Can this economy recover?

It looks like the economists are not getting the inflation thing right. They keep arguing that we can't have inflation because we have unemployment and a weak economy. But just today Bloomberg reports Consumer spending stagnated as higher prices caused consumers to cut back spending. So basically we're allocating more of our incomes to those items that are going up(Food & Energy) and cutting back on discretionary purchases. The Fed's definition of inflation is too narrow to capture what's going on.

The only thing that will goose the economy is innovation.

People will spend money on things that are new and shiny (like iPhones and iPads). But companies are not innovating, they are just holding their own. This is because employees dare not stick their necks out, they are desperate to keep their jobs. We have lost almost a decade of innovation which will put us behind the rest of the world for a long time.

What happened to all that green energy? That might have led us to create things that the world wanted to buy, but now the Chinese are into it, with turbines, solar, etc. Americans are happy to still have a job, let the Chinese innovate.

We are a rudderless boat, with a president that is "okay with being a one term president". I voted for the guy, and his lack of leadership is starting to really annoy me . . .

How much of our GDP is actually I-PHONES & I-PADS... It's actually relatively small. The only silver lining to these devices is not so much that they are sales or purchases in themslves but that they result in increased productivity for the rest of the economy.

As far as these green-initiatives. I think it's b.s. When ever gov't decides we should build one thing or another the result is just mis-allocation of resources..

There are vested interests - and brain-washed zombie voters - that essentially want to keep the US's energy policy back in the late 19th century:

Drill for oil
Dig for coal

The only modern element is "fracking" b/c we can't get at the oil and natural gas as easily today. Unfortunately this will most likely poison our water table.

As far as innovation is concerned, what difference does it make if the lower- and middle class can't be employed from it b/c all of the jobs are going overseas?

We are an economy that first and foremost is centered around finance and banking - thanks to 15 years of people "refinancing" and financing EVERYTHING they bought or own.

Our manufacturing base has been stripped clean thanks to bottom-line first (and only) policies - which has left us with TENS of millions of unemployable people - that might have had a job during the housing boom, but now are hopeless.

The real lesson here is if you are going to let the economy go on a 10 year orgy of overspending, over-financing and job exporting, you are going to be left with a shell of a nation that can't simply bounce back to <5% unemployment.

Too many seem to forget the excesses of the late 1990's and mid-2000's and act as if things should just "return to normal".

The problem is that "normal" was far from it.

But the underlying problems is that the resources have already been misallocated, for over a century and getting worse, in the form of jillions of incentives for the petroleum industry and way of life ... not least of which are wars and other foreign policy.

First of all, we need to really end most of the tax breaks enjoyed by larger companies. Companies like Pfizer, Microsoft and General Electric have black box divisions that open up foreign subidiaries not to compete more effectively but to play musical chairs with money to avoid taxes. The IRS also needs to investigate this more. We're not talking about Pfizer building a plant in Ireland to sell product in Europe or to resell to the U.S. parent. We have companies being very creative on how to allocate expenses and profits based on the tax code. Small companies don't do this because they are small companies without multiple divisions and an army of accountants trained in how to avoid taxes through these schemes.

We also need to understand that as a country not everyone needs a bachelor of Arts. In Germany higher education means a skill for many of its citizens as opposed to wasting four years of college on urban studies, sociology and English Lit.

As far as fracing.. Times ran an intesting article. Seems the jury is still out and it may turn out to be another bubble. A gas bubble of course. Just like ethanol, when the gov't is involved in tax credits and not enforcing environmental regulations you just know the true costs of the commodity is not being accounted for. Did anyone notice that Obama administration just pushed down(temporarily at least) the cost of Crude even though the goal is to get us to stop using oil?

Times did a great Ethanol piece. The Administration and Congress erect subsidies on foreign ethanol. Mind you ethanol is less efficient as a fuel than gasoline and increases smog. The result is higher corn prices, higher effective fuel prices and an ethanol industry which takes all that tax payer money and exports ethanol over-seas.

yes

No.

does this zerohedge clown make his own calls or does he just monday morning quarterback ?

iPhones and iPads still add to our trade deficit. Innovation won't help us when most of the sale price of a product goes to Chinese laborors and Taiwanese manufacturers.

We need more exports, and less imports. Everything else is just figuring out creative ways to sell off the country's assets to maintain the lifestyle we're accustomed to.

1. how much does the US spend on importing oil?
2. how much of the average price of an ipad/iphone goes to the cost of manufacturing?

Does capitalism lead to a country's success then inevitably to its demise? Ultimately, is economic failure inherent in a capitalistic system?

There is a lot of growth potential in the anti-growth movement -- ie energy efficiency, sustainable food, chemical-free living, etc.

Aging baby-boomers are going to want to stop putting pesticides and genetically modified foods down their guts, and as energy costs go up, it will make more and more sense to put solar on your roof.

Such things are already the basis of thriving cottage industries. If we took away big govt subsidies for food, fossil fuel and chemical cos in order to leve the playing field, the healthy, sustainable options would quickly become cost-competitive.

But to answer your question -- no, this economy cannot fix itself because it was based on non-stop growth, and we no longer have limitless natural resources to fuel such growth.

Something fundamental has to change for the economy to get better.

iPhones and iPads still add to our trade deficit. Innovation won't help us when most of the sale price of a product goes to Chinese laborors and Taiwanese manufacturers.

Not true. If G.M. can lower their cost of production by investing in a technology from France vs paying more for a similar technology from the U.S. it is better off purchasing from France. This buy american argument makes no sense if it means paying more and causing a firm to have a higher cost of business.

We'd have more exports if Congress and the President weren't so protectionist.

Does an endless net one-way export of dollars to China, Mexico, France, etc. sound sustainable? It will crush the purchasing power of the average American.

Well the issue with China is that They have to constantly print Yuan or let their currency rise. So they now have huge inflation pressures. And it forced the United States to go into debt which created for us an asset bubble.

Will all the "quick fixes", which are merely initiated for re-election purposes (tap oil reserve, etc.) be harmful in the long run or just temporary blips?

Blame Canada.

Will the bankrupt Dodgers return to Brooklyn?

lookin more and more like it is recovering..

"First of all, we need to really end most of the tax breaks enjoyed by larger companies."

add to the list of tax breaks to eliminate those enjoyed by mostly the top 20% of individual tax-payers, like the mtg interest deduction.

"Mind you ethanol is less efficient as a fuel than gasoline and increases smog."

I see consumer complaints from Brazil all the time about cars running on ethanol: they don't work, they don't have power, and the whole thing is a ruse. Ethanol is great as long as you're driving downhill and never have to go back up again.

Housing prices are still falling; unemployment has not changed and is getting worse. RS is right about inflation - there CAN be inflation when unemployment is high because even with unemployment high, consumers need to buy consumer staples, which include food and energy. Unless we stop eating.

The Fed has defined inflation away by excluding food and energy, and making "housing" 40% or so of the calculation, with housing counting only as rents. 60% of households own their homes, so rents do not affect them. Therefore, 60% of people are not affected by 40% of inflation. After rent, most people ONLY SPEND on food and energy, and those prices have skyrocketed.

"First of all, we need to really end most of the tax breaks enjoyed by larger companies."

Unfortunately, that's just screwing ordinary people even more.

Companies look like an easy target (after all, business is evil and CEOs pay themselves too much).
However, companies are mostly owned by ordinary, hard-working people (not the millionnaires and billionaires) through their pension funds.

Any form of corporate tax is simply another tax on those people who are prudent anough to save for their retirement. i.e. the middle class. They have been taxed once when they earned the money. They invest it in a business to grow the economy, create jobs, make things, and earn a decent return. They are then taxed again on that business' earnings (twice). And again on their capital gains (thats three times on the same dollar).

Take an average market PE of 12x. For every $ in corporate taxes you raise, the pension fund of the prudent middle class is reduced by $12. Gee thanks.

Or put another way - corporate tax only exists because it is easier for politicians to tell ordinary people "Lets take the money from the evil companies" rather than "Lets take the money from our hardest-working, most-prudent-saving middle classes - i.e. YOU".

I wish those people understood what is happening to them.

Democrat or Republican - the only debate is which people end up paying for our common services, and which people end up paying for the people who pay nothing (currently 50% of people pay nothing)

The tax issue on large companies is a cannard. Companies won't hire more or hire less because of it. It's about demand and we have a deleveraging consumer who is not spending. Taxes on big companies are a legitimate issue for other reasons chiefly they avoid paying taxes due to their ability to take advantage of the tax code so they gain an unfair advantage against smaller businesses.

You also see big companies sell licenses to subsidiaries they create in other countries taking jobs out of the country. The IRS goes after them for not properly valuing software rights or patents, but this is more art than science and the IRS is outgunned. Add to this large companies can spend big bucks on tax experts who know how to allocate costs across divisions to minimize taxes.

Basically a flat tax on corporations would level the playing field between large and small companies. It may also be true that small companies are the engines of employment.

CEO pay is an attrocity. But taxes are not the way to deal with this. It's more corporate governance, providing shareholders with more power and empowering the Board of Directors more. Right now the CEO and the Board are in each other's bed too much. It's not a healthy relationship from a shareholder standpoint.

"Aging baby-boomers are going to want to stop putting pesticides and genetically modified foods down their guts, and as energy costs go up, it will make more and more sense to put solar on your roof."

Folks have been talking about organic and natural and local and Food, Inc. and King Corn and your friendly farmer and what did we learn? The country doesn't really care. We elite might like spending more at the farmer's market, but most of America still isn't.

And energy prices *have* gone up... and it still doesn't make financial sense to do solar. Evne with the big government subsidies. Take 'em away, fossil fuels still look mighty cheap.

Have to agree.
I'd love for Solar and environmentally sourced energy to make sense, but it doesn't and just adds to the budget deficit and saddles the tax payer with Solyndra type losses.

Don't be so quick to pan non organic foods. Organic farmers use pesticides too. Nutritionally there's no difference. When people claim organic food has more nutrition they are wrong, the truth is fresh fruit and vegetables have more nutrition, not organic. If you want to prevent hunger and ensure the world is well fed , organic is not the way to go.

"Folks have been talking about organic and natural and local and Food, Inc. and King Corn and your friendly farmer and what did we learn? The country doesn't really care. We elite might like spending more at the farmer's market, but most of America still isn't."

I learned that the organic food industry has grown from a $1B industry to a $29B industry over the last 20 years. John Mackey learned that you could put up over 300 stores selling organic food.

"Organic farmers use pesticides too." Yes. They use organic pesticides. Not chemicals. Its not all about nutrition. Can I offer you some rice from Northeast Japan? It's mighty nutritious...

Some good news from China: "The official Xinhua News Agency on Saturday quoted the top official in charge of coal mine safety as saying that 1,419 miners were killed in the first nine months of the year, 27.6 percent fewer than the same period last year."

Organic food is part hype. There's no chemical test one can do on food to confirm it is organic or not organic, The Organic industry refuses to even permit such a test to be developed. Basically nitrogen is nitrogen. The plant can't tell the difference. That said, I do buy organic foods from time to time.

"Basically nitrogen is nitrogen." That sounds right but actually is not true. Organic fertilizer does not leach off during the winter. And that matters. Ask the Chesapeake Bay crabbers who have seen an 85% drop in blue crabs in the last 20 years.

Are you arguing for regulation of the organic food industry? Won't the market decide who is doing the right thing?

Regulation or more correctly standards are necessary. This need not come from the Federal Government and can be sponsored by trade groups or other non-governmental bodies. The current standard that the land must be organic is non-sense. What if the farm next door is not and there is run-off of pesticides?

http://www.rsc.org/chemistryworld/News/2007/April/13040701.asp

Do we see people around you who are capable of innovating our way out of this? With all the social and technological changes of the past 25 years, what new crop of citizens are being created? Uh, like, it's like so, you know, uh, like, you know, like I am just so .... you know? Listen to the birdbrained tweet-tweet talk around you and be very afraid.

I think what bothers me most about organic marketing is that mother on welfare is made to feel she's harming her baby if she feeds her child conventional food. If its a choice between a balance diet or an economically constrained organic one the answer is easy. Conventional food.

Do we see people around you who are capable of innovating our way out of this? With all the social and technological changes of the past 25 years, what new crop of citizens are being created? Uh, like, it's like so, you know, uh, like, you know, like I am just so .... you know? Listen to the birdbrained tweet-tweet talk around you and be very afraid.

You could say that about any generation. And I'm sure people have. But the point is taken. We need an education system that challenges people to be creative and to excel. We can do better.

not with people like you around.

Hey, columbiacounty, Mr. Innovation 2011, the guy who hits the "Respond [sic] to All" button on his email.

do you think that we are better off with more or less people in this country like riversider?

I don't have the macro points of view like Riversider does. I'm more focused on people, one by one.

Yes.

@RS: You may note that your link is to a 4 year old article from a chemistry organization in the UK. I thought we were talking about the US, where the USDA actually does regulate what can be called organic:

http://www.usda.gov/wps/portal/usda/usdahome?navid=ORGANIC_CERTIFICATIO

looking even better now

@malthus: I was aware fo the date and source. U.S. standards talk about farming practices. There's no mention of any chemical tests conducted on the food to prove the item is organic.

-1-

B. Does organically-grown food contain more or better nutrients - vitamins, minerals and phytonutrients - than conventionally grown food? Find Out More: Issues and References, number 1.

1. U.S. organic standards and certification do not address food quality. They denote method of production and handling only and were implemented to provide a credible marketing claim for organic producers, processors and retailers.

United States Department of Agriculture (USDA) National Organic Program (NOP) oversees all labeling and marketing claims for "certified organic" products sold in the U.S.

"The NOP is a marketing program housed within the USDA Agricultural Marketing Service. Neither the OFPA [Organic Food Production Act] nor the NOP regulations address food safety or nutrition." National Organic Program: Background Information, 2008. Full text: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELDEV3004443&acct=nopgeninfo

"In spite of research work carried out on different aspects of organic food, there is not yet a method/methods for routine use in authentication of organic food products. Research work to support and meet the needs of farmers and markets concerning claims on authenticity, safety and nutritional values of organic crops is necessary." Excerpt: "Need for Research to Support Consumer Confidence in the Growing Organic Food Market," by Yona Siderer, Alain Maquet and Elke Anklam, Trends in Food Science and Technology, vol. 16, no. 8 (2005):332-43. Abstract: http://dx.doi.org/10.1016/j.tifs.2005.02.001

Suggestions that a food composition component for "certified organic" be part of the certification and/or marketing process are being considered, especially in Europe. Laboratory analysis that can prove "product authenticity" of organic food claims are being researched.

http://www.nal.usda.gov/afsic/pubs/faq/BuyOrganicFoodsB.shtml#BuyB1

http://blogs.scientificamerican.com/science-sushi/2011/07/18/mythbusting-101-organic-farming-conventional-agriculture/

Exactly. Higher education stopped being about self-improvement and more and more and more about getting a higher-paying job. And the education got more and more costly. There is a glibness about quick answers to everything that I see reflected in the well-meaning protests of OWS - like, uh, you know, corporations have all the money and we don't - that's not fair.

Elaborate, please? I don't disagree, but if you can't articulate something you surely are not going to solve it.

The fact is, organic food has become a wildly lucrative business for Big Food and a premium-price-means-premium-profit section of the grocery store. The industry’s image — contented cows grazing on the green hills of family-owned farms — is mostly pure fantasy. Or rather, pure marketing. Big Food, it turns out, has spawned what might be called Big Organic.

All of which riles Mr. Potter, 62. Which is why he took off in late May from here for Albuquerque, where the cardinals of the $30-billion-a-year organic food industry were meeting to decide which ingredients that didn’t exactly sound fresh from the farm should be blessed as allowed ingredients in “organic” products. Ingredients like carrageenan, a seaweed-derived thickener with a somewhat controversial health record. Or synthetic inositol, which is manufactured using chemical processes.

Mr. Potter was allowed to voice his objections to carrageenan for three minutes before the group, the National Organic Standards Board.

“Someone said, ‘Thank you,’ ” Mr. Potter recalls.

And that was that.

Two days later, the board voted 10 to 5 to keep carrageenan on the growing list of nonorganic ingredients that can be used in products with the coveted “certified organic” label. To organic purists like Mr. Potter, it was just another sign that Big Food has co-opted — or perhaps corrupted — the organic food business.

“The board is stacked,” Mr. Potter says. “Either they don’t have a clue, or their interest in making money is more important than their interest in maintaining the integrity of organics.”

http://www.nytimes.com/2012/07/08/business/organic-food-purists-worry-about-big-companies-influence.html?pagewanted=all

Riversider's post is relevant to NY residential real estate because Mr. Potter "took off in late May from here for Albuquerque".

No riverturd's post is relevant to manhattan RE bc he is the Mr. Valentine of cream cheese prices.

Mr. Valentine has set the price........ On cream cheese.

And cream cheese austerity is why Riversider is spending so much time on the Potter?

I don't know. It kind of seems like rs is arguing that people are too stupid to make reasonably informed choices regarding food and thus the government should have more stringent regulations to protect the people from their own stupidity. How does he sleep at night with all his inner conflict?

Things seem so hard for rs. Hating people who lease cars, particularly SUVs, buying cream cheese, justifying a purchase in a building with a pool and a gym on a godforsaken stretch of the island, wanting more regulations (but only those he approves of, because he's anti-government, you know), not being able to harp incessantly about impending hyperinflation (yet kind of obviously still wanting to so so) because oil has just dived, etc.

no, what we have is just a giant ponzi scheme, but secured by our troops and killing weapons