tinyurl.com/ar9h67 -> www.businessweek.com/the_thread/economicsunbound/archives/2009/02/a_decade_as_bad.html
Economics Unbound A Decade as Bad as the Great Depression Posted by: Michael Mandel on February 18 Over the past ten years, the S&P 500 is down 50% adjusted for inflation (February 17, 1999 to February 17, 2009). By my calculation, the stock market was down roughly 50%, adjusted for inflation, in the worst ten years of the Great Depression (September 1929 to September 1939). When you add in the fact that real wages were stagnant over the past ten years and debt soared, I think we will look back at the last ten years as a decade of despair. As an optimist, I'm going to bet on the next ten years as being better. cgi/ Reader Comments CompEng February 18, 2009 12:56 AM Our problems are structural, and there's still a huge force behind the status quo. There are a large number of intelligent people who would still argue vehemently against your characterization of the past 10 years (I am not among them), and argue that we ought to "go back to them". The policies and relationships that made this happen are still the dominant conservative paradigm in the US and abroad, and I'm not convinced the liberals, on average, understand the problem enough to contribute positively to a solution. com/2009/02/17/slumps-and-spontaneous-re mission-wonkish/). When does the developing world's demand reach the point where the US does not have to be the consumption leader? That's when the economy will really recover: and global government policy is still a headwind and not a tailwind. It depend in how the government face this economic crisis and it seem that the Fed plan to keep printing money like there is not tomorrow to bail out all the banks, car industries, credit card companies etc.. and it would lead to hyperinflation or at least double digit inflation. We are just starting of this big crisis and let's pray that it will hit hard and fast and end in one or two years before we start a recovery. The worst is a decade long recession, it is better a sharp and painful recession but short in duration. Ajay February 18, 2009 04:17 AM What's held us back is tech, tech is the next logical step for this economy. The fact that the techies have been so abysmally stupid so as not to build a working micropayment system has held back all progress (content businesses like Businessweek could also have set up a micropayments system but content people are practically submental when it comes to tech and business issues). I just started working with a startup to make that happen so hopefully it'll happen soon. However, if we go under before we can release (we're currently looking for a round of funding), whether you win your bet or not will depend on whether someone does micropayments and how badly the government screws things up worse in the meantime on the downslide, as the governments of the late 20s and 30s did. It's all about timing, if and when these events happen has a lot to do with whether you win your bet. However, I believe micropayments will get done, as I'm trying to do it, so I'd bet on things going well. Bob Sloma February 18, 2009 09:09 AM I can only hope that things will get better. As an engineer, prior business owner, and now financial advisor, it has been a struggle to make any significant progress in my family's net worth situation since 2002. Even with a college education and advanced degree in finance, the search for the right mix of meaningful work, increasing (or at least steady) income and family life has been disappointing at best. I am happy to have had the MBA in finance in my back pocket to more easily facilitate the move from the tangible sector of the economy to the intangible. After over 20 years in the manufacturing industry, I had to throw in the towel and move to the service sector. I understand the importance of increasing productivity in the manufacturing world and indeed contributed to it. I feel it is a shame however that we as a country have not found other innovative ways to harness our ability to make things more efficiently than any other country in the world. CompEng February 18, 2009 02:25 PM Viking, you are touching on the essential question of the postmodern economy: how do we create enough new consumption markets to keep everybody employed? Else why would economists ask the bizarre question of how to keep people consuming. But honestly, while it's a step in the right direction, I doubt the power of such a concept to revitalize an entire economy any time soon. It takes a while for new usage models to gain critical mass, and it still ignores that digital content consumption is going to remain modest as a portion of a consumer's income: and therefore as a slice of the economy as a whole. The irony, as Barack Obama put it, is that that there are so many out of work when there is so very much to do. But that boils back to the very nature of capitalism, debt, and the monetary system: the people who have the money are good at creating or acquiring wealth, not spending it. The rest of us have not so much money as all this "worthless" individual talent. LAO February 18, 2009 03:46 PM Viking, Interesting that someone else's thoughts also go to the uncomfortable conclusion that there is already simply not enough work for everyone. Here are my best pollyanna thoughts: Some productivity will be hard to sustain as resources get used up, so manual labor may eventually experience renewed demand. People still need to work on the contributions to inefficiency in a broader sense -- friction, wasted heat, fishery decline, crop nutrition decline, etc. People need to dramatically improve the recycling story and stop making stuff that has no further use. Kartik February 18, 2009 03:54 PM If anything, the fact that the stock market's performance for the 20 years following 1939 were quite strong. HOWEVER, US real wages will NOT rise until China's per-capita GDP becomes about half the OECD average, which will be about 2017. Only after this barrier is crossed will US wages rise again. Furthermore, Americans who bought cars and houses so irresponsibly (there are idiots who owe $40,000 on a $25,000 car because they rolled in existing loan balances onto their next car) fully deserve a decade of hardship in terms of consumer spending. Products that were heavily dependent on cheap loans (houses, cars, and college tuition) will suffer. Paypal can already be used this way if both parties set up the conduit. Kartik February 18, 2009 04:01 PM Michael, Can you add charts of 1929-39 as well as 1998-2008, to illustrate your point? This would be more useful in plotting a worst-case scenario. Lord February 18, 2009 05:10 PM Ten years is a reasonably good time frame for a turnaround, but the next few may still get much worse. Joe Cushing February 18, 2009 06:50 PM I don't see it as a decade of despair because the we had booms and busts in the last 10 years. If it takes 9 years to recover, that will be the decade of despair. I think our economy is to clever to let big goverment get in the way of it. So even though the goverment keeps making bad moves to make us think they are helping, we will still be able to recover. Mike Mandel February 18, 2009 09:52 PM Kartik, I'll put the charts up tomorrow, when I am back in the office. I generally stick with round numbers because it reduces the temptation to cherrypick the data. Mike Mandel February 18, 2009 10:02 PM CompEng, Viking, I hate to be a broken record on this, but the question of "demand shortfalls" and running out of things to consume has come up repeatedly in the past. And always what has happened before is that new technologies created both new productive opportunities and the new demand. In 1945, there was enormous worry about what would happen to demand after the war spending stopped. But no one imagined that we would move into interstate highways, the suburbanization of America, and the massive translation of military technologies into civilian technologies. They are willing to pay (in money or time) for better health, for better education, and for better information and entertainment. CompEng February 18, 2009 11:08 PM Mike, you're right that it's not a new problem, and history certainly supports your argument. ...
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