Korean Job Discussion Forums

[Ya-ta Boy]

The long-feared capitulation of American consumers has arrived. According to Thursday�s G.D.P. report, real consumer spending fell at an annual rate of 3.1 percent in the third quarter; real spending on durable goods (stuff like cars and TVs) fell at an annual rate of 14 percent...

Also, these numbers are from the third quarter � the months of July, August, and September. So these data are basically telling us what happened before confidence collapsed after the fall of Lehman Brothers in mid-September, not to mention before the Dow plunged below 10,000. Nor do the data show the full effects of the sharp cutback in the availability of consumer credit, which is still under way...

Sooner or later, then, consumers were going to have to pull in their belts. But the timing of the new sobriety is deeply unfortunate. One is tempted to echo St. Augustine�s plea: �Grant me chastity and continence, but not yet.� For consumers are cutting back just as the U.S. economy has fallen into a liquidity trap � a situation in which the Federal Reserve has lost its grip on the economy...

For the fact is that we are in a liquidity trap right now: Fed policy has lost most of its traction. It�s true that Ben Bernanke hasn�t yet reduced interest rates all the way to zero, as the Japanese did in the 1990s. But it�s hard to believe that cutting the federal funds rate from 1 percent to nothing would have much positive effect on the economy. In particular, the financial crisis has made Fed policy largely irrelevant for much of the private sector: The Fed has been steadily cutting away, yet mortgage rates and the interest rates many businesses pay are higher than they were early this year.

The capitulation of the American consumer, then, is coming at a particularly bad time. But it�s no use whining. What we need is a policy response...

No, what the economy needs now is something to take the place of retrenching consumers. That means a major fiscal stimulus. And this time the stimulus should take the form of actual government spending rather than rebate checks that consumers probably wouldn�t spend.

Let�s hope, then, that Congress gets to work on a package to rescue the economy as soon as the election is behind us. And let�s also hope that the lame-duck Bush administration doesn�t get in the way.

http://www.nytimes.com/2008/10/31/opinion/31krugman.html?_r=1&ref=opinion&oref=slogin

This should get the anti-Keynesians out from under their rock.

[canuckistan]

7.5 million homeowners "underwater":

http://money.cnn.com/2008/10/30/real_estate/underwater_borrowers/index.htm?cnn=yes

The only thing separating them from foreclosure is a job loss. They cannot borrow in an emergency against negative equity in their homes.

With 1/4 of all employers saying more layoffs will come, this is the next wave.

[ontheway]

We are witnessing the death of the Federal Reserve socialist fiat money system, the death of keynesianism ... they are now out of ideas, clueless, ideologically and intellectually bankrupt ... their system has failed, the big government, socialist model has collapsed. It takes a lot of shine off the Nobel prize when the winner needs to go back to Econ 101.

Unlike the era of the First Great Depression, there are now people around who have seen this all before. The Government, Federal Reserve and Socialists have taken us down this road before and when we get to the end of this dark time, there will remain only a stubbornly self-deluded, ignorant few who will NOT be clamoring to abolish the Federal Reserve, the income tax, the property tax and the IRS.

Neither consumers nor government can spend us out of this crisis.


We need to let the economy adjust, to shake out the malinvestment, and then savings and investment can grow the economy into the future. We have to undo the distortions, taxes, regulations, incentives and subsidies, penalties and disincentives, and constrictions on business. We have to abolish the huge socialist market incentives and subsidies that have created the massive manlinvestment.

Until we do these things, the economy will not recover.

[Ya-ta Boy]

I can understand the call for a government stimulus package of spending and if done right, we'll end up with a stronger infrastructure ready to deal with the 21st Century. In his interview on Rachel Maddow's show, Obama says his program will restructure the electric grid that will be able to transfer the wind-generated electricity from North Dakota to population centers like Chicago. 5 million new jobs, he says. That's all well and good.

What I don't get is how people with their heads underwater with their bad mortgages are going to be persuaded to start spending and investing again. Government can do some things, but it can't do everything and 'psychological counselling' is one of the things government isn't designed to do. With wise taxing policies and targeted spending policies it can create a positive atmosphere, but in the end, people have to find the confidence that the future is going to be OK. That's the biggest trick of all.