Economy Slowing Again

Just an FYI. My company just announced a shutdown for July 4th. Not good news for the economy. We have been seeing orders being pushed out for machines, even in Asia. Not a good sign. My company is ususally the first to see slowdowns.

I've read rumors over the past week that JP Morgan Chase is preparing for another Lehman like disaster in the coming months.

Whats your field of work?

What is even worse for the economy than a slow down of orders is the internet buzzing with talk of a slow down. These economic self fulfilling prophecies are amazing to comprehend. I've been listening to the Euro news and then I see this and then I see DHS suggest JPMC could be in trouble. All that makes me start thinking about putting more away in savings "just in case" (not saying I am going to until I really start things getting bad). Multiply that times the entire population of the country with disposable income and it is amazing to contemplate what just a few news stories and internet buzz can do.

Unfortunately, we all have to pay for the many (and the corporations that enabled them) that lived beyond their means during the past dozen years. And now we'll all have to pay for some Euro governments that took on too much debt assuming the good times would never end.

OK here's my take : The economy and personal debt is in free fall and has has been for some time .

The economic razzle dazzle games that have been played by both the private and public sectors coupled with the outrageous nonsense proffered by Bennie and the FEDS has artificiallly buttressed the data for the past several years. The stock market simply is too volatile and subject to manipulation and mass psychology now . During the the period 1982 - about mid 'oo's it was a reasonable strategy for many now it is a sucker's bet . especially for anyone within a decade of retirement or those in retirement . its fine to buy in but make sure you are balanced and have ample reserve of safe resources .

This scenario is not a solid foundation upon which to project anything of rational econometric modeling INHO


the D word will never enter into the lexicon yet the situation is dire

o3jeff said:

Whats your field of work?

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Physicist for a semiconductor equipment, so when chipmakers see a slowdown in orders. We are at the front of the line. Very cyclic business but in the last few years we have been more cyclic.

Warp Daddy said:

the D word will never enter into the lexicon yet the situation is dire

Click to expand...

Dire? DIre is Spain and Greece.

The stock market is not the economy. People put too much, um, stock in the stock market. It is important but it isn't the end all be all. It puzzles me why whether the market is either up or down is even reported in the news. If you are an investor trading daily or invested in specific stocks, you already know what is going on because you are following it. If you are invested in a 401k or mutual funds, then you are in it for the long term (or you SHOULD be) so what the stock market does is irrelevant on a yearly basis, let alone a daily basis. If you are retiring soon, well, you really shouldn't be in stocks and if you're retiring in a few years, you shouldn't have much left in stocks except enough to hopefully offset inflation.

What is going to drive the economy diving again is people stop spending, businesses stop selling, businesses stop spending, and jobs get eliminated... further perpetuating the cycle. If the banks tighten up on lending because of problems in Europe, that further decreases spending and hurts more. None of this is caused by the stock market though of course the stock market will be effected and could effect those with poor investment choices. Market doom and gloom is a joke. What is happening in Europe though is pretty crazy.

Buy gold.

Maybe this sounds unpatriotic which isn't the case at all, I love the USA and think we live in the greatest nation on the earth, but broader than that there has yet to be in the history of humankind a civilization that has endured for perpetuity. They all come and go, eventually. I think technology could potentially play a huge role in the next evolution of human governance, many of the structures we see in the world (states, nations) are based on location and the historical difficulty it has been to communicate quickly. With that changing so rapidly, I think the notion of borders becomes more endangered.

I don't know if that's a good or a bad thing. I just think it's a thing. You can't underestimate the ability for someone in any corner of the globe to communicate instantly with someone on some other corner of the globe.

I think our government very much agrees with you Nick, hence why we have bases on every corner of the globe.


Now, regarding the economy, I think a painful, but good first step would be to re-establish the gold standard. IMO it would offer better long term economic stability with fewer booms and busts.

It seems en vogue to favor a return to the gold standard whenever there is an economic downturn. I think it is a lot easier for folks to comprehend a gold standard than fiat. Gold doesn't make sense to me for abstract reasons. My biggest concern against it is that it limits economic growth. So to advocate for the gold standard, you need to look around at all your toys and understand that we might not have them right now with a gold standard. Or at least, they would have and would develop much more slowly since economic growth drives tech. Sure, fear the boom and bust, but much of that has to do with other factors besides currency system. If we had better regulation of the banking sector, for example, the growth would not have boomed out of control, poor people would not have bought crazy ARMs doomed to default, and banks would not have set a bust up. 100% Free market is an awesome thought in theory but a failure in practice. If you regulate (and keep regulating as new devious "products" are created to side step the fail safes), then the boom/busts won't happen.

Well, you can't print gold and it seems to me that apt comparison of printing money when you got a problem is like feeding the addiction of a drug addict instead of fixing the problem. You print some money to temporarily solve a problem/addiction, but you create a bigger problem down the road that requires even more stimulus to achieve a fix.

Regarding greater regulations, how can that happen when the "Fed" are the banks themselves? They're never going to write policy that could harm short term profits and devalue their stocks.

It's obviously a very complex problem that I am no where near smart enough to know all the answers, but from what I do know, I have little faith in our current Fed pulling the purse strings and relying on fiat as the benchmark. Far too much room for corruption and manipulation.

You can say that such concepts will restrict economic growth, but when the growth isn't real, what does it matter?

Very GOOD discussion between you two!! Would have loved to have you both in one of my classes!!

That said ,you are both actually not only making fine points in the analysis but ALSO hitting the nub of the issue as convoluted and occluded as it has become .

As you undoubtedly know economic thinkers have been struggling on this VERY question for centuries

Given the the state of geo-politics and yes even inter-locking directorates that often occur between and among the sectors and major rain-makers across the global economy TODAY ,it is apparent that the WILL of the FED/SEC to OBJECTIVELY regulate is seriously compromised by ANY number of these factors .

Without sounding like some extreme conspiracy theorist the web of "connectedness" has completely acellerated the issue . When you think of the crazy derivatives that were bundled without either underestanding them coupled with the moronic rapid expansion of credit/mortgages to those with compromised FICO scores and the various "bubbles" that resulted it is clear that the web of inter-connectedness is driving this with little concern for downside effects.

I am NOT even going to go into foreign policy here because the last 10 yrs speaks for itself


So what is the answer : H',mm lets think about that one for a minute !! Both arguments make some grains for reason yet each has its flaws as you two pointed out . So in effect it is a moving target and the willof the voters is going to be measured once again this fall so we'll see .

I'm betting on some tweaking BUT NO REAL systemic change

Just curious...when was the last time we had an economy that was growing based on real factors and not those inflated by things like real estate price bubbles? And sorry if I oversimplify things, I'm just a lowly engineer...

I never bought the farce that the economy was getting better in the first place. I own two small businesses...I can tell lol...

The job numbers that came out last week should not have been a shock to anyone.

My suggestion is real simple....take your stocks and make them less risky for the next 5 years. That way the hit will not be so bad. That way what you gained since January will not be wiped out completely in May.

To trust the stock market is a bad move.
To trust the media and its reporting of the economy is a bad move.
To trust any politician (particularly now with the election) when they speak of what they will do...or continue to do is a bad move...


But to trust yourself based on your personal life and within its boundaries...thats the only right move at this juncture..

I think the trouble with a gold standard is that it prevents the value of a currency from floating. This is what is killing Greece. The Euro is like a gold standard for them since the value of the Euro doesn't float based on the Greek economy. So when the Greek economy is weak, they can't reduce the value of the Euro to reduce wages and increase exports. Instead they just have to keep borrowing money and head for default. People will riot if you try to cut their benefits and wages, but won't riot if you devalue the currency. So floating currencies are what make a global economy work.

I think the U.S. economy is doing pretty well compared to the rest of the world. We are still sending a lot of our wealth overseas to buy oil and manufactured goods. The higher car mileage standards and greater use of natural gas should help reduce the amount of foreign oil we buy over the next decade. And I think the migration of manufacturing jobs to what used to be cheap labor in the far east has slowed down considerably. Another problem is excessive executive pay with the corrupt board system is killing middle class income and jobs. I'd like the see the feds address that corruption, but unfortunately most of the politicians are for sale so they won't act.

There are still some lean years ahead for the U.S. but my guess is things will slowly improve over time. If Europe would hurry up and get Greece and other weak players out of the Euro currency, that would help things considerably.

Friday’s Economic Data Dump Wasn’t All Bad News
...Macroeconomic Advisers, which plugs every bit of new incoming data into its existing model and continually updates its projections, said today that, after the flurry of data this week, it believes the U.S. economy is growing at a 2.4 percent rate in the current quarter. That's faster than the rate of growth in the first quarter....
http://finance.yahoo.com/blogs/daniel-gross/friday-economic-data-dump-wasn-t-bad-news-180914715.html

Personal income up.
Spending up.
Auto manufacturing way up.
Housing activity up.
Construction spending up
...Yet the media focuses on the poor jobs number.


The silver lining.

Interesting I'm getting the opposite take from our customers. I work for contract manufacurer and two of our largest customesr manufacture instruments for the semiconductor manufacturers. Both of these customers are doing extremely well this year, much improvmenet over the last few years. I just received very large order from both of them.
Talking to our other industrial customers most are seeing growth this year, many in the double digits.

This on a broad base may at best a jobless recovery . There ARE "winners" in the various sectors of the economy, but not all boats are rising on that . The Question seems to be when will real GNP growth unbuttressed by interest rate fluctuations to the lowest levels in history be able to SUSTAIN broad based employment across all sectors ?

Many job hunters have foregone searching while others have been impacted by the slippage of FTE 's with the imbalance coming in with an increasing emphasis on PART time employment less than FULLTIME employment .

The hot sectors cited "may possibly " be an anomaly reflective of pent up demand that resulted from conservative business plans of recent times . Just dealing with the Macro level level

I'm doing great financially...
All my friends are working..
My house is almost paid for..
I have no debt except a mortgage..
I'm back to giving a lot to charity...
My 401k - although a bit flat now is doing well..

But from where I sit - things are doing well.. The company I work for is kicking ass and can't hire people quick enough..
I can't find enough people to staff IT jobs around the country and it kills me. We are moving our outsourcing from India to the Philippines. Indians want too much $ now..

I know construction is suffering.. But you had to see the construction slowdown coming... I did and I don't even work in construction.

We need people to learn for the jobs of the future..
While we were sending our kids to wars other countries were preparing their youth for the future.

The recovery is slow... But I have patients and believe that it is happening the correct way.. It may not put people back into McMansions but it doing well for me now..

PS: My year hiatus is over.. But don't try to drag me into any AZ drama... Not going to happen... Peace y'all... Until next time!