Sak, Im not convinced. See here’s the thing, after you’ve been unemployed for a period of time like 6 months or so (the exact # escapes me) the government assumes you have “quit” looking so they take you off the unemployment figures. This is a recent practice designed to improve the numbers. Also, yes there are jobs available but when you factor in the cost of living depending on your locale and the cost of getting to some of those jobs (ie: gas prices) it may sound rediculous but it ain’t even worth your fucking time, you paid into unemployment in the past might as well take some right?? Also, let’s bring up the record number of bankruptcies going on, which taxes on all of us. People spending more, yeah maybe, but what you don’t know is are they spending cash, or putting it on plastic hoping things get better? Big difference. Also I don’t see any benefit from the extremely wealthy splashing some cash around, most people if given money with no skills just piss it away, the lottery effect if you will.
Business cycles as they exist are a function of governemnt intervention. Left alone, equalibrium is a focal point that is reached rather quickly. Only through intervention do cycles of extended “boom” and “bust” occur.
The expansion of fiat money is what is responsible for “bubbles” that burst, in the 1920s, 1980s, and the 1990s. The government expands the money supply, it gets filtered down into the economy (but not evenly, it goes to government spending projects and the investment banks that underwrite government market operations). In the last go round it all got invested in large or new technology companies. These companies get this newly inflated cash and do what they always do with extra cash, they expand and invest. Factories that are not needed get built; warehouses, websites, and new bad ideas get money thrown at them for no damn reason other than there is just a bunch of “free” money floating around.
Without a fiat money supply going nuts, who the fuck would buy Geocities for a billion dollars? Why would Nortel buy every company under the sun even though > 90% of laid fiber optic cable is dormant?
I’ll also have to disagree with Bill.
Remember the supreme court justice who was trying to define porn? He said, “I know it when I see it.” Well that’s how the economy has been for the past 18 months. Whether it’s defined as an “official” recession or not, we’re in it, and we’re still in it pretty bad. The good news is that I expect us to hit rock bottom somewhere mid July. But growth coming out of that will still be slow. I’ve seen the hiring freezes, there just isn’t crap out there right now. And business spending is nonexistent.
The GOOD NEWS is that things can only get better. There is ALOT of cash out there, it’s just that NOBODY, other than the government, is spending. Microsoft, for example, has 40 billion dollars in cash laying around, and they are just waiting for the right moment to unleash it. And alot of us have trillions of dollars in cash laying around in money market accounts, just waiting for the fear to subside so we can put it into more risky investments that will in turn create wealth and jobs.
I think the economy still has alot of fat leftover to work out from the boom times. Unemployment will peak this summer. Companies like AOL are taking advantage of the downturn to write off losses. Bogus companies like Enron that had no business ever being a company are getting purged.
What’s leftover will be real companies that know how to compete and create jobs.
I think the government is doing the right thing with the stimulus. We all need a saftey net.
Well, it’s a matter of definition. If it
floats your boat to call a contraction of
at a two percent annual rate (or something
like that) a “terrible” economy, then do so,
or if it seems right to you to call 95%
employment “terrible unemployment” then go for it. But historically, or compared to many other countries in the world, these are just about trivial dips.
I stand by my point that even during periods
of economic expansion, most new businesses fail, and some established ones do. During those times the failures are not attributed to the economy (since that excuse is not tenable.) During a recession, that same number of failures is similarly not due to the economy: but you may be sure the business owners and employees will blame it on the economy! (You can reasonably attribute failures and layoffs in EXCESS of the amount during more normal times as being due to a recession, however. But that’s far less than the total.)
Well this ‘contraction’ has destroyed my 3 year old thriving business and I’m now in danger of losing my home. I’ve been working with headhunters for the last 5 months and Manpower Professional admitted to me that they were getting, on average, 300 resumes a day and placing only about 6 people a month. A lot of my peers in the IT field have been out of work for up to 15 months now. One guy has given up and is now working at Home Depot. Another guy is taking a position in South Africa. Things do NOT look good.
Lipo, I feel for you bro. I worked for a telecommunications company whom lost $400 million in contracts, because of idiot managers. As a result, all but 4 people were layed off, including me. That was last February. I finally just got a job at UPS. Even though it’s $8.50/ hr., it is better than nothing. I work a 5 hour shift, but am constantly moving packages at a ball busting pace. It is almost like EDT. Hope this helps.- The Starkdog
I don’t know if this is considered “good news” for most of us, but I have noticed that the Feds and their proxy companies/defense contractors are doing a TREMENDOUS amount of hiring right now.
Just in my city I’m seeing anywhere from like 10-30 job postings PER COMPANY on the job boards.
The problem with these jobs is that they are super highly technical, for engineers with like 15 years of experience.
Hopefully those with highly technical skills who have been displaced from their jobs will create the next “big” technology. That’s what happened when the government cut defense spending, all the displaced engineers created telecom businesses, and that boom (unfortunatley now a bust) really exploded.
I think it’s gonna be slim pickin’s for a while though, until the damn Israelis and Palestinians get their fucking act together. 
How I long for the days of Y2K bugs…
Wow, I heard that it was bad in the USA, but I didn’t realise it was hitting you guys so hard. I have an idea though. You should come to Australia. Apparently we having record growth rates and continous expansion despite the world economic slump.
An even better reason is that your US dollar is worth 2 of our Aussie Dollars - the only bummer is that if you move back home your money is invaribly halved.
And if all else fails we apparently have the worlds best beaches, and best beer, and if you really want to, you can sit around collecting unemployment benefits forever!
How much taxes do you have to pay if you
are actually productive in society and doing
things that people willingly pay you good
money for?
I suspect that if one can collect unemployment checks forever if one wants to, that means that the government probably seizes the majority of the income of those who actually work productively so as to be able to give it to those who don’t. Anyhow, what are the tax rates?
I don’t know, Bill…I didn’t get my engineering degree, then get laid off so that i could collect $227.00 a week for the rest of my life. I’m not exactly choosing to do it. I applied and found a job 3 years ago without much trouble…it’s a lot different now than it was then. It sure seems like a recession right now when you’re trying to find a job. Maybe it appears different when you have one.
Tax rates in Oz are around 50%.
I don’t believe it’s a question of appearing different when you have a job than when not. I think it’s a question of, when 95% of people looking for work ARE employed (instead of 96%), and the number of business failures across the board is not much more than usual – there are business failures all the time, it’s always been true that most startup businesses fail) the economy cannot be called “terrible” except by redefinition of that word. But I do think you get the same phenomenon as with purported global warming. You get a hot day, “it’s because of global warming.” Even if in that particular year there were no more hot days than in some particular year in the 1970s, when there was supposedly global cooling. Now, it may or may not be true that the average temperature is half a degree hotter or some such thing – it’s about on that order – but even if so, MOST of the hot days in a summer are attributable to the season, not to global warming. If there were 50 hot days on average before any global warming, then if there are 55 hot days this year, don’t attribute all 55 to global warming.
Similarly, even if there were an economic expansion, most of the unemployed would still be unemployed, and most of the business failures would still have failed. But all gets attributed to the recession.
C’mon, we’re talking about a HALF-PERCENTAGE POINT negative growth!!!
OK, I’ve beat that one into the ground 
Bill Im in the I.T. industry in seattle, and I dont know about the restof the country but the ‘unoficcial’ (real) unemployment rate here is about %15
I have been looking every week and havent landed a contract (havent worked in computers) since march of 2001, I have a lot of friends in the same situation
If you think the economy 'always' rebounds just look at Japans L shaped contraction
The IT sector job market is extraordinarily tight.
There was a NET LOSS of over 500,000 IT jobs across the country. That’s over 500,000 people all looking for the same jobs.
Check out the report on Dice.com for more details.
I think Bill is looking at it in a larger, economic standpoint and I agree with him. There will always be industries having trouble, while others are doing well or okay. As in industries, I mean certain business fields. There will always be people getting laid off no matter what condition the economy is. It’s just an easy way to blame it on the recession.
The economy is certainly far worse than it appears on the surface. Is it a disaster? No, not yet anyway. But it is a recession,
and not a trivial one at that. Furthermore, this recession is not “over” despite what the pundits are saying. We’ll likely see a “double dip” economy. The current “recovery”
is unsustainable. (Sorry to seem like I’m being a pesimist; just a realistic evaluation.) There is massive consumer debt.
Massive corporate debt. Still a large amount of overcapacity. Business investment is non-existant. Unemployment numbers
underrepresent the unemployed due to numbers taken off due to time frame. The US current account deficit is huge and growing. Foreign funds had been subsidizing this defecit, but
due to loss of confidence in the US economy the rate at which capital is flowing into the US is slowing greatly. The US $ is in the process of losing a significant amount of value - this would be predicted by the current account defecit and reduction in fund in-flow. Corporate bankruptcies are at an all time high. Consumer bankruptcies are pretty high too. Goverment statistics are highly questionable, as the pols have an interest in making things look less bad than they are. The Feds loose monetary policy, intended to ease the recession, will in the long term only greatly exacerbate it. The Feds easy credict policy was a major factor in the tech stock market bubble. Now that same easy credit has created a housing price bubble that will crash just like the tech stocks did. Speaking of which, the equities markets are still significantly overvalued and will likely drop further before the bottom. This recession is not over yet folks (regarless of what the CNBC pundits and the goverment bureaucrats tell you). It is going to take a long time to unwind the massive imbalances that have built up in the economy: businesses and consumers simply aren’t going to be able to spend much money until they pay down their debt load - it’s that simple. And the value of the US $ is
going to drop until the current account deficit is normalized. I wouldn’t be surprised if we end up seeing a return of the “stagflation” that occured during the 70’s. Reason I say that: too much debt, too much overcapacity and too much misallocated capital will prevent significant growth for some time. But the US current account deficit will cause the dollar to drop a lot, leading to inflation. Add in the potential for rising oil prices due to political instability from terrorism, and you have a recipe for 70’s economics take 2.
To colin:
Yes the economy is cyclical. And I agree with you that fiat money is indeed a problem. Money supply expansion was one major cause of the 90s-2k tech boom and bust, as well as the depression of 29-35. In my assessment, the government bureaucrats are not responsible for causing the business cycle. The business cycle is a fact of nature. However, the bureacrats are responsible for making the business cycle far worse. Keynesian economics
is largely flawed. Yet politicians won’t admit this because it would reduce their power base - it would remove their justification for manipulating the economy to further their
own agendas (typically expanding the welfare-warfare state). If you want to minimize the effects of the business cycle and make the economy healthier overall, you need
to get the pols and bureaucrats out of the money-manipulation and economy manipulation racket. Get rid of the Fed for that matter. But will that happen? Noooo…
To Coyote:
Sorry to hear about your probs up in Seattle. I recall reading one of your posts about that on the Extro mailing list. As a side note, the “L” shape economy in Japan is in a way unique to Japan because of some systemic structural problems that they have, and that they refuse to face and correct. It is also unusual because what Japan has experienced since 1990
is more like a “depression” than a recession". (My gf has family there, so I have second hand info on what the econ is really like there.) And if care isn’t taken, the same thing could happen in the US.
Their is a fundamental wealth success principle, but it is highly underutilized: spend less than you make. Save and invest the rest. If you follow this one priciple you can’t help but do well in the long term. Anyone living in the US making more than US$ 25k per year can do this. I don’t want to bash lipo here cause he’s in a tough spot. But it
never ceases to amaze me when I hear about people who were making big bucks all of the sudden end up broke because they’re income has dropped. Don’t people ever plan ahead for emergencies or contingencies? Don’t they
ever learn that good financial times don’t last forever, just as bad times do not? Humans must have really short memories…
IMO, Bill Roberts comments aren’t “wrong” - just too simplistic. Sure, in a dynamic free market, resource reallocation occurs
so that some things are wanted and produced less and others are wanted and produced more. But there are systemic disruptions that occur that effect everyone in every sector, not just the ones that have less demand. As one example, if you get a situation where debt loads are overextended and that capital had been misallocated in non-performing
sectors or enterprises, then you create a capital shortage for other potential sectors or enterprises - so they can’t get funded. A perfect example of this was the mis-allocation
of capital to brain-dead dot com ideas, and now IT start ups with good ideas can’t get funding.
Regarding the 2% contraction statistics Bill sites, I think that number is bullshit. I think the real contraction number is much higher than that. Agreed, if it were only a 2% drop, that wouldn’t be so bad. But I dispute the legitamacy of that number. Like a friend of mine says, 95% of all staticians agree that 99% of all goverment statistics are bullshit (the other 5% work for the government). And of course, there’s the statistician who drown in the lake that had an average depth of 6 inches…
BTW, if it matters … I do have a background in business school finance, as well as extensive personal investment experience…
Free Ex, I don’t think I’m being simplistic (of course, those that actually are rarely think they are) but rather I am addressing two specific points, rather than making a broad
statement. Namely that since there are normally many business failures and normally some unemployment, blaming all failures and all unemployment on a current condition is incorrect, though a common failing. And second, that by any ordinary use of the word “terrible,” by no historical standard, or by no standard compared to other economies in the world, can the current US economy be called “terrible.”
The fact that some sectors such as IT now have
major job loss has more to do with such sectors having become overblown and now experiencing a needed correction than anything else. I’d expect that even if the economy were expanding overall, you’d have had the dotcom bust. Yahoo or Amazon were not by any reasonable measure valuable at more than the Ford Motor Company, etc., and apparently also it takes fewer people to do the work currently needed than were previously employed. I feel bad for the people who are suffering in this, but to blame IT troubles on Bush, for example, makes no sense.
I’ll agree with most of what you said Free.
But I do disagree on two issues:
The double dip recovery is still up for debate. Only time will tell. I still think we’re in a U shaped recovery, not a W shaped one. The worst of the unemployment problem in my estimation, is about over. Whether the housing bubble “bursts,” is still debatable as well. Consumer spending and housing has kept this economy on life support, hopefully they can hold out until those other factors such as business investment, can kick in.
Plus you didn’t mention the psychological factor as well. How people “feel” about the economy is just as important as the quantitative stuff.
The other thing I disagree with is the notion that government intervention into the economy makes it more exaggerated. To a point, yes, you are right. But the ALTERNATIVE, being a hands free approach, would lead to gross exaggerations that would make the ones we’ve been through over the past 5 years look like little blips on the map. I think it’s important to have safety nets in place.
I think if somebody can get the damn Israelis and Palestinians to get their shit together, we will all be fine. But like there is a chance in hell of that happening. Bush has his hands full around the world, his people are spread too thin.
Someone made a comment about Japan’s economy… I have to say that, having lived in Japan since 1992 (i.e. the year after the bubble burst), all I’ve heard is how bad the economy is, how Japan’s mired in recession, yada yada yada. Despite this, I haven’t had any problems getting jobs, none of my friends (Japanese or foreign) have had problems getting jobs, I’ve started up a business that’s going pretty well, I know others who have done the same, and when I look out on the street I don’t see people moping around or worrying about how they’re going to be able to afford cabfare home. (Other foreigners come over for a vacation or the World Cup or whatever and actually say, “Hey, I thought there was a recession here…?”)
In other words, I think economists - especially Western economists who love to scream that the sky is falling when it comes to Japan but don’t know the first think about the country - are full of it.
I do believe that there is probably a shortage of jobs (in America and other places) in the IT sector at this time. What with the unbelievable (and unsustainable) growth caused by the Internet hysteria of the late 1990’s, it’s not surprising. But if you can’t get a job doing IT work, maybe it’s time to think about doing something else instead? Not trying to be flippant, but sometimes it’s hard to think outside the phalanx when you’re in the middle of a bad situation.
As the manager of my own company, I can tell you without any reservation whatsoever that the single biggest problem I face is finding and keeping quality personnel. Believe me, if you’re a good worker (and I would imagine that most of the people on this board are), then there is something out there for you. It may not be exactly what you had in mind, but it will keep those Biotest supps on the table…
Uh, sorry Bill. I misunderstood what you were
saying in your previous message.
Yes, I agree that claiming that the *sole* cause of a business failure is a poor economy is incorrect. Businesses fail in both good times and bad, and in both cases it is usually due to many factors. Although I think it would be fair to say that more business failures occur in bad economic times than good, and also that a poor economy *can* be a major cause of a business to fail. But in almost no cases is it the *sole* cause.
Regarding your second point, *I* didn't call the economy "terrible," and I certainly don't think that. What one considers "terrible" or not is really a semantic issue of how you define "terrible" and what one's point of reference is. The current US economy is certainly not terrible compared to third world countries (in fact americans have it easy compared to people in places like say, Argentina). I think the point of reference most people use when thinking about any current economy is the recent past (this is a common thinking error). So most peoples' point of reference for the current environment is the boom of the late 90s. The boom of the 90s was in some ways atypical, so it is not a good point of reference. None the less, that is the POR most people are currently using. Hence, others have called the current US economy "terrible," relative to the late 90s boom.
Regarding the rest of your comment, again I agree that the dot con bust would have occurred even in a growing economy because most of them had unsustainable business models. The two points I was making in my previous post were: 1)That there is a *qualitative* difference, even within given industries. The dot coms went bust, yet my business is in the IT sector, and during that same time frame, my business is doing so well that it is nearly 'coming apart at the seems' due to growth. So in addition to your point that there is market regulation of business *sectors* there is *also* a *qualitative* difference between businesses in the same sector. and 2)The second point that I was trying to make in my previous post is that, if you have a large scale capital misallocation (lots of bad investments - as occurred with the dot coms), lenders become scared and ultra-conservative, thus starving *quality* businesses from getting access to needed external capital. This effect is *not* industry specific, but is a systemic problem that adversely effects the entire economy. But like, I said, I misunderstood the intent of your original comments - so I think we've both clarified what we meant now.
Regarding blaming politicians for the economy, that is just way oversimplifying things. Do they have an effect? Yes. Are they the major cause of economic trends? No way. The "business cycle" was around before politicians were.
To Striker: agreed - what exactly will happen is yet to be seen. But I think you are overestimating the importance of the psychological factor. Yes, I agree it does play an important role. *But* if people have taken on so much debt that they can't pay their bills, then they won't buy any more. In that case, psychological perception is overruled by factual reality. (And this is happening - look at the *negative* US household savings rate, coupled with the recent decline in consumer spending.) Regarding government intervention in the economy vs not, we could debate that infinitely and not get anywhere; so I won't waste the time. Suffice it to say that I think the *perception* that bureaucrats reduce economic fluctuations is mostly an illusion. I also think that there is ample historic economic evidence to make the case that the economy is better off overall without government intervention, and that in fact they make it worse. I'm not going to take the time to teach a course on the history of government economic intervention on the T-mag forum, however.
To char-dawg: I'm glad to hear that things are going well for you. Apparently it's not going so well for everyone over there. But I'll take your word for it that things may not be as bad as alleged.
But I think you misunderstood my previous post. I was giving my assessment of the US econ overall, *not* my personal situation. I gave up IT consulting and "jobs" a while ago, and like you, I started my own biz. Things are actually going quite well for me, so I'm in no financial need of a job or career change. Believe me, as part owner and primary manager of *my own software company* I am well aware of the difficulty of keeping good staff: I had to deal with that during the 90s IT boom. Right now it's actually great for me because I have my choice of personnal - it's an employers market right now in IT. :-) But since you have such a hard time keeping good personel, maybe you can hire my girlfriend. :-) Once she finishes her degree. If she goes to Japan. And if she wants to live in Hiroshima. OK, probably not likely, but ... never know ... Later.