U.S. Economy

Discussion in 'Politics and the Topics of the day' started by Greed, Nov 2, 2005.

  1. Greed

    Greed Active Member

    In this economy, the 'R' word means resilient
    Despite major blows, the US sees 10 strong quarters of growth.
    By Mark Trumbull | Staff writer of The Christian Science Monitor

    Near-record energy prices. Hurricane devastation and displacement. Rising interest rates, with the Federal Reserve expected to raise its short-term rate to 4 percent Tuesday.
    It all spells trouble for the US economy, right?

    Possibly. Yet for years now, the world's largest economy has shown an impressive ability to absorb shocks and keep rolling ahead.

    Among the latest signs are healthy boosts in consumer spending, worker incomes, and the nation's output of goods and services. That output, known as gross domestic product (GDP), expanded at a 3.8 percent annual pace in the third quarter, which includes the immediate aftermath of hurricanes Katrina and Rita, according to the government's preliminary estimate.

    The number, stronger than analysts expected, suggests that the economy retains many of the strengths that helped America move through the dotcom bust, the 9/11 attacks, and corporate scandals like Enron with only a mild recession a few years ago.

    The economy hasn't yet escaped cyclical swings entirely. But observers say the levers of finance and the gears of production have become better managed, more flexible, and less volatile. And for all its agility, the economy also benefits from gargantuan scale - with some $12 trillion in annual output.

    "The US economy is this massive thing," not easily knocked off track, says Brian Wesbury, an economist at Claymore Securities in the Chicago area. Now in particular, he adds, "This economy has tremendous momentum."

    Consider this: Last week's news marks the 10th straight quarter of 3 percent or greater growth in annual GDP. That's the longest such streak since the mid-1980s.

    In the intervening years, business cycles seem to be getting smoother. The economy's slide in 2001 was so shallow that it has been almost 15 years since GDP has shrunk for consecutive quarters. And with the exception of 1991, you have to look back to 1982 to find a time when the economy was smaller at the end of the year than it was at the beginning.

    Of course, an economy with smoother business cycles still endures hardship and challenges. Poverty has persisted even in an era of generally strong growth. Hurricanes this year and last have meant upheaval for millions of people.

    Nor is there a guarantee of smooth sailing ahead. With the prospect of high heating bills this winter, consumer confidence as measured by the University of Michigan has plunged in the past two months to well below its 2001 valley.

    A slowing housing market and higher interest rates are having an impact, too. Rising home values until now have buoyed consumers, providing a new source of wealth to tap. Meanwhile, low interest rates helped spur consumers to take a higher ratio of debt to income than in the past.

    Now, as rates rise, some foresee a large brake on consumer spending.

    Yet for all the challenges, economists generally don't see recession clouds on the horizon. Consumer spending rose 0.5 percent in September and incomes went up 1.7 percent, the biggest rise this year, the Commerce Department reported Monday.

    "2006 looks like it's going to be a pretty good year," with about 3 percent growth, says Mark Vitner, an economist at Wachovia Corp., a bank based in Charlotte. N.C. "I think there's very little downside risk."

    This year's final quarter, he warns, could see some slowing - to about 2.5 percent, he figures.

    Many economists expect slower growth, but no decline, in consumer spending. Other components of GDP, such as exports, government spending, and business investment, are also moving higher.

    "The biggest mistake of economists over the past 20 years" has been to be too pessimistic, Mr. Vitner says. "We've consistently underestimated growth."

    What explains its vitality?

    • The shift to a service economy. Some of the more volatile manufacturing industries constitute a smaller share of the economy today. The rise of service industries has given the economy greater breadth and balance.

    • Better information and management. A widely held view is that policymakers at the Fed, and business leaders, now have timelier data on the economy. Corporations manage their inventories more wisely. The Fed, while still often criticized, has a stronger reputation for fighting inflation without hurting the economy's natural growth.

    • Flexible markets. Fed Chairman Alan Greenspan has repeatedly cited a wave of deregulation as a crucial factor enabling the economy to cushion shocks. In labor markets, growing flexibility has meant ongoing layoffs, but it also has spurred job creation that has kept unemployment low.

    • New financial tools. In a recent speech, Mr. Greenspan said that new instruments for spreading risks have helped create "a far more flexible, efficient, and hence resilient financial system than the one that existed just a quarter century ago."

    • Worker productivity. The rapid growth of labor output per hour in recent years has allowed for stronger economic growth without fueling inflation.

    Also, foreign governments and investors are now happy to invest in US bonds, allowing the US to become the world's great debtor. Economists say that imbalance will need to ease eventually.

    Still, for all the genuine concerns out there, the "R word" that most economists are using is still resilience, not recession.

    As economist Nariman Behravesh of Global Insight puts it, "We seem to be able to absorb serial shocks."

  2. Greed

    Greed Active Member

    Church-going boosts economic well-being: study

    Church-going boosts economic well-being: study
    Tue Oct 25, 3:20 PM ET

    WASHINGTON (Reuters) - Attending religious services may enrich the soul, but it also fattens the wallet, according to research released on Tuesday.

    "Doubling the frequency of attendance leads to a 9.1 percent increase in household income, or a rise of 5.5 percent as a fraction of the poverty scale," Jonathan Gruber of the economics department at Massachusetts Institute of Technology wrote in his study.

    "Those with more faith may be less 'stressed out' about daily problems that impede success in the labor market and the marriage market, and therefore are more successful," Gruber wrote in the study, which was released by the National Bureau of Economic Research.

    Living in a community with complementary ethnic groups that share the same religion increases the frequency of going to a house of worship, he said in the paper titled "Religious Market Structure, Religious Participation, and Outcomes: Is Religion Good for You?"

    Such visits correlate to higher levels of education and income, lower levels of welfare receipt and disability, higher levels of marriage and lower levels of divorce, the study said.

    Gruber says he focused on non-Hispanic whites aged 25 or older because "there is very strong evidence of racial segregation in church-going, so that the density of Hispanics or non-whites in a religion in some area is not likely to be relevant for the religious participation of whites in that area."

    Gruber divided the individuals into seven groups: Catholics, Jews, Liberal Protestants, Moderate Protestants, Conservative Protestants, other and none.

  3. QueEx

    QueEx Super Moderator

    Re: Church-going boosts economic well-being: study

    <font size="5"><center>5 reasons the Fed will fumble in 2006</font size></center>

    <font size="4"><center>Even with a new chief at the helm, the Fed is heading toward
    a policy blunder that will inflict a lot of pain on investors.
    Here are five big reasons why.</font size></center>

    MSN Money
    By Jim Jubak

    The odds are now better than 60/40 that the Federal Reserve will overshoot in 2006. It now looks, to me at least, like new Fed chairman Ben Bernanke will finish the inflation battle that Alan Greenspan started by raising interest rates so high that the economy starts to stall sometime next year.

    The Fed will then be forced to reverse course and start to cut short-term interest rates at the same measured pace that it used to raise them from the June 2004 low.

    Here are the five reasons I believe the Federal Reserve will give investors a painful demonstration of its all-too-human fallibility in 2006.

    (1) The Federal Reserve is fighting the wrong kind of inflation. The classic monetary remedy for inflation is higher interest rates -- that slows the economy, reducing demand. That, in turn, breaks the spiral of higher wages leading to higher prices leading to higher wages, etc. But the current problem isn't classic wage-price inflation. Wages are going nowhere fast; something else is driving inflation. Take a look at the numbers for the quarter completed in September. The economy, as measured by gross domestic product, grew at a 3.8% rate in the quarter. Consumer prices, measured by the Consumer Price Index, climbed at an annual rate of 4.7%, the highest rate of increase since June 1991. Where did that inflation come from? Certainly not from wage increases. According to the Bureau of Labor Statistics, employers' wage costs grew just 2.3% in the last 12 months. That's the slowest growth rate on record, beating out the 2.4% annualized growth rate in wages reported in August. Instead, current inflation is almost all a result of higher energy prices. While inflation including energy is 4.7%; inflation excluding energy is just 1.3%, the lowest quarterly annual rate in two years. (For those readers who think the CPI is so statistically corrupt to be useless -- a valid belief, in my opinion -- the Personal Consumption Expenditures Index, Alan Greenspan's preferred inflation measure, gives much the same result: a general annualized increase of 3.9% in September and a core increase without energy of 1.2%.) This wouldn't matter except . . .

    (2) Higher energy prices -- like higher interest rates -- slow the economy. So, in effect, the Fed by raising interest rates is stepping on the economy's brakes at the same time higher energy prices are working to lower economic growth. You can see the effect in a drop in consumer spending in September. Adjusted for inflation, consumer spending dropped 0.4% in September, following a similar drop in August. And it's not hard to understand why: With energy prices up and wages down, consumers are digging deeper into already empty pockets to keep spending. In the September quarter, that led to a negative rate of personal savings in the U.S. (savings fell at a 1.1% annualized rate). There are certainly big problems with the way that this number counts savings, so it's just about certain that the real savings rate isn't negative. But savings rates are dropping, and we're already in historically low territory: The personal savings rate hasn't been negative since the Bureau of Economic Analysis began keeping quarterly savings numbers in 1947. At a time when consumers can keep spending levels up only by borrowing (whether on credit cards or by refinancing a home or taking out a home-equity loan), higher interest rates from the Fed are Strike 2 against the economy. And the currency markets are set to deliver Strike 3. . .

    (3) Higher interest rates have produced a rally in the U.S. dollar, which makes U.S. exports less competitive in global markets and puts even more downward pressure on U.S. economic growth. I know it's perverse: The U.S. is running enormous trade deficits that leave us dependent on the savings of strangers; no one in Washington gives a second thought to spending billions we don't have; and companies in core U.S. industries such as autos and airlines are flocking into bankruptcy. But the U.S. dollar has rallied against most global currencies. This week the dollar hit a 25-month high against the Japanese yen, after gaining 14% in 2005 against the yen. The dollar is even up 12% this year against the euro, after falling by almost 50% against the European currency from 2002 to 2004. A higher dollar makes U.S. exports more expensive for foreign consumers. U.S. companies can combat that by outsourcing more production to cheaper, non-dollar international economies, and by firing U.S. workers and hiring workers in those same cheaper non-dollar economies. But those adjustments produce lower incomes in the U.S. and cut into U.S. economic growth. The Fed's policy of hiking U.S. interest rates has contributed to this drag on growth, as well, since higher U.S. rates have propped up the U.S. dollar against other currencies. So why is the Fed pushing up interest rates further when it could be so harmful to the economy?

    (4) When all you've got is a hammer, all problems look like nails. Raising interest rates may be the worst available tool for fighting inflation caused by higher energy prices. But what other tools are available? The other players in Washington show no inclination to break out their economic policy tools -- and it's even questionable that they know where they are after years of budget-busting neglect. Congress and the president could fight higher energy prices by doing something to damp energy demand (an energy conservation policy that consists of more than a presidential exhortation to drive less would be a start). Or to increase energy supplies (although I'm not sure that throwing money at Archer Daniels Midland (ADM, news, msgs) and the rest of the ethanol lobby is a worthy goal in and of itself.) But not even the members of Congress believe that the recent energy bill will do anything significant to reduce demand or increase supply. So that leaves the Federal Reserve to do the job of reducing demand by whopping the economy over the head with its higher-interest-rates hammer.

    (5) And, finally, circumstances have conspired against the Federal Reserve to increase the likelihood of a policy mistake. Hurricanes Katrina, Rita and Wilma have tied statisticians in knots and made it extremely difficult to figure out the underlying trends in the economy. For example, the Bureau of Economic Analysis reported a healthy 0.76 rise in inflation-adjusted personal income in September. (Personal income, which includes not just wages but rental and investment income, isn't the same as wages.) But, adjusted for the hurricanes, personal income may be higher, lower or the same as in August. For example, in the earlier month property owners in the disaster area took a big hit to rental income, which depressed August's numbers and made it easier for September to show a gain. The Economic Policy Institute calculates that absent the hurricane bounce-back effect, personal income fell 0.43% in August. And the transition from Greenspan to Bernanke encourages the central bank to continue current policy until after the March meeting of the Federal Open Market Committee. Reversing course when Greenspan is barely out the door isn't a reassuring way to begin the Bernanke years.

    A slowdown, yes; a recession, no
    I think the result of all this is that sometime in 2006 -- around midyear would be my guess given the lag before an economic trend starts to show up in the economic numbers -- the Fed will be facing a big growth surprise. Inflation may or may not be under control, but growth will have dipped toward the low end of the range that makes the Fed comfortable. And it's likely that there will be signs that growth could be headed lower.
    Note I'm talking about a drop below the current 3.8% growth to a rate that makes the Fed, Wall Street and Washington politicians (who are facing midterm elections in November 2006) nervous. I'm not talking about a negative quarter and certainly not a recession. A drop below 3% is a certainty if the Fed's interest rate policy overshoots. And somewhere in the range of 1% to 2% growth for a quarter would be a reasonable expectation for a low.

    By the time that growth low arrives, the Fed will have stopped cutting rates and is likely to begin sending signals of an ease or two if the growth picture doesn't improve.

    To me, this doesn't add up to either economic or investing disaster. More volatility than we've seen even in the last few months? Certainly. Radical shifts of money between sectors as the managers of hot money search for short-term profits? Certainly. Enough worry about rates of interest and growth to cause a flight to safety in assets that range from gold to consumer staples? Certainly.

    Looking out over the next six to 12 months, I think shifting portfolios to include more non-U.S. equities makes sense. In the near term, a stronger dollar will increase the sales of overseas companies. In the longer term, a decline in the dollar as the Federal Reserve stops raising interest rates will give investors in non-dollar-denominated assets a decent exchange-rate profit. I also think looking to U.S. consumer companies that represent safety from inflation and strong guarantees of growth is a solid strategy.

  4. dyhawk

    dyhawk New Member

    Re: Church-going boosts economic well-being: study

    interesting read............not sure if i agree with everything................in anycase i don't seea slow down in the economy being the major problem facing the US but bad spending habits and debt
  5. Makeherhappy

    Makeherhappy New Member

    Re: Church-going boosts economic well-being: study

    Haven't seen a post that good in a minute.

    All I have to say is, "make sure you are diversified in your portfolios"
  6. Greed

    Greed Active Member

    Inflation Views Could Change Under Bernanke

    Inflation Views Could Change Under Bernanke
    By RACHEL BECK, AP Business Writer
    Fri Nov 11, 1:18 PM ET

    NEW YORK - Trying to fix something that isn't broken has its risks, and that's raising concerns about a possible shift at the Federal Reserve over how it tackles inflation.

    Assuming the Senate confirms Ben Bernanke to replace Chairman Alan Greenspan, the central bank could for the first time in its history adopt a specific target for the inflation rate and then make adjustments to interest rates as a way of trying to keep it in that range.

    But is that really necessary? It may be tough to see the need now, given that the Fed's current tactics have kept inflation remarkably tame despite soaring energy costs.

    This topic has come under great debate in economics circles since Bernanke was tapped last month to succeed Greenspan, who is expected to leave the Fed on Jan. 31 after 18-plus years during which there were two stock-market collapses and economic recessions as well as numerous other financial crises.

    While Greenspan has long pursued a low-inflation policy during his tenure, he has been against setting an actual "inflation target," whereby the Fed discloses its goal and its forecast for inflation. His view is that the Fed can control inflation without setting a specific rate that it must then chase, which he believes could hamper its flexibility to act in a time of need.

    That stance has proven successful time and again, including in the last year as energy prices have skyrocketed but the core inflation rate — as measured by the consumer price index excluding energy and food costs — has remained at only around 2 percent, low by most standards.

    The Fed has done that by raising the rate that banks charge each other on overnight loans, known as the federal funds rate, in 12 quarter-point increments so that it now stands at 4 percent. The Fed began its current credit tightening cycle in June 2004 when the funds rate stood at a 46-year low of 1 percent.

    Like Greenspan, Bernanke — a former Fed governor who now serves as President Bush's top economic adviser — favors low inflation, but he wants to be more forthcoming and open about what that actually means.

    He has argued in the past that by setting an inflation target, it will lead to a more stable economic environment because businesses and consumers would be more certain about how the Fed will deal with interest rates and inflation. Bernanke has also said that in times of financial crises, the Fed could depart from its normal rules to do whatever it can to stabilize the economy.

    Supporters say such change would raise the Fed's accountability and limit the discretion of future Fed leaders. In addition, they point to the successes abroad, with many countries including Australia and Sweden as well as the European Central Bank now employing some inflation targeting.

    "The Fed has gained a lot of credibility under Greenspan's tenure, and all Bernanke is saying is that we can reinforce that by setting an inflation target," said Lyle Gramley, a former Fed governor in the early 1980s who now is a senior economic adviser at Stanford Washington Research Group. "This will make it explicit to the public what the Fed's expectations are."

    Still, there are many questions over whether there is any need for such a change, something that will likely be addressed during his confirmation hearing before the Senate Banking Committee on Nov. 15.

    One issue is whether "Bernanke would want to target a growth range on inflation, not a specific price index level, because a miss in the target could prove extremely punishing on the economy," Merrill Lynch economist Kathleen Bostjancic said in a note to clients.

    For instance, she notes, if the Fed's target for core CPI is 2 percent for the year, but actual inflation comes in at 2.5 percent, then inflation would have to come in well under 2 percent in the following year to meet the target. And getting to that level could require a considerable slowdown in the economy, presumably triggered by the Fed cranking up borrowing costs.

    Another point is whether an explicit inflation target would actually improve economic performance. Wells Fargo economist Eugenio Aleman says that even without an inflation targeting mechanism, the U.S. economy has had superior economic growth than many countries that implemented inflation targeting.

    There is also the issue of whether setting an inflation target would subordinate the Fed's other Congressional mandate to maintain a sustainable level of employment. The worry is that the Fed will become more interested in meeting its inflation goals rather than creating job growth.

    The good news is that Bernanke is known as a consensus builder. Chances are that he won't rush to push his agenda, but will work to convince those who are opposed of its merits. That, however, could be a mighty hard task.

  7. Greed

    Greed Active Member

    Weird Economic Reactions

    Weird Economic Reactions
    By Motley Fool Staff
    Fri Nov 25,10:11 AM ET

    Why does the stock market often tank when there's good economic news reported? Well, it's usually related to interest rates. Alan Greenspan and his buddies at the Federal Reserve set interest rates, trying to keep inflation at bay and promote a healthy economic environment. When positive economic news is released, such as lower unemployment figures, rising wages, or growing national productivity, the specter of possible inflation is raised. Economies growing too quickly can spur inflation, with too much currency in the marketplace leading to the weakening of the dollar and rising prices.

    To stem inflation, the Fed notches up interest rates to decrease the amount of borrowing and slow down the economy. Rising interest rates render bonds more attractive, as they offer fixed incomes. Investors pull money back from stocks, which are hit doubly with the threat of shrinking corporate earnings and with the attractiveness of growing bond yields.

    Got that? Maybe reread it once or twice. It's a bit complicated and can hurt your head until it sinks in.

  8. Greed

    Greed Active Member

    Global Work Force Helps Fed on Inflation

    Global Work Force Helps Fed on Inflation
    By MARTIN CRUTSINGER, AP Economics Writer
    Sun Nov 27, 9:47 PM ET

    While Alan Greenspan has won praise for his successful 18-year battle to keep inflation under control, he's the first to say he's had a lot of help. Among those most responsible are tens of millions of workers in China, India and Eastern Europe.

    Adding all those workers to the global economy has made the Federal Reserve's inflation-fighting job easier by increasing competition. That has helped hold down labor costs — the biggest single expense for employers — and, as a result, prices.

    It has come at a cost: Many of the jobs being done overseas used to be in America.

    Last week, General Motors Corp. announced plans to cut more than a quarter of its North American manufacturing jobs — 30,000 in all — and close 12 facilities by 2008. Those cuts will be added to the more than 3 million manufacturing jobs — one in six — that have been lost since mid-2000.

    "U.S. manufacturing jobs have withered over the past five years and many of those jobs are never coming back," said Mark Zandi, chief economist at Moody's Economy.com, a private consulting firm.

    For those U.S. workers who still have jobs, the pressure on their wages has intensified as companies use the threat of moving more production overseas — where labor is far cheaper — as a way to extract concessions from their U.S. workers.

    This phenomenon has hit manufacturing the hardest. But service workers are starting to be hurt as well. The ability to transmit digitally massive amounts of information to faraway places has led companies to send overseas jobs in such high-tech areas as architecture, computer software, medical services and engineering.

    "It is one thing to celebrate keeping inflation in check. It is another thing to celebrate that living standards are stagnant or falling for most American workers," said Thea Lee, policy director for the AFL-CIO.

    All the goods flowing into the U.S. from overseas have produced a record trade deficit that must be financed by borrowing from abroad.

    In 1987, the year Greenspan took over as Fed chairman, the U.S. had a deficit in its current account, the broadest measure of trade, of $160.7 billion. Last year, that deficit set a record of $668.1 billion and is projected to go even higher this year.

    Like most economists, Greenspan is an ardent supporter of free trade and has said the current account deficit should improve gradually without destabilizing the U.S. economy.

    Other economists worry that foreigners suddenly might decide to stop holding so many U.S. investments, driving down the dollar's value against other currencies, as well as U.S. stock and bond prices.

    Greenspan also has a benign view about how the U.S. can deal with workers who have lost jobs and or seen their wages depressed because of foreign competition. He thinks the country can solve this problem by doing a better job of educating workers so they have the skills they need for the high-tech jobs of the future, rather than the low-skill jobs that increasingly are moving to other countries.

    That solution, Greenspan believes, will help combat the growing wage inequality in the U.S. This trend has seen incomes for high-income Americans rise sharply while the wages of low-income workers have been stagnant.

    According to figures from the Census Bureau, the top 20 percent of U.S. households earned 50.1 percent of all income last year while the bottom 20 percent received just 3.4 percent of total income.

    Other analysts are not so sure that Greenspan's approach will work, especially given that high-tech jobs are being sent to countries with well-educated workers who earn far less than Americans.

    "The idea that you can educate yourself out of this problem is not accurate any more," said Jared Bernstein, an economist at the Economic Policy Institute, a liberal think tank in Washington.

    Greenspan had a different worry in recent congressional testimony. He said the Fed and other central banks will have to be diligent about fighting inflation once the beneficial effect of the huge increase in the global work force begins to wane.

    Greenspan will step down as Fed chairman at the end of January, so that will be a problem for Ben Bernanke, his designated successor.

  9. Makeherhappy

    Makeherhappy New Member

    It's going to get worse.

    When Delphi wants to pay their factory employees as low as $9 dollars an hour. That's a very bad sign. Since their average is about $26 dollars an hour, that's a hell of a decrease.

    On a different note,

    anyone know, or have purchased any of these:

  10. Greed

    Greed Active Member

    Fed lifts rates, shifts language

    Fed lifts rates, shifts language
    By Tim Ahmann
    25 minutes ago

    WASHINGTON (Reuters) - The Federal Reserve on Tuesday lifted a key U.S. interest rate for a 13th straight time and signaled that while it is not yet done raising rates, its 1-1/2 year credit-tightening campaign is winding down.

    As widely expected, the U.S. central bank's rate-setting Federal Open Market Committee voted unanimously to increase the benchmark federal funds rate by a quarter-percentage point to 4.25 percent, the highest level since April 2001.

    In a statement, the Fed dropped its long-standing characterization of policy as accommodative, or stimulative -- a recognition rates have risen to a more-normal level from a 1958 low of 1 percent hit in mid-2003, during the tepid economic recovery.

    But the Fed also repeated an expectation it would likely need to push rates up further to keep inflation at bay, suggesting at least one more quarter-point hike ahead.

    "The committee judges that some further measured policy firming is likely to be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance," the Fed said.

    Some analysts thought the Fed would begin shifting its language to provide Fed Chairman Alan Greenspan's designated successor, White House adviser Ben Bernanke, wide latitude to shape the future policy course.

    Bernanke needs just a final Senate vote of approval to take the reins on February 1, the day after the last rate-setting meeting of Greenspan's 18-year tenure.

    Policy-makers say there is no way to know for certain where interest rates might eventually settle, and analysts caution that the central bank might want to go beyond neutral to allay inflation concerns.

    According to minutes from the Fed's last rate session on November 1, officials thought "policy-setting would need to be increasingly sensitive to incoming economic data."

    The Fed began the current rate rise cycle in June 2004 when overnight borrowing costs stood at a 1958 low of 1 percent. At that time, it was clear they needed to move up.

    Now, however, many economists believe rates are near a neutral level that neither spurs nor curbs economic growth. And many expect the Fed to call off its credit-tightening campaign after another increase or two.

    For the most part, the economy has shown signs of vigor despite taking a late-summer beating from deadly Gulf Coast hurricanes.

    Despite the storms, the U.S. economy grew at a brisk 4.3 percent annual pace in the third quarter. While the hurricanes restrained job growth in September and October, hiring picked up sharply last month.

    There have been signs, however, that the roaring U.S. housing market is finally cooling, which could take away one source of support for consumer spending.

    A government report released just before the rate meeting began showed that retail sales rose only 0.3 percent last month, reinforcing private-sector forecasts for a slower pace of economic growth in the final three months of the year.

    "This was a disappointing number relative to expectations and certainly consistent with the idea that consumer spending is going to be a much smaller contributor to economic growth in the fourth quarter," said Chris Probyn, chief economist at State Street Global Advisors in Boston.

    However, Fed officials were likely to view the relative softness of fourth-quarter growth as a reflection of a hurricane-driven spike in energy prices that has put them on high alert for signs this is fostering broader inflation.

    While energy costs have receded from post-storm peaks, oil prices are still above $60 a barrel and natural gas costs are expected to stay elevated through the winter heating season.

    So far, this does not appear to be a widespread problem. Although overall consumer prices have shot up 4.3 percent over the past year, core inflation -- which strips out volatile food and energy -- has risen a more-modest 2.1 percent.

    "Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained. Nevertheless, possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures," the Fed said in its post-meeting statement.

  11. carlitos

    carlitos New Member

    some good reads on the economy..like 1 bro said,diversify..
  12. QueEx

    QueEx Super Moderator

    <font size="5"><center>American economy set for another good run</font size></center>

    Sunday Times (London)
    American Account

    THE YEAR that ended yesterday was a pretty good one in America — unless you made American cars, worked for an airline, or lived in the path of Hurricane Katrina. And, sadly, unless you had a loved one killed or maimed in Iraq.
    Most people got richer. Yes, share prices disappointed, but more people own houses than shares, and house prices rose by 13% on average. Corporate profits chalked up double-digit gains, continuing a three-year run of such increases.

    The jobs market strengthened to a point where just about anyone serious about getting a job could find one. Economists at Goldman Sachs estimate that when the final tally for the year is in, more than 2m new jobs will have been created, and the unemployment rate, which began the year at 5.2%, will have fallen to 4.9%.

    Despite a slowing in the last quarter, the economy racked up another respectable growth rate — about 3.5%, driven in part by a housing industry that built close to 2m new homes for immigrants getting on the first rung of the housing ladder, Americans who decided that they can afford bigger homes with the now-requisite media centres and baby boomers who are snapping up second homes in which to spend part of what will undoubtedly be their golden years.

    Investment bankers returned to the glory days, closing almost $3,000 billion of deals and are counting their bonuses in six, seven and even eight figures. The revenues from deals for each of the big four banks passed $1 billion for the first time. And that doesn’t include revenues from trading and other activities, all of which contribute to record bonus pools, smiles on the faces of upmarket property salesmen, busy days in Porsche showrooms and, less publicised, sizeable increases in charitable giving.

    Equally important, lots of bad things did not happen in 2005. The dollar did not collapse under the weight of a record trade deficit. House prices did not collapse under the weight of rising interest rates. The economy did not collapse under the weight of $70 oil and a hurricane that ravaged the nation’s oil and transport infrastructure. And President George Bush did not appoint an incompetent to succeed the fabled Alan Greenspan as chairman of the Federal Reserve Board.

    So much for the past. Is it prologue? Probably. As petrol prices fall from $3 a gallon to nearer $2, consumer confidence has recovered to pre-Katrina levels. That is not the best predictor of consumer behaviour, but, with jobs plentiful, it suggests that consumer spending is unlikely to collapse.

    Meanwhile, all signs point to a surge in business spending. A survey by the Institute for Supply Management and Financial Executives International shows that American companies plan to increase purchases of equipment, software, and other items by 9% in the new year. Balance sheets are in good shape, and every measure of chief- executive confidence is at or near record levels.

    All this cheer exists despite the likelihood that the Fed will continue to ratchet up interest rates. The new chairman, Ben Bernanke, will not want to use his first day in the chair to bring the round of rate rises, 13 so far, to an end. That’s a good thing. Inflation, although not threatening to get out of hand, is close to the top of the Fed’s 1%-2% comfort range. An unemployment rate of 5%, or even lower, indicates a tight job market in which wage pressures are mounting, especially for skilled workers. Capacity- utilisation rates are now high enough for many boardrooms to be treated to Power Point presentations about the return of pricing power, and for supply-chain bottlenecks to be popping up. And Opec has decided that, although $70 oil might threaten a demand-reducing recession and a shift from fossil fuels, $50 is a good, safe target number, more enriching than the $28-a-barrel price the Saudis not so long ago promised to maintain as a ceiling.

    So it would not be surprising if the Fed called a halt only after pushing rates to 5%, to the consternation of critics who fear Fed overshoot. They correctly point out that the housing market is slowing, with mortgage applications down and inventories of unsold homes up, and orders for durable goods other than aircraft have been disappointing. True, too, we have not seen an end of the productivity miracle that continues to allow output to expand while unit labour costs are contained. And it is also true that the relationship between short-term and long-term interest rates is now such that many observers see a recession in the offing.

    Those facts are grist for the mill of Greenspan’s critics, who say that further increases in interest rates will repeat a frequent Fed error of raising rates more than is required to contain inflation, thereby pushing the economy into recession.

    But the history of the past 18 years suggests that it is better to bet on Greenspan and the Fed than on his critics. Look elsewhere than the Fed boardroom if you want something to worry about in the new year. A loony left-wing Venezuelan president could shut down his oil industry; China could decide to unload some of its dollar hoard, driving the greenback down and interest rates to recession-producing levels; Congress could continue to match trivial spending cuts with generous tax cuts, forcing interest rates still higher; the president’s critics could force a premature withdrawal from Iraq, leaving neighbouring oil-producing countries at the mercy of anti-western Islamists; the opaque hedge-fund industry could precipitate a systemic banking crisis.

    My advice: don’t worry about things you can’t do anything about. Have a happy New Year.

    Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute

  13. Greed

    Greed Active Member

    another good run? havent we been told the shit has been horrible for the last 3 years. damn, how did i miss the good news.
  14. VegasGuy

    VegasGuy Active Member

    Yeah, what you said.

  15. Makeherhappy

    Makeherhappy New Member

    That is funny.

    Well I guess it depends on where you have your money..

    My 401k was up 15% last year, 32% the previous year, and a modest 6% the year before.

    The world economy will outpace the US economy.

    We'll see about another run.
  16. e-ternal

    e-ternal Banned

    Re: Church-going boosts economic well-being: study

    Was a good read!
  17. VegasGuy

    VegasGuy Active Member

    Jobless Claims Hit Five-Year Low
    Thursday, January 05, 2006

    WASHINGTON — The number of newly laid-off workers filing claims for unemployment benefits fell to the lowest level in more than five years last week, providing strong evidence that the labor market is shaking off the effects of a string of devastating hurricanes.

    The Labor Department reported Thursday that applications for unemployment benefits dropped by 35,000 to 291,000, the smallest number since Sept. 23, 2000, when the economy was in the concluding months of the longest economic expansion in history.

    The decline of 35,000 claims was much better than Wall Street had been expecting and bolstered the belief that the labor market is on the mend after a rough period in the fall when Gulf Coast hurricanes caused the loss of more than 600,000 jobs over a period of four months.

    The total for weekly jobless claims was far below the peak of 435,000 set the week ending Sept. 17, a period when the number of job losses attributed to Hurricane Katrina totaled 108,000.

    The government stopped tracking the impact of Katrina, Rita and Wilma last week because the weekly increase in storm-related layoffs had dwindled to slightly more than 1,000. But for the four months that the storms were tracked, the combined number of layoffs blamed on the hurricanes totaled more than 600,000.

    The better-than-expected improvement in the layoff picture for last week was certain to raise hopes for a solid performance in job growth for December.

    Analysts are predicting that the economy probably created 200,000 new jobs last month, with the unemployment rate probably holding steady at 5 percent. That would follow 215,000 new jobs in November after two months in which job growth had stalled because of the onslaught of massive layoffs in Gulf Coast states.

    Economists are predicting that 2006 will represent another year of steady growth in jobs of around 175,000 per month. That reflects their belief that the economy will keep growing at a solid pace this year as business spending to expand and modernize production facilities offsets expected slower growth in housing sales and overall consumer spending.

    The Federal Reserve has raised interest rates 13 consecutive times and is expected to boost rates again at Alan Greenspan's last meeting on Jan. 31 to make sure that inflation remains in check. But the Dow Jones industrial average shot up by 130 points on Tuesday following release of Fed minutes of the December meeting that suggested the rate hikes are drawing to a close.

  18. nittie

    nittie New Member

    Delphi has one plant I know of that pays 7.50 per hr. and the people work 12hr days 5 days a week plus weekends on top of that they are cutting health benefits and they don't match contributions to 401k's, what this economy is doing to low encome workers is criminal but it will take something like what happened in NOLA to wake people up.
  19. muckraker10021

    muckraker10021 Superstar *****

    <font face="arial unicode ms, microsoft sans serif, verdana" size="4" color="#333333">
    Your sarcasm is absolutely correct greed. The bush junta and their sycophantic corporatist supporters have told us that the US economy is great. Fortunately you and me and the majority of Americans - over 60% - know that this economy is "GOOD" only for those who are members of what bush calls "The Ownership Society".

    The typical working class American is being screwed royally by Bush Economics.
    As a former managing director of a top-ten Wall Street Investment Banking Firm what the Bushies are doing is totally transparent to me. For most Americans (more than 60%) they know they are getting screwed financially - with their wages falling and their poverty rate increasing - but they are puzzled when the economic statistics come out such as, the unemployment rate & the home ownership and those statistics sound good.

    Here is what's going on.

    The entire US economy under Bush is being managed with one goal in mind and one goal only!! Increase corporate profits and corporate balance sheets (cash-on-hand)
    Unlike Clinton or Papa Bush or even Reagan. The Bushies have nothing but disdain for the wage earning American worker. Whether you work for IBM, Federal Express, Cisco, Ford, Disney, etc. or you are a Republican or a Democrat.

    If you are a member of "The Ownership Society".- which means
    1.- You have substantial assets ( more than $250,000) in the stock and bond market EXCLUDING your 401K

    2 - You own your own home or homes with positive equity.

    3- The major part of your financial compensation consist of equities (stocks & stock options)

    4 - You are personally incorporated as a limited liability corporation. ( a consultant)

    If you are in this group of Americans then you have done very well under Bush.
    As a member of "The Ownership Society" - I have done very well under Bush Economics, but I am not imbued with the virtue of selfishness arrogance that I can't see or care what Bush Economics is doing to America.

    The best government can do for the economy, Bush RepubliKlans argued, is to boost the "supply side"--that is, favor wealth holders so they will have more capital to invest in new factories and production. This logic led to huge tax cuts for high-end citizens and for business and Declining Wages, Increased Poverty and EXPLODING DEBT for the "average working stiff" ( yes this is what too many of members of "The Ownership Society" call people who work a 9 -5)

    Retiring Fed Chair Alan Greenspan was the perfect chairman for this era. He deliberately restrained economic growth for many years, effectively suppressing employment and wages.

    READ :The One-Eyed King by WILLIAM GREIDER if you want to fully understand what Greenspan did under Bush and why he didn't do it under Clinton or Papa Bush.

    Now let us take a look at how the "average working stiff" has done under Bush Economics
    <img src="http://bigpicture.typepad.com/photos/uncategorized/bupdown_c04222005203757.gif">
    <font color="#ff0000">
    The remorseless decline in wages as a percentage of personal income has reached an historic low of 62% (the chart to your left). Meanwhile, consumer spending as a percentage of wages continues to spiral upward (the chart to your right). In the past three years, "average working stiff" consumers, determined to live beyond their means, leaned a lot more heavily on borrowings ($675 billion of non-mortgage debt) than paychecks ($530 billion) to cover the $1.3 trillion increase in their spending.</font>

    Below are a few articles for you peeps who want to know why the "good" economic numbers you hear in the corporate media don't comport with the reality that any small amount of research will reveal.</font>

    <hr noshade color="#0000ff" size="14"></hr>
    <font face="arial unicode ms, microsoft sans serif, verdana" size="4" color="#333333">
    • The poverty rate has risen steadily every year since Bush's election in 2000, from 11.3 percent to 12.7 percent in 2004.

    • For the first time on record household income also failed to rise for a record fifth straight year.

    • Median household income was at its lowest point since 1997.
    <font color="#0000FF">
    Rev. David Beckmann, president of Bread for the World says -
    “As real estate prices and the stock market rose, not much has been done for working families trying to make ends meet. Trickle down economic polices are meaningless in the face of these numbers.”</font></font>

    <img src="http://proquest.umi.com/i/pub/7818.gif">
    <font face="arial black" size="5" color="#d90000">
    Poverty in U.S. Grew in 2004, While Income Failed to Rise for 5th Straight Year
    <font face="Trebuchet ms, arial Unicode ms, verdana" size="3" color="#000000">
    David Leonhardt. New York Times. Aug 31, 2005.</b>

    Even as the economy grew, incomes stagnated last year and the poverty rate rose, the Census Bureau reported Tuesday. It was the first time on record that household incomes failed to increase for five straight years.

    The portion of Americans without health insurance remained roughly steady at 16 percent, the bureau said. A smaller percentage of people were covered by their employers, but two big government programs, Medicaid and military insurance, grew.

    The census's annual report card on the nation's economic well-being showed that a four-year-old expansion had still not done much to benefit many households. Median pretax income, $44,389, was at its lowest point since 1997, after inflation.

    Though the reasons are not wholly clear, economists say technology and global trade appear to be holding down pay for many workers. The rising cost of health care benefits has also eaten into pay increases.

    After the report's release, Bush administration officials said that the job market had continued to improve since the end of 2004 and that they hoped incomes were now rising and poverty was falling. The poverty rate ''is the last, lonely trailing indicator of the business cycle,'' said Elizabeth Anderson, chief of staff in the economics and statistics administration of the Commerce Department.

    The census numbers also do not reflect the tax cuts passed in President Bush's first term, which have lifted the take-home pay of most families.

    But the biggest tax cuts went to high-income families already getting raises, Democrats said Tuesday. The report, they added, showed that the cuts had failed to stimulate the economy as the White House had promised.
    <span style="background-color: #FFFF00"><b>
    ''The growth in the economy is not going to families,'' said Senator Jack Reed, Democrat of Rhode Island. ''It's in stark contrast to what happened during the Clinton administration.''</b></span>

    The main theme of the census report seemed to be the lingering weakness in compensation and benefits, even as the ranks of the unemployed have dwindled. Fewer people are getting health insurance from their employers or from policies of family members, while raises have generally trailed inflation.

    Last year, households kept income from falling by working more hours than they did in 2003, the data showed. The median pay of full-time male workers declined more than 2 percent in 2004, to $40,800; for women, the median dropped 1 percent, to $31,200. When some people switch to full-time work from part-time, they can keep household incomes from dropping even when the pay of individual workers is declining.
    <span style="background-color: #FFFF00"><b>
    ''It looks like the gains from the recovery haven't really filtered down,'' said Phillip L. Swagel, a resident scholar at the American Enterprise Institute, a conservative research group in Washington. ''The gains have gone to owners of capital and not to workers.''</b></span>

    There has always been a lag between the end of a recession and the resumption of raises, Mr. Swagel added, but the length of this lag has been confounding.

    In addition, the poverty rate rose last year for working-age people, those ages 18 to 64. The portion of people age 65 and older in poverty fell, while child poverty was essentially flat.

    Over all, the poverty rate increased to 12.7 percent, from 12.5 percent in 2003. Poverty levels have changed only modestly in the last three decades, rising in the 1980's and falling in the 1990's, after having dropped sharply in the 1960's. They reached a low of 11.1 percent in 1973, from more than 22 percent in 1960.

    In the same three decades that poverty has remained fairly steady, median incomes have grown significantly, lifting living standards for most families. After adjusting for inflation, the income of the median household, the one making more than half of all others and less than half of the rest, earns almost one-third more now than it did in the late 1960's.

    But income inequality has also risen in that time and was near all-time highs last year, the Census Bureau reported. The census numbers do not include gains from stock holdings, which would further increase inequality.

    In New York, the poverty rate rose last year to 20.3 percent, from 19 percent, making it the only city of more than one million people with a significant change. The reason for the increase was not obvious.

    Among populous counties, the Bronx had the fourth-highest poverty rate in the nation, trailing three counties on the Texas-Mexico border.

    Many economists say the government's statistics undercount poverty in New York and other major cities because the numbers are not adjusted for cost of living. A family of two parents and two children is considered poor if it makes less than $19,157 a year, regardless of whether it lives in a city where $500,000 buys a small apartment or a mansion.

    Households in New Hampshire made more last year ($57,400 at the median) than in any other state, while those in West Virginia made the least ($32,600). Fairfax County in Virginia ($88,100) and Somerset County in New Jersey ($84,900) were the counties with the highest earnings, the census said.

    The decline in employer-provided health benefits came after four years of rapidly rising health costs. The percentage of people getting health insurance from an employer fell to 59.8 percent last year, from 63.6 percent in 2000. The percentage receiving it from the government rose to 27.2 percent, from 24.7 percent.

    The trend is likely to continue unless the job market becomes as tight as it was in the late 1990's and companies decide they must offer health insurance to retain workers, said Paul Fronstin, director of the health research program at the Employee Benefit Research Group, a nonpartisan organization in Washington.

    The numbers released Tuesday showed a slight decline in median income, but the bureau called the drop, $93, statistically insignificant.

    The Midwest, which has been hurt by the weak manufacturing sector, was the only region where the median income fell and poverty rose. Elsewhere, they were unchanged.

    Since 1967, incomes have failed to rise for four straight years on two other occasions: starting in the late 1970's and in the early 1990's. The Census Bureau does not report household income for years before 1967, but other data show that incomes were generally rising in the 40's, 50's and 60's.


    <hr noshade color="#0000ff" size="14"></hr>

    <font face="arial black" size="5" color="#d90000">
    Don&rsquo;t Confuse the Jobs Hype with the Facts</font>
    <font face="Trebuchet ms, arial Unicode ms, verdana" size="3" color="#000000">

    <br><strong>By <a href="http://www.vdare.com/roberts/bio.htm">Paul Craig Roberts</a></strong>
    <br><strong>December 2nd 2005 </strong>
    <br>The November payrolls job report was announced Friday with the usual misleading hype. Spinmeisters made the most out of the 215,000 jobs. Looking beyond the glitter at the real facts, this is what we see. 21,000 of those jobs were <a href="http://www.vdare.com/roberts/050214_jobs.htm">government jobs</a> supported by <a href="http://www.vdare.com/roberts/tax.htm">taxpayers</a>. There were only 194,000 new jobs in the private sector. Of those new jobs, 37,000 are in construction and only 11,000 are in manufacturing. The bulk of the new jobs&mdash;144,000&mdash;are in domestic services.
    <br>Wholesale and retail trade account for 20,000. Food services and drinking places (<a href="http://www.vdare.com/sailer/end_of_immigration.htm">waitresses</a> and <a href="http://www.google.com/url?sa=t&amp;ct=res&amp;cd=10&amp;url=http://www.vdare.com/pb/marketing_malt_liquor.htm&amp;ei=n_uQQ8GOIY_I-QH6zuHCBw&amp;sig2=w5v9U-YI72aQoZ36mntrKw">bartenders</a>) account for 38,000. <a href="http://www.vdare.com/misc/levin_illegals_in_er.htm">Health care</a> and <a href="http://www.vdare.com/rubenstein/welfare.htm">social assistance</a> account for 27,000. Professional and business services account for 29,000. Financial activities gained 13,000 jobs. Transportation and warehousing gained 8,000 jobs.
    <br>Very few of these jobs result in tradable services that can be exported or help to close the growing gap in the US balance of trade.
    <br>The 11,000 new factory jobs and the 15,000 of the previous month are a relief from the usual loss. However, these gains are more than offset by the job cuts recently announced by General Motors and Ford.
    <br>Despite the gain in jobs, total hours worked declined as the average workweek fell to 33.7 hours. The decline in the labor force participation rate, a consequence of the shrinkage in well-paying jobs, masks a higher rate of unemployment than the reported 5 percent. The ratio of employment to population fell again in November.
    <br>Average hourly earnings (up 3.2 percent over the last year) are not keeping up with the consumer price index (up 4.3 percent). Consequently, real incomes are falling.
    <br>This is not the picture of a healthy economy in which growth in high productivity, high value-added jobs fuel the growth in consumer demand and provide savings to finance Washington&rsquo;s red ink. What we are looking at is an economy that is coming unglued from the loss of jobs that provide ladders of upward mobility and from massive trade and budget deficits that are resulting in unsustainable growth in indebtedness to foreigners.
    <br>The consumer price index measures inflation at 4.3 percent over the past year. Many people, experiencing household budgets severely impacted by fuel prices and grocery bills, find this figure unrealistically low. PNC Financial Services has a <a href="http://www.pncchristmaspriceindex.com/pressrelease.htm">Christmas price index</a> consisting of the gifts in the song, <a href="http://www.pncchristmaspriceindex.com/pressrelease.htm">&ldquo;The 12 Days of Christmas.&rdquo;</a> The index reports that the cost of the collection of gifts has risen 6 percent since last Christmas. Some of the gifts have risen substantially in price. Gold rings are up 27.5 percent, and pear trees are up 15.4 percent. The cost of labor (<a href="http://www.local802afm.org/publication_entry.cfm?xEntry=62525592">drummers drumming</a>, maids-a-milking) has remained the same.
    <br>Populations are hard pressed when the prices of goods rise relative to the price of labor, because this makes it impossible for the population to maintain its standard of living.
    <br>The US economy has been kept alive by low interest rates, which fueled a real estate boom. Consumers have kept growth alive by refinancing their home mortgages and spending the equity in their houses. Their indebtedness has risen.
    <br>Debt-fueled growth is qualitatively different from economic growth that results from an increase in high value-added jobs. Economists who look at the 3+ percent economic growth rate and conclude that things are fine are fooling themselves and the public. When the real estate boom ends, what will be the source of new spending power?
    Last edited: Jan 7, 2006
  20. nittie

    nittie New Member

    Ok I'll admit I'm part of this group but what I want to know is are the interest of the working class sustainable or will they go the way of the dinosaur and can anything be done to stop it? My first million I attributed to luck but the ones to come are a direct effect of hard work and believe me I mean hard, so...is keeping the middle class afloat a pipe dream or what?
  21. Greed

    Greed Active Member

    Record Share Of Economy Spent on Health Care

    Record Share Of Economy Spent on Health Care
    By Marc Kaufman and Rob Stein
    Washington Post Staff Writers
    Tuesday, January 10, 2006; A01

    Rising health care costs, already threatening many basic industries, now consume 16 percent of the nation's economic output -- the highest proportion ever, the government said yesterday in its latest calculation.

    The nation's health care bill continued to grow substantially faster than inflation and wages, increasing by almost 8 percent in 2004, the most recent year with near-final numbers.

    Spending for physicians and hospitals shot up considerably faster than in recent years, while drug costs grew at a slower rate than over the past decade.

    Even as health care costs continue to escalate, however, many Americans -- especially minorities and the poor -- still do not receive high-quality care, according to two other federal reports yesterday. The quality of health care is improving slowly and some racial disparities are narrowing, the reports found, but gaps persist and Hispanics appear to be falling even further behind.

    "We can do better," Health and Human Services Secretary Mike Leavitt said at a Washington conference on racial and ethnic disparities in health care. "Disparities and inequities still exist. Outcomes vary. Treatments are not received equally."

    Political, medical and economic leaders and experts have long warned that health care cost trends will gradually overwhelm the economy, and many companies now complain that employee and retiree health costs are making them less competitive. Yesterday's report added new reasons to worry.

    The overall cost of health care -- everything from hospital and doctor bills to the cost of pharmaceuticals, medical equipment, insurance and nursing home and home-health care -- doubled from 1993 to 2004, said the report from the Centers for Medicare and Medicaid Services. In 2004, the nation spent almost $140 billion more for health care than the year before.

    In 1997, health care accounted for 13.6 percent of the gross domestic product.

    "Americans rejected the tougher restrictions of managed care in the late 1990s, and yet they want all the latest advances in medical technology," said Drew Altman, president of the nonpartisan Kaiser Family Foundation, which researches health issues. "Since government regulation of prices and services is not in the cards, the inevitable result is higher costs."

    The health care increase of 7.9 percent in 2004 was almost three times the overall national inflation rate, which was 2.7 percent. The average hourly wage for workers in private companies was essentially unchanged that year, according to the U.S. Department of Labor.

    After a sharp jump in health care costs earlier in the decade, the health inflation rate appears to be plateauing, officials added.

    The best news involved spending on pharmaceutical drugs, which increased by less than 10 percent for the first time in more than a decade.

    Cynthia Smith of the Centers for Medicare and Medicaid Services, lead author of the health spending report, attributed the slower increase in drug spending to greater use of generic drugs and mail-order pharmacies, a slowdown in the introduction of costly new medications, and the impact of higher drug co-pays. Mark Merritt, president of the Pharmaceutical Care Management Association, which represents drug benefit managers, said the trend was also a result of their "work over the past decade to change the way consumers, clinicians and purchasers think about prescription drugs."

    Although the fast rise in drug spending in the past decade attracted great attention from officials and health policy experts, it remains a relatively small part of the health care bill -- about 10 percent.

    Defenders of increased drug spending have often argued that those added costs would keep people healthier and reduce the amount spent on hospitals and doctors. The 2004 statistics told a different story, however, with an increase in doctor costs of 9 percent from 2003 and an increase in hospital costs of 8.6 percent. The report's authors said the jumps appeared to be associated with higher Medicare reimbursement rates for some doctors and, anecdotally, to an upswing in construction of new hospitals.

    "This is an alarming situation, but it's more like a creeping infection than a broken bone, and so people get used to it," said Edward Howard, executive vice president of the Alliance for Health Reform, a nonprofit education group chaired by Sens. John D. Rockefeller IV (D-W.Va.) and Bill Frist (R-Tenn.). "Frankly, I don't see major change until people who have some sort of organized political influence start hurting a little more."

    In addition to the report on costs, a different agency yesterday released two new annual reports mandated by Congress on the quality of health care and disparities in care. Officials called them the most comprehensive assessments of their kind.

    For the report by the Agency for Healthcare Research and Quality, researchers compiled data from dozens of sources collected by the federal government and others to create 179 quality measures, including 46 "core" measures.

    The researchers concluded that the overall quality of care in 2005 had improved at a rate of 2.8 percent from 2003. That was the same increase as the year before, and many measures showed no improvement or even decreases.

    For example, there was improvement in the percentage of patients with high blood pressure whose condition was under control, but no improvement in providing speedy treatment to people having heart attacks.

    In the second report, the National Healthcare Disparities Report, researchers found more measures on which the quality gap between whites and racial minorities was shrinking than widening. But the report found that major disparities remained for all groups and that the gap had widened for Hispanics.

    Of disparities experienced by blacks, 58 percent were narrowing and 42 percent were widening, the researchers found. For Hispanics, 41 percent of disparities were narrowing, whereas 59 percent were becoming larger.

  22. Greed

    Greed Active Member

    Chasing Full Employment

    Chasing Full Employment
    February 12, 2006
    Economic View

    FULL employment! The United States has rarely entered that paradise. There was a hint of it in the late 1990's, but for Americans under the age of 50, the experience has been so fleeting that they may not realize full employment was once a hotly pursued goal — a condition considered so important that many politicians wanted it legislated and not left to chance.

    President Franklin D. Roosevelt put full employment on the table in 1944, declaring that having a job was a basic human right. During World War II, the nation actually achieved full employment. And twice since then, Congress has considered bills that would have guaranteed a job at decent pay for every adult who wanted work. That doesn't mean everyone; lots of people don't want to work. But in a society that legislated full employment, the government would be the employer of last resort if the private sector came up short of good jobs for those who wanted them.

    These are radical concepts today. Fear of another depression prompted the first debate, in the mid-1940's, and a steep recession contributed to the second, in the mid-1970's. Both bills, as finally enacted, failed to achieve their original goal. And as inflation rose in the late 70's, government shifted to fighting it, often at the expense of employment.

    The old-timers who tried to legislate full employment saw it not as a desirable market phenomenon — the spinoff of a robust economy — but as a civil right, on a par with the right to vote. That is still the view of a few economists, including Amartya Sen at Harvard, whose writings on famine, poverty and other injustices won him the Nobel in economics in 1998.

    "I know that people get scared of inflation and Wall Street is a natural ally in this fear," Mr. Sen said. "But the real costs of unemployment are very high. Having a job confers not only income, but social recognition and self-respect, which comes with having the sense of being wanted by society."

    Out of the second Congressional debate came not full employment but a fear of it. The law that Congress finally enacted, the Humphrey-Hawkins Act of 1978, set full employment as a goal — along with low inflation. Soon, however, each was viewed as the enemy of the other and full employment, defined as the right to a job, lost out.

    Full employment "was the tradition that flourished after World War II," said Helen Ginsburg, a professor emeritus of economics at Brooklyn College. "Now, it is full employment until the inflation rate goes up."

    For more than two decades, the guiding thesis embraced by economists and policy makers was this: If unemployment became too low, the labor shortage would give workers the bargaining leverage to push up wages. Employers would respond by raising prices to cover the labor costs, starting an inflationary spiral deemed to be more damaging than a rising unemployment rate.

    That dubious proposition kept America away from full employment. Every time the unemployment rate fell below a designated tipping point — 5 or 6 percent — the Federal Reserve would raise interest rates. The higher rates slowed the economy, muffled hiring and pushed the unemployment rate back up. The spell cast by this way of thinking did not break until the late 1990's, when the economy boomed, the unemployment rate plummeted, wages rose faster than inflation across the work force and, lo and behold, inflation remained low, although the Fed still held down interest rates.

    As a result, even some Wall Street stalwarts have eased up on their insistence that low unemployment and rising wages lead to higher inflation. Listen, for example, to James Glassman, senior domestic economist at J. P. Morgan Chase & Company. "This idea that wages are a signal of coming inflation is a bad habit," he said. "Business has control over labor costs more than ever in this global economy, as so many workers unfortunately are finding out."

    The late-90's hiring boom, approaching full employment, has lingered fondly in public memory. And now that the unemployment rate is falling once more — it dropped two-tenths of a percentage point last month, to 4.7 percent, its lowest level in four and a half years — there is talk again of somehow bringing back, if not full employment, then at least the late 90's version of it.

    The unemployment rate, excluding teenagers, fell below 4 percent in 1998, the first time it had dropped that low since 1973. It fell to 3.3 percent in late 2000, achieving briefly what many economists define as the "full employment unemployment rate" for adults. Some, however, would put it lower.

    "Two percent unemployment would certainly be a condition closer to one in which everyone seeking work would be able to land a job at a good wage," said William A. Darity Jr., an economist at the University of North Carolina in Chapel Hill.

    Adult unemployment often fell well below 3 percent in the early 1950's and occasionally in the late 1960's. After that, an expanding global production network shifted work overseas, reducing the number of good jobs in America. The late-90's bubble economy was a brief exception to this trend.

    So does globalization mean that for full employment to exist, there must be legislation that mandates it? A great majority of economists and politicians — liberals and conservatives, Democrats and Republicans — resist this view. They count on the markets to bring back full employment, with a smattering of tax breaks, subsidies and low interest rates to help the process. But not government as the employer of last resort.

    That faith in markets, on the other hand, has not yet produced full employment. A famous British economist, William Beveridge, argued in the 1930's that full employment exists when the number of job vacancies exceeds the number of people seeking them. Only then is everyone who wants a job likely to land one, at a good wage.

    The number of unfilled jobs in the United States is certainly smaller than the number of people seeking work. A survey from the Bureau of Labor Statistics showed, for example, 4.1 million job openings in December. That was well short of the 7.4 million unemployed people seeking work that month, not to mention the roughly 10 million others who say they would look for work if they thought that their hunt would be successful.

    Recognizing the shortfall in the demand for workers, the federal government generated public-sector jobs in the 70's under the Comprehensive Employment and Training Act, a program that the Reagan administration ended in 1983. Mr. Darity argues that something like CETA should be revived, not to supply make-work jobs, but to satisfy pressing social needs with projects like public school construction or a national teachers corps or high-speed rail lines.

    "Certainly there are areas that the private sector does not find profitable," Mr. Darity said, "but the public needs and the private sector would find useful."

  23. SABB

    SABB New Member

    Great post! good fucking looks.1
  24. muckraker10021

    muckraker10021 Superstar *****

    <img src="http://mywebpage.netscape.com/camarilla10028/Republiklan.jpg">

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    Paul Craig Roberts is one of the few wealthy Republicans who is willing to tell the truth about where is baby bush RepubliKlan economy is really headed.

    As a former Ronald Reagan administration Treasury Department official and a former Wall Street Journal editorial page writer, he knows exactly what’s going on …and Most Importantly is not willing to keep quiet just because he personally won’t be affected by Bush-Enomics.

    The RepubliKlan is destroying America economically.

    Check out the hyperlinks in Robert’s articles.
    In my view, He is 100% on point.

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    <font face="arial black" size="6" color="#D90000">Jobs News Even Worse Than We Thought </font>
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    <br><strong>By Paul Craig Roberts
    February 11, 2006</strong>
    <br> Last week the Bureau of Labor Statistics re-benchmarked the payroll jobs data back to 2000. Thanks to Charles McMillion of <a href="http://www.mbginfosvcs.com./"> MBG Information Services </a>, I have the adjusted data from January 2001 through January 2006. If you are worried about terrorists, you don't know what worry is.
    <br> Job growth over the last five years is the weakest on record. The US economy came up more than 7 million jobs short of keeping up with population growth. That's one good reason for controlling immigration. An economy that cannot keep up with population growth should not be boosting population with heavy rates of <a href="http://www.vdare.com/guzzardi/cheap_labor2.htm"> legal </a>and <a href="http://www.vdare.com/rubenstein/041118_nd.htm"> illegal immigration. </a>
    <br> Over the past five years the US economy experienced a net job loss in goods producing activities. The entire job growth was in service-providing activities—primarily credit intermediation, health care and social assistance, waiters, waitresses and bartenders, and state and local government.
    <br><a href="http://www.vdare.com/roberts/all_quiet.htm"> US manufacturing </a> lost 2.9 million jobs, almost 17% of the manufacturing work force. The wipeout is across the board. Not a single manufacturing payroll classification created a single new job.
    <br> The declines in some manufacturing sectors have more in common with a country undergoing saturation bombing during war than with a super-economy that is <strong>"the envy of the world." </strong> Communications equipment lost 43% of its workforce. Semiconductors and electronic components lost 37% of its workforce. The workforce in computers and electronic products declined 30%. Electrical equipment and appliances lost 25% of its employees. The workforce in motor vehicles and parts declined 12%. Furniture and related products lost 17% of its jobs. Apparel manufacturers lost almost half of the work force. Employment in textile mills declined 43%. Paper and paper products lost one-fifth of its jobs. The work force in plastics and rubber products declined by 15%. Even manufacturers of beverages and tobacco products experienced a 7% shrinkage in jobs.
    <br> The knowledge jobs that were supposed to take the place of lost manufacturing jobs in the globalized <strong>"new economy" </strong> never appeared. The information sector lost 17% of its jobs, with the telecommunications work force declining by 25%. Even wholesale and retail trade lost jobs. Despite massive new accounting burdens imposed by <a href="http://www.vdare.com/roberts/congress_capitalism.htm"> Sarbanes-Oxley, </a> accounting and bookkeeping employment shrank by 4%. Computer systems design and related lost 9% of its jobs. Today there are 209,000 fewer managerial and supervisory jobs than 5 years ago.
    <br> In five years the US economy only created 70,000 jobs in architecture and engineering, many of which are clerical. Little wonder engineering enrollments are shrinking. There are no jobs for graduates. The talk about engineering shortages is absolute ignorance. There are several hundred thousand American engineers who are unemployed and have been for years. No student wants a degree that is nothing but a ticket to a soup line. Many engineers have written to me that they cannot even get <a href="http://www.vdare.com/roberts/060131_deception.htm"> Wal-Mart jobs </a> because their education makes them over-qualified.
    <br> Offshore outsourcing and offshore production have left the US awash with unemployment among the highly educated. The low measured rate of unemployment does not include discouraged workers. Labor arbitrage has made the unemployment rate less and less a meaningful indicator. In the past unemployment resulted mainly from turnover in the labor force and recession. Recoveries pulled people back into jobs. Unemployment benefits were intended to help people over the down time in the cycle when workers were laid off. Today the unemployment is permanent as entire occupations and industries are wiped out by labor arbitrage as corporations replace their American employees with foreign ones. Economists who look beyond political press releases estimate the US unemployment rate to be between 7% and 8.5%. There are now hundreds of thousands of Americans who will never recover their investment in their university education.
    <br> Unless the BLS is falsifying the data or businesses are reporting the opposite of the facts, the US is experiencing a job depression. Most economists refuse to acknowledge the facts, because they endorsed globalization. It was a win-win situation, they said.
    <br> They were wrong.
    <br> At a time when America desperately needs the voices of educated people as a counterweight to the disinformation that emanates from the Bush administration and its supporters, economists have discredited themselves. This is especially true for <strong><a href="http://www.vdare.com/roberts/050315_economy.htm"> "free market economists" </a></strong> who foolishly assumed that international labor arbitrage was an example of free trade that was benefiting Americans.
    <br> Where is the benefit when employment in US export industries and import-competitive industries is shrinking? After decades of struggle to regain credibility, free market economics is on the verge of another wipeout.
    <br> No sane economist can possibly maintain that a deplorable record of merely 1,054,000 net new private sector jobs over five years is an indication of a healthy economy. The total number of private sector jobs created over the five year period is 500,000 jobs <em> less </em>than <em> one </em>year's legal and illegal immigration! (In a December 2005 Center for Immigration Studies <a href="http://www.cis.org/articles/2005/back1405.html"> report </a> based on the Census Bureau's March 2005 Current Population Survey, Steven Camelot writes that there were 7.9 million new immigrants between January 2000 and March 2005.)
    <br> The economics profession has failed America. It touts a meaningless number while joblessness soars. Lazy journalists at the <em>New York Times </em> simply <a href="http://www.vdare.com/roberts/060203_jobs.htm"> rewrite the Bush administration's press releases. </a>
    <br> On February 10 the Commerce Department released a record US trade deficit in goods and services for 2005—$726 billion. The US deficit in Advanced Technology Products reached a new high. Offshore production for home markets and jobs outsourcing has made the US highly dependent on foreign provided goods and services, while simultaneously reducing the export capability of the US economy. It is possible that there might be no exchange rate at which the US can balance its trade.
    <br> Polls indicate that the Bush administration is succeeding in whipping up fear and hysteria about Iran. The secretary of defense is promising Americans decades-long war.
    <br> Is death in battle Bush's solution to the job depression?
    <br> Will Asians finance a decades-long war for a bankrupt country?

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    <font face="arial black" size="6" color="#D90000">Their Own Economic Reality </font>
    <font face="trebuchet ms, arial unicode ms, microsoft sans serif, verdana" size="3" color="#000000">
    <br><strong>By Paul Craig Roberts
    February 15th 2006</strong>
    <br>Who can forget the <a href="http://search.atomz.com/search/?sp-a=000a298a-sp00000000&sp-q=neoconservatism&sp-p=all"> neocons </a>' claim that under their leadership America creates its own reality?
    <br>Remember the neocons' Iraq reality—a <a href="http://www.vdare.com/roberts/050111_ken.htm"><strong>"cakewalk" </strong> war </a>? After three years of combat, thousands of casualties, and cost estimated at over $1 trillion, real reality must still compete with the White House spin machine.
    <br>One might think that the Iraq experience would restore sober judgment to policymakers. Alas, neocon reality has spread everywhere. It has infected the media and the new Federal Reserve Chairman, Ben Bernanke, who just gave Congress an upbeat report on the economy. The robust economy, he declared, could soon lead to inflation and higher interest rates.
    <br>Consumers deeper in debt and fresh from their first negative savings rate since the <a href="http://www.policyreview.org/AUG01/roberts.html"> Great Depression </a> show high consumer confidence. It is as if the entire country is on an acid trip or a cocaine trip or whatever it is that lets people create realities for themselves that bear no relation to real reality.
    <br>How can the upbeat views be reconciled with the Bureau of Labor Statistics' payroll jobs data, the extraordinary red ink, and exploding trade deficit?
    <br>Perhaps the answer is that every economic development, no matter how detrimental, is spun as if it were good news. For example, the worsening US trade deficit is spun as evidence of the fast growth of the US economy: the economy is growing so fast it can't meet its needs and must rely on imports. Declining household income is spun as an inflation fighter that keeps mortgage interest rates low. Federal budget deficits are spun as letting taxpayers keep and spend more of their own money. Massive layoffs are spun as evidence that change is so rapid that the work force must constantly upgrade skills and re-educate itself.
    <br>The denial of economic reality has become an art form. Except for Lou Dobbs, no accurate economic reporting is available in the <strong>"mainstream media." </strong>
    <br>Occasionally, real information escapes the spin machine. The National Association of Manufacturers, one of outsourcing's greatest boosters, has just released a report, <strong>"US Manufacturing Innovation at Risk,"[ <a href="http://www.nam.org/s_nam/bin.asp?CID=202515&DID=236300&DOC=FILE.PDF">PDF </a>] </strong> by economists Joel Popkin and Kathryn Kobe. The economists find that US industry's investment in research and development is not languishing after all. It just appears to be languishing, because it is rapidly being shifted overseas: <strong>"Funds provided for foreign- performed R&amp;D have grown by almost 73 percent between 1999 and 2003, with a 36 percent increase in the number of firms funding foreign R&amp;D." </strong>
    <br>US industry is still investing in R&amp;D after all; it is just not hiring Americans to do the R&amp;D.
    <br>US manufacturers still make things, only less and less in America with American labor.
    <br>US manufacturers still hire engineers, only they are foreign ones, not American ones.
    <br>In other words, everything is fine for US manufacturers. It is just their former American work force that is in the doldrums.
    <br>As these Americans happen to be customers for US manufacturers, US brand names will gradually lose their US market. US household median income has fallen for the past five years. Consumer demand has been kept alive by consumers' spending their savings and home equity and going deeper into debt. It is not possible for debt to forever rise faster than income.
    <br>When manufacturing moves abroad, engineering follows. R&amp;D follows engineering, and innovation follows R&amp;D. The entire economy drains away. This is why the <strong>"new economy" </strong> has not materialized to take the place of the lost <strong>"old economy." </strong>
    <br>The latest technologies go into the newest plants, and those plants are abroad. Innovations take place in new plants as new processes are developed to optimize the efficiency of the new technologies. The skills required to operate new processes call forth investment in education and training. As US manufacturing and R&amp;D move abroad, Indian and Chinese engineering enrollments rise, and US enrollments decline.
    <br>The process is a unified whole. It is not possible for a country to lose parts of the process and hold on to other parts. That is why the <strong> "new economy" </strong> was a hoax from the beginning. As Popkin and Kobe note, new technologies, new manufacturing processes, and new designs take place where things are made. The notion that the US can lose everything else but hold on to innovation is absurd.
    <br>Someone needs to tell Congress before they waste yet more borrowed money. In an adjoining column to the NAM report on innovation, the February 6 <em><a href="http://www.manufacturingnews.com/"> Manufacturing &amp; Technology News </a></em>reports that <strong> "the US Senate is jumping on board the competitiveness issue." </strong> The Bush regime and the doormat Congress have come together in the belief that the US can keep its edge in science and technology if the federal government spends $9 billion a year to <strong>"fund innovative, big-payoff ideas that have the potential to transform the US economy." </strong>
    <br>The utter stupidity of the <strong> "Protecting America's Competitive Edge Act" </strong> (PACE) is obvious. The tremendous labor cost advantage of doing things abroad will equally apply to any new <strong> "big-payoff ideas" </strong> as it does to the goods and services currently outsourced. Moreover, US research is open-sourced. It is available to anyone. As the Cox Commission Report made clear, there are a large number of Chinese front companies in the US for the sole purpose of collecting technology. PACE will simply be another US taxpayer subsidy to the rising Asian economies.
    <br>The assertion that we hear every day that America is falling behind because it doesn't produce enough <a href="http://www.vdare.com/rubenstein/050921_nd.htm"> science, mathematics and engineering graduates </a> is a bald-faced lie. The problem is always brought back to education failures in K-12, that is, to more education subsidies. When CEOs say they can't find American engineers, they mean they cannot find Americans who will work for Chinese or Indian wages. That is what the so-called <strong>"shortage" </strong> is all about.
    <br>I receive a constant stream of emails from unemployed and underemployed engineers with many years of experience and advanced degrees. Many have been out of work for years. They describe the movement of their jobs offshore or their replacement by foreigners brought in on work visas. Many no longer even know American engineers who are employed in the profession. Some are now working in sawmills, others in Home Depot, and others are attempting to eke out a living as consultants. Many describe lost homes, broken marriages, even imprisonment for inability to make child support payments.
    <br>Many ask me how economists can be so blind to reality. Here is my answer: Many economists are bought and paid for by outsourcers. Most of the studies claiming to prove that Americans benefit from outsourcing are done by economic consulting firms hired by outsourcers. Or they are done by think tanks or university professors dependent on corporate donors. Or they reflect the ideology of <strong>"free market economists" </strong> who are committed to the belief that <strong>"freedom" </strong> is good and always produces good results. Since outsourcing is merely the freedom of property to act in its interest, and since this self-interest is always guided by an invisible hand to the greater welfare of everyone, outsourcing, ipso facto, is good for America. Anyone who doesn't think so is a fascist who wants to take away the rights of property.
    <br>Seriously, this is what passes for analysis among <strong>"free market economists." </strong>
    <br>Economists' commitment to their <strong> "reality" </strong> is destroying the ladders of upward mobility that made America the land of opportunity. It is just as destructive as the neocons' commitment to their <strong>"reality" </strong> that is driving the US deeper into war in the Middle East.
    <br>Fact and analysis no longer play a role. The spun reality in which Americans live is insulated against intelligent perception.
    <br>American <strong>"manufacturers" </strong> are becoming merely marketers of foreign made goods. The CEOs and shareholders have too short a time horizon to understand that once foreigners control the manufacture-design- innovation process, they will bypass American brand names. US companies will simply cease to exist.
    <br>Norm Augustine, former CEO of Lockheed Martin, says that even McDonald jobs are no longer safe. Why pay an error-prone order-taker the minimum wage when McDonald can have the order transmitted via satellite to a central location and from there to the person preparing the order. McDonald's experiment with this system to date has cut its error rate by 50% and increased its throughput by 20 percent. Technology lets the orders be taken in India or China at costs below the minimum wage and without the liabilities of US employees.
    <br>Americans are giving up their civil liberties because they fear terrorist attacks. All of the terrorists in the world cannot do America the damage it has already suffered from offshore outsourcing.

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  25. Greed

    Greed Active Member

    Interest rates close to right after last hike: Fed

    Interest rates close to right after last hike: Fed
    By Tim Ahmann
    Tue Feb 21, 3:54 PM ET

    Federal Reserve officials felt a 14th straight increase in interest rates last month put borrowing costs near where they needed to be, but agreed they could not rule out more hikes, given inflation risks.

    "Although the stance of policy seemed close to where it needed to be given the current outlook, some further policy firming might be needed to keep inflation pressures contained and the risks to price stability and sustainable economic growth roughly in balance," minutes from the Fed's January 31 policy-setting meeting released on Tuesday said.

    The minutes said some officials believed "somewhat" higher than desired readings on core inflation and inflation expectations reinforced the idea that further rate increases might be necessary.

    "However, all members agreed that the future path for the funds rate would depend increasingly on economic developments and could no longer be prejudged with the previous degree of confidence," they said.

    Meeting on Alan Greenspan's final day as chairman of the central bank, Fed officials pushed the overnight federal funds rate up by a quarter-percentage point to 4.5 percent, the latest in a string of increases dating to June 2004.

    As they had at their previous meeting in mid-December, policy-makers saw inflation risks stemming both from the possibility high energy costs might bleed through to other prices and from a diminishing amount of slack in the economy.

    Prices for U.S. government bonds fell after the release of the minutes, but the dollar pared gains. Major U.S. stock indexes were modestly lower, partly on concerns about higher interest rates.

    Financial markets are banking on another quarter-point rate increase at the Fed's next meeting on March 27-28 and a good chance of one more by mid-year.

    "If the economy slows down, more hikes would not be necessary. But right now, there should be an assumption that the Fed would push rates toward 5 percent," said Charles Lieberman, chief investment officer at Advisors Capital Management in Paramus, New Jersey.


    The minutes of the January meeting said some members believed the economy was running close to its non-inflationary capacity, a view underscored by new Fed chief Ben Bernanke in congressional testimony last week.

    A few days after the Fed met, the government said the U.S. unemployment rate fell to a 4-1/2 year low of 4.7 percent in January, leading financial markets to increase bets on further Fed rate increases.

    The Fed minutes showed policy-makers had already been debating whether the jobless rate, which stood at 4.9 percent in December, signaled full employment, beyond which wage-related inflation pressures would ignite.

    "Some participants remarked on the uncertainties regarding the extent of remaining capacity in labor markets and the outlook for labor costs," they said.

    The minutes said officials would watch closely to see if more people came into the labor market, easing tight conditions, and to see whether advances in business productivity were great enough to keep rising wages from spilling over into prices.

    Officials saw high profit margins as both a possible sign of the ability of businesses to pass production costs along to consumers, and as a potential anti-inflationary buffer that could absorb future cost increases.

    Fed officials felt the economy would bounce back smartly in the current quarter after a sluggish end to last year. But they expected the expansion to maintain a more sustainable pace over the next couple of years.

    While core inflation, which strips out volatile food and energy prices, was seen moving up in the near term, it was expected it to remain contained over the long haul.

  26. Greed

    Greed Active Member

    Why consumer pocketbooks had a rough start this millennium

    Why consumer pocketbooks had a rough start this millennium:
    Median family income rose just 1.6 percent between 2001 and 2004, a Federal Reserve survey released Thursday shows.

    By Mark Trumbull | Staff writer of The Christian Science Monitor

    As Americans entered a new millennium, gains in their pocketbook slowed dramatically.

    Median incomes rose just 1.6 percent after inflation during the 2001-04 period, according to data released Thursday by the Federal Reserve Board. The median family net worth, a measure of wealth that represents the sum of all assets minus liabilities, rose a similarly small 1.5 percent in that period.

    Gains are better than losses, but the survey confirms and amplifies a trend of wage stagnation that is continuing to dampen American paychecks into 2006.

    "It is a long-term trend," says Mark Weisbrot, an economist at the Center for Economic and Policy Research in Washington, which studies the well-being of American workers and families. "Over the past 30 years, the median wage has grown about 9 or 10 percent."

    The Federal Reserve survey of consumer finances comes out every three years, and represents a more detailed portrait of family finances than the monthly economic reports that come from the Department of Labor or other government agencies.

    The period studied in its new survey encompassed a rocky time for the stock market, a slow-growing job market, and a rise in both home prices and family debts.

    Inflation-adjusted incomes have grown so slowly, Mr. Weisbrot says, despite solid growth in productivity. A worker today is able to produce about 80 percent more, per hour of work, than his or her counterpart 30 years ago.

    "Globalization is part of the process by which the bargaining power of most employees in the United States has been drastically reduced so that they don't capture most of the gains from the economy," he says.

    Thanks in large measure to a rough stock market, the 2001-04 period was not necessarily a lucrative one for the richest Americans either.

    The median measure of income captures the "typical" family - with half of households above and half beneath that number. It reached $43,200 in 2004, up from $42,500 in 2001.

    Yet average incomes fell, in part due to a plunge in the earnings of the top 10 percent of families ranked on a scale of net worth. Essentially, they weren't able to earn as much on their assets as in 2001. It's not that managerial salaries have fallen. But the recent period hasn't been quite the booming opportunity for capital gains and stock options that the late 1990s was.

    Thus, the average American family income fell from $72,400 in 2001 to $70,700 in 2004. The average income of families in the top 10 percent of net worth fell from $273,100 to $256,000 during that period.

    The net worth, meanwhile, rose somewhat for families of all levels of wealth, although not as strongly as in the late 1990s.

    The median, or midpoint, for net worth rose by 1.5 percent to $93,100 from 2001 to 2004. That growth was far below the 10.3 percent gain in median net worth from 1998 to 2001, a period when the stock market reached record highs before starting to decline in early 2000.

    The Fed survey found that the share of Americans' financial assets invested in stocks dipped to 17.6 percent in 2004, down from 21.7 percent in 2001.

    The percentage of Americans who owned stocks, either directly or through a mutual fund, fell by 3.3 percentage points to 48.6 percent in 2004, down from 51.9 percent in 2001.

    Stock ownership rates were highest in 2004 among families with higher incomes and heads of households aged 55 to 64. Overall median stock holdings fell to $24,300 in 2004, down from $36,700 in 2001. With baby boomers turning 60 this year and nearing retirement, the survey found that the percentage of families with some type of tax-deferred retirement account, such as a 401(k), fell by 2.5 percentage points to 49.7 percent of all families.

    However, those who had retirement accounts saw their holdings increase. The median for holdings in retirement accounts rose by 13.9 percent to $35,200.

    The Fed survey found that debts as a percent of total assets rose to 15 percent in 2004, up from 12.1 percent in 2001. Mortgages to finance home purchases were by far the biggest share of total debt at 75.2 percent in 2004, unchanged from the 2001 level.

    "Three key shifts in the 2001-04 period underlie the changes in net worth," said the Fed researchers involved in the study. "First, the strong appreciation of house values and a rise in the rate of homeownership produced a substantial gain in the value of holdings of residential real estate."

    Second, the rate of ownership of stocks in direct and indirect forms (such as through mutual funds) declined, as did the typical amount held.

    Third, the amount of debt relative to assets surged, notably debt secured by real estate. The upshot: "Families devoted more of their income to servicing debts, despite a general decline in interest rates," the researchers said.

    The fraction of families with debt payments 60 days or more overdue rose substantially, mainly among people in the bottom 80 percent of the income ladder.

    The Fed survey of consumer finances is conducted between May and December of every third year, and involves interviews with several thousand US families.

  27. Greed

    Greed Active Member

    Economists at Odds Over Savings Rates

    Economists at Odds Over Savings Rates
    By ELLEN SIMON, AP Business Writer
    1 hour, 30 minutes ago

    Now that America's savings rate has been negative for an entire year, a first since the Great Depression, the question is whether we're a spendthrift nation on its way to the poor house or whether we're looking at the wrong numbers when we calculate savings.

    The personal savings rate is, essentially, the amount of after-tax income left once household bills are paid. Maybe it's $75 for a household, maybe it's $7,500, but as a percentage of income, it's declining. The personal savings rate used to be 10 percent of disposable income from 1974 to 1984, according to the Bureau of Labor Statistics. It fell to 4.8 percent by 1994, and was negative for all of 2005. As of January, the personal savings rate was minus 0.7 percent.

    With retirement looming soon for the baby boom generation, the concern is that a dearth of savings now could cause a cutoff in spending later.

    Some economists say that's far-fetched. They argue the personal savings figures are artificially low, since the numbers don't include increases in assets such as equities and homes. Yale University economics professor William D. Nordhaus made that argument in 2002 congressional testimony, saying that once assets were included, the savings rate for the 1990s would have been a robust 25 percent.

    European countries count capital gains and home appreciation when they calculate personal savings, said William Hummer, chief economist at Wayne Hummer Investments.

    "Our savings rate is understated," he said. "I think it's wrong."

    Another argument is that the wealthiest 20 percent of American families account for roughly 40 percent of consumer spending, spending roughly 4.5 times as much as the lowest 20 percent, something Citigroup's chief U.S. equities strategist Tobias M. Levkovich pointed out in a recent report. The implication: This group isn't going to run out of money anytime soon. If a healthy economy depends on the wealthiest Americans continued spending on $200 haircuts and $500 seven-ply cashmere sweaters, we can all rest easy.

    His corollary argument is that some of those with the lowest earnings are retirees, who are spending money they've already socked way, so the fact that they spend $18,000 a year but earn only $9,000 should worry no one.

    The other side argues that American consumers simply spend way too much.

    "The decline in the U.S. personal savings rate and the dearth of internal saving raise concerns for the future," The San Francisco Federal Reserve said in a November note titled "Spendthrift Nation."

    To prepare for retirement, "aging workers should be building their nest eggs and paying down debt," the note said. "Instead, many of today's workers are saving almost nothing and taking on large amounts of adjustable-rate debt with payments programmed to rise with the level of interest rates. Failure to boost saving in the years ahead may lead to some painful adjustments in the future. ...."

    The note blames "ongoing credit industry innovations (the growth of subprime lending, home equity loans, exotic mortgages, etc.)" for expanding consumer access to borrowed money and reducing consumers' perceived need for precautionary savings.

    It also blames individuals' eagerness to jump into "long-lived bull markets in stocks and housing," which came at the same time nominal interest rates were falling.

    "Reminiscent of the widespread margin purchases by unsophisticated investors during the stock market mania of the late 1990s, today's housing market is characterized by an influx of new buyers, record transaction volume, and a growing number of property acquisitions financed almost entirely with borrowed money," the note said.

    Bernard Baumohl, executive director of The Economic Outlook Group, said Americans are increasingly dependent on borrowed money. In 1980, about 78 percent of spending was financed from wages and salaries, he said. By 1990, the figure had dropped to 71 percent and it's been falling ever since. In January, it slipped to 64 percent.

    "With borrowing costs on the rise and the wealth effect from real estate assets diminishing, something has to give," he said.

    The federal government's stance is that we should — and will — change our ways.

    The Bureau of Labor Statistics, in a report covering the employment and economic outlook for 2004 to 2014, predicted such a change.

    "Over the projection period ... the personal savings rate is projected to improve gradually, from 1.8 percent in 2004 to 3.4 percent in 2014," according to the publication.

    How? The Bureau projects that income will grow at a slower 2.9 percent annual rate between 2004 and 2014, but personal consumption will drop.

    While economists wrangle over savings, the White House clearly thinks it's an issue. Vice President Dick Cheney, speaking at a conference on how to encourage people to boost savings and be better prepared for retirement, urged Americans Thursday to do a better job saving.

    "The American dream begins with saving money and that should begin on the very first day of work," Cheney said.

  28. hoodedgoon

    hoodedgoon New Member

    Re: Economists at Odds Over Savings Rates

    the rich get richer, the poor get poorer. disposable income's will decrease while employment will increase slightly. basically you got more people working, making less money with rising energy prices, increase interest rates to pay for social security and the war and slowing productivity.

  29. Greed

    Greed Active Member

    Re: Economists at Odds Over Savings Rates

    so despite all the articles posted in this thread you dont think bad spending habits are the real problems regarding disposable income?

    or are you another believer in the "only single mother with 8 kids are in debt because they have to use their credit card to buy bread and water" train of thought?
  30. Makeherhappy

    Makeherhappy New Member

    Re: Economists at Odds Over Savings Rates

    Old habits are hard to break.

    State of Black America: RED ALERT
  31. Greed

    Greed Active Member

    Re: Economists at Odds Over Savings Rates

    i agree about old habits but it seems like some people think its government's job to save people from their own bad habits.
  32. hoodedgoon

    hoodedgoon New Member

    Re: Economists at Odds Over Savings Rates

    You love to twist people's words and insinuate stuff they never said or even infered in their post eh. I guess the bottom 40% just have bad spending habits and the top 1% have good spending habits. Yea that's it.

  33. Greed

    Greed Active Member

    Re: Economists at Odds Over Savings Rates

    yes, it is that simple.

    you ever see an apartment building parking lot with dodge magnums, ugly ass chysler 300m's, and durangos? spending 30k on a car while you're renting? two money losing propositions.

    you ever heard of people refinancing their houses, taking the equity out, and just spending it instead of reinvesting it in a more lucrative security?

    i'm sure you have.

    people make bad choices, not just the bottom 40% but people in general, but the bottom 40% can least afford to make those bad choices.

    its like having a child when you cant afford it.

    is that a decision people choose to make that will keep them in poverty longer.

    at some point you have to stop making excuses and pretending that its official government policy to keep people poor.

    at some point people have to start staying in on friday and saturdays, start IRAs and keep their damn legs closed.

    avoiding poverty is not some harry potter magical secret.

    it doesnt help when people like you promote that everybody is trying their best and still cant succeed.

    we have class mobility in this country, stop pretending we dont.
  34. Greed

    Greed Active Member

    Re: Economists at Odds Over Savings Rates

    for the year 2003 reported in oct 2005

    top 1% - 16.77% of income
    top 5% - 31.18% of income
    top 10% - 42.36% of income
    top 25% - 64.86% of income
    top 50% - 86.01% of income

    considered top 1% if you break $295,495
    considered top 5% if you break $130,080
    considered top 10% if you break $94,891
    considered top 25% if you break $57,343
    considered top 50% if you break $29,019

    couldnt find wealth, and you can click on the link if you want to know what each percentile pays cumulatively in taxes.

  35. muckraker10021

    muckraker10021 Superstar *****

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    The Rich Get (Much) Richer</font>

    <font face="arial" size="4" color="#0000ff"><b>The top 1% take a fatter slice now than at any time since the 1920s</b></font>
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    By Steven Rattner. AUGUST 8, 2005 </b>

    Hooray for The New York Times and The Wall Street Journal for returning the problems of class in America to the front page. Shame on the rest of us, passive witnesses to the emergence of a second Gilded Age, another Roaring Twenties, in which the fruits of economic success have gone not to the broad populace but to a slim sliver at the top. For this handful, life is a sweet mélange of megafortunes, grand houses, and massive yachts. Meanwhile, the bottom 80% endures economic stagnation, including real wages that haven't risen in 14 months, according to the Bureau of Labor Statistics.

    Much of the recent commentary has focused on class mobility, the opportunity for individuals to move up the ladder. But trumpeting mobility as a reason for ignoring growing income inequality is a chimera. <span style="background-color: #FFFF99"><b>Even if mobility is high -- a questionable assertion -- it is hardly a consolation for those who remain at the bottom, gazing across a growing distance at the more successful.</b></span>

    We can debate a lot of economic data but not income inequality. Every serious study shows that the U.S. income gap has become a chasm. Over the past 30 years, the share of income going to the highest-earning Americans has risen steadily to levels not seen since shortly before the Great Depression.
    <span style="background-color: #FFFF99">
    <b>JUST HOW DRAMATIC A SHIFT over the past three decades? Economists Thomas Piketty and Emmanuel Saez calculated (using data from the Internal Revenue Service, hardly a hotbed of partisanship) that the share of income going to the top 1% of households nearly doubled, to 14.7% in 2002, up from a low of 7.7% in the early 1970s. By comparison, the income share for the top 1% peaked at 19.6% in 1928 before beginning its long slide. What is particularly alarming is that at every step up the ladder, the disparity has progressively widened. Over the past 30 years, the share of income garnered by the top 10% of Americans has grown by about a third; the share of the top 0.01% -- the 13,000 or so households with an average income of $10.8 million in 2002 -- has multiplied nearly four times.</b></span>

    What's to blame for this sorry situation? Certainly globalization has taken its toll. Cheaper labor in emerging markets means relentless wage pressure on U.S. workers. Meanwhile, the fruits of American success in fast-growing services and technology remain available only to the slice of our workforce with the necessary skills. Other factors, such as an increasingly regressive tax code, have also played a role.

    Growing inequality helps explain why so many Americans feel so vulnerable even as the overall economy continues to expand. Moods understandably darken when many have to take second jobs and go into debt to improve their living standards. These pressures are exacerbated by another evident trend: greater income insecurity, a result of the decreasing percentage of Americans who have certainty of pension and health-care benefits to cushion them against a loss of wages.

    The renewed attention to the glacial progress of all but a few has drawn fire from an eclectic mix of those who say it isn't true, those who say it is true but it doesn't matter, and those who say we don't know enough to know whether it's true, so let's not worry about it. But a common thread among these naysayers is the fear that fretting about income disparities could lead to the redistributionist and suffocating slow-growth policies of Old Europe.

    We can follow their advice and do nothing and hope that America's rising tide eventually will lift all boats proportionately -- something that has not occurred in 30 years. Or we can believe in growth capitalism while also worrying that most Americans are being left behind. As Brad DeLong, an economist at University of California at Berkeley recently wrote, historical data suggest that growth and less income inequality are not mutually exclusive objectives.

    Sadly, there is no magic bullet. We need to provide more education and training to fix our problem of too many low-skilled workers. We don't need to become tax-code Robin Hoods, but we can be vigilant about tax plans -- like virtually all of President George W. Bush's -- that widen the gulf between haves and have-nots. Finally, we can provide more protection for those at risk, such as better wage insurance to cushion the effects of globalization.

    If we don't pursue policies to fix inequality, social pressures may force unwise, even extremist moves, like protectionism. Income inequality is now wider in America than anywhere else in the industrialized world and on a par with that of a Third World country. Is this the American Dream?

    <font color="#0000ff"><b>
    Steven Rattner is managing principal of private investment firm Quadrangle Group which manages billions and is the former deputy chairman of Lazard.

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    Graduates Versus Oligarchs</font>
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    by Paul Krugman. New York Times. Feb 27, 2006. pg. A.19</b>

    Ben Bernanke's maiden Congressional testimony as chairman of the Federal Reserve was, everyone agrees, superb. He didn't put a foot wrong on monetary or fiscal policy.

    But Mr. Bernanke did stumble at one point. Responding to a question from Representative Barney Frank about <b>income inequality,</b> he declared that ''the most important factor'' in rising inequality ''is the rising skill premium, the increased return to education.''
    <b><span style="background-color: #FFFF99">
    That's a fundamental misreading of what's happening to American society. What we're seeing isn't the rise of a fairly broad class of knowledge workers. Instead, we're seeing the rise of a narrow oligarchy: income and wealth are becoming increasingly concentrated in the hands of a small, privileged elite.</b></span>

    I think of Mr. Bernanke's position, which one hears all the time, as the 80-20 fallacy. It's the notion that the winners in our increasingly unequal society are a fairly large group -- that the 20 percent or so of American workers who have the skills to take advantage of new technology and globalization are pulling away from the 80 percent who don't have these skills.

    The truth is quite different. Highly educated workers have done better than those with less education, but a college degree has hardly been a ticket to big income gains. <span style="background-color: #FFFF99"><b>The 2006 Economic Report of the President tells us that the real earnings of college graduates actually fell more than 5 percent between 2000 and 2004. Over the longer stretch from 1975 to 2004 the average earnings of college graduates rose, but by less than 1 percent per year.</b></span>
    <span style="background-color: #FFFF99"><b>
    So who are the winners from rising inequality? It's not the top 20 percent, or even the top 10 percent. <font size="4">The big gains have gone to a much smaller, much richer group than that.</b></font></span>

    A new research paper by Ian Dew-Becker and Robert Gordon of Northwestern University, ''Where Did the Productivity Growth Go?,'' gives the details. Between 1972 and 2001 the wage and salary income of Americans at the 90th percentile of the income distribution rose only 34 percent, or about 1 percent per year. So being in the top 10 percent of the income distribution, like being a college graduate, wasn't a ticket to big income gains.

    But income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent. No, that's not a misprint.
    <span style="background-color: #FFFF99"><b>
    Just to give you a sense of who we're talking about: the nonpartisan Tax Policy Center estimates that this year the 99th percentile will correspond to an income of $402,306, and the 99.9th percentile to an income of $1,672,726. The center doesn't give a number for the 99.99th percentile, but it's probably well over $6 million a year.</b></span>

    Why would someone as smart and well informed as Mr. Bernanke get the nature of growing inequality wrong? Because the fallacy he fell into tends to dominate polite discussion about income trends, not because it's true, but because it's comforting. The notion that it's all about returns to education suggests that nobody is to blame for rising inequality, that it's just a case of supply and demand at work. And it also suggests that the way to mitigate inequality is to improve our educational system -- and better education is a value to which just about every politician in America pays at least lip service.

    The idea that we have a rising oligarchy is much more disturbing. It suggests that the growth of inequality may have as much to do with power relations as it does with market forces. Unfortunately, that's the real story.

    Should we be worried about the increasingly oligarchic nature of American society? Yes, and not just because a rising economic tide has failed to lift most boats. Both history and modern experience tell us that highly unequal societies also tend to be highly corrupt. There's an arrow of causation that runs from diverging income trends to Jack Abramoff and the K Street project.

    And I'm with Alan Greenspan, who -- surprisingly, given his libertarian roots -- has repeatedly warned that growing inequality poses a threat to ''democratic society.''

    It may take some time before we muster the political will to counter that threat. But the first step toward doing something about inequality is to abandon the 80-20 fallacy.<span style="background-color: #FFFF99"><b> It's time to face up to the fact that rising inequality is driven by the giant income gains of a tiny elite, not the modest gains of college graduates.</b></span>


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