Unemployment by industry: Recession or depression? - Eric Janszen

[labasta]

Re: Unemployment by industry: Recession or depression?

One point EJ.
You say "Its the big one unless they start a hugh works program by 2009"........."As big as post WW2"..........

Might i ask, how will they fund it?

Seeing how "O-be" just said he was to attack Afgan with everything he got!

Mike

I assume they'll fund it with inflation.

[grapejelly]

Re: Unemployment by industry: Recession or depression?

One point EJ.
You say "Its the big one unless they start a hugh works program by 2009"........."As big as post WW2"..........

Mike

yes of course...how will they fund it...and more than that, how is this any different than what failed in the 1930s in the US and in the 1990s in Japan?

How does printing money, and/or taxing people even more, and then spending the money on public works, get people saving and investing again...?

These sectors facing depression or recession, wouldn't they be better off if they were sending fewer/no dollars to Uncle Sam, so the owners could re-invest in their business, cut costs, and turn a profit?

Isn't what we have in the US a lack of savings and productive investment, in these sectors that EJ has enumerated?

And won't taking more money away from people, either through currency depreciation (inflation) or taxing, cause these companies to be even worse off?

[kingcopper]

Re: Unemployment by industry: Recession or depression?

Boston University froze all new hiring two or three months ago.

The "Mega Monkey" had some great quotes a while back regarding our universities and their future income deflation. He told some kids and their parents to wait for Universities to drop their prices because no one would be able to afford tuition much less receive a loan to pay for tuition. Our universities will suffer soon enough.

[Wild Style]

Re: Unemployment by industry: Recession or depression?

Boston University froze all new hiring two or three months ago.

has their been talk of layoffs yet? We have a state school down here Florida Atlantic University (not to be confused with Florida International University). They started a hiring freeze as of June but they haven't started laying off yet. Hope it doesn't come to that.

[Slimprofits]

Re: Unemployment by industry: Recession or depression?

has their been talk of layoffs yet?

Not yet. Here is more from UPI and NYT: Colleges feel economic slump

Cornell, Brown and Boston University have announced selective hiring freezes while Arizona State University this week ended contracts with an estimated 200 adjunct teachers, The New York Times reported Saturday.

Tufts University this fall suspended new capital projects and said it may not be able to maintain its "need-blind" policy of admitting the best-qualified applicants and then meeting their full financial needs, the Times reported.

And on a side note, if we're looking for a sector in which business is up other than thrift stores, people all over the globe are choosing cremations over burials at a higher rate.

[rabot10]

Re: Unemployment by industry: Recession or depression?

Thanks for being honest EJ - it is not a nice picture. But the good news is I don't work in those kind of industries. I am now working on my plan to get through this in one piece. (my family if U know what i mean)

I am going to kick some ass and make this a real win for my family and friends - it's not that hard if u know whats coming! Hope U all do well.

Your Friend
rick

PS look at the post "Time at last to Short the Markets" to make money! I'm making a killing lol - OK not enough to off set my PM loses - but lots

[Munger]

Re: Unemployment by industry: Recession or depression?

Well, your work as usual is very helpful, comprehensive and well done, EJ.

But as usual in this case your conclusion could not be more wrong.

What we need to forestall depression are measures such as:

1. repeal tax on dividends

2. repeal capital gains tax

3. repeal income tax on corporations

4. END THE WARS so that taxes can be lowered

5. Did I mention END THE WARS?

6. End the bailouts of companies that should go belly up

The whole problem with our economy is encouraging consumption, discouraging savings and discouraging investment.

"Stimulus" is more of the same, depreciating stores of private savings, thus dis-incentivizing savings and investment, and encouraging consumption.

Ugh.

Bah - following these policies would exacerbate our problems. The issue isn't so much that Americans don't save enough - even though many clearly don't/can't. The issue is that wealth disparity has increased significantly over the last 30 years due to tax-cuts and productivity gains that have benefited the investor-class only.

As an example, imagine all money were held by a single person - Investor. Investor clearly has more money than he knows what to do with - so, he decides to put it to work in the economy by building a widget factory. Investor rightly expects to earn a return on his investment (he should know this is not possible as he already has all of the money, but I digress).

So he starts producing widgets - but he can't sell any, as no one else has any money. One possibility at this point is that Investor pulls his money out of the widget operation: if he cannot increase his share of the wealth he might as well keep what he has by putting it all in his vault.

Another possibility is that Investor may loan a bit of money to Consumer. Consumer uses this borrowed money to buy a few widgets and Investor gets this money back via his factory operation. Now Investor has all the money again, and expects his loan to be paid back with interest. But, since Consumer spent the money he borrowed and has no more, and Investor again already has all of the money, Investor finds that Consumer cannot pay him back. Investor may eventually realize that he cannot get more money than he started with, but this is beside the point: Investor stops making loans to Consumer; Consumer can no longer buy widgets. At this point Investor pulls his money out of the widget operation and puts it safely in his vault.

All the money in existence is again sitting in Investor's vault, but he has learned a valuable lesson: investing his money is pointless since he already has all the money there is to be had.

Now, there are still humans willing to labor to create goods and services - Consumer is willing to work at the widget factory - but there is no incentive for Investor to make widgets and pay Consumer if he cannot increase his share of the money.

Come now Keynes and Friedman to the rescue: government can create jobs and money to pay for these jobs to get Consumer laboring again to create goods and services. Consumer running around with money to spend may encourage Investor to begin operating his widget factory again.

Investor is really not too pleased about this, as he no longer has all of the money in existence. But it matters not: after Consumer gets paid for building a road that both Investor and Consumer may drive on, Consumer drives down that road to the store to purchase a widget. So in the end Investor ends up with all the money, only now there is a road and a widget as well.

So say what you might, but Bernanke is a very smart man, as is Volker, Buffet, etc. They understand this story well; Phil Gramm and Ron Paul do not.

But is it really true that supply-side economics is FAIL and Keynesian demand-stimulus works? Yes.

[dbarberic]

Re: Unemployment by industry: Recession or depression?

Probably the most sobering and direct to the point piece I've read on iTulip in awhile.

Ugh...

[Slimprofits]

Re: Unemployment by industry: Recession or depression?

Wildstyle, more about higher education here: More Schools Impose Hiring Freezes

[Basil]

Re: Unemployment by industry: Recession or depression?

Boston University froze all new hiring two or three months ago.

Several universities have done the same. Though I do actually know of two faculty searches at BU that are going forward.

Universities are hit from three sides: 1) shrinking endowments, 2) shrinking donations, and 3) students that can no longer attend (daddy worked for Lehman or something along these lines). In addition many students have been getting smart and realizing that if they take an overload they can get out of school in 3 or 3.5 years, i.e. for up to 25% less. If inflation picks up again, then universities will get whacked on a fourth front.

Many state school systems have invoked pay freezes for faculty. I would predict that several private schools will soon do the same. Down the line, though perhaps as early as next year, some colleges and universities will begin to let go of untenured tenure track faculty in good standing, as they will not be able to get rid of the senior faculty members whose 401ks have shrunk. The best schools will avoid this like the plague, but some will not be able to do so.

Some university endowments were heavily invested in the new fangled 'low risk high return' products being sold by Lehman and others. A friend of the family who advises Columbia University said she could not believe where they have been putting their money. She predicts that their endowment will be halved. George Washington University has let most of the endowment ride on down town real estate and their debt exceeds their endowment. That may not turn out well.

At the end of the day some colleges and universities will go under. Some may even merge.

[grapejelly]

Re: Unemployment by industry: Recession or depression?

Bah - following these policies would exacerbate our problems. The issue isn't so much that Americans don't save enough - even though many clearly don't/can't. The issue is that wealth disparity has increased significantly over the last 30 years due to tax-cuts and productivity gains that have benefited the investor-class only.

No, that isn't the issue at all. The rich/poor gap is a result of some participating in the FIRE economy and making outsized gains, and the rest in the producers & consumers economies paying for those gains through currency depreciation and taxes.

So you lost me already. But then you write:

As an example, imagine all money were held by a single person - Investor. Investor clearly has more money than he knows what to do with - so, he decides to put it to work in the economy by building a widget factory. Investor rightly expects to earn a return on his investment (he should know this is not possible as he already has all of the money, but I digress).

This is already too far into the land of fantasy rather than a thought experiment, I am afraid.

Let's say investors are holding onto their money and not investing, as you posit.

Question: will "priming the pump" get things moving again?

Why aren't investors investing? Because their return by stuffing their money in a mattress exceeds the return by investing.

So what you do is, let the market forces go to work. Let people keep their money instead of taxing it away through currency depreciation or direct taxes.

Entrepreneurs will borrow money and invest. Interest rates will rise. There will be a return on capital. More capital will be invested.

If instead, you tax and depreciate and "stimulate", there will be no pools of capital to invest. Taxes and currency depreciation provide a negative return on savings, a disincentive to save and invest. If you invest and make money, you are taxed heavily. If you just keep your money on the sidelines, you lose it more gradually through currency depreciation.

In this "you are screwed" world, you are more likely to spend your money and not invest it at all. Consumption is more rational than losing it altogether.

That's where we are at right now. Keynsian solutions steal money from where it would be employed productively, and incentivize consumption rather than savings and investment.

[labasta]

Re: Unemployment by industry: Recession or depression?

Thanks for being honest EJ - it is not a nice picture. But the good news is I don't work in those kind of industries. I am now working on my plan to get through this in one piece. (my family if U know what i mean)

I am going to kick some ass and make this a real win for my family and friends - it's not that hard if u know whats coming! Hope U all do well.

Can you give me a few tips?

[tombat1913]

Re: Unemployment by industry: Recession or depression?

Well, your work as usual is very helpful, comprehensive and well done, EJ.

But as usual in this case your conclusion could not be more wrong.

What we need to forestall depression are measures such as:

1. repeal tax on dividends

2. repeal capital gains tax

3. repeal income tax on corporations

4. END THE WARS so that taxes can be lowered

5. Did I mention END THE WARS?

6. End the bailouts of companies that should go belly up

The whole problem with our economy is encouraging consumption, discouraging savings and discouraging investment.

"Stimulus" is more of the same, depreciating stores of private savings, thus dis-incentivizing savings and investment, and encouraging consumption.

Ugh.

Yes, there's a man speaking sanity! Less unproductive government jobs, less war, less tax.

just one more little thing, END THE FED!

[Masterburg]

Re: Unemployment by industry: Recession or depression? - Eric Janszen

I am new on this Forum, here from Luxemburg; situation is getting tougher here too..

Now, concerning recession or depression, inflation or deflation, I found this good article from Hugo Salinas Price on http://www.plata.com.mx/mplata/artic...iidarticulo=89

concerning the sudden schrink (or sudden stop in exponential growth) in the Reserves of World's Central Bank.
As he explains:

'It seems to me that when a huge number such as USD7 trillion suddenly stops growing, it must indicates that someting very serious is going on..'

What could be the explanation ? Financial heart attack ?

et merci a EJ et a tous les bloggers..

[SBell]

Re: Unemployment by industry: Recession or depression?

4. END THE WARS so that taxes can be lowered

5. Did I mention END THE WARS?

I definitely agree with "end the wars" but aren't both Afghanistan and Iraq "off budget" anyway? We're not paying higher taxes to fund them (if we were the wars would have ended a long time ago), we're simply borrowing the money. So ending the wars only means not having to borrow the money to fund them. It can maybe reduce the taxes on the future generations that have to pay the borrowed money back, but I don't see how it could affect current taxes?