The U.S. economy

[Glenn]

The Dow ends nearly 500 points lower -- its worst point drop in more than seven years -- as bank woes scare investors.

[MoTown]

Looks promising. I bet we can top that tomorrow.

[WTFchris]

The fundamentals are strong.

[xanadu]

This fall in value is really the ultimate outcome of bogus accounting that sprang from the deregulation of the 90s (starting with repub congress and clinton presidency) and has roots in reagan's 'the bill will never come due budget philosophy'. The deregulation has led to incredible information assymmetry in the investment market. only insiders have any clue about the value of most companies. Creative accounting tricks have been the rule more than the (enron) exception. Quarterly statements have always tended toward the misleading, but statements seem to be almost meaningless at this point. No one knows the true value of many publicly traded firms. markets with information assymetry are NOT efficient.

What has been the precident for prosecuting insider trading from enron? How many people were prosecuted for unethical conduct? There was no punishment for making shit up. eventually, these companies fall beneath the weight of their own incompetence. anyways, once the world realizes how little they actually know about corporate america, the whole system could really collapse at any moment. these financial institutions truely represent the roman leaders partied the night away while rome burned beneath them.

Companies like lehman bros. don't fall over night. their value has declined over the last few months based on when each type of investor learned about the reality: first high placed managers, 2) their friends, 3) high $ investors, 4) mutual funds, 5) index funds, 6) everyone else.

It could be the case that other sectors of the economy have been more truthful and it might be a mistake to pull money out now, but we don't know. Anyways, i stand by what i said in april.

the GDP measure in the US has a far different meaning now than in the 50s. In the 50s, most of the GDP was represented by infrastructure and manufacturing output. In theory, these types of outputs have inherent value. As our economy has transformed, GDP has increased via paper wealth and investments. If Worldcom stocks drops from $80 to $0, you have nothing to show from the supposed GDP. In comparison, if you had manufactured tractors and went bankrupt, you would still have the manufactured tractors existing somewhere in the economy. We are in currently in highly uncharted territority. The deregulation of the economy by republicans makes the water even murkier because business are essentially for regulating themselves and outsiders have almost no oversight of the accounting practices. In addition, a large portion of GDP growth had been mortgage equity, which resulted from skyrocketing housing and property costs. In fact, if it you wondered why reported economic data seemed better than actual conditions, now you know.



Nonetheless, this rebate will stimlate the economy some. Supply side tax cuts have very diffuse effects, especially now that we have global stock and currency markets. The greater the income disparities the less stimulated the economy is as the super rich spend much smaller % of income on consumer goods.

Perhaps, the bigger problem in the US is private debt. While always high, it shot up around Reagan's preidency and it has shot through the roof during the bush presidency, partly because of the extremely artifically low interest rates and the deregulated banking industry.



Another type of debt, which is not included in any of the above graphs is the deterioration in our physical infrastructure (roads, bridges, dams, water and sewer infrastructure). Most of this was built 50 years ago or more and in dire need of costly repairs. (imagine tearing out the streets of Manhattan to fix the sewer underneath.)

All in all, we are at the precipice of a debt cliff looking down into an abyss. Our economic indicators are out of whack because the rapid increase in debt has masked the stagnation in houesehold wage rates. The national debt is very concerning, but private debt is the real sword of Damocles hanging above our heads IMO. we'll see.

[Big Swami]

I've said this before, but I don't really care about the Dow or whatever. That's not "our" economy. That's the rich people's economy. Their economy can be perfectly fine while ours is in the shitter, so I don't care to hear about it anymore.

But if I did care about the rich people's economy, I'd probably be fascinated with the levels of delusion out there in the media. "Huge banks getting bailed out or sold for parts weekly; everything is fine."

[Uncle Mxy]

The Dow, bonds, and home equity constitute a lot of regular folks' retirement money. All are under siege.

[Wilfredo Ledezma]

You know it rebounded yesterday, right?


Blame Chris Dodd.

[MoTown]

And it was a great rebound. Go down 500 points, rebound 140 points.

Seems like a solid economy.

[Uncle Mxy]

This is as much about the failure of U.S. economic principles as anything.

This is socialism at the highest levels, the largest single nationalization of resources the world has ever seen.

Capitalism is pretty much dead.

[geerussell]

I've said this before, but I don't really care about the Dow or whatever. That's not "our" economy. That's the rich people's economy. Their economy can be perfectly fine while ours is in the shitter, so I don't care to hear about it anymore.

If you have any skin in the game beyond the cash in your wallet, there's some reason to worry. Mortagages and the financial instruments derived from them have poisoned the entire financial well.