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"Stop Digging" article for Financial Sense


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Could a partial answer to the US's current problems be a more enlightened immegration policy. Having seen your bits taken from FSN on the population thread and considering the number of houses in the US lying empty, current unfavourable demographics and looming social security bills to be paid.

 

Immigrants whowant to be productive could be an answer.

 

But not to the car method of transportation and cost of oil imports !!

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Could a partial answer to the US's current problems be a more enlightened immegration policy. Having seen your bits taken from FSN on the population thread and considering the number of houses in the US lying empty, current unfavourable demographics and looming social security bills to be paid.

 

Immigrants whowant to be productive could be an answer.

 

But not to the car method of transportation and cost of oil imports !!

 

I don't think it's a shortage of workers that the US is suffering from, it's a shortage of viable businesses.

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I don't think it's a shortage of workers that the US is suffering from, it's a shortage of viable businesses.

 

SURE.

Too much money has been poured into malinvestments:

Wars, transfer payments, McMansions, SUV's... these are all a drag on the economy,

and divert scarce capital away from productive enterprise

 

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I don't think it's a shortage of workers that the US is suffering from, it's a shortage of viable businesses.

 

Agreed. My suggestion would be a long term fix. But if you attracted the right kind of immigrants who want to start a business rather than those who want to collect social security. If you keep the bright IT students rather than rejecting them once they have completed their IT course. Longer term this would feed back into the economy.

 

However at present US Politics seems to be going in the other direction it seems?

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  • 1 month later...

WRONG PRICE SIGNAL?

 

No wonder Americans went crazy building McMansions in the outer-rings

 

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People were slow to catch on that the game was changing.

Because they kept building "large", they are now suffering big losses.

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SURE.

Too much money has been poured into malinvestments:

Wars, transfer payments, McMansions, SUV's... these are all a drag on the economy,

and divert scarce capital away from productive enterprise

The US has been and still is very innovative, the trouble is the lure and greed of malinvestment always seems to get the better of them. That, and a political system that is happy to keep quite when it feels the going is good, but then feels the need to engage in mass moral hazard when it turns bad.

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  • 3 weeks later...
Immigrants who want to be productive could be an answer.

How do you restrict those "non-productive" immigrants?

 

The US has been and still is very innovative, the trouble is the lure and greed of malinvestment always seems to get the better of them. That, and a political system that is happy to keep quite when it feels the going is good, but then feels the need to engage in mass moral hazard when it turns bad.

The right price signals (like a higher oil price, thanks to a gasoline tax, can help to limit malinvestment.

But it takes courage, foresight, and a political battle to introduce it

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The right price signals (like a higher oil price, thanks to a gasoline tax, can help to limit malinvestment.

But it takes courage, foresight, and a political battle to introduce it

seems a bit keynesian (rather than Austrian) to me

 

from todays daily reckoning

 

So, it turns to another great economist – Keynes. Instead of colluding to fix the price of money, Keynes said governments should make up for the lack of private spending with public spending. That is, instead of allowing consumers to use their resources as they wished, politicians should divert resources to their own pet projects. In its idealized form, if the private sector found no use for a working man, for example, the feds should put him to work on some socially-useful project – such as building a bridge or picking up trash.

Of course, if there are idle hands in an economy it’s because the feds have already distorted it. Typically, various government rules and safety nets make it difficult to adjust the price of labor downwards. So, when prices fall, labor rates become disproportionately high. Who’s going to pay a man $25 to make a gadget that sells for $15? No one. That is what causes unemployment. But rather than allow labor prices to fall, Keynes came up with a trick. Government should spend money, thus causing inflation. The rising prices will make labor seem relatively affordable again.

But like all the tricks and quick-fixes in economics, Keynesianism causes more problems than it solves. Governments rarely have any genuine savings. So, in order to spend, they either have to take money away from other spenders ...or print it up. If they take it from other uses, the net gain, in theory, is zero. In practice, it is much less than zero, since most government spending is wasted. If it prints up the money, on the other hand, the inflationary effect is much greater...and ultimately ruinous. As we shall see...as the reckoning continues.

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How do you restrict those "non-productive" immigrants?

 

Difficult from a political angle possibly, as such moves tend to generate claims of politically incorrect (to say the least) from the opposition. I understand this point. Also the NAFTA /Mexican angle also I guess has an impact.

 

However US could start by looking at its policies towards foreign students who have ended their studies. + by listening to Bill Gates. Of course BG may have a certain business angle which will slant his opinion but still.

 

http://www.businessweek.com/magazine/conte...68051089279.htm

 

+ Does not the US already operate a rather complicated immigration / Green Card system which limits immigration to those with a certain sum of $$$ in readies (I think?). A certain targeted loosening might be beneficial but again could be politically difficult in the midst of a recession.

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US WILL AVOID OLD MISTAKES - and make new ones instead

 

Wealth is sliding fast

chart_net_worth_line.03.gif

(This is nothing more than "fictitious wealth" getting written down)

 

The Great Recession

Economists generally agree this is the worst economic downturn since the Great Depression,

but they say despite pain, another depression isn't likely.

EXCERPT:

 

"One of the main reasons why economists think another depression could be avoided is that it will take more than just a sharp decline in consumer spending and household wealth to spark a depression.

 

Even though household net worth has fallen a record $11 trillion, or 18%, during the course of this recession, the broader economy can weather such a shock.

 

Historically, stock market crashes and bursting housing bubbles haven't necessarily led to depressions. It takes a variety of economic factors and policy decisions to turn a recession into something even more serious.

 

"I don't know if you can make a causal link between a loss of wealth and a depression," said Lakshman Achuthan, managing director of Economic Cycle Research Institute.

 

Learning lessons of the 1930s

Significant policy changes since the 1930s will also cushion the blow.

 

Unemployment insurance, Social Security payments and larger government at the federal, state and local levels keep money flowing into the economy even as consumers and businesses pull back on their own spending.

 

"There's a lot more safeguards in place," said Keith Hembre, chief economist at First American Funds.

 

Hembre said the $787 billion stimulus bill passed by Congress in February will also spur more economic activity down the road.

 

In addition, the Federal Reserve, led by Great Depression expert Ben Bernanke, has pumped trillions of dollars into the economy with new lending programs the central bank has never tried before. That has swelled the supply of money. By way of contrast, the money supply tightened during the Great Depression.

 

There were many other policy mistakes made in the 1930s that economists say are not being repeated today, including stiff tariffs that killed international trade and government imposed limits on prices and production levels.

 

Even if Congress imposed "Buy American" provisions in the public works paid for by the stimulus bill, there is no call to move back to the strict protectionism of the 1930s or production and price controls."

 

/more: http://money.cnn.com/2009/03/25/news/econo...isons/index.htm

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  • 2 weeks later...

FIGURES FOR THE DOWNTURN - a Second leg Down?

 

Debt Growth has been unhealthy:

+ Business-related debt is hovering at 50-70% of GDP (most of last 4 decades)

+ Household debt grew from below 50% (before mod-1980's) to 70% (2000) and 100% (2007)

: HH debt now stands at $13.8 Trillion, 75% of which is home mortgages

: From 2001-2007, HH Debt increased by $6.26 Trillion, a near double

 

Household debt at 100% of GDP is not sutainable, and it must be reduced by repayments, or

writedowns. To fall to 75% of GDP, then $3.4 Trillion will need to be reduced, and that might

be 1/3 byr writedowns, and 2/3 by repayments

 

Such massive repayments will mean that Us households will have to spend $2 trillion less,

which is 11-14% of US GDP, Spread that over 5 years, and you will see 2- 3% knocked

of GDP. Adn that's BEFORE the multiplier effect!

 

MEANTIME, government debt is growing...

 

 

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THEY HAVENT STOPPED DIGGING YET...

 

'Tax Bomb' dead ahead: Former GAO chief says your taxes will double

 

Yes, taxes will go up. Must. Why? Debt: federal, state, corporate, bank, pensions, personal. The hole just keeps getting deeper, bigger. Well over $100 trillion of debt is being piled on future generations, while our GDP is only $15 trillion annually.

 

Reagan was right, "government is the problem," both the GOP and the Dems.

 

Imagine doubling your taxes: That's what David Walker, the former U.S. comptroller general and GAO chief, recently said on CNN: "The federal government has spent more money than it takes in at an increasing rate. Total federal debt almost doubled during President George W. Bush's administration and, as much as we needed some stimulus spending to boost the economy, the nonpartisan Congressional Budget Office now estimates total debt levels could almost double again over the next eight years based on the budget recently outlined by President Obama," with our "tax bill doubling over time."

 

Debt is killing the American Dream. We've mortgaged our future, and now Obama's adding a new $1.84 trillion federal deficit. That's four times Bush's record deficit last year, with deficits over $500 billion annually for the next decade. The president's gambling, doubling down, betting the farm, going "all in," with a huge bet that could break the bank. Is this America's last hand in a high-stakes poker game?

 

/more

 

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