It’s been three years since everything really started going to shit and, while we may not “technically” be in a recession anymore, it certainly feels like we are. The news from Europe seems to be getting worse and worse. Why is this recession (ie. this pervasive feeling of utter economic shittiness and dearth of consumer confidence) taking such a long time to dissipate?
First impression–too much wealth concentrated in too few hands.
The super-wealthy have no need to spend. The rest of us do not have the security to spend. When spending stops, so does the economy.
This implies that all we need do is decide en masse to start spending again. If that were the case then I would imagine consumer confidence would return more quickly than it has done.
I think part of the reason why the economy is so fucking shit is because, prior to the initial collapse, banks were giving credit to anyone with a pulse, so people were spending beyond their means. This meant that demand got massively artificially inflated by people running up huge bills on all this phantom credit. Now that the lines of credit have been taken away (because the fucking Nobel laureates who spent years lashing it out to crackheads and illegals finally figured out they couldn’t pay it back), businesses have all these excess buildings and stock and workers and capacity which, realistically, they may never, ever need to use. After all, the only reason they had it in the first place was to satisfy the demands of people who were spending money that literally didn’t exist.
All this stuff needs to be bought and redirected by people working in more profitable sectors and that will take ages.
I get a gut feeling that a lot of large corporations saw the recession as an excuse to put the collective squeeze on the bottom rung employees (get fewer employees to do more for less) and have not found the need to let up on their squeeze with a 9% unemployment rate.
One reason I’ve heard is that this recession was due to a credit crisis. The normal method for an economy to rebound has been curtailed. Usually, interest rates fall during a recession prompting people and businesses to borrow and invest or spend.
In this recession, banks are hampered by bad loans and people are also indebted as far as they can go. So no ordinary recovery.
Another big reason is that the lack of control of derivatives (aka: weapons of mass financial destruction) has resulted on lots of properties that (not only houses, business space too) that are under water, that means a lot of people and business men that have less money to invest.
And/Or they can not move to a better location or start a business.
Ah, but in order for credit to be granted, it takes two parties: one to receive the credit and one to grant it. The difference is that the grantors are presumed to be expert in the field and be able to differentiate someone credit-worthy from someone who is not. Dog-whistles aside, there is a noblesse oblige that is demanded from those who have control of resources. It is fair, since those members of society are universally granted privileges not granted to those who do not.
The reason that a business has stock, workers, and capacity is that they calculate that it will make them money. If a business finds that satisfying more, less, or the same demand than another point in its history (based on the decision-makers’s calculations – and predilictions) it will do so. Businesses, as we have been so often advised, are not charities.
As for how long it will take for workers to work in more profitable sectors… how long do we want to wait? Do we, as a nation (I’m assuming you are American) allow other countries to take the lead in these areas, or do we make the choices that allow us to make sure that future generations–and the industrious ones among the working and middle classes ready, willing, and able to learn the skills of the future–are able to do so? If we do, then we’d better stop fetishizing hating government for the sake of hating and trying to shring it, and directing the resources that a government has at its command to encourage certain behaviors such as attending colleges and trade schools, spending money on programs that private enterprise does not spend on such as infrastructure, alternative energy program, et. al.
To the extent that we continue to cling to the prevailing ‘wisdom’, IMO, is the extent that the economy will continue to go to shit.
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The economy is still shit because the business sector has now adapted to a shit economy and is finding it profitable.
Unless profits are taxed at a very high rate owners of profitable businesses have no reason to invest in future growth.
This. The people in the business section who do not find status quo profitable are not, by and large, in charge of making decisions.
This administration’s job growth efforts were almost completely centered around increasing government employment or on government funded projects.
Other than the bailout of GM & Chrysler, almost nothing has been fostered in the private sector. No private sector investment that would produce sustainable employment.
Combine this with all the industrial production job flight from the US to off-site international locations due to cheap non-union labor availability, plus more lax environmental regulations.
Yeah, because we all know that no one wants to make any more money than they are currently making now. :rolleyes:
Anyone who tells you he knows why the economy is a certain way is lying or misinformed. Unless he is a billionaire who made his money by investing decisions based on his knowledge of how the economy is at any given time. And even then, there’s a good chance he’s wrong this time.
Remember how many of us noted that in 1937 Roosevelt cut federal spending at the behest of the deficit hawks, and the economy tanked again? Well, state after state is cutting spending, as is the federal government with the end of the stimulus package, and the economy is tanking again. Long term unemployment benefits are going to run out for a lot of people, and that is going to make things even worse.
This despite the fact that the market is pretty good, and that corporate profits are quite good.
The housing market is another reason. With so many people in foreclosure, and even more under water, why would they spend money?
Wasn’t very effective was it. Not to mention the wisdom of giving SS tax credits in the first place.
I think much of the employment world is still horrified at the perceived tax burdens coming from Obamacare, plus all the other BS regulations this administration has heaped, or tried to heap, on them
It’s not any consolation, but things could get worse if the debt ceiling isn’t raised. If we can’t pay our debt, our bond rating slips. If our bond rating slips, the interest rate goes up. If the interest rate goes up, the national debt skyrockets. This has to be paid somehow, and guess where that money has to come from?
Things get worse if the debt ceiling IS raised also.
No win situation.
It’s sure to work this time!
‘It’s the same plan that we used last time, and the seventeen times before that.’
‘E-E-Exactly! And that is what so brilliant about it! We will catch the watchful gub’ment totally off guard! Doing precisely what we have done eighteen times before is exactly the last thing they’ll expect us to do this time!’
Personally I believe that this is the major cause of much of the problem. The big debts incurred in the enormous housing bubble haven’t gone away. If you’re still struggling to pay off a huge loan you don’t have the cash to spend on anything else. And those business selling you everything else aren’t making any money.