The Real Reason the Economy is So Bad

self | 1/24/03 | self

[ChinaGotTheGoodsOnClinton]

I teach a class in Network Security at a local college.

This class is full of local IT pros, and many have been hit by the IT slow down.

I am often asked what is causing it and when will it turn around.

I made up a list Powerpoint list for my next class.

It includes the usual stuff like:

1) The Trade Deficit and weakening U$ Making $$$ Less Desirable

2)End of 1999 Feds changed Foreign Investment Rules

3)CBO used false figures in the mid to late 90’s: Pay the Fiddler effect

4)Many retired 40 somethings back in the job market

5)Over riding Security Concerns: Rep Conyers Senator Clinton

It hit me today on my exercise bike what was missing

THE ECONOMY IS IN THE DUMPSTER BECAUSE MOST INVESTORS WATCH CNN!!

I mean, first of all we give investors too much credit for being smart.

If they were smart no one would have been burned by the tech crash.

But I ask you which is a more stable world.

One where Saddam has nukes or one where he is not in power?

So why do stocks go down when it looks like we are going in?

Three letters: CNN

It seems most investors haven't yet made the connection between business and politics.

[ChinaGotTheGoodsOnClinton]

I thought I'd use the collective genius of my fellow FREEPERS to shake this idea down.

[Kosh5]

Hmm, the answer to your question is more complex than it appears.

First of all, the stock market is a highly irrational arena. Much of the stock moves are made by a fairly small number of institutional investors. Much of the rest is driven by day-traders - perhaps the most irrational bunch of all. The fundamental problem faced by any investor is that they must make investment decisions without all the facts. No company is going to fully disclose what it is doing. Accounting is designed to portray a level playing field wherein different companies can be compared. But no company fully discloses everything going on. Not only is it impractical - it gives your competition an edge.

The stock market has evolved from a long-term investment arena into a short-term investment arena. Is it any surprise that we get irrational behavior by both investors and corporations? Not to me...

I will check back on this thread later - off to watch Bush's SOTU address...

[observer5]

Somebody should make a study, how the american media starts reporting how bad the economy is the day the republicans get into office. I have observed this since the Bush senior years...

The american media talk the country into a recession every single time.

[Gunslingr3]

Limbo, Limbo, how low can it go?

[Thane_Banquo]

Generally, a weakening US Dollar should narrow the trade deficit: Foreign products become more expensive to US consumers (because dollar buys less foreign goods). So we import less. But our goods become cheaper to foreign purchasers, meaning we export more.

The question is whether the increase in GDP from a narrowing trade deficit is offset by the decrease brought on by lower FDI (foreign direct investment).

[The Duke]

In 1992 the American people proudly declared "character doesn't count" as they placed "cocaine Willy" on the throne. Eight years later it became apparent that people in high places were not trustworthy, which in retrospect was a no-brainer because "character doesn't count". The books had been cooked.

So, the smart money was yanked, and thus started a "giant sucking sound" that would render even the venerable H. Ross Perot stupified.

And now, here we are, the party is over, all who were partying in '92 are now middle-aged and thinking retirement - a couple of us have even sobered up - and we're asking... "but where did all the money go?"

I think we're poised on the edge of a cliff. At least we're guaranteed that the nightly news will be interesting.

[grb]

I think that the unemployed IT pros, are unemployed not because of a struggling economy, but the companies are hiring H1-B visa holders and shipping work offshore. They work for less than half the price. There was an article on this site, stating the goverment is only allowing a certain number of H1-b's into the country, the trouble is the INS doesn't keep track of that number.

[Gunslingr3]

The american media talk the country into a recession every single time.

That idea is as proposterous now as when the Dems tried the same battle cry against Bush when he pointed out the coming recession during his campaign for office. The media doesn't inflate the money supply or load consumers with debt. A recession is simply a restructing after a period of excess credit and subsequent malinvestment. Some people still don't appreciate the scope of the bubble from the '90s.

[Kosh5]

A agree that the 90's was a rather significant bubble, but the media does play a role in the economy.

The media influences the public. The public is the consumer. Consumer behavior drives business activity and in turn business investment.

Does the media drive the bus? Clearly, no. But to insist that the media has no role whatsoever is not intellectually sound. There is much more to the economy than money supply or debt load. Just watch the consumer confidence figures and correlate them against the tone of media reporting, and you cannot escape the conclusion of influence.

[NetValue]

I buy into the theory that the market has ONLY two motives: fear and greed. When investors get scared (war does this) they sell shares and buy gold or hold cash. When investors sense a profit to be made they buy in trying to get there ahead of the other investors who will buy and push up the values of their shares.

The American greed thing diminished when the Fed Gov went after Microsoft, when the Fed Reserve pulled the plug on the market, when 9-11 occurred (we took a good look at our values), and now war looms. If it must be war, do it now do it fast, get it over with and the markets will recover rapidly!!

[Zebra]

Of course those are the motives that drive the markets. These are base instincts that allow even dopes to follow the herd. And the war will be a good reminder to the foreigners who have pulled back from direct US investment: the safest, least rigged market in the world is here. The twin pull of fear (in investments in Brazil, Iran, etc.) and greed (a mammoth US economy and robust rebound) will draw foreign investment back.

[henderson field]

Of course immigrants have reduced salaries and increased unempoyment in the Information Technology sector. But too bright a future was painted for the whole industry. As a result legislators thought it would be OK to let the manufacturing base go to Mexico and then to China. Now we see they were wrong. Of course they were wrong. Who among them has any business experience? Who among them was a capitalist? No, most are socialists living on the public dole. Why would they know anything about business?

[WFTR]

First, I think you need to distinguish between the economy and the stock market. Here's how I see things.

In the 90's, a huge number of baby boomers who hadn't saved as much as they hoped for retirement suddenly became serious about investing. Many had good salaries and most of the toys that they wanted, so they started buying stocks. Others didn't have good salaries, but they worked several jobs in the hopes of investing well enough to retire. When that many people with that much money start to buy something (demand), someone will sell it (supply). As demand increases, so does the price. As money kept chasing money, the stock market rose. When everyone suddenly realized that there was no "there" there, stocks fell to previous values and sometimes below previous values.

Another effect of the sudden influx of money into all of these companies was that the companies had money to hire people. When companies have money to hire people, unemployment declines. As unemployment declines, companies still looking to hire people offer better wages. This upward spiral led to people making huge amounts of money in industries that were favored by the investors.

In terms of the economy, I'm not sure that we really made that much more stuff during the 90's. If we aren't making stuff and making a profit by selling it, we really don't have a good economy. I think that there are numerous reasons why we aren't making stuff the way that we used to.

A big reason is that taxes and regulations make production in the United States very expensive. Companies can make more profit on many things by making them somewhere else. They can take advantage of less regulation and less time wasted on these regulations. In many cases, the capital needed to build the infrastructure that allowed companies to relocate to other countries came from federal aid dollars taxed from the American people. We've given companies every reason to produce elsewhere and no reasons to produce here. Until we reverse that trend and compensate for some of its effects, we won't really have a good economy.

WFTR
Bill

[RnMomof7]

Try 700,000 jobs lost in the last year and many gone forever to China (or another 3rd world country) ..they will never be back

[ChinaGotTheGoodsOnClinton]

Thanks all.

I've already covered the China media Coverup, the impact of a Bowl of Rice a Day wages and the H1B and S visa problems.

But there is something up when for instance Harley profits are up over 25% and the stock goes DOWN.

I watch CNN enough to know that when they choose to report are reporting good news, the market is up.

When they choose to report bad news, the market goes down.

And like I said, the fact that people had money in the market before the tech bubble crash proves, at least in the financial area, they are pretty dim.

I think the idea is pretty solid.

Sounds like a good project for a PhD research paper....

[RnMomof7]

When they choose

Key words

[Doctor Stochastic]

Increased government spending.

Increased government regulation, especially unfunded mandates at the state level.

Increased deficit drawing money from the consumer to the government.

Consumers's lack of confidence in the Current Administration and Currently Sitting Congress to do anything constructive, and the Opposition's lack of anything coherent to contribute.

Oil price increases dating back to 1999. Lack of confidence that the Venezuelan can be settled soon.

Uncertainty over costs of war in Iraq and wherever.

Lack of market for American products; the Rest-of-the-World isn't in much better economic shape.

[sausageseller]

And now, here we are, the party is over, all who were partying in '92 are now middle-aged and thinking retirement - a couple of us have even sobered up - and we're asking... "but where did all the money go?"

SS. They dissed the savings accounts because of low rate of return plowed it into the market and IPOs. Thus creating a "bubble" economy. The bubble has deflated and now all we hear is "woe is me"!

[djf]

We invent everything, but no longer produce anything. (Except American FARMERS!)

[Uncle George]

Yes, the media had Christmas labeled "FAILURE" two months in advance. Then they LIED after the fact when it wasnt so bad. It is a VAST LEFT WING CONSPIRACY to drive the Country DOWN DOWN DOWN for their rotten stinking political agenda, a POX on the whole subhuman party.