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Thread: Gloom and Doom quotes from the past

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    Default Gloom and Doom quotes from the past


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    Default Re: Gloom and Doom quotes from the past

    How about these?

    There is no internet bubble.
    There is no housing bubble.
    Subprime is contained.
    There is no European debt problem.

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    Default Re: Gloom and Doom quotes from the past

    Quote Originally Posted by mikef View Post
    How about these?

    There is no internet bubble.
    There is no housing bubble.
    Subprime is contained.
    There is no European debt problem.
    Can't speak for the last two, but I don't know too many people who didn't see the first two coming from a mile away.

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    Default Re: Gloom and Doom quotes from the past

    that's actually a very good 'catch' Eagle. However, your author attempts to assert that just as 'solutions' to earlier problems were found, solutions to current problems can also be found. I'm not so sure, and neither were some responders to your author. For starters ...

    (snip)"The average American is likely to see his standard of living drastically reduced ..."

    The Miami News, Aug. 13, 1979
    (snip)


    (snip)"Regarding the first quote, the real median wage of the full time white male worker has been basically stagnant since 1973. Increases in family income occured because more women are working--and to a lesser extent because of a reduction in discrimination in the workplace. When family income stopped increasing, many people used their home equity or credit cards as an ATM to raise their consumption beyond their income. Things may not have gotten worse for Joe Six Pack in the last 40 years, but they haven't gotten better either. Few economists, let alone politicians, recognize this problem of stagnant incomes for almost 40 years. "(snip)


    Arguably, this goes right back to a point raised in past threads. By the late 1960's early 1970's the WW2 based destruction of a huge number of foreign factories, and the WW2 based 'loss' of a generation of skilled foreign workers, both of which had provided America's industries and workers with a near-monopolistic advantage as 'the only high volume exporter left standing' through the 1950's and early 1960's, was drawing to an end. As newly built foreign factories and a new generation of skilled foreign workers started to present serious competition, American workers' wages stopped rising. However, American price levels continued to rise as the rest of the world again started to compete for global resources ( and Nixon was forced to break the last link between US dollar valuation and precious metals, thus opening the door for future US dollar inflation ). This was a clear formula for a declining American standard of living.

    As the responder points out, America chose to avoid accepting a declining standard of living - by changing the 'economic model'. The first phase of this was to send mom into the workplace, which in fact restored / preserved the 'inflated' American standard of living by adding the productivity of mom's labors to the 'income' side of the family financial equation.

    However, as US wages remained stagnant while US prices continued to rise, eventually even the dual contribution of both dad's and mom's productivity could no longer support the 'inflated' American standard of living. Still refusing to accept a declining standard of living, and with mom and pop having no additional labor to throw at the 'income' side of the family financial equation, mom and pop elected to take on future debt in order to augment current spending levels. However, unlike the first phase, additional debt did not bring any additional productivity into the equation. Instead it created an additional 'drain' on future productivity for debt service / repayment.

    Thus as US wages still remained stagnant while US prices still continued to rise, eventually a large number of moms and dads could no longer service their debt. Nor could they continue to access the ever growing amounts of newly borrowed money necessary to preserve their 'inflated' American standard of living. But as the burden of maintaining that 'inflated' American standard of living started to meet the cold reality of impending bankruptcy, yet another delaying tactic was employed by moms and pops. This third phase involved the liquidation of previously accumulated assets to augment current spending levels in order to maintain that 'inflated' American standard of living a bit longer ... i.e. selling off stock and bond investments, early withdrawls from retirement funds etc.

    Back to your author's assertions. In regard to the example discussed above, only the first phase of adding mom's labors to the family financial equation actually represented a 'solution' to a declining American standard of living. The next two phases, taking on huge amounts of additional debt and the liquidation of previously accumulated assets in order to temporarily preserve the illusion of an 'inflated' American standard of living, weren't a 'solution' at all. They merely 'hollowed out' family finances and merely postponed an eventual day of reckoning ... at which point the 'inflated' American standard of living could not be sustained further by any means still available to mom and pop.

    The point I'm trying to make is that while sending mom into the workplace was a legitimate solution to a declining US standard of living, borrowing money and liquidating assets were temporary measures that did nothing to fundamentally alter the family's productivity. The original 1979 quote from the Miami Post failed to anticipate that mom and pop could be so 'financially irresponsible' as to take on huge amounts of new debt, and to then liquidate family / retirement assets, in order to continue spending levels that preserved the 'inflated' US standard of living at the expense of everything else ( their own retirement, their children's futures etc. ). Indeed these 'irresponsible' measures did allow mom and pop to 'kick the can down the road' for a while - but at the expense of creating even more serious future financial problems. Now that a day of reckoning has finally arrived, there aren't any 'tricks' left to further postpone a long overdue return to a lower American standard of living that is truly sustainable based on mom and pop's actual productivity. There is no free lunch - thus there is no real solution ! So your author's assertion is wrong.

    Yet more disturbing, recently US gov't economic policy has been following the exact same borrowing 'trick' as discussed in phase two. As with mom and pop, refusal of the gov't to reduce spending while funding current spending with ever increasing levels of debt will eventually lead the gov't to the same place mom and pop wound up ... see the thread about the S&P downgrading the US gov'ts credit rating ! Greece, as well as some US states, have already reached phase three ! And just like mom and pop, without any additional real 'productivity' to add to the equation, current levels of US gov't borrowing and spending will be forced to an end by external forces !!! And when that actually happens, a whole lot of Americans who currently depend on high levels of US gov't spending to maintain their personal standards of living will be facing their own day of reckoning.

    ~
    Last edited by Melonie; 08-06-2011 at 05:22 AM.

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    Default Re: Gloom and Doom quotes from the past

    Quote Originally Posted by jimboe7373 View Post
    Can't speak for the last two, but I don't know too many people who didn't see the first two coming from a mile away.

    Really? Well you either hang out with some very prescient people.... or hindsight is 20/20.

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    Default Re: Gloom and Doom quotes from the past

    Quote Originally Posted by mikef View Post
    Really? Well you either hang out with some very prescient people.... or hindsight is 20/20.
    It's really not too tricky, just a slight change to an old concept "When your gardner starts giving you tips on real estate or internet stocks, get out of the market".

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