The Economy Is Fine. . . . Really?

by Jimmy Akin

in Economics

Like everybody else, I’ve been following reports that the economy is bad, that we may already be in a recession–or worse–and it has me concerned.

I *really* don’t want that to be the case, but I have to face the possibility that it is.

On the other hand, I’ve been hearing reports for the last five years about how bad the economy has been, when in fact we’ve been in a period of economic growth for the last five years.

So . . . what’s the deal?

Was it just the media wanting a scare story all this time leading them to sensationalize any possible negative number when in fact the economy was fine? Was it hatred of the Bush administration? And what does this say about current reports of a recession–or worse?

I dunno.

I *especially* hope that all the negative talk doesn’t lead to a self-fulfilling prophecy.

So I at least like to hear both sides of a story before forming an opinion, and thus I was intrigued to read THIS STORY IN THE WALL STREET JOURNAL.

Pardon the pun, but here are the "money" quotes (excerpts):

It is hard to imagine any time in history when such rampant pessimism about the economy has existed with so little evidence of serious trouble.

It is most likely that this recent weakness is a payback for previous strength.

A year ago, most economic data looked much worse than they do today. . . . But the economy came back and roared in the middle of the year.

Because all debt rests on a foundation of real economic activity, and the real economy is still resilient, the current red alert about a crashing house of cards looks like another false alarm.

So is the current talk just talk . . . or something more?

I dunno.

I report. You decide.

GET THE STORY.

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{ 124 comments }

Jeff January 28, 2008 at 11:01 pm

It’s hard to tell. I think, to some extent, some people in positions where they are able to influence the economy in some way and hate Bush have done everything they can do to drive the economy down. “Analysts” do it with stocks all the time. They want to drive a price down, so they put out rumors of problems and a company’s stock falls. I can, and does, happen.
I think some people think they can do this with the economy as a whole, and they may be right. If enough people hear enough bad news given by those in positions of presumed trust and/or knowledge, they get scared and change their plans. Depending on what they do, they can cause problems.
I think it is possible for the “self-fulfilling prophecy” theory to be true.
We also need to be careful about what is done to help the economy. Some politicians are currently pushing plans to bail out those who bought houses with adjustable rate mortgages and now face foreclosure due to overspending. The problem is that bailing those people out would undermine the system and would be flat out unfair to those of us who purchased houses recently and bought within our means.
Of course, I could be wrong, and just wasted five minutes typing this…

Tom January 29, 2008 at 12:42 am

The first question is: When comparing the economic data from different years, are we comparing apples to apples or apples to oranges? A number of people are claiming that the government is manipulating the stats, so there is no consistent comparison.
http://www.shadowstats.com/

LarryD January 29, 2008 at 4:21 am

Being in packaging sales, I make my judgments based on how my customer base is doing – and my base is diverse, ranging from automotive to retail, from municipal to medical, from small business to large. While it is true that certain segments are struggling (automotive for one, but mainly in the OEM market, because service and parts markets tend to stay strong in any economy), most are remaining strong. So, based on my monthly sales numbers, which are above last year’s, I don’t see much evidence of a full-blown recession. When companies aren’t busy, they don’t need packaging. When they are busy, they need it alot to get their products to the market. Even in a struggling market where I live (metro Detroit), I’m personally finding this recession talk overblown.
I admit, this is anecdotal, and some may snicker that maybe my sales were ahistorically low last year. I’ll grant you that – however, over the past six years, my growth has been steady save for one year. And who knows – next month, or the next six months, may be very very difficult. And there are people and businesses who are struggling, that is for sure. I can only base my observations on my experience, and right now, I’m not discouraged by what I see.
I think that people, when hearing news that the economy is struggling, look at their personal situation and say “I’m not doing poorly at all – so my neighbor must really be suffering!”
The important thing is not to panic – the economy goes through up and down cycles all the time, and some regions of the country experience expansion while other regions contract, but over time, the trend has been upwards. This “stimulus” package is more political than practical (esp with the Senate wanting to extend unemployment benefits and giving a tax rebate to those on Social Security – a pure vote grab, IMHO), and one wonders if bailing out defaulting homeowners has more to do with bailing out the lenders instead of helping the homeowners. A statistic I heard is that only 4-5% of homeowners are behind on their payments. I certainly don’t want to see anyone suffer, but does that percentage warrant a bailout?
And the national unemployment rate is 5%. That’s about as close as you can get to full employment – and yes, I know that people come under the radar who have given up looking for work, but still – this is not the 70′s when unemployment was higher, interest rates were in double digits, and there truly was a recession.

Ed Peters January 29, 2008 at 5:29 am

Right, right, and right. IMHO.

SDG January 29, 2008 at 6:15 am

Just this morning NPR’s Marketplace was reporting that durable goods sales last month were higher than expected, and prefaced their comments by saying “Is the enonomy in better shape than we think?”
FWIW.

John J. Simmins January 29, 2008 at 6:17 am

This all has to do with the upcoming presidential election. How are you going to run against a poor economy unless you have a poor economy?

Jeff January 29, 2008 at 6:49 am

A statistic I heard is that only 4-5% of homeowners are behind on their payments. I certainly don’t want to see anyone suffer, but does that percentage warrant a bailout?
Good point and I think the answer to your question, no matter the percentage, is no. It is not the business of government to pull peoples rear ends out of the financial fire. If we start assisting people who can’t make their mortgage payments, then do we have to assist people whose homes are now valued lower than they were at purchase? Where is their government assistance?
What about people who have large credit card debt? Should they get a bailout? What about people who bought a new car too soon and now are “upside down” on their note?
If someone truly needs help because of circumstances beyond their control (disease, disability, or other problem prevents them from working), then I have no problem. However, to just bail people out due to their own greed or lack of self-control (I can talk here, because I spend too much myself) isn’t fair to those who have made smart decisions.

ajesquire January 29, 2008 at 7:49 am

Foreclosures soared in 2007:
http://www.msnbc.msn.com/id/22893703/
Home prices are down nearly 8.5%:
http://www.msnbc.msn.com/id/22895550/
Even Wal-Mart is having to cut prices:
http://www.msnbc.msn.com/id/22894081/
New home sales have plunged:
http://money.cnn.com/2008/01/28/news/economy/newhomes/index.htm?postversion=2008012816
But I’m sure this is all a grand conspiracy against George W. Bush.
The fact is that some geographic areas and some market segments will not be hit hard, some areas will definitely feel pain, and some areas will be extremely hard hit.

cjmr January 29, 2008 at 7:53 am

I think a lot of people are looking at their personal economies and extending it to the general economy.
We are now spending close to twice as much on gas as we did two years ago (and that’s with me cutting way back on my driving–the kids don’t do classes that are more than five miles away any more). Our electric bill is 150% of what it was two years ago, health insurance is up about 130%, and our water bill is about to double–all due to rate increases. The state just did a new assessment on real estate in our neighborhood, with the result that our tax burden will increase by $500 per year for the next three years. I can only guess on what food prices have actually increased percent-wise, but I have a hard time buying a week’s worth of groceries for under $180 any more, and five years ago I was getting them for under $100. The cost-of-living raises they’ve been giving at husband’s work have not been as big as the actual increases in the cost of living, so we’ve had to cut back more each year. Of course we feel pessimistic about the economy.

~Steise~ January 29, 2008 at 8:00 am

Silly me! I just never realized that the government was here to take care of people. I thought it was “government for the people, by the people.” I had NO idea that “to take care of the people” was in there too. I guess I’ve learned something new.
As for the economy, from what I’ve witnessed through the years, it all depends upon which side of the employment line a person stood. If someone is employed and doing well, the economy is great. For those who aren’t employed and doing well, then it just stinks.
Quite frankly, I think many people (myself included here) need grow up and realize that life (including the economy) isn’t always going to be fair. We can’t always expect Uncle Sam to pick us up and dust us off when we have problems. It just causes MORE problems.

Steve January 29, 2008 at 8:10 am

Folks, Let’s just say Snowballs start as snowflakes and need a hill to roll down to gain momentum. The subprime credit meltdown is the snowflake that fell from the sky. The Alt-A and Prime borrowers have been pretty much ignored and rarely even mentioned thus far. That my friends will be the snowball that gains momentum down a pretty steep hill. Millions of homeowners are currently stuck in neg-ams and most (about 95%) have migrated to the minimum payments creating an upside down scenario with their equity. Most of those loans will start to adjust this year. What’s troubling about the article is how many economists seem to think there is a handle on it all and that this won’t affect the larger picture. Here’s food for thought… What about the effect on the home improvement industry, everyone from contractors, builders, and manufacturers? What about the trucking industries that were enjoying the transport of goods and the companies that make heavy equipment such as graders and backhoes? What about stores like Sears that make and sell tools and appliances and so forth? What about the auto industry that was enjoying the fruition of people tapping their home equity to by their new SUVs and hybrids? You know I can go on and on here but the trickle down effect to the little guy will be SIGNIFICANT by the time the snowball reaches the bottom of the hill. If you haven’t noticed, MOST of the economic good news is coming from our exports and our hands in over seas investments like Asia, and new world countries. A huge blame is to be put on the US companies that have chosen to ship our manufacturing jobs to foreign countries as well. Is there reason for concern?.. Absolutely! I wish sideline commentators would get their facts straight. We’ve all enjoyed the 10 year party, Now it’s time to clean up the mess and batten down the hatch because the storm is coming. But just like a party, everyone leaves at the end of the night and the guy that threw it is stuck cleaning up the mess. I liken alot of the comments from these “know it alls” that feel letting this all fix itself to guy that came to the party, got drunk off the free beer, then gets pulled over on the way home only to tell cop that it wasn’t his fault and to go arrest the guy that brought the keg. Sorry Charlie, We all need to pull together and help out here. If you ask me, keep the government out of it as much as possible , they can’t even tie their shoes right and seem to screw up most everything they get involved in. The Banks should be held accountable and shoulder the bulk of the bailout for hard working Americans. It was indeed their loosey-goosey lending guidelines and their appetite to tap everyone’s equity with “no make sense loans” but bottom line is you and I enjoyed the beer, the band and the dancing girls. It’s time for everyone to clean up the aftermath.

Curious January 29, 2008 at 8:18 am

Welcome Back to your blog Jimmy!
To be a little more objective and scientific, why don’t you look at Catholic Answers’ donations over the past few years? In times of economic stress, doesn’t charitable giving decline? So you should be sitting on top of some useful data.

SDG January 29, 2008 at 8:44 am

Home prices are down nearly 8.5%:

But is that “real” economic weakness, or is it the popping of an overly inflated real estate bubble? Obviously a popped bubble is unpleasant too, but if real estate was overpriced before — and from what little I know it appears clear that it was — then an adjustment was inevitable.

Brian Day January 29, 2008 at 9:00 am

The WSJ article ties in nicely with an op-ed from Ben Stein in the NY Times.
NYT
One of the points in the op-ed is that how did $100 billion in housing losses translate into $2.5 trillion (25 times as much)in stock market losses? Part of the answer is when the stock market goes up – traders make money. When the stock market goes down – traders make money. So it is in the trader’s interest to churn stocks – by any means possible – even if it takes some “creative” reasoning.

Jeff January 29, 2008 at 9:40 am

We are now spending close to twice as much on gas as we did two years ago (and that’s with me cutting way back on my driving–the kids don’t do classes that are more than five miles away any more). Our electric bill is 150% of what it was two years ago, health insurance is up about 130%, and our water bill is about to double–all due to rate increases. The state just did a new assessment on real estate in our neighborhood, with the result that our tax burden will increase by $500 per year for the next three years. I can only guess on what food prices have actually increased percent-wise, but I have a hard time buying a week’s worth of groceries for under $180 any more, and five years ago I was getting them for under $100. The cost-of-living raises they’ve been giving at husband’s work have not been as big as the actual increases in the cost of living, so we’ve had to cut back more each year. Of course we feel pessimistic about the economy.
Where do you live? I haven’t seen those kinds of increase in the north Texas area. Right now, gas is about $.80 higher than two years ago; my electric bills are running within about 10% of two years ago; our health insurance hasn’t changed at all; our water bill is within 10% of two years ago; our property tax went down; and we spend about $300 per month on groceries (four people).

Zeno January 29, 2008 at 9:43 am

Like everybody else, I’ve been following reports that the economy is bad, that we may already be in a recession–or worse–and it has me concerned.
I *really* don’t want that to be the case, but I have to face the possibility that it is.

Why would anybody fear an impending recession when, in fact, a recession isn’t determined until all the numbers have finally come in concluding that we had actually been in one!
By that time, it may have already passed!

Liam January 29, 2008 at 9:51 am

The problem is that saying “the economy is X” has only a partial correlation at best with how individuals experience that economy and what they think their own prospects are.
I can attest that charitable giving is down markedly over the last year for the charity (St Vincent de Paul) of which I am treasure, and the needs have dramatically increased.
My own health insurance went up 20% last month. My heating costs (natural gas) are running even with last year but are 50% higher over 2 years ago. Property taxes are up 15% over a year ago. Water/sewer is up about 10%.
It’s not the 70s, but it’s showing signs of veering into that direction, but this time with less social netting for folks. I recall this being predicted by the senior economist at the major investment firm I worked with a decade ago, and he predicted that if the wealthier segment did not pay attention to growing economic disparities (which he expected would be the case), they would fall prey to their own naivete in that regard (that is, he was predicting New Deal II).

Kevin Jones January 29, 2008 at 9:55 am

The irony is almost too much to take. Yesterday everyone was worried about excessive consumer spending, a lack of saving, exploding debt levels, and federal budget deficits. Today, our government is doing just about everything in its power to help consumers borrow more at low rates, while it is running up the budget deficit to get people to spend more.

I’ve noticed the same thing.

Though there’s a “Problem? What problem?” tone to many WSJ articles, I’m glad I read this one.

David B. January 29, 2008 at 10:20 am

The economy ebbs and flows. That will never change. Personal fiscal responsibility over reliance on the Government is the only sound course of action. Yesterday, I read a letter to the editor in my local paper. The writer asked, “Does the goverment expects us to subsidize our own retirement?” To which I respond “Hell yeah!”

ajesquire January 29, 2008 at 10:36 am

“Home prices are down nearly 8.5%:
But is that “real” economic weakness, or is it the popping of an overly inflated real estate bubble? Obviously a popped bubble is unpleasant too, but if real estate was overpriced before — and from what little I know it appears clear that it was — then an adjustment was inevitable.”
In many areas I believe it is an adjustment and the popping of a bubble. The problem is that irresponsible lenders have been writing mortgages and lines of credit on “equity” that was largely fictional.
People are now finding, especially in certain pockets, that they owe more than their houses are worth. REI sales after foreclosures will drive surrounding prices further down, depressing the market in that entire region.
Certainly alot of these lenders and borrowers were acting irresponsibly. But the fallout from all of this will have ramifications beyond the people who were directly at fault.

Zeno January 29, 2008 at 11:23 am

But is that “real” economic weakness, or is it the popping of an overly inflated real estate bubble? Obviously a popped bubble is unpleasant too, but if real estate was overpriced before — and from what little I know it appears clear that it was — then an adjustment was inevitable.”
But how can any proper adjustment take place when there is this bail-out by the government?
In order for proper stabilization of prices to occur, they should be left alone or else the government will only exacerbate the situation by their artificial bail-out.

Scott W. January 29, 2008 at 11:44 am

To be a little more objective and scientific, why don’t you look at Catholic Answers’ donations over the past few years? In times of economic stress, doesn’t charitable giving decline? So you should be sitting on top of some useful data.
If we wait, perhaps some anonymous brickbat hurler will post their records.

Zeno January 29, 2008 at 11:48 am

“To be a little more objective and scientific, why don’t you look at Catholic Answers’ donations over the past few years? In times of economic stress, doesn’t charitable giving decline? So you should be sitting on top of some useful data.”
Could somebody explain the reason for this non-sequitar?

Gary Keith Chesterton January 29, 2008 at 12:13 pm

Could somebody explain the reason for this non-sequitar?
It’s easy. Jimmy has some “fans” out there who think he makes too much money, and they love to complain about it in indirect ways like this.

Tim J. January 29, 2008 at 12:37 pm

“Jimmy has some “fans” out there who think he makes too much money…”
Would they think he made “too much money” if he shared their opinions?
Envy is one of the Seven Deadlies, too…

Beeline January 29, 2008 at 2:22 pm

The media has always been the wrong place to rely on for the current direction
of the Stock Market.
More often than not , these people have been prescient.
Larry Kudlow, Bob Brinker
Larry is a Catholic by the way.

M.Z. Forrest January 29, 2008 at 2:33 pm

Presumption also isn’t a good thing. Unless the person in particular wrote the critical posts, I would assume he was sincere. Charitable donations are actually a very good gauge for evaluating the economy. Starbucks is another good way to evaluate the economy. As far as there being little evidence for trouble, there are many traditional measures that indeed have been indicating over the past few years that we are at a peak. The Income to housing cost ratio has been over its stable level. There are other measures like durable goods orders that seem to indicate we aren’t contracting yet. What is noise and what is truth is a whole different bag. I guess that is why investment bankers don’t make $6.25/hour.

Curious January 29, 2008 at 2:51 pm

Zeno and Tim J.,
No malice intended. I wasn’t making any back handed attack on Jimmy. I just thought it would be interesting to look at charitable giving as an indicator of economic stress. CA, as a charity, would be an interesting test case. My, we’re a little prickly these days.

Tim J. January 29, 2008 at 3:01 pm

Sorry, Curious… for what it’s worth, I was making a generic comment and not one directed at your remarks.
There are those who like to try and make an issue over the fact that Jimmy gets paid to do this. It has happened recently, in fact, with envious sniping over the Catholic Answers Cruise.

Zeno January 29, 2008 at 3:05 pm

I, on the other hand, was just requesting clarification.
My thanks to both you and M.Z. Forrest.
By the way, can anybody solve the following:
1*7=7
7*10=70
7+5=10
5+7=10
7*6=36
6*7=36
8*9=60
It’s tickling my brain!

Curious January 29, 2008 at 3:23 pm

Greetings All,
I was being a little flip in my suggestion; you’d need to look at alot of charitable giving to make a statistical case. Also, Jimmy probably has little access to the financial side of CA. I always figured Jimmy was not in this for the money. There are easier ways to get rich, unless you’re talking about treasure in Heaven.

Brian Day January 29, 2008 at 3:25 pm

Zeno,
The numbers are in Base 12.

Matthew Siekierski January 29, 2008 at 3:28 pm

Zeno:
Base 12.

El S. January 29, 2008 at 5:31 pm

Jimmy,
We aren’t in a recession. Thats a simple fact.
A recession, by definition, is three straight quarters of contraction.
The last fiscal quarter of 2007 was the first one in about five years that contracted. So, six months from now is the earliest this thing could turn into a recession. Of course, the media isn’t helping. If people think we’re in a recession and they stop spending… it’ll cause a recession.
Unemployment will go back down with the cut in interest rates last week, but that’s going to cause inflation. The Federal Reserve has to be very careful with what they’re doing. Very careful.

Zeno January 29, 2008 at 5:44 pm

Mr. Brian Day,
Mr. Matthew Siekierski,
Thanks.
Curious,
About “There are easier ways to get rich, unless you’re talking about treasure in Heaven” –
I believe there may be a Recession in Heaven.

Gary Keith Chesterton January 29, 2008 at 6:08 pm

Sorry, Curious. M.Z. is right.

Mary January 29, 2008 at 6:51 pm

Certainly alot of these lenders and borrowers were acting irresponsibly. But the fallout from all of this will have ramifications beyond the people who were directly at fault.
And anything done about it will also have fallout.

Coughlin January 29, 2008 at 7:36 pm

Jimmy,
Please remember that economics is prudential.
Please also remember there are many people hurting in this economy, some due to their own fault but some due to circumstances.
Distributionism and economic theory(ies) of GK Chesterson and Hilaire Belloc are probably better applications of Catholic social teachings.
The dog eat dog, survival of the fittest Adam Smith–Milton Friedman (which has many valid points) has many flaws and is not completely Catholic. Socialism and obviously the evil communism are not compatible either.
The economic miracle of Germany under Catholic Konrad Adanaeur is a good example.
Social Credit which I think is from Canada or at least popular there is also interesting.
There was heavy Catholic influence philosophically and practically in the US union movement and the Catholic presence helped stop the communist presence.
Many of the neo-Catholic conservatives are unaware of Catholic social teaching like in Pope Leo’s encyclical Rerum Novarum to the last Pope in Solicitudo Rei Socialis.
The St. Joseph Baltimore Catechism has defrauding a laborer of wages as sin that cries to heaven for justice.
Issues like Just Wage (minimum wage?–a prudential application that is debatable), dignity of the individual, health and pension benefits (certainly debatable how-market solution/privatization certainly could achieve this)
George Bush is far from perfect from a Catholic position.

Matt January 29, 2008 at 8:44 pm

Coughlin,
I think you’re conflating what Catholics must do with what the government must do. The Just Wage was a social contract between workers and employers, the government was not a party to it.
Dick Cheney, like him or not gives 70% of his income to charity. Would it be better if his tax rate went to 70% and the government doled out the benefits? No. Not only would there be less money because of lowered productivity, but most of it would be wasted on beauracracy.
God Bless,
Matt

labrialumn January 29, 2008 at 8:51 pm

It depends how you measure it.
I have noticed 25-30% inflation per year the past few years. Food and gas prices bear this out. That is what hits the common person in this country.
Now the stock market has on the whole, risen a great deal. Indicators related to -that- are what the economists use.
But when the dollar is worth 1/3 – 1/4th of what it was a few years ago compared to gold, or 1/4 of what it was four years ago compared to the Euro, something is obviously very much not good with the economy.
The poor and middle class are suffering. That is not typical in a healthy economy.
A healthy economy does not depend upon enemies and potential enemies to buy out its banks to prevent a bank crash, with the result that those hostile powers (the Caliphate and the Red Guards Terrorist Organization) can crash our economy at a time of their choosing – say when the RGTO goes to enslave Formosa and the Pescatores, or we seriously offend the Muslim Brotherhood.
The unemployment rate is determined by those people on unuemployment – that is those who have only been unemployed six months or less. It does not tell you how many people are unemployed. We are also talking about roughly 15 million people. Five times the population of this State.
What does Catholic social teaching say about an acceptable rate of people without work or any means of staying alive?
Excessive consumer spending is related to this: If you know the dollar is being radically devalued, and that your savings will be taxed, you spend. At least that way, you get some good out of it. That is how people think in this country – and with a reason.
Life is unfair because of sin, and the results of the Fall. God is fair and He expects us to imitate Him.
If three quarters of contraction is definitional for a recession, what is 8 or more years of extreme dollar devaluation?
Coughlin,
Indeed, and just wage is NOT “what the market will bear” but what your work is worth in terms of gain to your employer.
George Bush got derailed by the War on Method. Prior to that his philosophy was closer rather than further.
Could some people be suffering because of their own fault? Of course. Is that a death penalty offense? Or should you give that cruise money to the poor, the widow, and the orphan?

Alois January 29, 2008 at 9:01 pm

Where do you live? I haven’t seen those kinds of increase in the north Texas area. Right now, gas is about $.80 higher than two years ago; my electric bills are running within about 10% of two years ago; our health insurance hasn’t changed at all; our water bill is within 10% of two years ago; our property tax went down; and we spend about $300 per month on groceries (four people).
My only response to this is God bless Texas.

deanswife January 29, 2008 at 9:37 pm

Shadow banking, derivatives, fat tails, and black swans. Welcome to the wonderful world of modern finance. I’m a housewife and I’ve been reading about this stuff for the last six months, trying to figure out how to protect ourselves from these things.
It’s not easy.
How do you buy a house when you don’t know if financial speculation will drive its value up or down? How do you get excited about a raise when you hear the Fed’s cut rates again and our currency is getting sold on the world market and therefore your bank account is now worth less? How do you keep money in a bank at all when you’re not sure if that bank is even solvent, or if it’s hiding billions in losses in off-balance sheet SIV’s and CDO’s? How do you plan for retirement when the Wall Street roller coaster threatens to wipe out everything you invested?
“There will and must be many more such booms, for without them the United States can no longer function. The bubble cycle has replaced the business cycle.”
http://www.marketwatch.com/news/story/america-land-bubbles-next-pop/story.aspx?guid=%7B60CE4669%2D6814%2D4A48%2DA555%2DBE998EC6FC58%7D&dist=TNMostRead
My daily dose of sanity, and how to invest “defensively”:
http://globaleconomicanalysis.blogspot.com/
http://www.dailyreckoning.com

Anonymous January 30, 2008 at 3:15 am

I have noticed 25-30% inflation per year the past few years. Food and gas prices bear this out. That is what hits the common person in this country.
Are you out of your mind? If we had 25% inflation, this country would be destroyed. It’s only ever been higher than 20% under Carter. Post-Reagan, it hasn’t risen above 7%. The Consumer Price Index was created specifically to measure the inflation of “the common person in this country”, and it tends to overestimate by 1%, and its still only 5.6%.
As for the devalued dollar, its not necessarily a bad thing. Remember that a devalued dollar makes our goods look cheaper, which increases our net exports, which leads to more production, which creates jobs. So, if you’re as worried about unemployment as you seem to be, then have no fear.

Charles R. Williams January 30, 2008 at 4:53 am

Any recession today is confined to certain regions like Ohio and Michigan and certain sectors of the economy, finance and housing. No one knows if it will spread but I suspect there is a certain amount of hysteria fueling government policy. This policy response is part of the reason the dollar has fallen precipitously and the financial markets are gyrating.

cjmr January 30, 2008 at 6:43 am


Just ‘outside the beltway’ in Maryland. The gas cost increase isn’t entirely due to gas prices, I have an older car that isn’t getting as good of mileage as it used to, and husband’s commute increased by 10 miles per day.

cjmr January 30, 2008 at 6:44 am

For some reason the italicized “Where do you live? I haven’t seen those kinds of increase in the north Texas area.” at the top of my last post didn’t come through.

Coughlin January 30, 2008 at 7:17 am

The biggest problem for most people in the modern economy is USURY. The Church still bans it in encyclicals.
Mortgages, credit cards, bubbles, arms etc
There is of course individual responsibility but it hard for people in such an unnecessarily complex system to understand and compete and not be exploited.
USURY, the forgotten teaching of the Catholic Church

Brian Day January 30, 2008 at 9:18 am

The unemployment rate is determined by those people on unuemployment – that is those who have only been unemployed six months or less. It does not tell you how many people are unemployed. We are also talking about roughly 15 million people. Five times the population of this State.
Can I have some of what you are smoking?
All kidding aside, where did you get those numbers? Right now the unemployment rate is near historical lows at 5%. Looking at the Department of Labor website, they are claiming that 7 million people are unemployed, so you are off by over a factor of two.

Patrick January 30, 2008 at 9:36 am

Brian,
People that have given up looking for work are no longer counted as “unemployed”. The definition was changed in the 1990s, so the unemployment rate now is not comparable to periods prior to the mid-1990s.
Also-someone else up above- a recession is technically two quarters of contraction, not three.

Tim J. January 30, 2008 at 9:48 am

Why is it that the economic doom-and-gloom predictions multiply like rabbits during the last year of any Republican administration – shockingly enough, and purely coincidentally, I’m sure – an election year?
Did anyone get all worked up about the supposed re-definition of “unemployed” when it supposedly happened?… that is, during the Clinton administration?
Where was all the breast-beating for the homeless, uninsured and disenfranchised during the Clinton years?

Brian Day January 30, 2008 at 9:57 am

Patrick,
My point still stands. Where did the 15 million unemployed claim come from?
And is anyone accounting for the underground economy? The fact that it is underground makes it impossible to measure, but I would think that there is a significant number of people who are “off the books” and doing “OK”.

Juli January 30, 2008 at 12:18 pm

Coughlin, Adam Smith was a moral philosopher first, and believed that people working for their interests would be the best producer for society. Compare to a command economy, and you will see the huge difference.
The problem with tweaks of a socialist nature is that we never know when we are going to kill the goose who produces golden eggs.

Catherine L January 30, 2008 at 12:25 pm

Does anyone remember the mantra: “Bush is talking down the economy.” That was in November/December 2000 during the recount fiasco. What was so strange was that the mantra was repeated after the election, but before Bush took office. And it turns out that he was right–there was a recession near the end of Clinton’s term. Now the democratic candidates are “talking down the economy” prior to the election and I don’t hear a peep of complaint.

Economics Writer January 30, 2008 at 12:49 pm

The economy nearly stalled in the fourth quarter with a growth rate of just 0.6 percent, capping its worst year since 2002.
Wednesday’s Commerce Department report showed that the economy that deteriorated considerably during the October-to-December quarter as worsening problems in the housing market and harder-to-get credit made individuals and businesses more cautious in their spending. Fears of a recession have grown, even as inflation remained elevated.
For all of 2007, the economy grew by just 2.2 percent, the weakest performance in five years, when the country was struggling to recover from the 2001 recession. The housing collapse was the biggest culprit; builders slashed spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years.
On Wall Street, stocks slid. The Dow Jones industrials were down around 35 points in trading around noon.
The fourth-quarter’s performance was much weaker — half the pace that economists were expecting.
The 0.6 percent annualized increase in gross domestic product (GDP) marked a big loss of momentum from the third quarter’s brisk, 4.9 percent showing. The fourth-quarter pace was the slowest since the first quarter of last year.
The GDP figures come as worries mount that the country is on the verge of a recession or perhaps is already sliding into one.
In the fourth quarter, consumer spending slowed to a pace of 2 percent, down from a 2.8 percent growth rate in the prior quarter. For all of last year, consumers boosted spending by 2.9 percent, the smallest increase since 2003.
Businesses also watched their spending more closely during the final quarter of last year. Fearing a lessening appetite from their customers, they cut inventories of goods. That shaved 1.25 percentage points from fourth-quarter GDP, the most in a year.
Spending by businesses on equipment and software slowed to a pace of 3.8 percent in the fourth quarter. For the year, such spending was up just 1.4 percent, the worst showing since 2002.
Sales of U.S. goods and services abroad also slowed sharply in the fourth quarter. Exports grew at a 3.9 percent pace, compared with a sizzling 19.1 percent growth rate in the third quarter. That strong export growth was a key reason why the economy performed so well as a whole in the prior quarter. For all of 2007, exports grew by 7.9 percent, the slowest in two years.
Some analysts think the economy is on pace to recede from January through March. Under one rough rule, the economy would have to contract for six months in a row before the country is considered to be in a recession. The odds of a recession have risen sharply over the last year, and analysts increasingly believe the U.S. will be in one during the first half of this year.

Zeno January 30, 2008 at 12:50 pm

And it turns out that he was right–there was a recession near the end of Clinton’s term.
Another thing about the Clinton term — people seemed to have the mistaken notion that the surplus then was a direct result of the Clinton administration; nobody ever actually bothered to acknowledge that the surplus could easily have been the result of the republican administrations before him.

Tim J. January 30, 2008 at 1:34 pm

Economics Writer -
Cutting and pasting an entire AP article in the combox – and passing it off as your own thoughts – is bad form.
http://biz.yahoo.com/ap/080130/economy.html?.v=4
Now, I’m not saying there aren’t problems with the economy… there always are. We just hear about these problems in the press (like, say the AP) a LOT more during Republican administrations than during Democrat ones, when the Old Guard press is dutifully mum.
Sure, we may be heading for a recession. It happens. I’ve lived through a number of them. Should we be throwing ourselves out of windows, in your opinion?

Celeste January 31, 2008 at 12:18 am

Well, I don’t know whether or not we are in a recession, heading into one, or heading out of one. I can’t trust the media to tell the truth anymore than I can trust our government representatives. Everybody is putting their own spin on things.
What I do know is that there are more people living under the bridge near where I live. I know more and more people who don’t go to the doctor because they can’t afford it and can’t get or can’t afford health insurance. I know more and more people who have to go to the food banks to make it to the end of the month.
I don’t know about the numbers. I only know what I see around me. And I know more and more people are struggling to make it day to day.
Most of the people I know aren’t affected by the foreclosures. They couldn’t afford to buy even with the sub-prime loans.
We are talking about working people here. Most work at least two jobs.
As far as the people in my neighborhood are concerned, things are getting harder and harder every year.
I don’t know if that qualifies as a “recession” or not, but whatever you call it, it’s real out here.

Economics Writer January 31, 2008 at 7:35 am

I didn’t pass it off as my own thoughts. I just didn’t include the link. Perhaps you assumed.

Economics Writer January 31, 2008 at 7:36 am

Should we be throwing ourselves out of windows, in your opinion?
Do you live on the first floor?

Jeff January 31, 2008 at 7:43 am

Should we be throwing ourselves out of windows, in your opinion?
I did already. I switched to Apple about six months ago…

Michael January 31, 2008 at 7:47 am

Are you out of your mind? If we had 25% inflation, this country would be destroyed. It’s only ever been higher than 20% under Carter. Post-Reagan, it hasn’t risen above 7%. The Consumer Price Index was created specifically to measure the inflation of “the common person in this country”, and it tends to overestimate by 1%, and its still only 5.6%.
This is one of things where we are expected to believe what the government tells us and not our own experiences. Seriously, go to the grocery store some time if you don’t think the annual inflation is in the double digits. Try to run a small business and watch how fast your overhead is going up. Check how much extra you have in your own account at the end of the year assuming you have any extra. Inflation is burning through the economy right now. The CPI, it was modified under Clinton to hide the real inflation rate. The basket of goods is no longer static to reflect the lowered standard of living that people are expected to accept. The highly volatile goods like energy are excluded. It does not reflect what people really experience and it certainly does not overestimate the real inflation rate.

Tim J. January 31, 2008 at 7:53 am

“I didn’t pass it off as my own thoughts. I just didn’t include the link…”
Why, how careless of you.
None the less, great swaths of cut-and-paste are bad netiquette and a violation of Da Rulz (check the links in the left-hand column).

Tim J. January 31, 2008 at 7:58 am

And since we’re getting all anecdotal…
My family is better off financially than we were last year. I got a new job recently with the highest salary I have ever made (though it is nothing astonishing).
Not to minimize the troubles of others, but like I said, if we’re going on anecdotal evidence… there’s my two cents.

Economics Writer January 31, 2008 at 8:04 am

how careless of you
No, I simply wasn’t sure whether she wanted her name associated with a Catholic forum.
great swaths of cut-and-paste are bad netiquette and a violation of Da Rulz
It’s not a particularly large swath in comparison to numerous other posts on this forum, perhaps even including some of your own. In all, it amounts to less than 20 sentences. It didn’t look very large on my screen. I even edited to make it smaller. Perhaps you simply have a bias against the content which makes you more sensitive to it.

Mary January 31, 2008 at 8:29 am

Most of the people I know aren’t affected by the foreclosures. They couldn’t afford to buy even with the sub-prime loans.
Just you wait.
The housing bubble pushed up prices. With it burst, the prices will come down. That means that people who were shut out of the market will be able to buy.
Assuming, of course, that the government doesn’t barge in to prop them up and so continue to shut these people out.

Tim J. January 31, 2008 at 8:39 am

“It’s not a particularly large swath in comparison to numerous other posts on this forum”
The difference being, of course, that people actually wrote these themselves. If you want people to read an article, you say so and post a link.
“Perhaps you simply have a bias against the content which makes you more sensitive to it.”
Truthfully, I don’t find the article controversial at all. Who doesn’t know this already? Perhaps you have a bias toward the content?

Joe January 31, 2008 at 9:29 am

I think there are four different economic worlds, which overlap:
1. The Stock Market, with fluctuations good for headlines.
2. The ‘real economy’ assessed by indicators other than share prices. Seen by those with degrees in the subject. Although economists do not always agree about the relative significance of the different indicators.
3. The selective indicators of armchair pundits, like me, sometimes nakedly riding hobbyhorses. Where a little knowledge can be a dangerous thing and a source of amusement for graduate economists who can disguise their hobbyhorses (if any) better.
4. The electoral economy. The level of personal (and if they are altruistic – collective) economic optimism or pessimism experienced, perceived and anticipated by those who vote. In the US this is not the same as ‘the people’ because many, usually the poorest, tend not to vote. The ‘electoral economy’ is a major factor determining who wins and loses elections.
If it is possible for the US economy to be ‘talked down’ by Bush-bashers, then it is also possible for the US economy to be ‘talked up’ by Bush-lovers.

Tim J. January 31, 2008 at 10:06 am

“If it is possible for the US economy to be ‘talked down’ by Bush-bashers, then it is also possible for the US economy to be ‘talked up’ by Bush-lovers.”
Absolutely. My point being that the MSM – those who write and speak what most people read and hear – is composed overwhelmingly of those who at present have a vested interest in talking down rather than up.
Of course the economy isn’t as good as it has been in the last few years, during which it was booming. It’s not great, but neither is it time for compulsive hand-wringing and fretting, as many wish to encourage.

sky January 31, 2008 at 10:22 am

Should we be throwing ourselves out of windows, in your opinion?
I did already. I switched to Apple about six months ago…

Can we stay on topic? Why do Apple lovers feel so insecure they so often need to do this?

ajesquire January 31, 2008 at 10:37 am

“Absolutely. My point being that the MSM – those who write and speak what most people read and hear – is composed overwhelmingly of those who at present have a vested interest in talking down rather than up.”
Do you actually believe that the “MSM” is anti-Bush? After 8 years, do you really, truly believe that?
Yesterday the Attorney General took the position that torture is acceptable if “the ends justify the means”. Is that a headline in any paper you’re reading? Because the only people I’ve heard talk about it are those lunatic liberals.
At the end of the day, the “MSM” are corporations and will do what is best for their corporate interest, not any particular political interest. It’s not in their interest for the economy to tank any more than it’s in George Bush’s interest.
It’s just a very easy and convenient way out to dismiss any news story as simply “anti-[whomever] bias”.

Tim J. January 31, 2008 at 11:40 am

“It’s just a very easy and convenient way out to dismiss any news story as simply “anti-[whomever] bias”.”
Well, no, not actually. It’s a fact that the huge majority of professional journalists slant liberal and vote Democrat (about which I will theorize later).
How did you hear about Mukasey’s weaseling? I heard it on the radio and read it in the papers. Your evidence that someone is burying the story?…
Parties out of power are prone to shout “Things are Really Bad”. Is that really news to you?

Economics Writer January 31, 2008 at 11:43 am

The difference being, of course, that people actually wrote these themselves.
No, they didn’t. For example, Inocencio in reply written to you on the Guard Against Euphoria thread did a much larger cut and paste. You said nothing. No one said anything. The board is in fact littered with many much larger cut and paste posts. And DA RULZ has no concrete guideline as to what is large and what is not. If I had thought it was over-sized, I wouldn’t have posted it.

Tim J. January 31, 2008 at 11:51 am

Probably no one commented because Inocencio A)credited the actual author B)gave the source, and C)commented briefly himself – by way of introduction – on how these excerpts addressed the current topic.
Anonymous cut-and-paste jobs that are given no set up and no explanation are a different matter, or is that too complex and nuanced to grasp?

Economics Writer January 31, 2008 at 12:00 pm

Tim, whenever you’re finished making up your own DA RULZ, I’ll be happy to check them out.

Inocencio January 31, 2008 at 12:18 pm

Economics Writer,
Is it too much to ask you to cite and/or provide a link to whatever source you are quoting?
Take care and God bless,
Inocencio
J+M+J

Economics Writer January 31, 2008 at 12:31 pm

Is it too much to ask you to cite and/or provide a link to whatever source you are quoting?
It’s not too much for me. How about for you?

Mary January 31, 2008 at 12:32 pm

People — remember that you may have to draw Jimmy’s attention to those who violate DA RULZ.

Inocencio January 31, 2008 at 12:39 pm

Economics Writer,
Where did I not cite and/or provide a link to my source?
And I am very glad to hear you will now cite and/or provide a link to your source.
Take care and God bless,
Inocencio
J+M+J

Economics Writer January 31, 2008 at 12:47 pm

Where did I not cite and/or provide a link to my source?
I never said you didn’t.
And I am very glad to hear you will now cite and/or provide a link to your source.
But you don’t hear. I said it’s not too much for me to ask you to cite and/or provide a link to whatever source you are quoting. Is it too much for you to ask me to cite and/or provide a link to whatever source you are quoting?

Inocencio January 31, 2008 at 12:52 pm

Economics Writer,
Thank you for clearing that up for me. It has been a pleasure. Have a great day.
Take care and God bless,
Inocencio
J+M+J

Economics Writer January 31, 2008 at 12:58 pm

Anytime Inocencio. If you need anything else, just ask. Ask and you shall receive.

Tim J. January 31, 2008 at 1:14 pm

Well, you know what Chesterton said about the rules… if you can’t obey the big ones, you get the small ones.

Economics Writer January 31, 2008 at 1:16 pm

Ask and you shall receive. Have you tried that rule?

bill912 January 31, 2008 at 1:21 pm

Just starve it, folks.

Anonymous January 31, 2008 at 4:33 pm

hmmm, most everyone pissing in the wind on this one.
Since this is about discerning the winds in the sails of the economy.
The media is most of the time a contrarian indicator of the direction of the economy, since in the last 5 years there have been at least 5 rounds in the media
where all the talk was about recession on the horizon and which stocks to buy to
weather the coming storm.
Through many cycles I have found
Larry Kudlow, Bob Brinker
to be the most prescient and correct.

Mary January 31, 2008 at 5:21 pm

Ask and you shall receive. Have you tried that rule?
Cool.
We ask for an apology for a cut-and-paste post of someone else’s words without a link.
We ask you, henceforth, to provide the link and the attribution.

El S. January 31, 2008 at 5:58 pm

This is one of things where we are expected to believe what the government tells us and not our own experiences. Seriously, go to the grocery store some time if you don’t think the annual inflation is in the double digits. Try to run a small business and watch how fast your overhead is going up. Check how much extra you have in your own account at the end of the year assuming you have any extra. Inflation is burning through the economy right now. The CPI, it was modified under Clinton to hide the real inflation rate. The basket of goods is no longer static to reflect the lowered standard of living that people are expected to accept. The highly volatile goods like energy are excluded. It does not reflect what people really experience and it certainly does not overestimate the real inflation rate.
The CPI does take into effect energy. In fact, without energy factored in it drops all the way down to 2.6%. Energy is a HUGE factor of the CPI. And the basket of goods is changed every ten years. That sounds pretty static to me.
And why is static a good thing? A static basket of goods fails to take into account substitution bias: if the price level of butter goes up, the demand for margarine accompanies it. But the CPI doesn’t reflect that. Static is bad if taken too far.
Now, I don’t know what data you’re using when you say the CPI doesn’t overestimate, but I do know that the Boskin Commission, appointed by the Senate, found a tendency of the CPI to overestimate by .8-1.6%.
Of course, inflation is definitely going to get worse. Two interest rate cuts was a bad move by the Federal Reserve, and in 6-9 months we’ll be dealing with rampant inflation.

Economics Writer January 31, 2008 at 6:51 pm

We ask for an apology for a cut-and-paste post of someone else’s words without a link. We ask you, henceforth, to provide the link and the attribution.
“Whatever you ask for in prayer, believe that you have received it, and it will be yours.”

Michael January 31, 2008 at 6:53 pm

Real inflation versus the government reported CPI.
http://isil.org/towards-liberty/inflation-gov-lies.html

Michael January 31, 2008 at 7:09 pm

Here is another interesting web page which discusses how CPI obviously underreports real inflation that people experience.
http://www.straightstocks.com/current-market-news/real-inflation-showing-in-reports-not-called-cpippi/

Mike Petrik February 1, 2008 at 9:45 am

Predicting a complex market economy is almost as perilous as timing the stock market. Because investors and consumers have imperfect information and do not always behave rationally, the business cycle will almost certainly be forever with us. The best we can hope for is skilled management of the money supply by the Fed, and avoidance of confiscatory taxes and unnecessaary regulation by Congress.
I think the more interesting question is why the heightened state of financial anxiety among Americans? Properly and fairly understood, standards of living continue to climb. People live in larger houses, with better apppliances, greater access to entertainment and superior quality health care than ever before. And yes, that is true at every level, including the working class and poor. I do believe there is an answer, and it is the flip side of the cause of this increased standard of living. Our living standards are a direct result of an economy that is unprecidently robust, dynamic and international. Constant change is the order of the day. When workers are getting nice checks they worry, and with good reason, that those checks could stop tomorrow for reasons that they cannot understand. This is an inevitable part of a modern vibrant international economy. And change is stressful, especially when accompanied by a large dose of uncertainty. Households would find this phenomenon more manageable if they saved and invested prudently, but they don’t — not in this country. People will say they cannot afford to save but for the most part they are engaging in self-deception. Americans are living beyond their means and they do not have to — they choose to. Their lives as consumers are out of sync with their lives as producers. As producers they are aware that the marketplace can throw them a curve ball at any time, but they consume as though that risk was not there. Hence, instead of relieving the unavoidable anxiety associated with the change and uncertainty of a robust modern economy by prudently saving 10-20 % of household income, most households instead aggravate the anxiety by saving little if anything — or even engage in negative saving via imprudent borrowing.
My 2 cents for what their worth.

David B. February 1, 2008 at 10:27 am

“Whatever you ask for in prayer, believe that you have received it, and it will be yours.”
Eco,
Jesus doesn’t expect us to sit on our butts and wait for him to give us material goods . He expects us to use our talents. Remember the “talents” parable?

David B, February 1, 2008 at 10:29 am

And no, I ain’t saying you said that. I’m answering stupidity in general. Stupidity that believes God is a slot machine.

BobCatholic February 1, 2008 at 12:36 pm

From the article:
>But housing is now a small share of GDP (4.5%).
Wrong.
Housing is an asset. GDP is income. This is comparing a flow with a static thing. In other words, you’re trying to compare apples to oranges.
The correct thing to do is compare total housing with total household assets.
According to Wikipedia: By comparison, total U.S. household assets, including real estate, equipment, and financial instruments such as mutual funds, was $62,500 billion in 2005
http://www.bea.gov/national/FA2004/TableView.asp?SelectedTable=16&FirstYear=2001&LastYear=2006&Freq=Year
Total residential assets are 16,245.3 billion.
Divide 16,245.3 into 62500 and what do you get? 26%
This is TWENTY SIX PERCENT of American household assets.
So this article minimizes the impact of the Residential housing stock decline in price on the economy.
I mean, when the 26% of your assets are dropping like a rock in price, you’re not exactly going to go out and spend money, are you? Now imagine when the entire country is behaving this way. Result: Recession.
We saw what happened when financial assets imploded between 2000-2002. We had a recession because people saw their assets drop in value and cut back in spending.

labrialumn February 1, 2008 at 6:19 pm

I’m not out of my mind, but I do my own grocery shopping. Perhaps you do not.
Food items have roughly doubled in price over the past three years. I’ve been painfully aware of that, living on student loans with no other income. Gas has gone from 1.43/gallon to 3.01/gallon in that same three years. Again, pretty close to a doubling of price. Get out and see for yourself rather than relying upon whatever the government or Wall Street tells you.
The jobs are taken by the 30 million or so illegals. Or sent over seas.
Devaluing the dollar is a form of theft, or stealth taxation. The Romans tried that, and it more than the barbarians, destroyed the western half of the Empire.
cjmr, they have more oil wells in Texas than we do in Minnesota.
Coughlin, and of course, devaluing the dollar is a form of usuary. I quite agree with you, the Church, and the Bible on that.
Pipe, what do you get for 5% of 300 million people? I got 15 million, you equate my math to being high on recreational pharmeceuticals.
As I pointed out, but you missed, was that they only count those people who are within six months of having lost a job, and who have had a job for more than two years in a row previously. That leaves out a lot of people. Humans. Made in the Image of God. Maybe 5% unemployment is good because it forces wages down and thus profits up at the cost of the suffering of the poor, but is it good in the transcendant sense of the word?
Yes, Tim, I did get upset at the redefinition of unemployment, but then I was never a supporter of She-Who-Must-Not-Be-Named or her figurehead husband.
Juli, you are right about socialism being bad. That is why I favor microcapitalism (distributism) over either the plutocratic, stock-market speculating form of capitalism and socialism, both.
At any rate, the Dar al’Islam and Mainland China along with Mr. Soros own the American economy at this point, and can crash it when they so desire, if and when it should suit their purposes.
Zeno, indeed, the historical pattern for the last few decades has been for the Democrats to spend the country’s stored capital, the Republicans to enact austerity measures to get it back – losing favor with the populace as they do so, and then the Democrats, getting elected, spend it again. This time around GW Bush didn’t rebuild the capital, due to the costs of the War on Method (which could have paid for nuclear power for the country two or three times over, or solar power sats if you prefer them)
This part of the country has yet to truly recover from the recession of the early 1980s.
I’m one of those people who can’t afford to go to the doctor, and who doesn’t have medical insurance. I have internet because I have to for my on-line classes. 10% of the population of this large town is supposedly homeless (though they must have shelter, or they’d be dead, this week has seen -66 wind chill on the old charts.
Mike, saving makes no sense when inflation devalues your savings faster than you earn interest.
Is it in keeping with the Church’s social teaching that a transient workforce with high stress due to uncertain employment futures is a good thing, even if it is ‘normal’ for a ‘healthy, vibrant, international economy’? Did the one who wrote that understand that that means that American workers have to receive, in time, the same pay as people living in grass huts? While those who have the excess to invest can make a bundle on the goods transfer? Is an international economy necessarily a good thing? Is not a degree of safety and mutual loyalty in ones’ employment of some value? Is not being able to care for ones’ children a good thing?
David, I’m not a social Darwinist. Neither is Rerum Novarum or Centissimus Annus.

Economics Writer February 1, 2008 at 6:57 pm

what do you get for 5% of 300 million people? I got 15 million, you equate my math to being high on recreational pharmeceuticals.
The much used unemployment rate figure is not based on the full population of 300 million, but only on a subset of people of about half that size. For example, it does not include spouses who sit at home watching TV, or the people who sleep in alleys, or people in prison, etc. who have not recently been looking for work. In total, they count about 80 million people as “not in labor force”.

Anonymous February 2, 2008 at 5:30 am

Labrialumn:
I disagree with your assessment of inflation, as does my wife who does our grocery shopping. It is true that gas prices have gone up fast the last few years, but how about the last 25? It is an old math trick to arbitrarily select the periods over which one measures change.
And your flat our wrong about savings. Plenty of Americans with modest incomes are building wealth by saving and investing.

Tim J. February 2, 2008 at 9:27 am

“The much used unemployment rate figure is not based on the full population of 300 million, but only on a subset of people of about half that size.”
As it should. It also doesn’t include babies or nursing home residents. In what way could these people be meaningfully called “unemployed” in the same sense as a healthy adult that is truly out of work?

Economics Writer February 2, 2008 at 10:45 am

Whether it “should” or it shouldn’t is a statement of opinion. What is fact is the unemployment rate figure does not give full light to the state of unemployment. It may well be good reason not to count babies and nursing home residents, but such people are not the only people not counted. For example, there’s someone, let’s call him John, who hasn’t worked in a few years. John is well in need of a job and checks the job listings from time to time and talks to people he knows but hasn’t yet found anything to match his unique skills.

bill912 February 2, 2008 at 10:58 am

So John should earn his living at something that doesn’t “match his unique skills”. As Barry Fitzgerald said in “Going My Way”: “And you’re willin’ to starve rather than push a broom!”
Which is what we should do to the troll.

bill912 February 2, 2008 at 11:02 am

More…

bill912 February 2, 2008 at 11:02 am

porn…

bill912 February 2, 2008 at 11:02 am

sites…

bill912 February 2, 2008 at 11:03 am

to…

bill912 February 2, 2008 at 11:03 am

get…

bill912 February 2, 2008 at 11:04 am

rid…

bill912 February 2, 2008 at 11:04 am

of.

bill912 February 2, 2008 at 11:05 am

There!

Economics Writer February 2, 2008 at 12:09 pm

So John should earn his living at something that doesn’t “match his unique skills”.
John has tried that many times. But it has yet to work out either for him or his past employers. Or his resume.

deanswife February 2, 2008 at 2:56 pm

Mish sez,
“Table A-12 is where the rubber meets the road when it comes to unemployment. In order to keep the “official” unemployment rates low, the folks at the BLS dreamed up new categories of workers such as “marginally attached”.
‘Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.’
Classification U-6 is how unemployment actually feels to the average Joe on the street. On a seasonally unadjusted basis, that figure is close to 10%.”
http://globaleconomicanalysis.blogspot.com/2008/02/jobs-contract-as-2007-job-growth.html
Not taking sides here, but just in case there was any confusion…

Charles R. Williams February 5, 2008 at 11:28 am

“Total residential assets are 16,245.3 billion.
Divide 16,245.3 into 62500 and what do you get? 26%”
So perhaps residential housing has lost 10% of its value. Then the typical American family has lost 10% times 26% of its assets – about 2.6% of its financial assets. This reduction in wealth will reduce consumer spending but not a great deal. Perhaps, enough to slow GDP growth for a quarter or two. And to the extent that families regard these losses as temporary, a reasonable family will just wait it out rather than make radical adjustments in their day-to-day lifestyle.
There is no recession. There is media-driven hysteria.

Mike Petrik February 5, 2008 at 12:53 pm

I’m inclined to agree, Charles. That said, business cycles are inevitable. They are the result of imperfectly rational consumers and producers making decisions based on imperfect information. Therefore, it is quite possible that a recession is in the works, but if so we will survive it just as we have the others. The media-driven hysteria to which you properly refer would have folks believe that we are on the brink of the Great Depression II, which is utter nonsense.

BobCatholic February 11, 2008 at 12:59 pm

> Then the typical American family has lost 10% times 26% of its assets – about 2.6% of its financial assets.
A house is not a financial asset.
My analysis is a MACROECONOMIC one, not a microeconomic one. The Macroeconomic view looks very good due to all the 4 million millionaires who have plenty of money to bide their time, and the large amount of assets they own.
Taking a look at the microeconomic issues:
For most people,the house is the largest asset they have. Take a 10% drop in value of the asset’s value and then realize that their mortgage hasn’t dropped 10%, and that doesn’t exactly look good for them, economic wise.
http://www.census.gov/compendia/statab/cats/banking_finance_insurance/household_financial_assets_and_liabilities.html
Depending on range, your typical household has between $5K to $78K of financial assets.
So, one’s $300K home dropped by 10% which is $30,000, which for most Americans is their entire nest egg. 75% of households have $47K or less in net worth.
On top of that, one is upside down in the mortgage (a LOT of mortgages have been taken out in the last 3 years, which means zero or less equity), which still requires payment. And if the person is unfortunate enough to be in an adjustable rate that is going to be adjusting upwards….ohoh. And then when the layoff comes, more fun! And then the medical bills….owch.
>And to the extent that families regard these losses as temporary, a
>reasonable family will just wait it out rather than make radical >adjustments in their day-to-day lifestyle.
And for those who don’t have the funds to wait it out, say due to layoff, or that their interest rates have adjusted upward to the point where their monthly payment is more than they can afford now….more problems. The only people who can wait it out are those with the huge financial cushion – with 75% of households not having sufficient cushion.
My original analysis was very optimistic. The Microeconomics don’t always line up with the macroeconomics, which usually are more optimistic.

The Truth Hurts February 23, 2008 at 8:49 am

God punishes in more than one way…

David B. February 23, 2008 at 9:54 am

God also doesn’t like being “quoted” on the plight of America.

The Truth Hurts February 25, 2008 at 11:43 pm

Than I’ll quote Fatima.
Sodom is heaven by comparison to the US.

bill912 February 26, 2008 at 3:38 am

Evidence?

Matt February 26, 2008 at 7:39 am

BobCatholic,
if the person is unfortunate enough to be in an adjustable rate that is going to be adjusting upwards
Unfortunate? You think an overextended mortgage and an adjustable rate is some sort of accident? I have great sympathy for people who made bad judgements about the mortgages they signed, and lacked the wisdom to have a 2 to 3 month cushion against unemployment, and I think there is certainly some need to provide charitable help to them, and to encourage lenders to try and help them restructure. Unfortunately governmental action will only serve to undermine the very foundation of mortgage system which allows those average income earners to buy a home.
Be charitable but don’t try to play games suggesting personal greed on the part of the home buyer is not a direct cause of such things as interest only and adjustable rate mortgages. It seems to me ridiculous for someone to buy any home that they can not afford to pay off in 15 years with a fixed rate mortgage and a 3 month cushion. I doubt there’s many markets that this is not feasible for the average family.
God Bless,
Natt

David B. February 26, 2008 at 10:54 am

Sodom is heaven by comparison to the US.
In Sodom, only Lot and his family were right with God (and even that changed).
In America, There are many sinners, but there are also many people striving toward sainthood.
You are quoting something from 90 years ago. It must be remembered that America is a nation of 300,000,000. I don’t know that Sodom had as many sinners, so it makes sense that America is worse in that it has had more sins committed within its boarders than Sodom did.
However, God didn’t destroy Sodom until there were none there that were righteous. I don’t think that we Americans are all unrighteous. There are many people living and dead, like Mother Angelica and Saint Elizabeth Ann Seton who are praying for the nation. I’m tired of folks desparing of God’s mercy for the U.S. We need prayers, not prophets.

David B. February 26, 2008 at 10:55 am

er, “despairing”

The Truth Hurts March 4, 2008 at 5:10 pm

If France was the firstborn daughter of the Church.
Than this country is the firstborn daughter of…
You take a guess.

bill912 March 4, 2008 at 5:14 pm

The clarity and profundity (not to mention the spelling and punctuation) of the above are awe-inspiring!

James March 4, 2008 at 5:20 pm

I see where you have a point David.
But I also worry because sins commited after the Redemption have more severity. Plus, this country should have been an example because of its influence.
Mother Angelica said many times she saw this country paying big time pennance.

David B. March 4, 2008 at 6:37 pm

James,
And I see your point. Isn’t wonderful to be able to see the points of others?

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