How do you see this reccession ending?

The idea of "minimum wage spiral" as if it were some sort of absolute law or especially something to strive for makes me want to go all communist.

It's as if competition between firms doesn't serve to keep prices down, even if costs go up, and that companies price goods by adding up all their costs and tacking on their desired profit, the demands of the market be damned.

It's just insane to me.

Now I perfectly understand in some cases that margins might be so low that increases in costs might result in a direct requirement to raise wages or risk going out of business. I just see little to know reason to think that this is the case in a majority or even a significant minority of cases.

Democracy is the process in which we determine the government that we deserve

as I recall..hasnt there been somewhat slow but steady increases in GDP for quite some time now? I'm pretty sure thats a sign the recession already friggin ended. Its just that as any decent economics course will tell you, its gonna be years before we really fully head into a boom cycle >.>

The problem is that the GDP gains of the last decade have conspicuously failed to benefit the average worker.

Consumer confidence isn't determined by how much cash corps are sitting on. It's determined by whether they can get a job and whether they can afford to live.

Blind Final Fantasy 6 Let's Play

Exactly, if we were to beat even a fraction of the wealth they've stashed away out of them, we could eliminate the deficit ($1.1 trillion) or even the debt ($14.2 trillion) without even blinking and they would STILL be obscenely rich. The wealthiest 25% own 87% of this nation's net worth, amounting to $54.2 trillion, and the top 1% own 50.3%, or $30.8 trillion.

Except that even those machines still need some people to make sure they work, and those people are overwhelmingly Chinese sweatshop labor today. Where does the difference between the coolie's earnings (or lack thereof) and the value of their work go? To fat cat American investors, just like johnnyfog said.

Unless of course NO employer offers decent wages, in which case the only options are striking or starting a competitor. Oops, no labor unions and nowhere near enough credit for new ventures to overcome monopoly pressure.

No economic system expects people to be paid more than they produce, since it would require running in the red, that pithy Marxist motto is the practical goal of every economic system, the sticking point is how heavy-handed you have to be about getting there. Let's turn this around, you seem to support owners and managers making far more than workers, does that make you a fascist?

Except that if wages are too low, prices become inflated in “Real Dollars,” meaning that they actually go up anyways, which they have, decreasing sales.

The average Joe's contribution primarily consists of creating wealth in exchange for money, then spending that money on products and services (necessity, then luxury,) which keeps money in circulation. The rich spend a far smaller proportion of their income and produce a far smaller proportion of wealth.

[citation needed◊]

Eric,

^ The money won't necessarily go to a rich American investor. It's more likely to go to a rich Chinese investor nowadays.

The Chinese government actually makes life very difficult for foreign companies.

edited 12th Apr '11 9:36:14 PM by storyyeller

Blind Final Fantasy 6 Let's Play

That's a very difficult topic to make firm statements about. For instance, China (HK SAR inclusive) exports $1.8 trillion, while it has $1.5 trillion in foreign direct investment, a figure which doesn't include other types of foreign investment, nor tell us how much of this investment is in export industries instead of other ones, exactly how much actual cash in the form of profits is going where, and to whom (116k PDF.)

Even so, I think I can state pretty confidently that it's very unlikely the bulk of export profits in China go to Chinese of any class even today.

Also, reading this brief overview from The Other Wiki seems to indicate that Chinese regulation of foreign operators has been loosening over the years, not tightening.

Eric,

edited 13th Apr '11 2:40:21 AM by EricDVH

Thanks for that. One of those things where many media just ignore it completely and FoxNews covers the statement "we're not broke" as an example of liberal myopia, but does not fully explain the position behind it.

Trouble is, while I agree we're not 100% screwed yet, it's going to be almost impossible to crack open the "motherload of our own wealth" because the rich will find the loopholes, tie up things in court, move investments overseas, etc. And IMHO they'd be right to resist (at least by legal means) paying a government that continually fails to spend resposibly.

@OP:

Realistically, I forsee possibilities, but I think the future of the world economy is really in the balance. I'd guess the chance of a double dip recession / lost decade is better than 50%. I would argue the real question is how long the current recovery lasts.

• First, the debt limit issue. Failure to address this could cause investors to panic and raise interest rates, resulting in an essentially immediate double - dip recession. Failure to address the issues that might cause the debt limit bill to fail could be a [expletive deleted] - load of trouble later.
• Second, stagflation (inflation without wage growth) due to oil price woes. Ironically, the official U.S. inflation rate doesn't count certain goods (like gas!) many regard as a necessity, so you could get theoretically get stagflation without inflation.
• Third, it's likely policy in Washington will tip the ecomc balance in the U.S. one way or the other, and that may depend on the outcome of the 2012 election.
• Fourth, the repercussions of troubles overseas will cause uncertainty, which stifles opportunity.

However, I'm actually not at all panicked about the current U.S. economy. We've survived worse, though you have to go back more than a few decades. I'm far more worried about what happens when China pulls the plug on debt buying, Saudi Arabia pulls the plug on oil, whatever the next big natural disaster is, etc.

edited 13th Apr '11 9:37:55 AM by FrodoGoofballCoTV

Eric: Do I really have to explain to you why the federal government defaulting on its debts would be bad for the economy?

If the government defaults, it doesn't pay off its debts. If it doesn't pay its debts, no one will loan it money. If it can't borrow money, it can't continue to perform all its functions. If it can't perform all its functions, then the people relying on those functions have to do without. In many of those cases (social security, medicare, government employee paychecks, etc), those functions drive the economy. Removing them from the economy would be a Bad Thing.

On less straightforward (but no less real) grounds, a government default would cause massive amounts of uncertainty, and the economy hates uncertainty. When people aren't sure what's going to happen, they tend to act conservatively (in the sense of not-taking-risks, not politically-right-leaning). That means sitting on cash instead of investing it, which stifles growth.

Really from Jupiter, but not an alien.

And before anyone asks, yes governments with powerful economies have defaulted on their debts before. The Russian Debt Default in the 1990s kept them in a near Great Depression-esque state economically for 8 months straight and it took almost a decade really for it to truly fully recover.

Were it not for the fact the Russian economy of the time was fairly isolated from the world in global economic terms, the aftereffects could very well have derailed the then-prosperous world economy.

A default in the US would be far worse for the world than happened in Russia 14 years ago. It would also hammer the US economy much worse.

"Allah may guide their bullets, but Jesus helps those who aim down the sights."

Frodo Goofball Co TV: Why allow the risch to resist in the first place? Last time I checked the "humanetic court of Europa" does not have any power in USA, which means that the "Supreme court" is the endstation for any trial, which means that you could make a new law.
Even better: What about just fixing the tax laws, so that there can not be any room for interprention, so the US finally comes on the level of some other civilized countries?

A guy called dvorak is tired. Tired of humanity not wanting to change to improve itself. Quite the sad tale.

I think deficit spending is a dumb idea for unrelated reasons, but do you have any idea just how absurd the belief we're anywhere near defaulting is? Look at the link I gave you, and you'll notice the debt of Japan (a country hardly teetering on the brink of collapse) is at 180% of GDP, a level ours would have to grow something like 2.5 times to reach, requiring the current level of deficit spending to be maintained for about 30 years straight.

It's about as likely as moon men invading.

Eric,

Fiscally we're not that bad off, but there is a legal limit on our debt. If it isn't raised, we will default.

Blind Final Fantasy 6 Let's Play

@del diablo

• I'm not suggesting "allowing" the rich rich to resist, I'm saying they already are. Government wants to work with the rich, so they give them ridiculous tax breaks to cooperate. The big corporations have learned how to game the system.
• The second reason I don't want government to just take from the rich and be happy, is that they haven't demonstrated to me they can spend wisely and cautiously. You don't just let people keep spending if they're bad at it.
• The third reason is that if you chase too many rich people away with out - of control (from their point of view) tax increases, you get a double - dip recession from that alone.

@Eric DVH

• The thing is we're talking three types of default here.
  • The first type of default (what you're talking about) is if the country cannot pay its debts at all. We're not there yet.
  • The second type of default (what storyyeller is talking about) is if congress fails to raise the spending limit. Then we default because borrowing more money would be breaking the law.
  • The third type of default (what I'm worried about) is if no one wants to buy our debt anymore. Then we default because the international market is dysfunctional.

edited 14th Apr '11 1:23:37 AM by FrodoGoofballCoTV

Personally? At this point I would have just started demanding money with menaces from the uber rich. Either that or give shareholders more power to bring stupid decisions by marketing boards to task, I mean look at how obviously whipped most shareholders are when they seem to be convinced of how good the fellows at the top are even when losing them money.

Either that, or just go all out and take possession of the chief executives funds and refusing to allow them to trade until they have contributed their amount in tax.

I kind of see Communism coming back into effect or at least it being discussed.

Disclaimer: If anyone disagrees with anything I say, I am quite prepared to not only retract it, but also to deny under oath I ever said it.

It's always being discussed, but I don't see it coming back at all because as vulnerable as the current free enterprise system is to corrupt official, communism literally relies on the fact that no one in the government is corrupt.

The thing about making witty signature lines is that it first needs to actually be witty.

Yeah, then I guess either we wait it out or anarchy, I personally would like to witness full-on anarchy, I mean we've all seen riots and news about protests in the middle east about government problems but I just find the idea of 18 year olds rioting on the white house amusing.

Disclaimer: If anyone disagrees with anything I say, I am quite prepared to not only retract it, but also to deny under oath I ever said it.

All that requires is a trip away from civilization in total. Trust me it doesn't scale well from individuals and small groups (less than 50) to civilizations.

"Allah may guide their bullets, but Jesus helps those who aim down the sights."

Frodo Goofball: It seems we agree then, but are located in different countries.

Briankelly 130: Anarchy? Anarchy means that there are no one to stop me from oppressing another person, besides the other person. It is a extremely bad thing.

A guy called dvorak is tired. Tired of humanity not wanting to change to improve itself. Quite the sad tale.

Briankelly 130: Full-on communism would hardly be needed to fix a lot of the financial crisis in the USA, our top-end income taxes are 35%, while most 1st-world nations have a 40-60% one. Heck, even in this country, throughout most of the '50s & '60s it was about 90%, and from the mid-'30s to Reagan, it never dipped below 70%◊.

Eric,

edited 14th Apr '11 10:38:25 PM by EricDVH

Though to be fair, most rich people didn't actually pay 90% due to all the loopholes.

What we really need is to close all the loopholes. Unfortunately, that's also one of the hardest things to do. In Georgia, there was an attempt at tax reform, but their initial plans were cut down so much over time that they eventually only decided on two loopholes to remove, and even that was only because there were lobbyists on both sides.

Blind Final Fantasy 6 Let's Play

Oh, I won't dispute that's a problem (Europe is noted for this, Britain being particularly infamous,) but high top-bracket taxes are definitely effective. Look at this chart (second image, scroll down) and you'll notice it's almost an exact mirror image of the income tax chart. Speaking of tax dodgers, the situation has been worsening enormously even under the current super-low rates.

Eric,

And you think merely hiking the rates on the rich will fix that?

"Allah may guide their bullets, but Jesus helps those who aim down the sights."

Is it 'hiking' tax rates if you're only removing what was supposed to be a temporary tax break to begin with?

Furthermore, I think Guantanamo must be destroyed.

Anarchy, eh? You know what the difference between a civilised, law-abiding society and anarchy? Ten meals. More specifically, the lack thereof. People accustomed to eating regularly go a little screwy without food, and it's a ver fine line between 'I'm hungry' and 'I'm hungry and will get food no matter what or who I have to sink'

No, strictly speaking it's not, but good luck trying to convince people of this. Ten years was too long for a 'temporary' tax break, because people got used to it and feel it's the status quo. Compare the Syrian Emergency Laws, enacted in 1962. At some point, temporary 'aint'

edited 15th Apr '11 8:55:30 AM by pathfinder

The terrible downside to multiple identities: multiple tax returns