condescending comments about my reading comprehension or "making up my own facts", even though what I said is true.

    BTW, Reagan didn't start his presidency with a severe recession. The economic growth rate when Reagan took over (1st qtr 1981) was 8%, and this was without any tax cuts. If you don't believe me, look it up.

    http://www.data360.org/dsg.aspx?Data...=274&count=500


    I've pointed out countless times when Melonie made something up. I've even listed them once or twice.

    I don't follow any ideology. I don't claim there is one solution for everything. There are times when tax cuts do make sense and there are times when tax increases make sense. There are times when increases in government spending makes sense and there are times when reducing spending makes sense.


    No, I don't make things up and I provide references for what I post, unlike you.


    There you go with your snide, condescending remarks again.



    Tax cuts have not been proven to work. Please tell me what we have to show for Reagan and Bush's tax cuts besides $11 trillion in debt. Thanks to Reagan and Bush's "supply side economics" which drained money from the government, our infrastructure is falling apart, and as I said before, the economy grew at 8% 1st qtr 1981 before Reagan cut taxes.





    Again, there was already strong economic growth before JFK's tax cuts went into place. The economy grew at a rate of 6-8% the last 3 quarters of 1961 (see chart again)
    http://www.data360.org/dsg.aspx?Data...=274&count=500

    If our government spent the same amount of money on a military buildup or something else that was as labor intensive, without going to war, the results would have been the same.



    Yes I would, especially the five years before his tax cuts and the five years after.
    I'm going to take Deogol's words to heed and try to just keep it factual and avoid any personalizing.

    You conveniently forget the "Misery Index" when Reagan took office. Double digit unemployment, double digit inflation and double digit interest rates. Growth in the FIRST Quarter of 1981 was 8 %. What was it in the rest of 1981 and 1982 ? What was it AFTER Reagan's tax cuts went into FULL effect ? If all you look at is just economic growth numbers then your arguments make more sense than they otherwise do. When JFK took office, we were just starting to come out of the THIRD ( some argue the FOURTH ) Eisenhower Recession. Unemployment was still high and after a rebound, economic growth started to lag into 1962 which is why JFK cut taxes in '63. The economy took off in 1964 and really boomed until 1969 when Nixon took office.

    Not to parse words, but to me, when someone is accused of "making it up" that means they lied or fabricated something. I've never read anything from Melonie where she came close to doing that. And I certainly never read anything from you showing anything of the sort. Were there times where YOUR sources proved to be better ( read: more accurate ) than hers ? Sure. Not too often, but it certainly happened. So what ? How many times does she have to post that she links to lots of things without necessarily agreeing or vouching for the contents ? Were there times when I think your view was closer to the truth than hers ? Yep. Not too often but when I think you're right I ALWAYS say so. And just to be clear, afaic you never lied or fabricated. Ignored facts that don't fit or support your argument ? Yes. Haven't we all from time to time ?

    Btw, just a brief note about "reading comprehension". Not the most diplomatic thing I've ever posted but I think you take it much more personally than you ought. It's admittedly my stock response to anyone who misreads or takes out of context what I post or in your case, sometimes your own links. Many's the time I've read your link on an issue and found it does NOT say what you claim it does. And when I've called you on it, your usual response is to NOT respond.

    Taxes are one part of the Federal Budget. What about SPENDING ? If raising taxes really reduced deficits then why did the deficit go UP after Bush 41 raised taxes ? California has the highest income and sales tax rates in the country. Where else does their structural deficit come from other than spending ? How do you account for the large Federal surpluses AFTER Clinton CUT taxes ? Was it all the result of Gramm- Rudman ?

    On top of everything else, we've HAD this discussion. Many times. Mel and I have pointed to sources that show increased growth and increased revenues after JFK, Reagan and Clinton cut taxes. You claim that tax cuts cause deficits by cutting revenues. Two different spins on essentially the same set of data.

    Do you think now is a good time for Obama and the Dems to raise taxes ?

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by Deogol View Post
    Please don't make this a snide remark thread! If you are not offering anything but throwing mud at each other, feel free to re-edit your remarks with calmer tempers now. I value both your opinions, but not to keen on name calling.
    I have taken your advice and edited my remarks to clean out any "mud". Don't hold your breath waiting for Eagle to do likewise.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by Eric Stoner View Post
    I'm going to take Deogol's words to heed and try to just keep it factual and avoid any personalizing.

    You conveniently forget the "Misery Index" when Reagan took office. Double digit unemployment, double digit inflation and double digit interest rates. Growth in the FIRST Quarter of 1981 was 8 %. What was it in the rest of 1981 and 1982 ? What was it AFTER Reagan's tax cuts went into FULL effect ? If all you look at is just economic growth numbers then your arguments make more sense than they otherwise do. When JFK took office, we were just starting to come out of the THIRD ( some argue the FOURTH ) Eisenhower Recession. Unemployment was still high and after a rebound, economic growth started to lag into 1962 which is why JFK cut taxes in '63. The economy took off in 1964 and really boomed until 1969 when Nixon took office.
    We didn't have double digit unemployment when Reagan became President. It was around 7%, and it was around 7% when his first term ended. The unemployment rate didn't reach 10% until well into Reagan's 2nd year, which was after Reagan cut taxes. The main reason for the high unemployment was high interest rates, not high taxes, and when interest rates were lowered, unemployment went down.

    Quote Originally Posted by Eric Stoner View Post
    Not to parse words, but to me, when someone is accused of "making it up" that means they lied or fabricated something. I've never read anything from Melonie where she came close to doing that. And I certainly never read anything from you showing anything of the sort. Were there times where YOUR sources proved to be better ( read: more accurate ) than hers ? Sure. Not too often, but it certainly happened. So what ? How many times does she have to post that she links to lots of things without necessarily agreeing or vouching for the contents ? Were there times when I think your view was closer to the truth than hers ? Yep. Not too often but when I think you're right I ALWAYS say so. And just to be clear, afaic you never lied or fabricated. Ignored facts that don't fit or support your argument ? Yes. Haven't we all from time to time ?
    Melonie does consistently make things up. She's not lying, in that she believes what she is saying is true, but it isn't. She constantly makes assumptions, based on her ideology, which turn out not to be true. According to Melonie's ideology, businesses cannot pay good wages and be successful. Businesses that get their electricity from clean sources cannot be successful. Then she makes stuff up based on these assumptions, and other assumptions that turn out not to be true. Here is one example:

    http://forum.stripperweb.com/showthr...21#post1829021

    In her statement, Melonie claims BMW moved their production to South Carolina because of low wages and subsidies, and cheap electricity from coal-powered plants. She then goes on to say that if "BMW persisted in importing vehicles manufactured in western europe ( and thus preserved high paying western european auto worker jobs) they arguably WOULD be bankrupt by now".

    In reality BMW manufactures approximately 90% of its vehicles in Western Europe (Germany, UK, and Austria), and they export a significant number of those vehicles to the United States, and they are able to remain profitable most years. As recently as 2 or 3 years ago, they were the most profitable auto maker in the world.

    In addition, the state where BMW chose to locate its US plant doesn't get most of its electricity from coal powered plants. Over half of the electricity in South Carolina comes from nuclear power plants.

    To summarize, Melonie claims BMW cannot manufacture vehicles in Western Europe and import them to the US, without going bankrupt. In reality, most of their vehicles are manufactured in Western Europe, and many of these vehicles are imported to the US. Melonie also claims that BMW located their plant in South Carolina because of cheap electricity from coal-powered plants. In reality, over half the electricity in South Carolina comes from nuclear power.

    Melonie frequently makes statements like that, without knowing whether what she is saying is true or not. She just assumes it is, based on her ideology. I doubt very much Melonie is intentionally misrepresenting facts. She probably does believe what she is saying is true, but many times it turns out not to be.

    Quote Originally Posted by Eric Stoner View Post
    Btw, just a brief note about "reading comprehension". Not the most diplomatic thing I've ever posted but I think you take it much more personally than you ought. It's admittedly my stock response to anyone who misreads or takes out of context what I post or in your case, sometimes your own links. Many's the time I've read your link on an issue and found it does NOT say what you claim it does. And when I've called you on it, your usual response is to NOT respond.

    Taxes are one part of the Federal Budget. What about SPENDING ? If raising taxes really reduced deficits then why did the deficit go UP after Bush 41 raised taxes ? California has the highest income and sales tax rates in the country. Where else does their structural deficit come from other than spending ? How do you account for the large Federal surpluses AFTER Clinton CUT taxes ? Was it all the result of Gramm- Rudman ?
    Tax rates aren't the only factor that determine government revenue and deficits. We were going through a recession when Bush 41 was President, which reduced revenue.

    President Clinton's tax cuts weren't anywhere near as big as his tax increases. We had strong economic growth throughout Clinton's presidency, before and after his tax cuts, which contributed to revenue, along with the tax increases. We had gone from deficits of $300 billion to a balanced budget before Clinton's tax cuts were even passed.


    Quote Originally Posted by Eric Stoner View Post
    On top of everything else, we've HAD this discussion. Many times. Mel and I have pointed to sources that show increased growth and increased revenues after JFK, Reagan and Clinton cut taxes. You claim that tax cuts cause deficits by cutting revenues. Two different spins on essentially the same set of data.
    but you leave out that we had strong economic growth before these tax cuts were passed and there were other factors that contributed to economic growth, such as significant increases in spending on a war and social programs during the Johnson Administration, and significant decreases in interest rates and significant increases in spending on a military buildup during the Reagan Administration. Tax cuts probably did contribute to the economic growth, and I have nothing against cutting taxes, as long as the revenue is enough to cover government expenses. I'm opposed to government running large deficits unless we are fighting a major war or going through a severe economic crisis, as we're doing now.

    Quote Originally Posted by Eric Stoner View Post
    Do you think now is a good time for Obama and the Dems to raise taxes ?
    No, right now I see high unemployment as being a bigger problem than our deficits.
    Last edited by eagle2; 01-26-2010 at 11:41 PM.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by eagle2 View Post
    We didn't have double digit unemployment when Reagan became President. It was around 7%, and it was around 7% when his first term ended. The unemployment rate didn't reach 10% until well into Reagan's 2nd year, which was after Reagan cut taxes. The main reason for the high unemployment was high interest rates, not high taxes, and when interest rates were lowered, unemployment went down.


    Melonie does consistently make things up. She's not lying, in that she believes what she is saying is true, but it isn't. She constantly makes assumptions, based on her ideology, which turn out not to be true. According to Melonie's ideology, businesses cannot pay good wages and be successful. Businesses that get their electricity from clean sources cannot be successful. Then she makes stuff up based on these assumptions, and other assumptions that turn out not to be true. Here is one example:

    http://forum.stripperweb.com/showthr...21#post1829021

    In her statement, Melonie claims BMW moved their production to South Carolina because of low wages and subsidies, and cheap electricity from coal-powered plants. She then goes on to say that if "BMW persisted in importing vehicles manufactured in western europe ( and thus preserved high paying western european auto worker jobs) they arguably WOULD be bankrupt by now".

    In reality BMW manufactures approximately 90% of its vehicles in Western Europe (Germany, UK, and Austria), and they export a significant number of those vehicles to the United States, and they are able to remain profitable most years. As recently as 2 or 3 years ago, they were the most profitable auto maker in the world.

    In addition, the state where BMW chose to locate its US plant doesn't get most of its electricity from coal powered plants. Over half of the electricity in South Carolina comes from nuclear power plants.

    To summarize, Melonie claims BMW cannot manufacture vehicles in Western Europe and import them to the US, without going bankrupt. In reality, most of their vehicles are manufactured in Western Europe, and many of these vehicles are imported to the US. Melonie also claims that BMW located their plant in South Carolina because of cheap electricity from coal-powered plants. In reality, over half the electricity in South Carolina comes from nuclear power.

    Melonie frequently makes statements like that, without knowing whether what she is saying is true or not. She just assumes it is, based on her ideology. I doubt very much Melonie is intentionally misrepresenting facts. She probably does believe what she is saying is true, but many times it turns out not to be.


    Tax rates aren't the only factor that determine government revenue and deficits. We were going through a recession when Bush 41 was President, which reduced revenue.

    President Clinton's tax cuts weren't anywhere near as big as his tax increases. We had strong economic growth throughout Clinton's presidency, before and after his tax cuts, which contributed to revenue, along with the tax increases. We had gone from deficits of $300 billion to a balanced budget before Clinton's tax cuts were even passed.



    but you leave out that we had strong economic growth before these tax cuts were passed and there were other factors that contributed to economic growth, such as significant increases in spending on a war and social programs during the Johnson Administration, and significant decreases in interest rates and significant increases in spending on a military buildup during the Reagan Administration. Tax cuts probably did contribute to the economic growth, and I have nothing against cutting taxes, as long as the revenue is enough to cover government expenses. I'm opposed to government running large deficits unless we are fighting a major war or going through a severe economic crisis, as we're doing now.



    No, right now I see high unemployment as being a bigger problem than our deficits.
    Melonie doesn't do anything that you or any other poster also does. She makes arguments. She expresses opinions. Some have greater factual support than others. In the case you cite involving BMW and South Carolina, I think the facts are more on your side than hers. Not the first time. I am hardly in lock step with Melonie and certainly disagree with her from time to time.

    Are you claiming Reagan's tax cuts caused unemployment to go up ? Or that Volcker's interest rate cuts caused it to go down ? If that worked then we ought to have full employment now with short term rates at effectively less than ZERO.

    You are partially correct about Clinton. He did not cut taxes across the board and his increases were record setting. However you again ignore the effect of his cutting Capital Gains and business taxes and the resultant increases in economic growth AND tax revenues. Would it have been better had he cur taxes across the board ? Probably. Certainly "Main Street" would have enjoyed more of the benefits tha Wall Street enjoyed. I spent eight ( 8 ) years waiting for the "middle class tax cut" that Slick Willy promised. Remember ? And do you also remember that Willy admitted that he'd raised taxes too much ?

    While I've repeeatedly agreed with you that Reagan's deficits were too large and Bush 43's were absolutely inexcusable, we must recall WHERE all spending bills originate. The House. Who controlled it when Reagan was President ? The Dems. To Bush's shame, he was nothing more than a rubber stamp for Tom DeLay and Karl Rove who tried ( and failed ) to spend the GOP into long term political power. All that being said, Reagan's deficits as a % of GDP were tiny compared to what Obama is doing now and Bush's also pale in comparison.

    To get to something a little more relevant and constructive : I've repeatedly asked you - What would YOU do now to generate growth and increase employment ? Cut taxes ? INCREASE spending ? And if you did, increase spending on what ? Social benefits ? Inrastructure ?
    Last edited by Eric Stoner; 01-28-2010 at 09:22 AM.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by Eric Stoner View Post
    Are you claiming Reagan's tax cuts caused unemployment to go up ? Or that Volcker's interest rate cuts caused it to go down ? If that worked then we ought to have full employment now with short term rates at effectively less than ZERO.
    No, the Fed raising interest rates did, but the tax cuts didn't prevent unemployment from increasing dramatically. The unemployment rate started falling when the Fed started lowering interest rates, not when Reagan cut taxes. Interest rates aren't the only thing affecting the employment level. The current economic crisis and high unemployment rates were not caused by high interest rates. The high unemployment in the 1980's was. Interest rates were already low to begin with when the current crisis began. The Fed's options were/are limited.

    Quote Originally Posted by Eric Stoner View Post
    You are partially correct about Clinton. He did not cut taxes across the board and his increases were record setting. However you again ignore the effect of his cutting Capital Gains and business taxes and the resultant increases in economic growth AND tax revenues. Would it have been better had he cur taxes across the board ? Probably. Certainly "Main Street" would have enjoyed more of the benefits tha Wall Street enjoyed. I spent eight ( 8 ) years waiting for the "middle class tax cut that Slick Willy promised. Remember ? And do you also remember that Willy admitted that he'd raised taxes too much ?
    I don't remember President Clinton promising tax cuts or saying he raised taxes too much. I don't think he did. We had strong economic growth, even before his tax cuts, full employment, and budget surpluses.

    Quote Originally Posted by Eric Stoner View Post
    While I've repeeatedly agreed with you that Reagan's deficits were too large and Bush 43's were absolutely inexcusable, we must recall WHERE all spending bills originate. The House. Who controlled it when Reagan was President ? The Dems. To Bush's shame, he was nothing more than a rubber stamp for Tom DeLay and Karl Rove who tried ( and failed ) to spend the GOP into long term political power. All that being said, Reagan's deficits as a % of GDP were tiny compared to what Obama is doing now and Bush's also pale in comparison.
    President Reagan is the one who signed the bills. I consider the President responsible for any bills he signed. In addition, the biggest spending increases went towards a military buildup, which Reagan fully supported.

    Quote Originally Posted by Eric Stoner View Post
    To get to something a little more relevant and constructive : I've repeatedly asked you - What would YOU do now to generate growth and increase employment ? Cut taxes ? INCREASE spending ? And if you did, increase spending on what ? Social benefits ? Inrastructure ?
    To begin with, I would have implemented a bigger stimulus that went towards more labor-intensive projects, such as rebuilding our infrastructure. Our nation's infrastructure is in dire needs of this anyway. I would give tax rebates as debit cards that could be spent, but not deposited in banks. I would give tax credits to businesses for hiring additional employees. I would also give incentives to older workers to retire early.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by eagle2 View Post
    No, the Fed raising interest rates did, but the tax cuts didn't prevent unemployment from increasing dramatically. The unemployment rate started falling when the Fed started lowering interest rates, not when Reagan cut taxes. Interest rates aren't the only thing affecting the employment level. The current economic crisis and high unemployment rates were not caused by high interest rates. The high unemployment in the 1980's was. Interest rates were already low to begin with when the current crisis began. The Fed's options were/are limited.


    I don't remember President Clinton promising tax cuts or saying he raised taxes too much. I don't think he did. We had strong economic growth, even before his tax cuts, full employment, and budget surpluses.


    President Reagan is the one who signed the bills. I consider the President responsible for any bills he signed. In addition, the biggest spending increases went towards a military buildup, which Reagan fully supported.



    To begin with, I would have implemented a bigger stimulus that went towards more labor-intensive projects, such as rebuilding our infrastructure. Our nation's infrastructure is in dire needs of this anyway. I would give tax rebates as debit cards that could be spent, but not deposited in banks. I would give tax credits to businesses for hiring additional employees. I would also give incentives to older workers to retire early.
    The problem with your anlaysis is that you apparently forget that unemployment is historically a LAGGING indicator. It is the last to go up in a recession and the last to go down in a recovery.

    You have apparently forgotten that Clinton campaigned in 1992 promising a "middle class tax cut". When he took office he RAISED taxes on the middle class. It's all there in the history books. Several people have reported and published that Clinton privately admitted that he'd raised taxes too much.

    If you take out Reagan's increased military spending we would still have had large deficits. Without his tax cuts, it is highly questionable whether we would have seen the economic growth and INCREASED revenues that we did.

    Aside from the infrastructure spending with which I agree, most of what you propose was tried and failed. We had two demand side stimulus programs while Bush was still in office. Neither did a thing. Obama's program has been heavily oriented toward preserving public employment. The lion's share of the infrastructure spending was BACK- loaded. Most projects haven't gotten started yet, won't for at least another year and once underway will quickly run out of funds to keep going.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    Quote Originally Posted by Eric Stoner View Post
    The problem with your anlaysis is that you apparently forget that unemployment is historically a LAGGING indicator. It is the last to go up in a recession and the last to go down in a recovery.
    How much of a lagging indicator do you need? At the end of Reagan's first term, 3 years after his tax cuts were passed, the unemployment level wasn't any lower than when Reagan took office.

    Quote Originally Posted by Eric Stoner View Post
    You have apparently forgotten that Clinton campaigned in 1992 promising a "middle class tax cut". When he took office he RAISED taxes on the middle class. It's all there in the history books. Several people have reported and published that Clinton privately admitted that he'd raised taxes too much.
    If President Clinton raised taxes too much, what were the negative effects? We had full employment, strong economic growth, and a balanced budget.

    Quote Originally Posted by Eric Stoner View Post
    If you take out Reagan's increased military spending we would still have had large deficits. Without his tax cuts, it is highly questionable whether we would have seen the economic growth and INCREASED revenues that we did.
    Again, the economic growth rate was 8% when Reagan took office. The main problem with the economy at the time was inflation. If we needed to cut taxes to achieve strong economic growth, how was the economy able to grow like that before Reagan's tax cuts? There were many years where we had increased revenue without tax cuts. If tax cuts always result in increased tax revenue, why is it that the only times we saw significant increases in the deficit, were after Reagan and Bush's tax cuts? You don't think Congress increased spending under other presidents?

    Quote Originally Posted by Eric Stoner View Post
    Aside from the infrastructure spending with which I agree, most of what you propose was tried and failed. We had two demand side stimulus programs while Bush was still in office. Neither did a thing. Obama's program has been heavily oriented toward preserving public employment. The lion's share of the infrastructure spending was BACK- loaded. Most projects haven't gotten started yet, won't for at least another year and once underway will quickly run out of funds to keep going.
    I'm not proposing to do what Bush did. I'm proposing that government give out debit cards or vouchers that can only be used for spending, not deposited in banks. This way all of the rebate will be used towards spending. Taiwan did this and it did increase consumer spending.

    http://www.findingdulcinea.com/news/...ing-Money.html

    Taiwan’s residents were eager to start spending, if mall and store traffic on the island were any indication. French retail chain Carrefour reported 30 percent higher than normal sales this weekend at its Taiwan locations.

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    Default Re: weekend commentary - 2010 economic predictions from Karl Denninger

    ^^^ Yes, BUT. when Reagan took office unemployment was 7.6 % When he left in 1988 it was 5.5 % and in 1989 while his tax cuts ( his LOWERING of the Marginal RATES) were still in full force and effect) it was 5.3 % . After Bush 41 raised taxes it went up. When Clinton took office it was 6.9. By 1998 AFTER Clinton cut Capital Gains and SOME Business taxes it had dropped all the way to 4.5 % As much as Clinton raised taxes, he never came close to restoring the confiscatory rates we had under Nixon, Ford and Carter.
    Btw, these are the OFFICIAL Bureau of Labor Statisitics numbers available at bls.gov.

    In looking at the economic growth numbers then vs. now, you ignore inflation and high interest rates. Thanks to Reagan and Volcker we got growth, increased tax revenues, lower interest rates, low inflation and low unemployment. The "good" Greenspan continued Volcker's policies in his first term and for half of his second. A number of our present problems were caused by his interest rate machinations and a LOT of our current and future problems can be laid at the door of "Helicopter Ben" Bernanke.

    Your voucher program was tried. It DID NOT WORK ! Much of what you have proposed was done by Japan in the 1990's and is being continued. In many ways their economy is just as much of a mess as ours is.
    Last edited by Eric Stoner; 01-31-2010 at 02:58 PM.

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