The US Economy

[chris the cynic]

Yesterday I was supposed to start on my TNM lines for the nth time, and for various reasons it didn't happen. So today I was all ready to start recording when my sister showed up and decided that now would be a great time to have a long conversation on the economy.

I started wondering other people thought about it. When I have a random question that I want a diverse group of people to answer I come here, I used to go to PDX but activity there is sort of negligible. Not nonexistent, just negligible. So, what do you think about what's going on in the US economy?

If you don't know what's going on, basically the reason that stock markets around the world are having spasms that differ from their usual spasms is that we seem to be teetering on the brink of collapse. The longer story goes like this:

Once upon a time in the United States of America bad things happened, and then other bad things happened, and then more bad things happened. This was the start of the Great Depression. A few years later some lawmakers got together and said that it would be nice if that didn't happen again.

The created a law that did several things to stop it, for our purposes the important one was that it made it so that bad things wouldn't lead to more bad things. It did this by isolating parts of the economy from each other. It separated commercial banks from investment banks. The basic idea was that instead of bad things then other bad things then more bad things then Great Depression it would instead be bad things then stop.

Nine years ago that law was repealed. Investment banks realized that mortgages were a good investment, commercial banks were happy to sell them off to investment banks, and all seemed good. Then commercial banks attained enlightenment. The realized that since they were selling the mortgages to investment banks if someone defaulted on their mortgage it was the investment bank, not the commercial bank, that was screwed over.

Thus began a bold new era in banking. They gave mortgages to everyone. No job? No problem. The investment banks either didn't notice what was happening, or were too stupid to care, they kept buying up the mortgages and mortgages worked their way into every part of the economy. They were packaged and repackaged so many times that a lot of people didn't even realize they were dealing with a mortgage.

Then one day someone realized that these mortgages were worthless because people had no hope of paying them off. Soon everyone knew they were worthless. When you have worthless stuff instead of money it can be a bit of a problem.

We had five major investment banks, now we have none. Two were bought, one collapsed outright, and the remaining two stopped being investment banks to avoid collapse.

It was after the first major bank run that the Fed Chairman and Treasury Secretary announced a 700 billion dollar plan to save the US economy from total collapse. Right now people are debating the finer points of the plan, like the fact that it would apparently give the person who wrote it more power than the President without any possibility of oversight.

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So, like I said, what do you guys think about all this?

[EER]

Well, the first thing that surprised me is

Nine years ago that law was repealed.

because 1. So the Democrats got rid of that law, and 2. did they assume no bad things would happen anymore or what? (If you know a name of that law I'll happily google it tonight).

Over here, about two years ago the same was happening with crazy loans being issued to people who did not work or anything, I think a law was passed that made it impossible for these loans to be issued, but I'm not sure, as I didn't really look into it at the time.

Back to the US Economy, a problem is that not only the US Economy depends on the US Economy, but that you guys also import a boatload of goods from the Netherlands and other European (and probably non-European) countries. So if you can't pay for that, you'll take 'us' with you. Given that, I say that 'saving' the economy must happen, or really bad shit will happen over here too.

If you want to know my views on any specifics just ask, as 'what do you guys think about all this' is a rather general statement that could mean anything.

[Mr_Cyberpunk]

You know we're heading for global recession once everyone starts investing in commodities and not stock. Commodities will always have value, shares won't.

Once the banks start shutting down a lot of companies will hit the shit right away since so many now depend on loans and money that they don't own.. so what happens when the supply runs out? you then see why modern capitalism sucks because no one has any capital, its all tied up in debt and shares which in a situation like this means FUCK ALL. Hence why you'll see the wealthy investing shit loads into gold and oil as these will continue to trade even during a recession.

Also George Bush giving people money to save the economy.. WTF?! did this dude fail economics? basically he's putting tax payer money BACK into the capitalists... that just fucks the entire Marxists system. The whole idea is that Tax payer money goes BACK to the workers in form of services. Most likely this is the start of America decentralizing itself and privatizing the entire country. Eventually forcing entire dependency on Liberialist bullshit where the economy rules and controls every last fucking detail.

The lower and middle classes in the US are about to get screwed while the Upper live like kings. George Bush is going to go down in history as the American version of Nero, IMO that's what he is, he's just as stupid as Nero and I hope he ends up the same way.

[chris the cynic]

Well, the first thing that surprised me is

Nine years ago that law was repealed.

because 1. So the Democrats got rid of that law,

That surprised me too. The answer is actually no though. Everyone got rid of the law. The bill was passed through a Republican legislature with a veto proof majority, Bill Clinton signed it, but given the veto proof majority that doesn't really do much. As for why Democrats were involved in deregulation, they initially rejected it until the Republicans agreed to help out with another act. (I think)

and 2. did they assume no bad things would happen anymore or what? (If you know a name of that law I'll happily google it tonight).

The depression era law was the Glass-Steagall Act.
The thing that finally repealed it was the Gramm-Leach-Bliley Act.

I don't really understand what they were thinking. It could be that they just didn't see it coming. The bill didn't read, "Let's let banks pass around mortgages, and put everything so close together they can knock each other down like dominoes" so they were probably thinking of it mostly in terms of mergers. Still, you'd think that someone would have raised their hand and said, "This was in response to a banking collapse to prevent further baking collapses, couldn't repealing it result in a banking collapse?"

If you want to know my views on any specifics just ask, as 'what do you guys think about all this' is a rather general statement that could mean anything.

I was intentionally general so that if anyone had any specifics they had opinions on they could share them without me having to guess what specific things they had opinions on first.

I am interested in how everyone feels about pure capitalism. (I can narrow generalities into other generalities that are, strangely, bigger than the generalities I started with.) It seems to me that every time the US moves closer to pure capitalism we end up getting screwed. In spite of that there is a theory that if we just let the market work everything will be ok. On the one hand that is sort of true, the market will work things out, on the other hand it's like saying, "We don't need medicine, evolution will make everything ok," things will work out, but mindless forces do not care who is crushed along the way.

[chris the cynic]

Once the banks start shutting down a lot of companies will hit the shit right away since so many now depend on loans and money that they don't own..

This is why I am currently unemployed instead of working a business confounded with my sister. She didn't want to be one of those businesses and our start date was getting pushed back beyond the tourist season.

It's a seasonal thing, a lot of times a business doesn't have enough money to pay its workers now, but they know that when their big season kicks in (the Christmas season, tourist season, whatever) they will have that money, plus interest. So they take out a loan. It makes complete economic sense, it's good for the bank, it's good for the company.

so what happens when the supply runs out?

The companies can't make payroll, or rent, or whatever it is that they can pay for the full year, but not necessarily every month. When their strong season comes they don't exist anymore. Their workers are unemployed which means that they can't buy from other companies, which means that even companies that don't depend on credit are screwed. Unemployment leads to more unemployment. If no one is getting paid no one can afford to pay for anything. You've got yourself a depression.

Hence the 700 billion dollar bailout. If it works credit wont freeze, if it doesn't all hell breaks loose.

Also George Bush giving people money to save the economy.. WTF?! did this dude fail economics? basically he's putting tax payer money BACK into the capitalists...

If credit freezes a lot of the taxpayers will find themselves unemployed. The more people unemployed the worse businesses do, the worse they do the more people are unemployed. Even Bush isn't willing to see that cycle go into full swing.

that just fucks the entire Marxists system. The whole idea is that Tax payer money goes BACK to the workers in form of services. Most likely this is the start of America decentralizing itself and privatizing the entire country.

It's actually deprivatizing now. AIG, which I’m pretty sure is the largest insurance company on earth, has been effectively nationalized. 80% of it belongs to the US government. Things are becoming more centralized, not less.

Eventually forcing entire dependency on Liberialist bullshit where the economy rules and controls every last fucking detail.

Last I checked (about two days ago) it was the conservative bullshit that had the economy ruling and controlling every last fucking detail. The Liberialist bullshit had the economy taking a back seat to the government, or more accurately, being forced into the backseat at gunpoint.

The lower and middle classes in the US are about to get screwed while the Upper live like kings. George Bush is going to go down in history as the American version of Nero, IMO that's what he is, he's just as stupid as Nero and I hope he ends up the same way.

He's trying not to. He stopped playing his fiddle for long enough to give a speech supporting Paulson where he basically made it clear he knows nothing about the economy.

[Jonas]

No no no, the US economy is doing just fine, you just THINK it's faltering because you only read leftist media! Just as Gelo.

[Moonbo]

Actually most conservatives are rather cranky at the moment, being opposed to govt intervention as they are, even to bailouts.

http://online.wsj.com/article/SB122221420203869283.html

But yes, I'm all for balancing out media coverage. Here's a helping hand .

http://www.realclearpolitics.com/articl ... r_bet.html


-Gelo

[Jonas]

Actually most conservatives are rather cranky at the moment, being opposed to govt intervention as they are, even to bailouts.

About time

[DDL]

Wait, WHAT?

"The best plan, IMHO, is for the government to buy all the cheap houses and knock them down"

WHAT. THE. FUCK.

I can kinda see how that would help raise house prices, sure...but man: step back, and have a good long think about what the fuck you'd be doing. Smashing perfectly good (albeit cheap) houses. Smashing houses. Fucking...smashing houses.

"Hi Mr taxpayer, can I take a whole boatload of your money, buy a house and then smash it?"

"...wha?"


God, right wing insanonauts make me really angry sometimes.

Still, the guy who wrote the second one (OMG THE UNIONS WILL EAT UR CHILDS!) is called Mallory Factor. Mallory Factor? And he's (she's? It's? Fucking "Mallory": I have no benchmarks for sex-typing) an investment banker, too: so gets doubly pwned.

So I guess they're entitled to a bit of ranting (while they still have a job).

[Moonbo]

...did you actually read Mallory's article? I would have thought you wouldn't like forced membership in unions or the removal of the right to a secret ballot when employees vote about making a union.

Oh, and agreed on your comments on the WSJ article. I can't imagine tearing down houses is the best idea either. It just happened to be the first 'cranky conservative' article I found .

-Gelo

[chris the cynic]

I certntainly would support freezing all plans to build new houses, it doesn't make sense to continue to increase supply when the value is dropping. But knocking them down is insane. The 700 billion dollar plan being worked on at least stands a decent chance of making a profit.

(Speaking of profit, invest in divers US finiancal stocks now -assuming they're dirt cheap; things are changing fast- if they go back up you'll be rich, if they fail you won't really care anymore.)

It is true that spending 700 billion dollars on houses that we completely destroyed would increase the national debt significantly less than McCain's economic plan which half of the country supports. (Obama debt increase + 700 billion down the drain < McCain debt increase alone. Neither one would reduce the debt, the bastards.) But even so 700 billion dollars down the drain isnt a good idea, especially since if we were to try to recoup any of that we'd have sell the land, and the only buyers would be people who wanted to build houses, which would screw the whole thing over. We'd loose hundreds of billions and change nothing.

Am I the only one left who thinks we should be paying down the national debt?

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While the first article is insane and thus forgivable, the second is blatant lies. I'm not saying I agree with things like the Employee Free Choice Act, I'm just saying that the claims made about it are verifiably false.

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By the way, Ahmadinejad has a female translater who speaks English quite badly and keeps on hitting a pitch that is on the verge of making my ears bleed. I think world leaders should have decent translators. Not related at all but I thought I'd bring it up.

[Moonbo]

I can believe that Mallory spinned the facts his way. What's your understanding of the EFCA?

-Gelo

[DDL]

I don't really see how there's any net difference between "voting for union membership secretly" and "voting for union membership non-secretly".

End result, either 50+% of you want to be in a union, or 50+% of you don't.

If the former, you're gonna be forced into it anyway, right? Even if it was a secret ballot, you'd still be forced into it?

Coz if the forced signup is the big change, I don't understand why Mallory Factor (*snort*) doesn't make a bigger deal of it, instead focussing on the secret ballot vs non secret ballot.


And the rest appears to be largely inflammatory buzzwordage, with no actual factual explanation: "To get these tax breaks, companies need to enforce a gag rule on truthful and non-coercive speech about the downsides of unionization"....

Uh...how? Is it actually called a 'gag rule' in the bill? MOAR DATA PLZ.

And the phrasing also shamelessly implies a link between "the truth" and "unionization is bad!", and suggests any positive aspects of unionization are actually untruths coerced out of people.

It's...horrible journalism, basically.


Also, overusing the word 'coercive' to describe every policy you don't like, EVER, is also bad journalism.

Also, Mallory Factor. *gigglesnort*

[chris the cynic]

The way it works right now is that if a majority of employees say they want to form a union they can, sort of. One of the ways that a majority of employees can do this is for them to sign "cards." If they choose to use this method, and the company in question is unable to find any evidence that anyone was coerced, the company can say, "I refuse to recognize your uncoerced majority, hold a secret ballot."

That oversimplifies a little. Card check isn't just a way to get a majority in support of the union. It is also a way to get a secret ballot. If more than 30% but less than 50% sign the cards there will be a secret ballot, but the thinking is that if more than 50% sign the cards (and there is absolutely no evidence anyone was coerced) there isn't much point in a secret ballot since more than 50% already said they wanted to join the Union publicly.

That's the thinking, the actual practice is that the company can say, "You chose to publicly declare you wanted a union? Who cares?" and force the secret ballot delaying the formation of the union (and giving them time to examine the list of everyone who publicly came out in support of it and use that information as they see fit. Depending on how paranoid you are that may or may not be an important point.)

So that's how card check works now.

Under the EFCA if more than 50% of the employees signed the cards, that is more than 50% said they wanted to join the union publicly, and there was absolutely no evidence any of them had been coerced, the company would not be allowed to demand a secret election before the employees could be unionized.

That is all that would change (wrt ballots.) If the employees wanted a secret ballot they could still have one, if less than 50% but more than 30% signed the cards they would hold a secret ballot as usual, and, of course, if they chose to go the route of a majority signature drive none of this would come into play. If there was evidence of coercion it likewise would not result in unionization.

It's not eliminating the secret ballot because employees can still have one if they choose and one may still be necessary. It doesn't even come into play in cases of coercion.

There are three other things as well. One is that right now there are "Right to Work States." In a right to work state you can have a labor union, but they don't have much power because even after a company has a unionized work force they can just hire a bunch of people outside of the union and use them as scabs. (Whether this is good or bad is entirely a member or perspective, in general labor doesn't like scabs, business does.)

It also says that if a new union and the company that employs its members within 90 days either side can, if they so choose, request federal mediation. This could lead to binding arbitration if, after 30 days, it too fails.

Finally it says that if pro union employees are illegally terminated they will be compensated thrice back pay. So basically if you break the law or you'll be three times worse off than if you didn't. Personally I would support that for employees regardless of union standing, I think a lot fewer people would be illegally terminated if the people doing the terminating knew the person they were terminated would be better off, and they would be worse off, than if they obeyed the law. Besides that most businesses have a lot of ways to legally terminate people they don't like.

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On the subject of firing people. My dad was once fired because the people in charge didn't like him. The people in charge said that it was because he was a thief. The people in charge were idiots. As their own lawyer had to tell them, if they had come out and said, "We're firing him because we don't like him," it would have been legal. As it was not legal and he came out on top.

[Moonbo]

Hmm, so cutting through Mallory's hyperbole:

1) Currently companies can demand a secret ballot if >50% of people sign cards, even if there's no evidence of coercion. EFCA says that if 50% of people sign cards then the company can't demand a secret ballot.

2) Right now there are "Right to Work" states, which allow companies to hire non-union labor in the case of a strike. EFCA would say that they couldn't offer permanent jobs to non-union labor in case of a strike.

3) EFCA would force companies to pay wrongfully terminated union employees 3X back-pay.

At first blush, #1 sounds exactly like a way to remove secret ballots. Like you say, public card counting is just one way that unions can get formed, though it's not so popular because if you do it that way the company can force a secret ballot. If EFCA passes, and it becomes the favorite way to form unions that means that there will never be a recourse to secret ballots as long as the union can get 50% of people to sign up in their non-secret vote. Wouldn't a better way just be to mandate secret ballots in all cases for forming unions? That way there couldn't be any coercion by either the company or the unionizers.

For #2, I really don't see why letting companies hire non-union people is a bad thing. If someone doesn't want to be part of a union (and have some of his wages garnished to pay union dues) and wants the job, I say let them have the job.

For #3, I guess that doesn't seem too bad, though you're right that it seems odd that being part of a union will suddenly give you this special right that normal folks wrongly fired wouldn't get.

Interesting stuff, thanks for spelling it out.

-Gelo