Roubini: “We Are in ‘Worse Situation Than in 2008”

[Veritas]

“The world’s developed economies are trapped at the stall speed of low growth and need to have greater fiscal stimulus and less austerity to kick-start growth, leading economist Nouriel Roubini told CNBC Friday. This time around we have fiscal austerity and banks that are being cautious.”

http://www.cnbc.com/id/44368995

What’s next?

[CA renter]

While Roubini certainly deserves a lot of respect, I have to disagree with him about what will save our economy. The first thing we need to acknowledge is that it is not salvageable at this level. People keep pretending that it’s 2005, and that we’d all be hunky-dory if not for that “financial crisis” that “came out of nowhere.”

The financial crisis has its roots in the trickle-down economic policies that began in the early 80s. The notion that we could reward speculation over labor, and somehow create a thriving economy from buying and selling things at greater prices and with higher debt levels was and is absurd. The idea that we could impoverish the majority of our population (by outsourcing their jobs) so that the capitalists who produce nothing could become wealthier and wealthier is completely ignorant and totally dismisses psychology and human behavior, not to mention simple math. A healthy economy will ALWAYS require us to actually MAKE things that can be sold here and abroad. A healthy economy requires JOBS for people so they can continue to buy goods and services from one another. There is no other way.

As it stands, if they insist on keeping the majority of Americans in perpetual poverty, and if they insist on growing the wealth/income divide even more, then they must understand that prices of everything will continue to fall to such levels that the majority of Americans (and other poor people around the world) can afford to pay for them.

At the very least, they should understand what is causing our “crisis” before they come up with more hare-brained “solutions” to the “crisis.”

[carlsbadworker]

Agree with CAR. The reason deadbeats use their houses as ATM is because they have no where else to get money for consumption. Productivity growth has been high since early 80s yet almost all economic gains went to corporations rather than workers. It should come as no surprise that we are facing weak demand. Asking the nation to have more debts either through the private sector or through the public sector is not a solution. On the contrary, we need to provide workers more income to pay off their debt. Well, I know it is easy to say than to be done, but help and encourage savings is the only way to get out of this mess.

[paramount]

Great post CAR.

My Question: are we still in a crisis or is this our new bleak reality?

[paramount]

[quote=CA renter] A healthy economy will ALWAYS require us to actually MAKE things that can be sold here and abroad. [/quote]

It’s pretty clear based on the thuggish actions by the justice department last week against Gibson guitars that someone doesn’t want American’s making stuff.

[temeculaguy]

Macro Economics 101, try to ignore the rhetoric and look at the big picture because there are a lot of myths out there. Here are some facts:

1. The U.S. is the largest economy in the world, it’s 2010 Nominal GDP was 14.7 trillion, representing 25% of the global GDP (with 4.5% of the population).

2. The U.S. purchasing power is the largest in the world, representing 20% of the global purchasing power (with 4.5% of the population).

3. It has the 6th highest output per capita (the first five are small countries with populations of less than Los Angeles and half are smaller than San Diego)

4. The U.S. is the world’s largest manufacturer, representing 19% of the worlds manufacturing (with 4.5% of the population).

5. 1/3 of the worlds millionaire and 1/3 of the world’s billionaires. The largest stock exchange, the largest gold reserves and 60% of the world’s reserves are in the dollar, it’s nearest competitor (the euro) has 24%. 139 of the 500 largest companies in the world are American, that’s just under a third. (with 4.5% of the population)

6. More foreign money is invested in the U.S. by far at 2.2 trillion, double the second largest, but this will shock you, Americans own more of the rest of the world than anyone, 3.3 trillion. So it might look like like other countries own our stuff, but we own theirs, and more of it.

So step back a bit before thinking that all we make are stocks and ponzi schemes just because someone says so or because certain industries have been downsized. WE ARE 4.5% OF THE WORLD”S POPULATION!!!!! What numbers will make you happy? Should we manufacturer or own half of all things? 75%? We are the New York Yankees times 10, we have everyone else’s best pitchers and you are angry because we don’t also have everyone else’s 2nd best and 3rd best. So we’ve fallen on some rough times, so has everyone else, but we have an invincible formula. On the other threads about schools, they are dominated by educated Asians who are….drumroll please…who are now Americans! That’s the beauty of it, we don’t get behind, because people around the globe who are smart or rich consistently do one thing, the become Americans. Guess how long we’ve held the number one spot as the world’s largest economy, every freaking day since 1870!!!!

Have a glass of wine and relax, the other 95% of the humans get to eat when we let them and have the standard of living we permit, do we really need to push for more control, wealth and power? Do we have to have everybody else’s lunch before we stop and eat our own?

[CA renter]

[quote=paramount]Great post CAR.

My Question: are we still in a crisis or is this our new bleak reality?[/quote]

We are still in a crisis, and will continue to be in a crisis until and unless the “collective awakening” happens. People are still defending those who have destroyed us (the capitalists), and have turned against the few who are still willing and able to fight on behalf of working people, and who might still have enough power to challenge those who’ve decimated our job base and who are trying to turn us into a Third World nation (the unions and union workers — whether you like them or not, they are our last hope). As individuals, we have nowhere near enough power to overcome those who seek ever-growing profits at all costs.

The PTB control money flows, and by way of political corruption and public propaganda, they are quickly gaining control over our natural resources, public assets, and public revenue streams. We have to stand together as working people and DEMAND a reversal of the wealth flows that have occured over the past few decades. Most importantly, we cannot allow them to divide us, whether it’s Democrat vs. Republican, or public vs. private worker, etc. That’s how they gain power — they have played our weaknesses like nobody’s business. We need to ignore the emotional rhetoric and FOLLOW THE MONEY.

[CA renter]

[quote=temeculaguy]Macro Economics 101, try to ignore the rhetoric and look at the big picture because there are a lot of myths out there. Here are some facts:

1. The U.S. is the largest economy in the world, it’s 2010 Nominal GDP was 14.7 trillion, representing 25% of the global GDP (with 4.5% of the population).

2. The U.S. purchasing power is the largest in the world, representing 20% of the global purchasing power (with 4.5% of the population).

3. It has the 6th highest output per capita (the first five are small countries with populations of less than Los Angeles and half are smaller than San Diego)

4. The U.S. is the world’s largest manufacturer, representing 19% of the worlds manufacturing (with 4.5% of the population).

5. 1/3 of the worlds millionaire and 1/3 of the world’s billionaires. The largest stock exchange, the largest gold reserves and 60% of the world’s reserves are in the dollar, it’s nearest competitor (the euro) has 24%. 139 of the 500 largest companies in the world are American, that’s just under a third. (with 4.5% of the population)

6. More foreign money is invested in the U.S. by far at 2.2 trillion, double the second largest, but this will shock you, Americans own more of the rest of the world than anyone, 3.3 trillion. So it might look like like other countries own our stuff, but we own theirs, and more of it.

So step back a bit before thinking that all we make are stocks and ponzi schemes just because someone says so or because certain industries have been downsized. WE ARE 4.5% OF THE WORLD”S POPULATION!!!!! What numbers will make you happy? Should we manufacturer or own half of all things? 75%? We are the New York Yankees times 10, we have everyone else’s best pitchers and you are angry because we don’t also have everyone else’s 2nd best and 3rd best. So we’ve fallen on some rough times, so has everyone else, but we have an invincible formula. On the other threads about schools, they are dominated by educated Asians who are….drumroll please…who are now Americans! That’s the beauty of it, we don’t get behind, because people around the globe who are smart or rich consistently do one thing, the become Americans. Guess how long we’ve held the number one spot as the world’s largest economy, every freaking day since 1870!!!!

Have a glass of wine and relax, the other 95% of the humans get to eat when we let them and have the standard of living we permit, do we really need to push for more control, wealth and power? Do we have to have everybody else’s lunch before we stop and eat our own?[/quote]

IMHO, this says it all right here:

http://3.bp.blogspot.com/_v3_kw7R30BI/SPdjzUeM9DI/AAAAAAAAADk/cwSlKhfq9Lw/s1600-h/finshv.jpg

Note what happened the last time we saw something like this.

I’m concerned not about aggregate wealth in this country, as there is no doubt there are some exceptionally wealthy people here. The important questions are: how was this wealth “earned,” how is it allocated, and why? What are the long-term consequences if this trajectory is allowed to continue?

We need to fix what’s wrong in our country first, then we can worry about what’s wrong in other countries. We have a lot of work ahead of us.

[sdrealtor]

AMen Brother TG! And make it a good glass of wine not that cheap stuff in a box:)

[an]

[quote=sdrealtor]AMen Brother TG! And make it a good glass of wine not that cheap stuff in a box:)[/quote]
+1

[briansd1]

Sometimes I agree with you, CA renter. You are correct that we have structural problems. Those are long-term problems that need to be addressed.

But Roubini is correct also. We need to to something to create jobs today. There are short-term things that the government can do to provide jobs and build insfrastruture.

Of course, in the big picture, Temecula Guy is correct. America is wealthier than ever before. But our proportional wealth to the rest of the world is declining. That is anxiety inducing to many.

Real Americans don’t like it when the new worldly foreign students come here to attend the best universities and drive Lexus to class. Then they move on to take the best jobs, surpasing the native Americans’ own children.

Real Americans are more confortable with the immigrants being the tired, the poor, the huddled masses yearning to breathe free…. something to do with paying dues.

TG is clearly comfortable in his own skin and he’s not stressing about his position to the rest of the world. That’s a healthy way to look at life. As long as the pie is growing, we are all good.

[EconProf]

[quote=CA renter]The financial crisis has its roots in the trickle-down economic policies that began in the early 80s. The notion that we could reward speculation over labor, and somehow create a thriving economy from buying and selling things at greater prices and with higher debt levels was and is absurd. The idea that we could impoverish the majority of our population (by outsourcing their jobs) so that the capitalists who produce nothing could become wealthier and wealthier is completely ignorant and totally dismisses psychology and human behavior, not to mention simple math. A healthy economy will ALWAYS require us to actually MAKE things that can be sold here and abroad. A healthy economy requires JOBS for people so they can continue to buy goods and services from one another. There is no other way.

.”[/quote]

CAR, not sure what you mean by the trickle-down policies of the 1980s, but assume it is the supply-side, incentive-based policies of the Reagan years: cutting marginal tax rates drastically, closing tax loopholes, and deregulation. The result, once the policies fully took hold in about 1984, was a rapidly expanding economy (7 & 8% YOY in some quarters, compared to 1% so far this year), a rapidly falling unemployment rate, and a steadily falling rate of inflation. American living standards and consumption increased accordingly, as we freely chose to buy more foreign-made cars, clothes, tools, and appliances made in factories where no American unions dictated work rules and pay. From your post, it appears you would like to limit American consumers to US made goods in the above categories. I wonder what prices we would pay, and what quality we would get. Do you really want to let Detroit have that kind of power over our car-buying public?
Free (or freer) trade is always disruptive. There are winners and losers. The losers are easily identified, vocal, and elicit our sympathy and that of the superficial mainstream media. The winners are the broader consuming public, who are far more numerous but not organized into a lobby with any clout.
Another winner is the US exporters, who capitalize on American advantages in certain goods with higher labor skills and costs than the rest of the world. Let the Indonesians and Indians do the drudgery of making shoes and shirts–our workers won’t go back to that job.

[The-Shoveler]

Just my two cents.
I think we are almost in the same spot as we were in 2008 (with the exception of TV of course, just kidding).
Nothing has changed much.
it’s still the same problem, HOUSING.
In CA approx. 30 % of home owners with a mortgage owe about 100K more than they can sell for, sorry you just cannot have an economic recovery in conditions like that.
Probably the same amount who paid 100K more than they can sell, (that’s real money to most people).
12 % unemployment in SoCal and no credible plan to put them back to work (I guess it’s nice if no one in your hood works in construction).

The bad debt did not go away, it just got transferred to the Gov. so yea very close to 2008, not much has changed.

[EconProf]

[quote=temeculaguy]Macro Economics 101, try to ignore the rhetoric and look at the big picture because there are a lot of myths out there. Here are some facts:

1. The U.S. is the largest economy in the world, it’s 2010 Nominal GDP was 14.7 trillion, representing 25% of the global GDP (with 4.5% of the population).

2. The U.S. purchasing power is the largest in the world, representing 20% of the global purchasing power (with 4.5% of the population).

3. It has the 6th highest output per capita (the first five are small countries with populations of less than Los Angeles and half are smaller than San Diego)

4. The U.S. is the world’s largest manufacturer, representing 19% of the worlds manufacturing (with 4.5% of the population).

5. 1/3 of the worlds millionaire and 1/3 of the world’s billionaires. The largest stock exchange, the largest gold reserves and 60% of the world’s reserves are in the dollar, it’s nearest competitor (the euro) has 24%. 139 of the 500 largest companies in the world are American, that’s just under a third. (with 4.5% of the population)

6. More foreign money is invested in the U.S. by far at 2.2 trillion, double the second largest, but this will shock you, Americans own more of the rest of the world than anyone, 3.3 trillion. So it might look like like other countries own our stuff, but we own theirs, and more of it.[/quote]

A good recitation of where we stand in an absolute sense. My worry is that the trend in each of these categories is deteriorating of late. Our wealth and power are the result of democratic capitalism and (relatively) free markets for a couple of centuries. The past decade has seen an erosion of the forces that made us great. We must rediscover the importance of incentives in every sphere: taxes and regulation, public spending, unions and labor policy, and the moral hazard of handouts to both individuals and corporations.

[SK in CV]

[quote=EconProf]CAR, not sure what you mean by the trickle-down policies of the 1980s, but assume it is the supply-side, incentive-based policies of the Reagan years: cutting marginal tax rates drastically, closing tax loopholes, and deregulation. The result, once the policies fully took hold in about 1984, was a rapidly expanding economy (7 & 8% YOY in some quarters, compared to 1% so far this year), a rapidly falling unemployment rate, and a steadily falling rate of inflation. [/quote]

Really? That was the result of supply side economics? Irrespective of any other influences. You have some empirical evidence to back that up? Nevermind, I know the answer. It is merely wishful thinking, blinded by ideology. Scientists don’t succumb to that.

[Author]

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