The fundamentals of our economy are strong
John McCain, 15 Septeber, 2008
The fundamental business of the country is on a sound and prosperous basis.
Herbert Hoover, 25 October, 1929
Giants like Bear, Fannie, Freddie, Lehman, Merrill-Lynch, AIG all falling. 6.1% unemployment. Productivity gains of almost 20% in 8 years, coupled with declining median income for working families after adjusting for inflation. If this is fundamentally sound, I'd hate to be around when things are fundamentally unsound.
1. Nathan T. Freeman09/17/2008 07:12:56 AM
I read an interesting remark the other day that whoever gets elected president is going to be the next Herbert Hoover -- presiding over a dramatic economic crash no matter what he does. Based on that, the speaker thought it would be a disaster for Obama to win. "It would set blacks in the US back a generation to have Barack Obama in the White House for the next 4 years," went the argument.
I'm not agreeing with it. I just thought it was an interesting statement. One of those gambles that would look like genius in hindsight, but you'd never think about again unless it happened.
Personally, I think "economic indicators" have about as much meaning as "weather indicators." Yeah, you can form an educated guess about what might happen in the next day or two, but beyond that, the process is simply too chaotic. The best you can hope for is to try not to make too many macro influences.
Come to think of it, credit expansion is an awful lot like carbon output. Short term, highly visible gain with seriously unpredictable and potentially catastrophic consequences later.
I might have to quote myself on that in the future.
2. Craig Wiseman09/17/2008 08:49:44 AM
>> when things are fundamentally unsound.
As spoiled Americans, I guess our frame of reference is warped.
Compare & contrast our .fundamentally sound. economy with, say one that really is fundamentally UNsound:
3. Craig Wiseman09/17/2008 09:09:46 AM
To (briefly) continue my rant...
Louisiana got hit hard by Gustav. I know the weather chanel and TV in general got tired of it after about 2PM the day it hit because there were no dramatic pictures to show, that doesn't change the fact that almost 50% of the population of the state lost power for significant periouds of time. The city I live in, Baton Rouge, was completely absolutely dark for days after. A number of people I know STILL don't have power back yet, and now we have Ike on top of THAT. My wonderful AT&T phone had four bars and NO service, no text, no nothing, except every hour our so it would pop up and tell me I had 9, 10, 11, 12 new voicemails. Not that I could listen to them.
I'm very thankful we had a generator that allowed us to save our refrigerator and run some fans, but even that is not an ideal way to live.
My point? Having NOT had what everyone else takes for granted, I guess I'm pretty hard on folks that dont' think we it nice in America.
Even with the economic troubles we have, it's still (by far) the best place to live for the average person in the history of the world.
4. Jerry Carter09/17/2008 09:26:47 AM
It depends what you look at as the fundamentals. Fundamentally, capitalism (the basis of our economy) is working properly - strongly you might argue looking at risky business practices coming back to bite those who took the risks.
Looking back on what our government tried to get us out of the great depression, comparing its sluggish positive economic influence to the sluggishness created by the Marshall plan - and contrast it to the speed with which the German economy recovered after WWII and I think you have a good case for less government interference when things fall down.
Whichever president we wind up with would well serve the global economy by remembering this bit of history. Shielding people from the consequences of their actions only encourages them to continue on with those actions. The bail out of AIG, while short term will suppress volatility, will in the long term only perpetuate the idea that risky business is sometimes OK.
The clear cut capitalist solution to this mess would be to cut our losses, learn our lessons and move forward without the government (an intrinsically SLOW moving animal) in the way of a free market economy (a nimble beast, when left to it's own means.)
The responsibility lies with the individuals who lied on loan applications, ran up their credit cards and bought into the hype that they could have more than they could afford with just the right interest rate. As a society, our only responsibility to them at this point is to educate and help where we are so moved. Government action disconnects the mistake maker from the consequences and removes the disincentive to future mistakes.
5. Bruce Perry09/17/2008 09:46:35 AM
@4, and what about organizations that encouraged people to lie on loan applications and failed to verify that the applications were correct?
6. Ed Maloney09/17/2008 10:09:14 AM
@4, I don't see any of the mortgage brokers and investment bankers offering to return the billions of dollars that they earned from the "poor judgement" of their customers during the past 8 years. More regulation? Bring it on...
7. Chris Whisonant09/17/2008 10:40:27 AM
Sadly, the response to these issues with Capitalism with be Socialism. The government can't even run the congressional cafeteria without going into debt. What makes anyone think that they can run the healthcare and mortgage industries?
8. Danny Lawrence09/17/2008 10:41:35 AM
You missed McCain's point Rich, when he said "Fundamentals" he meant people, ie "American Workers".
To quote one of your favorite movies, Rich: "You keep using that word. I do not think it means what you think it means."
9. Chris Whisonant09/17/2008 10:50:05 AM
By the way, meant to link to this article: http://mises.org/story/3104
Don't miss the last 3 paragraphs...
10. Tim Tripcony09/17/2008 01:15:07 PM
@8 - That's what he said he meant after Obama questioned his statement that the fundamentals are strong... so Obama was insulting American workers by claiming they're not strong. That's how ridiculous this election is becoming.
The true fundamentals of the economy are painfully simple: amount and liquidity of capital and the confidence to spend it. If everybody who has money is hoarding it, the economy isn't strong because the money isn't flowing. Not spending means supply goes up, which drives prices down: deflation. Spending too much drives prices up: inflation. Right amount of spending makes Goldilocks a happy little economist.
Jerry's right: capitalism is working. The market is correcting itself... it's just a shame the people who "played by the rules" and didn't overextend themselves are now seeing the price of their own houses plummet (hm... seems I predicted this a year ago...), paying more for gas and groceries, losing their jobs, and so on. Market correction punishes the irresponsible and responsible alike. Democrats tend to think that regulation is the solution to every problem; Republicans tend to think that regulation is the problem. I just yearn for a balanced approach.
11. Chris Whisonant09/17/2008 02:34:39 PM
One thing that should be noted is that the recent increase in unemployment really started to take off after the minimum wage was increased.
Here's one article: http://www.seacoastonline.com/articles/20080910-BIZ-809100352?sfad=1
No, I'm not saying that's the cause of all issues, but let's not lose sight of the fact that some of those numbers of newly unemployed may have been simply due to a poor economy. Also remember that President Bush inherited the beginnings of a recession from 2000 and then dealt with the worst foreign attack on our soil in our history. Then the economy proceeded to grow and jobs continued to be created - even to the point of surpassing President Clinton's employment rates.
12. David Vasta09/18/2008 09:26:44 AM
@Chris - You nailed it my man. The problem as I see it is the Government keeps bailing out the banks and I for one am not keen on the Government helping out private companies. As for Freddie and Fannie, they are both being run poorly, and should have just failed. The Sub-Prime problem is not the government/my burden to sort out. Let them fail and let the entrepreneurs step in and handle it.
I don't think the numbers match the problem. I see it as the media and others saying the economy is bad and we are all buying into it for some reason. Over all we have a pretty decent economy and it's stayed pretty strong over the past 10 years. Like Global Warming, this is a cycle and it will have to run out and just cycle.
13. ninest12304/23/2016 04:47:43 AM