What Recovery?

You don’t really have to concede point 1, I think it’s entirely realistic. Worried could mean the respondent is a layoff away from it being a real huge problem, which is probably realistic for a lot of people. Worried could also mean having to put off other purchases because the rent/mortgage is due. I’d like to see more about this and maybe to see the media get behind the very reasonable idea that working people shouldn’t be paid so little that they have these types of concerns.

Wrong Joe. Let’s concede that this number is probably much higher, due to the fact that this information is sensitive and not readily shared with a stranger.
Let’s also concede that those housing bubble mortgages were the worst cases and have already been discharged. And finally, let’s concede that the Democrats are not only responsible for this mess, they have aggravated and expanded it over the last 4 years.
How foolish you sound Joe.

“In all, 53 percent said they are “very concerned” or “somewhat concerned” about having the money to make their monthly payment. ”

This is important, but, not for the reason that you are directly implying.

This is directly related to what economists call “consumer confidence”.

So, if you proverbially “invent the better mouse trap” only 47% of the world will coming knocking at your door.
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Even if these contain many, many households which are a layoff, a 99 week stint with unemployment and five or six more months away from not paying their mortgage, what is important is that if somebody want them to buy a big ticket item like a new car, a big screen TV or a vacation, they will say “no”.

Increased consumer spending = decreased unemployment as decreased consumer spending = increased unemployment.

Bad consumer confidence = weak and, likely, a decrease in consumer spending.

It means that we will not be able to rely on households to spend our way out of this recession.

So if Democrats are responsible I would hope the Republicans have a plan to fix it. Please show me this plan.

Retardomax,
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What kind of severely deranged reasoning of yours could conclude that the collapse of the housing bubble created under a Republican White House with Republican control of both houses could be caused by Democrats?
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How much crack does somebody need to use before this makes sense?
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Retard, drugs kill – please use more.

How about we conceded that the number is much lower because “worried” is such a vague term and could be interpreted as anything inside of a large range of definitions as serious as “the thought keeps my up at night” to as innocuous as “yeah, I worry about paying my mortgage every month because it’s a bill and I take my debts seriously as any responsible person should.”
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It’s fun to play devil’s advocate. The really fun part is that neither of us is incorrect.

I will not concede the first point because it depends on the question being asked. If the question was “can you afford your current mortgage”, there might be more sensitivity and people would generally favor a prideful answer (“I’ll figure it out”) rather than a negative answer. But the question was “Are you worried…” which psychologically, you’d be less inclined to favor a prideful answer and actually you’d be more likely to favor a pessimistic answer because, let’s face it, everyone sometimes feels a bit of doubt or concern about their situation (hell, I’ve got enough savings to live for a year without a salary and my wife and I still talk concernedly about our expenses on a regular basis).
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I will not concede the second point because there are almost certainly some of those who somehow managed to scrape by – not to mention, Joe already acknowledged they were likely a small portion.
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I will ABSOLUTELY not concede the third point because it is ludicrous to outright blame the Democrats. Near universally, it is agreed that Wall Street shares the blame, that banks banking on mortgages that they expect to default share the blame, that people not trying to figure out that they couldn’t budget for these mortgages share the blame, that Republican failure (particularly from the Bush admin) to regulate shares the blame and, yes, the Democrats share the blame. To claim any single group or individual is to blame is to fail miserably at realizing a fundamental fact of any major calamity: no true major calamity can happen unless there are dozens, perhaps hundreds or thousands of little failings along the way. Whether it be the repeal of the Glass-Stegall act, the pushing of Fannie and Freddie, the political gridlock, the States having to slash their budgets instead of helping their citizens, the Bush tax cuts or the Bush tax cuts expiring, the wars, the insanely stupid games that all of these companies were playing, or the mistakes of individual citizens, the stimulus being too little, the stimulus being too large, the number of mistakes that it took to get to this point number in the millions, possibly billions, and it is far too big, far too drastic, far too expansive to lay it on any single individual or group.
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Plus, I honestly believe that compared to the work of the Republicans since the Reagan Revolution have, as a whole, had a far greater impact to create this mess than anything else. I honestly believe that just about everything you can blame Wall Street for, blame banks for, blame homeowners who never should’ve been homeowners for, were created situations because of deregulation performed by Reagan and his successors.

“Worried could mean the respondent is a layoff away from it being a real huge problem, which is probably realistic for a lot of people”
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Which is exactly what the story mentions. I agree with you that there is no reason to concede that people are exaggerating.

Hell, I’ve been worried half my life about making rent, even when it realistically isn’t a problem, because I have no safety net. Sometimes, I suddenly freak out worrying about “what ifs” (usually at night when I am tired) and have to talk myself down. Quite frankly, what a vague survey.

Addendum: This recession made me feel even worse about things NOT because of the recession but because of the *constant* harping on news shows of how you should have FOURTEEN MONTHS of savings to live off of. That would happen NEVER for me. Maybe, MAYBE I could stuff 3 months away. But ever since hearing the derision in every economists tone on tv shows about how unprepared you are for not having such a safety net, my self confidence has been seriously eroded.

See, here’s the part that never made sense to me about trickle down economics. Theoretically, if you leave more money in the pockets of the rich, they’ll invest more into their businesses increasing employment which provides more people money which increases consumer confidence which gets people spending which gets the economy going. However, why would you invest money into your business if you can’t find a logical reason to believe that consumer spending will increase when consumer confidence is so depressed? On the other hand, trickle up politics works the other way: make a useless but paying job so people have money so consumer confidence increases so the economy is moving making the private sector see a profitable reason to invest thus creating actual jobs. Since most people would rather do something worthwhile (and since you don’t need to maintain these useless jobs long term), people leave the useless jobs in favor of the useful jobs.
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Seriously, I think Keynes at his fundamental statement is right: get these guys digging holes just to be filled in but use actual shovels. They don’t want the backbreaking labor? They can go get a construction job where they drive a mechanized shovel or a welding job or a white collar job they’re used to, but in the meantime, they can at least put food on their table and keep the economy moving. Just set aside time during the day for them to do some job hunting so they have the opportunity to change jobs. Unlike Public works projects, these don’t take 18 months to get set up, you can just start them on some unclaimed land.

A financial transaction tax is a great idea that will never be implemented because Washington D.C. is where good ideas go to die.

Unlike other half-baked tax reforms, like a “flat tax,” a transaction tax is brilliant. It would be trivial to administer a transaction tax. It would be nearly impossible to evade and stupid to try, since the tax savings that would be generated by not reporting any given transaction would be negligible.

IOW, unpatriotic corporations and corporate executives would fight it tooth and nail.

Who the HECK has 14 months of living expenses sitting around?? I’d bet the number of people who had enough wherewithal to be able to survive 14 months with no income amount to about 10% of the population of this country or less.

“…I honestly believe that compared to the work of the Republicans since the Reagan Revolution have, as a whole, had a far greater impact to create this mess than anything else.”
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The “Reagan Revolution” produced the modern “conservative” movement, which is responsible not only for the deregulation of the financial services industry but also most industry, taking us headlong into the coming fossil-fueled cataclysm, weakening the working classes by undermining unions and transferring massive amounts of wealth to the top few percent of the population, fetishizing all things military, the anti-science idiocracy of the public, vicious anti-liberal partisanship, the list of awful consequences of movement “conservatism” goes on and on. But Democrats participated in this movement as well, whether they called themselves “conservatives” or “centrists”. Bob Rubin and Bill Clinton were a big part of the “conservative” movement problem (it always pushes policy to the right no matter who has power) that got us where we are and value-free, pathologically centrist establishment journalists watched the whole thing happen, pretending that mendacious, traitorous “conservatives” were legitimate and respectable, to this very day.

With the way the wealth gap has been growing, I don’t think you can concede the point Joe. 40% of this country is worth $0 or less (they owe debt). The poverty line is just plain destitution. You get above that by a little and you’ll still be concerned about your rent or mortgage.

Then you consider that between 14% & 17% on average in the U.S. fall below the poverty line. Then factor in the state of the economy and the recent crash, we’re probably much higher than that.

10% unemployment accounts for 10% of that worried state.

Then you have the working poor.

And after that you still have over leveraged and under water individuals.

And then you have those people who aren’t quite poor, but aren’t quite comfortable.

Add in rising prices for education, food, etc over the last few years, the difficulties finding jobs, the worries about losing jobs and I don’t think 53% is all that surprising or that it can be written off.

By the way, Rob Shapiro thinks the Budget Commission’s leaked notion of limiting mortgage interest deduction is foolish, given the housing slump.

Shapiro says:

There are reasonable arguments for paring back this deduction, since it channels so much investment into housing. Of course, that’s its explicit intention, so home ownership can be part of the American dream.

But that’s not quite the full story, is it? From the NYTimes:

Economists don’t agree on much, but they do agree on this: the interest deduction doesn’t do a thing for homeownership rates. If you eliminated the deduction tomorrow, America would have the same number of homeowners, the same social networks, the same number of gardens.

The deduction might help some people (like me) to purchase bigger homes than they otherwise would. And it certainly helps people who are selling mansions to get a higher price. But it is hardly the democratic subsidy people think. In fact, it’s patently regressive. [...]

…among homeowners, only about half claim the deduction. And for the 37 million individuals and couples who do, the rewards, at least on average, are surprisingly modest — just under $2,000 per return. (Figure it like this: the median home, as computed by the Bureau of the Census in 2003, is valued at $140,000. If you finance 80 percent of it with a 6 percent mortgage, your interest bill is $6,720 a year. A taxpayer in the 25 percent bracket would save one quarter, or $1,680.)

But cumulatively, the deduction is a big deal. This year, it is expected to cost the Treasury $76 billion. And the rewards are greatly skewed in favor of the moderately to the conspicuously rich. On a million-dollar mortgage (the people with those really need help, right?), the tax benefit is worth approximately $21,000 a year. And according to the Joint Committee on Taxation, a little over half of the benefit is taken by just 12 percent of taxpayers, or those with incomes of $100,000 or more.

Shapiro also stated:

But doing it would inescapably further drive down housing values, and doing it now could lock in years more of slow economic growth.

Again, from the Times:

…tax policy was never intended to function as a price support. Even less should it support a putative housing bubble. Even the president’s directive mentioned sustaining housing ownership — not sustaining housing prices. High prices may even be a disincentive to ownership. And the housing market, the panel concluded, is overcapitalized anyway. Thanks to the interest deduction and other breaks, the effective tax rate on owner-occupied real estate in the U.S. is estimated to be only a fraction of the tax on business. Some of the capital being plowed into McMansions with Olympic-size lap pools would earn a higher return (tax considerations aside) in medical research or pollution control.[...]

A more salable approach would be to kill the deduction in stages, by gradually reducing the $1 million ceiling over many years. Over time, it would simply disappear. Congress could do that; it should do it. The deduction is overrated as an icon, and as tax policy it is misdirected and unfair. But don’t hold your breath.

Homeownership and a level playing field are always good for a speech. But they are nothing compared with propping up housing prices. And that is what the mortgage deduction is all about.

Beyond that bit about the home mortgage interest deduction, Shapiro has his head pretty much in the right place, especially with this observation:

As with Social Security, the main difficulty lies not in figuring out how one could slow annual cost increases in health care, but rather in marshalling majority support for such measures.

Again, sorry for the long copy-paste (the article is five pages long, so I’ve cut a bit)…I guess I need to stop teasing Zechman, hey?

(And yes, Jayackroyd, this is the article which finally made be give over my email to the Times firewall.)

Well, I know. It seems hard to believe but every financial pundit I hear radio or tv act like you are seriously lame without that. And people who call in often seem to be sitting on some little nest egg. I think the rest, like me, feel too much like dirt to call and ask questions.

Why does the 53% surprise you? What do you expect when President Bush told us to spend after 9-11 and the housing bubble allowed people to turn their houses into ATMs. The problem is that the growth of the economy in the 2000s was on paper only and there was no sustained growth. Now, when we need people to spend their money, they are getting smart and are starting to save. That great on an individual level, but it is not good during these bad economic times.

In truth, real income for the middle class has grown very little for the past 40 years. Most of the growth have gone to the rich and the super rich. The super rich corporation gobbled up the rich corporations, which has left of economy in the hands of a few very powerful corporations, whose stupid business decisions can take us all down like an anchor. I can tell you my income has not gone up with inflation as my gross income is eaten up with high health premiums and other expenses related to my job. As far as real income, I took home more when my salary was $30,000 14 years ago than I do now making $50,000. I have to admit I not innocent, as I ran up debt when I should have saved.

“See, here’s the part that never made sense to me about trickle down economics…”
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As you probably know, Keynes was the grandfather of modern economics and pre-dated Supply Side/Trickle down economics by about 45 years.
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Trickle down and Supply Side Economics never won even one Nobel Prize, was not taught in Universities and was, in reality, a political ideology and not a form of economics.
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To Keynesians Savings is not equal to investment. Savings is, say, an attorney calling his stock broker and buying $50,000 worth of stock at about the same time one doctor sells $20,000 worth of stock, an accountant sells $15,000 of that stock and Restuarant owner sells another $15,000 worth of that stock. So, who gets hired?
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Nobody.
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Savings is often a lateral transfer of wealth from one person to another, often, of similar (high) income groups.
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Investment is when that restaurant makes so much money that the owners either buy a second one or invest as silent partners in a second one.
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Cutting taxes for the wealthiest helps the wealthiest save money by handing it back and forth to one another while producing nothing new at all.
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Getting money into the hands of the lowest income individuals doing some kind of work (preferably productive so that there will be a side benefit) so that these newly employed people spend, spend and spend more until, in order to make more profits, business owners use their retained profits to expand their businesses both internally (hiring or re-hiring employees) and externally (opening up a new branch).
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Since Keynesian economics involves deficit spending during bad times and lower spending and tax increases during good times, the right wing had to create something which got them more votes.Hence, Trickle ON economics. That is get a professional actor to smile and say “God Bless America” many times over and P on our heads and tell us that it is raining. Hence, trickle ON economics.

chupkar: Thank you for bringing the real world to Joe.
Most people live month to month.

But doing it would inescapably further drive down housing values
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People keep forgetting that the reason it’s called a bubble is because prices have exceeded the actual value of the commodity. Efforts at propping up housing prices or contruction jobs are only prolonging the agony.

Agreed.
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We have up to 2.2 Trillion dollars of work needing done on our infrastructure which will need many of those same people from the construction trades according to the American Society of Civil Engineers:
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http://www.infrastructurereportcard.org/
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Sure they are an interest group, which is why I would say “up to” 2.2 Trillion. Perhaps somewhat less would be sufficient.

2.2 Pat. How about the admission of guilt by Barney Frank, who was in charge of oversight of Fannie and Freddie during the housing boom and subsequent mortgage meltdown, that he was at fault? That do it for you Pat?

I remember a West Wing episode and they were talking about the problem of how every President knew that the nation had to stop increasing the personal debt load and stop spending as much, but no President wanted to be the one who was on watch when people did that because of its effects on the economy.

AS Paul Krugman and others have pointed out, the Fannie Mae/Freddie Mac meme is a completely misleading canard pushed by the republicans in a desparate attempt to shove some of the blame on to the Democrats. but the fact is, Britain, Ireland, Spain and several other countries saw a bubble in their housing prices without Fannie Mae’s help, which suggests that Fannie Mae was a marginal cause at best. Far more significant were the unregulated mortgage lenders such as Countrywide and the Wall Street firms like Lehman Brothers that “securitized” the risk. Fannie Mae and Freddie Mac certainly did not cover themselves in glory (they might have, with better management, have served as a break on the runaway bubble), but they were not a prime cause.

Not that you and your friends will listen and/or learn, but it is worth stating for the record.

“How about the admission of guilt by Barney Frank…”
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The problem causing the financial meltdown was the fact that banks sold off all loans as bonds.
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Twenty years ago if a loan officer took a loan to people who could not pay it back to the vice president, since the bank would hold the mortgage for the life of the loan, the loan officer would have his head handed to him or, very literally get an immediate termination notice.
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Once the risk was bundled into bonds where unscrupulous rating agencies gave them high ratings for complete garbage with many loans which would never get paid back, if that same irresponsible and unethical loan officer took those same people’s application to the vice president to sign off on, he would be given a bonus check and a promotion.
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About fifteen years after this started, Barney Frank added in Fannie Mae and Freddie Mac to the mess contributing a small amount to the total damage.
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For that small amount, indeed, Frank was responsible.
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But, focusing on Frank is like ignoring the captain and first mate of the Titanic and putting all the blame on the waiter in the dining hall.
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We never, ever have the choice between a perfect and flawless candidate and an idiot. We have choices between so-so candidates and awful candidates or, occasionally, a good but imperfect candidate like Barney Frank.
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Frank was like the waiter on the Titanic. George W Bush was the Captain of this Titanic and, for caving into ridiculous Republican demands in 1999, Bill Clinton was first mate for getting rid of the Glass Stegal act.

I’m surprised that Joe’s surprised. Everybody I know is worried. Those who have safe jobs are worried. Those who are working overtime are worried. Fear perpetuates itself. Most people are one paycheck away from disaster.

Thanks for posting this.
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Oh, and thanks for the morning WDIM links; I’ll gladly scroll over a thousand freeper and rusty posts to get to those.

Really? Unregulated, amazing. So, all of a sudden under Bush, banks had no regulations? When were the regulations removed? Can you show me the legislation? No, you’re full of it.
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You can only change history in your little pea brain.
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Barney Frank and the House Financial Services Committee were in charge of all of this, the banks, the mortgage companies, insurance (including AIG), and he was a big cheerleader for Fannie and Freddie. The Bush Administration tried to get control of Fannie and Freddie in 2005, but they were shot down by the Dems.
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“Frank became the chairman of the House Financial Services Committee in 2007 after the Democratic Party won a majority in the House. The committee oversees the entire financial services industry, which includes the securities, insurance, banking, and housing industries. He is considered to be one of the most powerful members of Congress.”
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Even before he became chairman, Frank and the Dems were steering the HFSC.
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Here’s Barney:

For years, Frank was a staunch supporter of Fannie Mae and Freddie Mac, the giant government housing agencies that played such an enormous role in the financial meltdown that thrust the economy into the Great Recession. But in a recent CNBC interview, Frank told me that he was ready to say goodbye to Fannie and Freddie.
“I hope by next year we’ll have abolished Fannie and Freddie,” he said.
Remarkable.
And he went on to say that “it was a great mistake to push lower-income people into housing they couldn’t afford and couldn’t really handle once they had it.” He then added, “I had been too sanguine about Fannie and Freddie.”
When I asked Frank about a long-term phase-out plan that would shrink Fannie and Freddie portfolios and mortgage-purchase limits, and merge the agencies into the Federal Housing Administration (FHA) for a separate low-income program that would get government out of middle-income housing subsidies, he replied: “Larry, that, I think, is exactly what we should be doing.”
“Noteworthy is the fact that Treasury Secretary Tim Geithner has come to a similar conclusion.”

Frank also said that any federal housing guarantees should be transparently priced and put on budget. But he added that the private sector must be encouraged to re-enter housing finance just as the government gradually withdraws from it.
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Pat, you’re an econ genius.
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Your analysis is at least 5th grade level.
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According to you there is no value in having a stock market, brilliant. I am awed.

“When were the regulations removed? Can you show me the legislation?”
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“The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999. The bills were passed by a Republican majority, basically following party lines by a 54–44 vote in the Senate[12] and by a bi-partisan 343–86 vote in the House of Representatives.[13] After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. The final bill resolving the differences was passed in the Senate 90–8 (one not voting) and in the House: 362–57 (15 not voting). The legislation was signed into law by President Bill Clinton on November 12, 1999″
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http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act#Repeal
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Before 2007, months before the financial meltdown, mortgage backed securities were under regulated but had been around since the Reagan Administration created them in 1986, 21 years earlier.
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“Real Estate Mortgage Investment Conduits, or “REMICs,” are a type of special purpose vehicle used for the pooling of mortgage loans and issuance of mortgage-backed securities. They were introduced in 1987[1] and are defined under the United States Internal Revenue Code (Tax Reform Act of 1986), and are the typical vehicle of choice for the securitization of residential mortgages in the US.REMICs are investment vehicles that hold commercial and residential mortgages in trust and issue securities representing an undivided interest in these mortgages. A REMIC assembles mortgages into pools and issues pass-through certificates, multiclass bonds similar to a collateralized mortgage obligation (CMO), or other securities to investors in the secondary mortgage market. Mortgage-backed securities issued through a REMIC can be debt financings of the issuer or a sale of assets. Legal form is irrelevant to REMICs: trusts, corporations, and partnerships may all elect to have REMIC status, and even pools of assets that are not legal entities may qualify as REMICs.[3]”
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http://en.wikipedia.org/wiki/Real_Estate_Mortgage_Investment_Conduit
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“You can only change history in your little pea brain.”
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Face it meltdown, you don’t know the difference between economics and home economics (baking cookies in junior high school – classes which really were never needed and I am, personally, glad to see out of the schools as a waste of time) and get all of your “facts” from Glenn Beck.
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You are saying that mortgages originated from 2000 through 2006 defaulted months after Barney Frank deregulated parts of Fannie and Freddie in 2007?
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Obviously sound mortgages originated between 2000 and 2006 would not default due to legislation written in 2007. The reason for the financial meltdown was that year after year after year of unsound mortgages fell all at once as the free market incentives got perverted into a Ponzi scheme.

“According to you there is no value in having a stock market…”
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Really?
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When did I write that?
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I did write that excessive savings causes an inflated stock market, inflated mortgage backed securities and inflated real estate prices while investments in actual capitalization of companies in a profitable market do not have this side effect.
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Since Reaganomics started:
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Stock market crash of 1987 – largest percent drop since 1929.
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Stock market crash primarily with the dot com businesses being the second largest drop in stock value in 2000.
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The savings and loan crash of 1986.
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The financial meltdown of 2007 devastating both stock value and housing prices both.
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The New York Stock Exchange was founded in 1817 with it’s origins going back to 1792. The crashes have gotten more and more spectacular since the Messiah, Ronny “Dutch” Reagan began using Trickle On Economics and you still believe it is raining.
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Please read a book on introductory Macro Economics and post then, not now.

Keynesian economics with its multiplier effect is a fraud.
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A simple analysis of the theory should make that apparent to anyone but a liberal.
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If the theory that every dollar spent by government returns more that the original dollar, then tax everyone at 100% and redistribute the dollars back through the economy and we will rid ourselves of the debt in no time. Keynesian economics is the real Voodoo economics and a complete fallacy.
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But the factors that affect something like the stimulus are also psychological. When the president and the government is constantly creating distrust and uncertainty, any short term positive effect is offset by their own stupid politics. We are destroying our currency, making imports, like oil more expensive, and since we don’t manufacture anything, we aren’t able to sell goods to balance our trade deficit.
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http://www.moveleft.org/voodoo_multiplier/index.html

To conclude: the main fallacy of the spending multiplier lies in the assessment of MPC. The multitude of factors that influences the propensity to consume is not taken into account. While government spending may have a small and transient positive effect on consumer spending (thus increasing MPC), there are numerous factors that reduce MPC. Among those factors are taxation and inflation (less money available for consumption), unemployment, and insecurity over the economic development. All these factors have the power to cause negative marginal propensity to consume and therefore a multiplier that is less than unity.

It is illogical that money taken away from the economy and then given back to the economy by the government should have any positive effect (m>1) on GDP. Rather, history proves that m<1 and government spending hurts the economy.

“To Keynesians Savings is not equal to investment. Savings is, say, an attorney calling his stock broker and buying $50,000 worth of stock at about the same time one doctor sells $20,000 worth of stock, an accountant sells $15,000 of that stock and Restuarant owner sells another $15,000 worth of that stock. So, who gets hired?
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Nobody.
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Savings is often a lateral transfer of wealth from one person to another, often, of similar (high) income groups.”
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Moronic.
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Savings provide capital for loans, for business expansion, for creating wealth. Even an idiot like you must have heard that somewhere in remedial school.
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New issues are brought to the market in order to raise capital and allow a corporation to expand. Firms are free to sell their own stock and raise capital or buy it on the market. Your analysis is garbage.
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And, indeed you are very tiresome.

The value of a thing is what someone will pay for it. You can say that everything is overvalued, if you don’t wish to purchase it. For example: I am not a soccer fan. The value of a ticket to attend a World Class Soccer event to me is $0. To someone that is into it it might be $1000.

You are correct in stating that efforts to artificially prop up prices are only delaying the inevitable. Prices will find their level and the sooner that they bottom, the sooner they can recover.

“New issues are brought to the market in order to raise capital and allow a corporation to expand. Firms are free to sell their own stock and raise capital or buy it on the market.”
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The term you are looking for is liquidity.
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The economic purpose of secondary markets such as stocks, bonds and derivatives is to make it easy to sell off one’s shares of a very large business. Only a small fraction of all businesses are on the stock market and, therefore, represent only the exception, not the rule.
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Being an imperfect institution,people buy up securities at inflated values at times requiring what is now euphemistically called “an adjustment” (previously called a “crash”).
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I have never said that there is no reason for the stock market or anything even vaguely resembling that. I, simply am stating a fact from Keynesian Economics that savings is not equal to investment and for the 99% of businesses which are not on any stock exchange, retained earnings is the only source of capital.
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This is introductory Macro Economics, not something I came up with.
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“Keynesian economics places central importance on demand, believing that on the macroeconomic level, the amount supplied is primarily determined by effective demand or aggregate demand, and Keynes summarized Say’s law as “supply creates its own demand”. For example, without sufficient demand for the products of labor, the availability of jobs will be low; without enough jobs, working people will receive inadequate income, implying insufficient demand for products. Thus, an aggregate demand failure involves a vicious circle: if one supplies more of his labor-time (in order to buy more goods), he may be frustrated because no-one is hiring – because there is no increase in the demand for their products until after he gets a job and earns an income. (Of course, most get paid after working, which occurs after some of the product is sold.) Note also that unlike the Say’s law story above, there are interactions between different markets (and their gluts and shortages) that go beyond the simple price mechanism, to limit the quantity of jobs supplied and the quantity of products demanded.

Keynesian economists also stress the role of money in negating Say’s law. (Most would accept Say’s law as applying in a non-monetary or barter economy.) Suppose someone decides to sell a product without immediately buying another good. This would involve hoarding, increases in one’s holdings of money (say, in a savings account). (Keynes identifies the “animal spirits” of sudden collective pessimism as the catalyst for what he calls the “hoarding” of money, without specifying any ultimate causes of such pessimism.) At the same time that it causes an increased demand for money, this would cause a fall in the demand for goods and services (an undesired increase in inventories and thus a fall in production, if prices are rigid). This general glut would in turn cause a fall in the availability of jobs and the ability of working people to buy products. This recessionary process would be cancelled if at the same time there were dishoarding, in which someone uses money in his hoard to buy more products than he or she sells. (This would be a desired accumulation of inventories.)”
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http://en.wikipedia.org/wiki/Say%27s_law#Keynes_vs._Say
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When net savings via secondary markets greatly exceeds investment in new businesses or new issues of stocks and bonds, prices of the securities get bid up with no improvement in the actual performance of the businesses lent to or the stock it represents. This is known as a “bubble”.
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Due to massive amounts of savings but not an equivalent amount of investment and the craze over the internet, internet businesses which openly, honestly and legally stated that they were, at that time, losing money hand over fist got people to buy stock in companies at a level that a price earnings ratio would never justify unless these companies went from having almost no sales to overwhelming the market.
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The same thing happened with mortgage backed securities right after the dotcom bust. People were buying mortgage backed securities with the flimsiest loans in part due to inaccurate ratings but, also, due to mania and excessive savings relative to investment causing real estate prices to go dramatically beyond what the American people could afford to pay.
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The unregulated market acted accordingly and loan officers lent money to everybody in sight regardless of if they had any chance of paying back.
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Second mortgages financed middle income spending after the dotcom bust during the Dubbya years. Now homes are “underwater” (owing more than they are worth) with no remaining equity and job instability ruining consumer confidence.
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As we did during the Great Depression and World War II, we need the government to take over for scared consumers, but, wingnuts like you still love trickle on economics and still believe that it is raining.
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Sorry, but rain isn’t yellow. That would be the Koch brothers, owners of the Tea Party trickling on you.

“If the theory that every dollar spent by government returns more that the original dollar, then tax everyone at 100% and redistribute the dollars back through the economy and we will rid ourselves of the debt in no time.”
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You’re using the “slippery slope” argument.
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The best mockery of a “slippery slope” argument was that if courts ban gay marriage, soon they will, also, ban heterosexual marriages. (Personally I think civil unions should be fine for everybody but that is totally off topic.)
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Keynesian economics dictates that at times of reduced consumer spending being best known as slow growth or a recession, even though taxation causes a reduction in spending for the party being taxed, some people, due to income, spend a larger percentage of income than others.
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If basic survival for a family of four costs $40,000 in Manhattan, then from $0 to $40,000 100% of money brought into that household will be spent. By contrast at the other end of the spectrum, Bill Gates spends an extremely small percent of his income.
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So, ignoring the less extreme middle for simplicity’s sake, $1 in additional tax of Bill Gates will decrease spending by no more than (probably less than) one cent. If it is used to hire a Manhattan construction worker with two children who’s income as of yesterday was $0, all of that $1 will be spent.
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Taxing 100% of all income would not serve anybody well according to Keynesian Economics.
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The only reason that government is taking over for spending is because no matter how much money you leave households in recessions and slow growth, almost none of it goes into spending.
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What wingnuts like you miss is that when the government hires people, people with bills to pay do not cash their checks and fill up pools with $1 bills and wallow in it. They very promptly give it to private business.
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Just as valuable knowledge and valuable assets exist most among the highest paid people, bartering their talent and/or assets brings money promptly up the later from those with fewer assets, talents or marketable credentials.
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So, right after the poor person gets paid, the taxpayer starts getting their money back not from the government, but, from consumers.

“You are correct in stating that efforts to artificially prop up prices are only delaying the inevitable. Prices will find their level and the sooner that they bottom, the sooner they can recover.”
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You are, basically, correct. However, there is a problem: The lower one’s income the less one is willing to pay for any good or service of any kind.
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This means that, if a Manhattan construction worker has two children, a stay-at-home or unemployed wife and, therefore, costs of survival (known as the poverty line) of $40,000 per year even if he is the biggest soccer fan who ever lived, he will, also, be unwilling to pay anything more than $0 if his earnings are not greater than $40,000 per year.
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Also from Keynesians, prices are sticky. That is the soccer players, the stadium workers as well as the lease on the stadium were established in advance of the match and, most likely, were at a going rate years in advance. So, for the ultimate soccer fan who owns 50 cents plus subway fare back and forth who would attend a soccer match, the price will not go from, say, $20 to reach 50 cents due to those set costs. The soccer team and the stadium will go out of business due to paying for debts and so on before prices reach such a low point causing more layoffs.
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Secondly, imagine what you would be compelled to do in the housing market during the bubble.
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The house you want has gone from $280k in 1997 to $310k in 2003 to $400k in 2005, what do you do when you have a down payment on the house available at a price of $420k in 2006? You rush in and buy it as soon as possible since the price will, you expect, be higher in 2007.
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By contrast, imagine you did not buy that house and the price in 2007 is $440k, in 2008 $420k, in 2009 $390k and last August $310K? Being wise, you hold onto your money and wait until it is back to $280k.
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If everybody waits, it will cause a downward spiral.
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The trick is not to get just one market going, but to get pay into the hands of workers of all kinds beginning with those who have skills appropriate for government projects such as road construction. As incomes rise, housing prices will approach 2007 levels again over time.

“When the president and the government is constantly creating distrust and uncertainty…”
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The Tea Party is creating distrust and the failed economy is creating a highly negative certainty – certain that they can not afford to spend any of their income.
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Being less certain that the economy is awful is the best thing the president can do.
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Certainty is not always positive. If you mean “distress” instead, the psychological effect of the stimulus package causes some hope and a decrease in distress.
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As for distrust, that is what you, meltdown and the Tea Party cause: false distrust of all kinds.
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The last thing this country needs if certainty of a continuing failing economy. We need less certainty of that.

Trickled on Pat, sorry that you feel pissed on, and that you relate to the world around you from such a .
subjective and submissive viewpoint. You must realize that most people don’t want to see their world from the place you find yourself.
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Most of us have moved on past your pre-pubescent level of relating to each other. You might want to find someone to help you deal with your issues.

Trickled on Pat, if the government spending a dollar creates more than that dollar, we should and would continue and expand government spent ad infinitum. Why not? It’s not a “slippery slope argument”. It is simple common sense.

Did I not just read that sales of existing homes were the highest last month in 28 years?

“Trickled on Pat, if the government spending a dollar creates more than that dollar, we should and would continue and expand government spent ad infinitum. Why not? It’s not a “slippery slope argument”. It is simple common sense.”
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Using your “simple common sense” instead of having one Guinness with my burger for dinner yesterday I should have drank a brewery.
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No, one was just what I liked. Half a beer would have been left me thirsty and two heavy stouts would have been too much.
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As for “trickle on” it is about the class warfare Republicans have declared on the poor and middle class and far too easy use of words to adapt from “trickle down”.
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If you knew economics, you would know that there are limitations to how far any country at a specific point in time and technology can produce. So, using your “common sense” you would fail to acknowledge that the economy can not exceed 100% employment, it can not have more than 100% of it’s commercial buildings filled and can not at any particular level of technology exceed a certain number of goods produced, so, approaching the idea of all money being, as rightwingers like to say when a road is being built “redistributed” is absurd.
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The first mistake you are making is that Keynesians do find deficits during recessions, when interest rates are low since businesses do not want to borrow since they are not expanding their businesses and households do not want to borrow since they fear they will be unable to pay the money back, deficits are acceptable.
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The next mistake you made is that it the difference between the parties being taxed and the the parties being hired which make it work. Increasing the taxes on a family of four making $90k per year to hire somebody who, also, has a family of four who make $90k per year would have no net impact. It has to be that the people hired have a greater likelihood of spending the money than the parties being taxed. The smaller the difference between the two, the smaller the stimulating effect on the economy.
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The politically hardest part of Keynesian Economics is that, to avoid normal inflation (not stagflation caused by an oil embargo as happened to Nixon and Carter) during times such as the Clinton years as the dotcom bubble was blowing up, you pay off deficits by reducing discretionary spending to a minimum and you raise taxes to pay off the deficit as much as possible.
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Your “common sense” is only if you believe somebody is saying that the government is magic the way that the far right like to say that large corporations are magic. (Goldman Sachs did some magic – they made millions of jobs disappear in addition to billions of dollars of bailout money disappear).
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When you seek to tax a family of four making $91,000 per year to hire a people making $89,000 per year for a family of four the impact is so small as to be undetectable. It when you tax the very highest paid individuals making over $250,000 per year and spend it on people making $50,000 per year that you get the biggest bang for your buck.
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It is not magic and your “common sense” which would have you the drunk tank and the fat farm (one burger, not 48 burgers was what I wanted and had for dinner at the pub next door) if you really lived by it is a pathetic distortion.
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We do not have 99% unemployment. We have 10% unemployment and about 7% out of work so long that they are officially called “discouraged laborers”. So, it would not be 100% of the income of those working which would help since that would, also, stop the multiplier effect. It would require about 6% of GDP needed to get 17% of all unemployed back to work.
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Those who wish to inform you otherwise are people making far, far more than $250,000 per year such as the Koch brothers. The lower 98% of us would do better with a more graduated income tax and more spending on roads other infrastructure.
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Please don’t use your “common sense” when it comes to eating, drinking alcohol or caffeine. I am going to go get myself one – not one hundred – cups of coffee now since one cup is what I will enjoy and more I will not enjoy.

As income rises from what moron? Your imagination? You want more government employees to get higher salaries paid from by who? You? Are you stupid or what? In case you haven’t noticed the Fed is printing money as fast as they can and they still cannot cause inflation. Why?
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Because there are NOT any jobs here! Stupid! The only people getting raises are government employees. They make twice as much as private workers. Therefore making the private employees slaves to government workers. Screw you!