Obama got reelected because Americans have settled. The majority has concurred that 8% unemployment and a $10 dollar an hour job with no benefits is the new reality. Well I do not like to be the one to spoil the surprise, but there is a brave new world, a new economy is around the corner waiting for the US, and Washington does not have the answers because it is beyond their control. I am talking about the the great recession of 2013.
The blame is on the people of this country who hailed our leader when he speaks in the forum of the “new, wonderful good society” which will the change our country will see, which the people believe will mean he is leading us to “more money, a easier and secure life for all” while we living fatly of the industrious - Cicero 43 B.C.
- The good news is the economic balloon has already deflated. Crashes come after bubbles. We now are just stuck in the mud.
- The bad news is the long run trend line is down because of global competition.
People are looking for political solutions to an eroding economic base. It is like we were a hot tube of water and now with global competition, cool water values are open and can not be turned off.
Democratic strategy – If you liked the lackluster growth of the past four years, hold on to your hats, some excitement ahead, but not the good kind. The financial cliff President Obama will lead us over. If we reach this financial cliff the economy will shrink by .5%. It is simple mathematics. The Democrats want to choke growth by a new taxes, transferring money from the productive to the entitled.
GOP Strategy – In contrast the Republicans wants to hold the line on taxes to prevent us from sliding back into the 1970s (considered the economic Stone Age by economic historians).
Which economic scenario will play out in 2013? – The intoxicating Democratic promises that won the election will bring us to a new reality. When neither the new math or the old math can reconcile the budget and the debt which is at a dizzying high, we will go into another deeper recession in 2013. Now this is not for certain as GDP is recovering and progress in the private sector has been made (entrepreneurs will always discover a way), the question is is this sustainable? Can we get out of this mud or will it be another years of spinning our wheels.
Moving political chess pieces in the background - The Democrats and the GOP will fight out the budget which is really about congress and some compromise will be reach somewhere in between regardless of the President. All the power in Washington is about the allocation of the budget, anyway (and the Federal Reserve bank). Symbolically it is a blow that Obama got re-elected, but the President needs the House to really move forward.
However, that being said will any of this really matter if the problem is not only in Washington but we are now longer the big isolated island of the USA, you know the one that was portrayed in the old TV show Happy Days?
- The reality is we are in a global market and the competition will only increase as more of the world is educated and connected. The only way to make the US wealthier is to let the markets work by giving entrepreneurs the most opportunity to compete, that is a small government sector and low taxes. We need to purse a more Libertarian economics or the whole country will be left behind.
- China and India are not as rich as the USA, but that is not the point. The point is, the people there are bright and capable like Americans but get paid at a fraction of the cost. You do the math.
Recession factors
- Monetary policy – Easing or no easing we have basically negative rates of real interest. This does not seem to help, it is like pushing against the wind. The interest rate environment could not be any better. If the economy is not moving there is a reason, a ghost in the machine. That is the machine of the economy should be working one way, but the some speculative unknown force controlling and dampening the actions of economics progress.
- Fiscal stimulus – Rob Peter via debt, deficit, spending and the tax system and pay Paul. In fact what if Paul is lazy and Peter is a job creator? Then we have a problem. This transfer of wealth engineered by the brain trust in Washington is not the best idea. Yet even with turning up the dials in the C+I+G=GDP equation the machine is not moving in the right direction or in a predictable way. More like a Frankenstein economy.
- Global markets – Enter the specter, China, India, Latin America etc. Why pay you $40/hr (that is an $80,000 dollar a year job when someone abroad can do it cheaper. I am not talking about making toys to be placed in WalMart. Since the Internet and the fast seamless transfer of information, the interconnection of the human brain on this planet a fact, there is a transfers of information and skills without need for physical presence. Even if you do not feel it or see it, specialization of labor on an intellectual level that does need to hurdle import laws is happening. Jobs are outsourced and someone smarter can do your job better and cheaper. There is nothing wrong with that, it just is the reality of the world, called global competition.
After WWII and with communism, the world was in ruins. In the USA we were all winners and our fathers has secure jobs and pulled in the driveway at 4:30 in the afternoon, they retired to Florida with something called a pension.
Now the world is cheaper and we have more toys, but the job market is not secure and I see a lot of people carrying debt, car payments, mortgage and multiple credit cards.
What is left in the US economy?
Jobs that can not be exported easily..
- Retail jobs
- Medical care jobs
- Work for the Sheriff’s department
- Government workers
- Military
- Teachers
- Restaurant jobs
- Security guards
- Insurance companies
- Bank jobs
The problem with these jobs are they are not creation jobs. They do not create much value, but rather more service. They will not move the country forward.
Sure on Monster.com and Indeed you can find some boring senior analysts positions specializing in vendor software or a project manager, but even those the price has deflated.
So do not expect to search Craigslist help wanted and find that dream job. Take a look at your hometown, does the above pretty much summarizes it?
How to protect yourself from the future economic problems in the US?
- Smart people always will prosper, you have to just use your creativity, which is almost synonymous with intelligence. Brainstorm, look around you get up early and search the web for hours until you think of some skill or asset you can offer.
- Do not think in terms of money but rather enjoying your life. If you think in terms of money, your life will be only a chase for something that takes years to achieve.
- Do not put too much hope in Washington, rather create your own opportunities.
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11 responses to Depression 2013
No 2013 great recession
First of all there will be no great recession in 2013 as I will bullet point what I think is relevant.
1.) Smart people will not just offer prosperity, but during this tough time smart people will offer humility. Through their own resilience and their selfless offerings,they will not be loners but fearlessly uniting many of us against the same fear mongering that got us to where we are today.
2.)Opportunities will abound and continue to abound through some measures started in Washington.
3.) Consider that your protection will be your ability to help float other boats during and after a bad storm.
It should be clear that fair tax policy should be a start to reducing the deficit. Increasing taxes on those making greater than $250,000 is one beginning step. There is no way around this because the economy as a whole needs to acknowledge that any recovery will not be possible if a the tax revenue dependency continues to fall on the greatest consumers of the middle class. These are the everyday spenders and therefore are the revenue generators for the same companies executive that see only the GOP ideas as the only way.
Now in addition to this, preserve the same tax rates on those making under $250,000 but change the tax rate to those making $20,000 or less to zero. This can achieve a boost to the economy in the form of new spending. Growing the economy and lowering the unemployment rate. Since many people are now stuck in this “brave new world” of low paying jobs, this type of policy will be a significant pay increase for worker earning less that $20,000. And therefore offer a more dignified existence for people in this country who are potentially competing on a global scale with the lower paid people in countries like India and China.
We cannot continue to assume that the best and the brightest are out to serve us when in fact they are about serving themselves first. Society is the integration of many factors that requires the organization of many forces. Continuing to amass wealth for a few who show no responsibility to the greater world around them only exasperates the an imbalance of power that has shown their only interest is to police what they already own.
Today’s economy is no longer a product based economy. We are consumer based. Rewarding producers does not matter because of the global market place. Consumer based economy focuses on production with as few humans as possible. Today its about spreading the material wealth without getting too hung up on the few who make the gadgets. A machine that can produce can work on the moon without people. All we need is an efficient supply ship to bring to the goods back to us. We all must come to realize that the 20 th century is getting farther away with each tick of the clock. A time where producers got 2 weeks vacation and pension. Now we have machines that never sleep and are recession proof.
Recession 2013
Most people do not oppose taxes on the rich but the idea of taxes and a manditory transfer of wealth
Great comment, really.
I would add one more reason why there might not be a recession in 2013, that is Oil. The USA and Canada are starting to produce oil at near record levels and this will be for the next ten years or so. With more supply of oil wheels of the machine will move easier.
See I do not have a big problem with taxing the millionaires even though I tend to be libertarian. What the issue is, is taxing at all. Sure the rich compared to the poor or middle class is great in the USA. It is larger than it really ever has been, and you can see it. We all struggle to pay the bills with no real retirement savings while the elite many who did not get their money on their own merit enjoy the good life as Alphas in the world while we are Thetas or Betas at best. Some of us our Deltas and can barely get by. But the issue is not to make everyone equal but to pay the debt and fix the leak.
So although I have no problem with a more egalitarian society I think the way to achieve this is with small government not larger. If the government was small and then we would all get rich.
I think spending cuts, including the military should be a priority rather than tax increases.
Government workers get paid way to much if you consider all the benefits etc they get.
In my perfect world, spending cuts would be my first choice and I think the budget could be balanced with spending cuts alone. The problem as everyone knows is not spending on things like schools and science, but the massive transfer of wealth from the US social system, things that can not be cut because they are entitlements.
Not cutting problems but waste would do it.
Again the problem is not a social system, I have no problem with that, it is the way it is run, at grossly inflated prices for any basic procedure in the hospital, for example. Thirteen dollars for aspirin because we know the government will pay.
Thanks you!
I think you hit the nail right on the head with the 13 dollar aspirin. But in strange way that $13 aspirin goes to revenue and paychecks to a health care system that really is more about sick care than health. Economics is really a strange beast.
Military spending could be greatly reduced but the military complex and its politics is all about a 2nd to none strategy. With this kind of thinking we will never have open dialogues with the intention of real peace. And therefore can never stop the spending that supports the endless adventures of keeping the peace.
Energy is getting real interesting. One area of support I have for the present administration are the new cafe standards. And a 10% increase fuel economy could lead to a reduction of 2 million barrels per day of crude oil use. This would add $150 million per day to the pockets of every fuel consumer. If my math is correct, this would be like $50 billion dollars per year. In addition to this is the coming online of more solar and wind energy. Right now Germany is generating 20% of its energy with renewable. A cold northern European country has set the standard for an emission free
energy technology which will replace all of its out dated coal burning facilities and taking off line nuclear facilities. A greater thinking along those lines and the real cost of energy being reduced can further offset the cost and stabilize the volatile energy markets.
Perhaps the best way to manage a country of 3 million sq miles and 300 million people is to compress the size of government. What seems to me worse is that we have a government that thinks it has to manage 10 million sq miles, 2 billion people and 100 governments. In the end, you got to wonder why we celebrated the end of the cold when in retrospect we all seemed to be better off before it ended. The dividends of post cold war spending just never seemed to come true.
What would make the US economy grow
In the long term this energy boom would be our saving grace if it were real. I think energy independence a policy that Obama will pursue, deploying new technology to drill in the USA will be a boom greater than the Internet boom. we will all get rich. Energy transformed Norway a small little fishing country to one of the richest countries in the world. The same can be said for any place that has oil from the Middle East to Texas. If cheap oil will flow from the USA than ‘happy days are here again”.
I the short term the fiscal cliff is an issue.
The CBO said that the fiscal cliff will push the US into a recession fast. It is automatic almost. The thing is the world is not betting congress will let it go that far. Close door meetings are happening and progress is being made.
Yet even still 2013 will not be an easy year economically. I look around and all I see is 10 dollar an hour jobs, and a lot of people at the hotel I run can not pay their bills with ease.
I think in the USA everything costs and people make just a little. It is still a nice life here and an easy life, but the economy will not take off unless there is some innovation or development in the energy or technology sector.
“According to CBO’s projections, if all of that fiscal tightening occurs, real (inflation-adjusted) gross domestic product (GDP) will drop by 0.5 percent in 2013 (as measured by the change from the fourth quarter of 2012 to the fourth quarter of 2013)—reflecting a decline in the first half of the year and renewed growth at a modest pace later in the year.”
Don’t get too hopeful about negotiations because conservatives are absolutely and possibly irrevocably clueless about the concepts of dealing and compromise. Obama wants to put anything on the table that will get him the titles “above party politics” “statesman”: social security has already hit the table, and for why?
The basic idea is the USA has a spending problem. Consumers are in debt as is the government. Money is easy to spend but hard to earn and create wealth. The solution is simple. Cut spending until we can start paying down the debt. Why must ‘compromise equate with tax increases. Why not compromises be based on what is spent and with the common goal of a balanced or surplus budget until the debt is paid?
Although the best and brightest have shown repeatedly that they are intent on serving themselves at the expense of all others: co-lateral damage is of no consequence. they need to be held accountable and punished appropriately, considering the utter devastation inflicted.
Why dont we just call it how we should see it…
Our problem is the that the recession of 2007/2008 was the result of powerful influences from courts, president,and congress.
Rome had the same problems. We will not fix our system of govt until the democrats and republicans have reduced their own time in office and become elected by public money and not private be they fromm democratic or republican sources.
Not a simple fix I might add. Both parties have their own problems and to pit one against the other political party does not seek a solution in my opinion.
From your list on Jobs that can not be exported easily..
Retail jobs
Medical care jobs
Work for the Sheriff’s department
Government workers
Military
Teachers
Restaurant jobs
Security guards
Insurance companies
Bank jobs
I would add:
Farming,
Oil,&
Nat Gas production jobs
Most Alternative Energy jobs,
Construction jobs, Homes, offices & commercial construction.
Airplanes construction jobs,
Sophisticated machinery,
Chemicals,
Pharmaceuticals,
Biotechnology products.
You are right those additional jobs are in the USA for the intermediate term, however, most can be done abroad. For example, chemicals and pharmaceuticals are already made in China. Everything can be shifted abroad unless you need to do it here, like a waitress.
Farming, is done all over the world and imported into the US. Look at where fish come from, usually central America, or garlic from China. But consumers do like local produce so it will stay here in part. I look carefully where food is from.
Oil and natural gas we have a lot of so these are good jobs. for the jobs you listed you just have to train yourself for years and hope they are not exported.
Doom and Gloom
Doom and gloom, doom and gloom, doom and gloom, that’s they only thing that’s ever been written here. Doom and gloom.
I’m not sure if this blog was around in 2009 but I would have liked to have read predictions from back then. “Obama is taking us into another Depression!” would probably have been one of the headlines. “Obama is soft on terrorism” would be another, followed by “Dow heading for 1500, sell everything while you can!”.
I like to read both sides of the argument and what’s written here is worse than anything on Fox or Limbaugh. I’m not a huge fan of Obama but under his stewardship things have improved dramatically, whether you want to believe it or not (probably not). How many times have I pointed out here that GM and Chrysler were ten fingers and nine toes in the ground? Chrysler paid off their loans and GM announced they are buying back the rest of the outstanding government stock (probably because they want them off their back). The Feds are selling off the last of their AIG stock, at a huge profit may I add. Here is what Bloomberg wrote on January 28th about AIG: “Proceeds from the Treasury’s sale of its remaining AIG shares boosted U.S. profit on that bailout to $22.7 billion”. Notice the word “profit”?
Doom and gloom.
Now for the subject at hand, Asia. American manufacturing jobs are not coming back folks, so get your head out of the sand and move on. If I were an owner of a small American company making widgets and it cost me $15/hr for an employee to assemble it in Keyhole, Tennessee and I could get it done in China for $2.50, guess which one I would choose. Would you be the stoic American and say you are patriotic to the point where you would sacrifice all that profit in the name of American jobs, or would you send the assembly work over to Asia? Thought so. Don’t reply with the knee-jerk response that the $15/hr pay is the result of mandates and regulations that American business are forced to pay. Would you rather see the jobs back here at a competitive rate of, say, $3.00 an hour?
We are slowly emerging from a major shock to the system and it’s not going to come easy nor quick. I’d like to leave you all with this article which I saved from 2009 which, just like everyone here, made bold predictions of what was to come. Reading it 4 years later it’s almost laughable. Let me remind everyone that we are days away from the Dow reaching a new high. Keep in mind that the market does not move by speculation but by confidence.
smartmoney.com/invest/strategies/25-percent-unemployment-how-job-cuts-could-derail-the-recovery/
Recession 2013
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