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Unlike Germany, the US automobile sales stimulus package is guaranteed to offer little for the average consumer... Including those that will not be buying. (cleanmpg.com/forums/showthread.php?p=188001)

http://www.cleanmpg.com/photos/data/523/2007_Civic_iCDTi_Hatch_-_Review_Thumbnail.jpgWayne Gerdes – CleanMPG (cleanmpg.com) – Feb. 15, 2009

Germany’s stimulus... Honda Civic iCDTi -- An easy 70 + mpgUS and 15% off for removing an ancient emissions nightmare. Ours? Don't bother :(

Southfield, Mi -- A report by R.L. Polk analysts predict the current government economic stimulus package will increase U.S. light vehicle sales by a mere 94,000 units in 2009, providing consumers with an average rebate of $330 for each new vehicle purchased.

Throughout the negotiations between the House and the Senate over the economic stimulus plan, Senator Barbara Mikulski (D-MD) spearheaded a provision to help revive the sagging automotive market. Under the current proposal, consumers who buy a new vehicle will be able to deduct the sales tax from their income taxes.

Polk analyzed vehicle prices, sales tax rates, registrations by state, and income tax brackets to develop its rebate forecast. The sales projection forecast is based on measuring the efficiency of past incentive programs across the automotive industry, together with current economic conditions including limited credit availability, low consumer confidence and a rising unemployment rate.

A previous proposal also included a deduction for interest expenses on new vehicle financing. Under that plan, Polk estimates the average rebate would have been $1,250 per vehicle, and would have provided a sales boost of 359,000 units in the U.S.

"Although the current tax incentive is not as generous as the initial one, it is nevertheless an encouraging measure. This incentive program could be even more successful if coupled with additional steps to boost consumer confidence that would drive more showroom traffic for dealers," said Lionel Yron, director of Consulting & Analytics at Polk.

An interesting point of comparison is to look at the steps taken by Western European governments to spur automotive demand in their region. In Germany, consumers can receive a rebate of 2,500 Euros (equivalent to $3,200 USD) if they scrap their old vehicle when purchasing a new one. According to Polk estimates, this measure is expected to increase light vehicle sales by 200,000 units for 2009 and should push the German car market just above 3 million units!

"Because of the fixed rebate amount, small car buyers will benefit from a greater discount. As such, Polk expects to see robust sales gains in this segment. The scrappage bonus may very well ignite a sustained recovery for the German car market," commented Ulrich Winzen, chief analyst at Polk.

R. L. Polk & Co. is a provider of automotive information and marketing solutions. Polk collects and interprets global data, and provides extensive automotive business expertise to help customers understand the market in total.

Thee stimulus bill has so much pork that I'm glad that I'm a vegetarian.

Thee stimulus bill has so much pork that I'm glad that I'm a vegetarian.

Now that was funny. :D

I agree. This thing is a complete joke of a "stimulus" bill from my standpoint. :(

Honestly I still don't see anything wrong with this country. We really don't need a stimulus bill of any kind at all. Let the crap companies die and let the good ones survive.

Honestly I still don't see anything wrong with this country. We really don't need a stimulus bill of any kind at all. Let the crap companies die and let the good ones survive.

:flag:

I agree 150%!

However try and think like a Democrat for a minute. If you lets those crap companies die out lots of voters in big blue states don't have jobs. And then you might lose some seats or the 2012 election!

Washington DC power & prestige > All other concerns

There will be a US production shortfall of $2 to $3 trillion in 2009. Government is the only entity that can step in and make up for this underutilization of resources. If not, what is the solution? Just let unemployment go to 25%? What "free market" force is going to solve this problem. Read Nouriel Roubini or Paul Krugman.

The Republicans and Rush Limbaugh have destroyed this country and the world. It is not about letting crap companies fail, ALL companies will fail if there is no demand.

Although they cling to dogmatic belief in the free market, Republicans wouldn't know Adam Smith from Adam Ant. Go ahead and call building roads and schools "pork", you demonstrate your economic and financial illiteracy.

You too, Jim? The issue isn't schools and roads, it's money for NASA, a possible influenza epidemic, etc ad infinitium. From what I can glean, huge amounts of money are being allotted to things that have no tangible benefits for the economy. What happened to the lean, mean legislation targeted at the severe issues we face now? I don't dispute that other things are desirable, but what the heck are they doing in this bill??

We need focus on the housing issues and the businesses of this country. This thing is so huge, so cluttered, so inflated in every respect of the word that I can't help wondering if it will actually help us?

New country song i heard today,they're living it it up on wall street and shuting down detroit.

I really would like to get my hands on the Honda Civic iCTDi! It would be the perfect toy after my HCH!

I really would like to get my hands on the Honda Civic iCTDi! It would be the perfect toy after my HCH!

Best post in this thread so far. ;)

This thing is so huge, so cluttered, so inflated in every respect of the word that I can't help wondering if it will actually help us?

$400 billion is too small, not too big. The tax breaks are a joke and will help nothing. Also, why on earth do we need to focus on the businesses of this country. How about we focus on the citizens for a change.

6 months congress passes "stimulus 2". Then in a year, "stimulus 3".

We still will not spend as much money as we waste on military and killing brown people in the name of spreading freedom.

Hi All:

___I was watching Washington Week in Review last night and one of the experts spoke about the mistake of this bill was that the Obama administration gave it to Congress to build instead of building it themselves. The quote was something like "8-years of pent up demand was let loose."

___On the other side of the coin, I was reading quite a few articles about Nationalizing the banks which is so un-capitalistic as to make us all scream but it may be the only way to clear out the garbage. This includes both the bad debt and the current exec's who are failing to write down the bad loans for fear of it hurting their capitalization further. Only "Chase" has stepped up so far and the rest are sending in their lobbyists to the republican's and now democrat's to try and dampen any mandatory accounting of how bad the situation is. There are many Mortgage help organizations that were setup within the last year and most cannot do anything due to bank intransigence so the homes are going to foreclosure. The banks are not writing them off at market but the cost of the loan which again is mistaking reality for fantasy.

___Adding insult to injury, nobody is closing any holes in exec pay that was declared by the Obama administration for future TARP funds.

___The back room deals I have been reading about in Times, WSJ and Business Week are making us look like a bunch of clowns with the politico/business complex taking us where they want to go instead of where the country needs to go. Same crap that was happening during the Bush Administration although not as pretentious.

___The system in some cases should have been allowed to collapse and built back up again with the Government taking over the institutions. The Federal Government is the only entity large enough to do this with $2 to $3 Trillion (by printing money of course) to attempt to deleverage and clear the financial system. 60 Minutes is going to have a featured show on the causes so make sure you watch that tonight as well.

___Good Luck

___Wayne

$400 billion is too small, not too big. The tax breaks are a joke and will help nothing. Also, why on earth do we need to focus on the businesses of this country. How about we focus on the citizens for a change.

6 months congress passes "stimulus 2". Then in a year, "stimulus 3".

We still will not spend as much money as we waste on military and killing brown people in the name of spreading freedom.

With nearly $800 billion total, what the heck? Where exactly is this incredible quantity supposed to come from? Printing money is plenty fun I'm sure but there is no free lunch. We are now all on what (in my mind) amounts to an interest only loan on the future. We get to pay and not much else.

As for focussing on citizens, I hear you but those citizens need employers for paychecks and vendors for products to buy. We can't focus on just one or the other.

$400 billion is too small, not too big. The tax breaks are a joke and will help nothing. Also, why on earth do we need to focus on the businesses of this country. How about we focus on the citizens for a change.


It's all nice to say "for the people" but do we really need all this "for the people" right now?

You can find plenty of state by state info here:
http://www.stimuluswatch.org/project/by_state

Lets see....

Pawtucket
$2,000,000 to put down new grass and a track
$1,200,000 to add new public docks
$10,000,000 for new sidewalks and repairs
$4,000,000 for JUST one street sidewalk & lighting repair???
$20,000,000+ for various other street repairs in just Pawtucket alone....

Providence
$18,500,000 for a new arts center and non profit theater???
$20,000,000 for a to refurbish the Amtrak station (The current one isn't bad...)
$4,800,000 for polar bears?????? :eek:
$90,000,000 for a high school renovation....Right.... cut education funding but at least make the school look nicer.....

The list goes on..... way to go congress... bailing out banks and bears....

So you are saying that public docks, sidewalks, amtrak stations are bad?

Infrastructure is good. Unless you are the unibomber living in your shack in the woods you will use the infrastructure as well. What if our parents and grandparents had this attitude? We would all still be living on farms with dirt roads. This country is falling apart at the seams and we need to rebuild it. There is plenty of work to do, we just need to get at it!

I have only been there a couple of times but i am pretty sure there are no polar bears in Providence. Many false outrage websites are springing up with lousy information, dont get suckered in by Rush Limbaugh propaganda.

http://www.rogerwilliamsparkzoo.org/

We sure do. I haven't been there recently so I can't comment on exactly how many bears dwell within state limits.

And yes: Amtrak/sidewalks/and public docks are BAD when we were paying for it with money we don't have. If we want these things then we should fund them the proper way. Through the state or even the federal government off money really earned. From things like taxes etc. etc..

It doesn't take a genius to know increasing taxes, especially on the wealthy or luxury goods would be a good idea but I don't see anyone selling out their wealthy campaign donors yet.

Public goods are good. That is why they are called goods instead of bads. Zoos, street repair, public train stations all create more wealth and economic activity. This economic activity will create tax revenue.

What if Ike said, forget investing in roads... the national debt must be paid off first. cleanmpg would stand for "clean more pig goo". The interstate highway system helped launch an economic miracle with the automotive industry.

We are in a depression. If we do not use people and companies to do public works, they will sit at home and do nothing. You don't want that do you?

Also, we do not just print more money. That is a Limbaugh lie. We have to sell bonds in the world market. Thankfully, the world markets still like our IOU's. If we let our country crumble to crap nobody will buy our debt and we will be a 3rd world country with nuclear bombs.

... The quote was something like "8-years of pent up demand was let loose."...

When the local papers looked into this several days before it passed, our congressional delegation and governor were only barely hiding that this 'stimulus' was the perfect vehicle for funding a huge wish list of projects that had long been sitting around waiting for government money. It was also an opportunity to backfill cuts from the state's ballooning budget deficit.

Yes, plenty of pent-up political demand for money is suddenly unleashed.

Unfortunately, printing money is exactly what we are doing. We don't have any reserves to cover the multi-hundreds of billions of dollars being committed to these efforts and I haven't seen any attempts to acquire those dollars before putting them into circulation.

Other countries aren't exactly liking buying our debt anymore, either... since they don't have any money either.

There's a fundamental misunderstanding among Americans re: just how important it is to avoid a SEVERE economic contraction. Most of this misunderstanding is due to the fact that most of us have never lived through one, so we don't heed the risks.

But the risks remain. The deeper a contraction goes, the harder it is to pull out of it. As Keynes correctly noted during the 1930s, and as Japan found out to its disappointment during the 1990s, severe contraction can lead to deflationary liquidity traps................self-reinforcing private decisions which lead to equilibrium AT LOW LEVELS OF OUTPUT & EMPLOYMENT.

It's commonly believed that Hoover & his Fed refused to actively stimulate the American economy out of depression from 1929 to 1933. But that is not the case, and the figures show this. Hoover's budgets were increasingly fiscally expansionary. And the Fed did increasingly "flood the street with money." But it was always too little too late. In short, they treated the contraction as a garden variety down turn, and ended up always two steps behind and two steps too late. FDR's New Deal was Hoover on steroids, and yet was only marginally successful........reducing unemployment from 25% to a still high 10-15%. Only the uber fiscal expansion of WWII finally returned the economy to full employment.

Japan's attempt at stimulus in the 90s was much more active, and helped the country avoid the horrors experienced six decades earlier. But in spite of increasing debt to 180% of GDP (the US is half of that), the 90s were a period of stagnation that became known as the "lost decade".

Keynes is unfairly associated with fiscal stimulus. It's unfair because he clearly said that monetary stimulus was more effective, and that fiscal stimulus should only occur as a last resort in dire circumstances. For most contractions experienced in the US since WWII, monetary policy alone has been adequate to insure lost output is minimal & temporary. That's just as Keynes would have it.

But we find ourselves in a different place now. In more typical post-WWII downturns, private indebtedness has only marginally exceeded returns on growth, causing shorter periods of balance sheet repair. Not so today:

http://www.cleanmpg.com/photos/data/500/total-credit-debt-percentage-gdp.jpg

Bernanke's monetary stimulus has been ongoing for two years now. Unlike past downturns, the effect has been pretty poor. And to make matters worse, conventional tools have reached their end. Discount & fed fund rates are near 0%. To continue further, the Fed has to (and likely is) purchase Tbills at such a blistering rate that they are in effect targeting a (higher) inflation rate. And that still might not be enough, given that money supply at the end of the day depends upon the decisions of private actors to a greater degree than we appreciate:

http://www.theweek.com/article/index/93121/End_times_for_Milton_Friedman

The high levels of private debt actually have much in common with levels in Japan in 1989 and the US in 1929. This pairing back will take much longer, and be much more painful. And as a result, the risks of 1930 are that much greater.

We can learn a lot from Japan in the 1990s. By their own admission, they were too timid. Yes, by their own admission their fiscal stimulus was at times less than efficient:

http://www.nytimes.com/2009/02/06/world/asia/06japan.html?_r=1&partner=permalink&exprod=permalink

But they were aggressive enough to avoid the poverty and political instability that comes with liquidity trap induced 1930s depressions that reach a sticky, low output equilibrium.

My "free market" friends must understand that the discipline of macroeconomics has long since left them. We really are all Keynesians now, to varying degrees.

So please do criticize the stimulus as not effective or efficient enough. That will certainly be true. I can definitely tell you that I would rather see less for highways and more for high speed rail, for example.

But smaller? With an output gap of $2 trillion? When the Fed has nearly exhausted its conventional tools? This needs to be even bigger. The alternative is much, much, much worse.

Who will pay it back? We all will, with higher taxes and restored economic growth. This stimulus so far is nothing like the debt incurred during WWII, which we were able to handle just fine over the subsequent two decades.

Frankly, if there is a crime, it is not a fiscal stimulus of nearly $1 trillion while facing a $2 trillion output gap. The crime is the $5 trillion in debt incurred 2001-2009....................which makes it fiscally more difficult to counter this fall in output now.

The crime is the $5 trillion in debt incurred 2001-2009....................which makes it fiscally more difficult to counter this fall in output.

No argument on that point.

EXACTLY! fine job mparrish. RLC, if this country just willy nilly started printing money, the dollar would collapse overnight. We do not have unlimited access to capital though which is why we need to get this right as quickly as possible. I am afraid that this $400 billion is just to get the public warmed up. TARP was $700 billion and the Fed pumped in another $ 2 trillion (plus $5 trillion for FNMA and FHLMC). The banks STILL need another $ 4 trillion.

We are betting on the American people. I will take that bet. Plus, I want to live in a modern country with public goods. There are plenty of lousy places on the planet with no infrastructure and no taxes, don't want to live in those places.

Am I missing something fundamental here? I don't see how spending money we don't actually have yet doesn't constituted "printing money." I can't simply spend $500,000.00 without seeking funding first... how can the government without "printing money?"

I'm not trying to be combative here... I just don't see where I've mislabeled what I'm perceiving.

did you pay cash for your house? if you did then good on you sir!

Most people don't, they borrow the money. The US Government needs a mortgage to build up its crumbling infrastructure. http://www.asce.org/reportcard/2009/

I don't know if cleanmpg likes these links or not, if not sorry in advance. This is from the American Society of Civil Engineers (a left wing fringe organization).

We need to build a society for our baby girls!

Yes, I had to borrow the money for my house. The key here is that I had to seek approval and get the funding arranged before I spent it. How is the government any different? If they commit to an amount of money before they arrange borrowing the amount from other countries, how is that not printing money? Especially if they spend it before borrowing it?

We don't have a political affiliation here at CleanMPG. Post away. We only ask that political discussion be kept civil.

And RLC, you are not being combative, that is the purpose of the internet and sites like this. Free flow of ideas even when opinions differ.

US national debt is roughly about $13 trillion (it was 5 or 6 when w took over) and US GDP is about the same. I think our national debt will be somewhere about $20 trillion when this depression is over. As mparrish says though, it was worse than this after ww2 and we innovated our way out of that debt, we can do it again.

of course the downside to the national debt is the money comes from somewhere. If the US government borrows the money it is not available for private investment or governmental investment by developing countries who really need it badly (probably worse than us). We kind of have this funky paradigm now where America gets all of the capital of the world and developing countries suck egg.

Don't get too caught up in the timing of the borrowing. The US government does not need to "eat what it kills" it "kills what it wants to eat".

Am I missing something fundamental here? I don't see how spending money we don't actually have yet doesn't constituted "printing money." I can't simply spend $500,000.00 without seeking funding first... how can the government without "printing money?"

I'm not trying to be combative here... I just don't see where I've mislabeled what I'm perceiving.

Sean, I'm going to respond by being overly simplistic in order to make a case.........and run the risk of being criticized for not being accurate.

Yes, spending money we don't have is sort of like "printing money", to use your phrase. The problem is that "printing money" is NOT ALWAYS BAD.

Printing money is usually bad. It is quite common in countries with weak, political central banks who are pressured or enthusiastic about letting the presses roll at politically opportune times (hyperinflation down the road be damned!). As a result, you get triple digit inflation in Mexico & Argentina in the 80s. In 1989, the Buenos Aires grocery store prices were changing HOURLY.

But these are examples of political decisions to print money for political ends.

Countries like the US don't really "let the presses roll". Our central banks just start buying a lot more non-cash securities. But this has the same exact effect. You end up with more dollar bills on the street.

The Fed "prints money" so to speak in every recession via security buy backs and lower discount rates. Their actions result in more dollar bills on the street. They do this because the balance sheet repair by individuals and businesses have already dramatically lowered the money supply on their own (see article by Delong in TheWeek posted earlier), and the Fed actions can offset them.

I don't know the mechanics of how the $800 billion will be created, but it's likely in a manner similar to the Fed's actions. Even more important, it doesn't really matter how as long as it is done right and done well.

So to use a crude analogy............imagine an economy with a $10 money supply and $10 in output (goods and services produced). Then a credit crunch causes money supply to fall by 10% to $9. Output follows suit, falling to $9.

But there is still $1 of idle capacity existing! $1 of gainfully employable workers who are out of work. $1 of factory equipment not moving. And equilibrium at $9 can be maintained for some time until the collective actions of private individuals are finally reversed. And the deeper the contraction, the harder to reverse. See 1929-1933. So the Fed prints $1 to put these factors of production back to work sooner to avoid the nastiness that comes with the prolonged $9 equilibrium.

There's a price to be paid. For developed economies, it is usually debt to be paid back over time. But if they do it "right", high inflation is not likely. If they do it right, they are restoring optimal output at $10.

Again, a crude example. But when Obama talks about "saving" jobs, he's talking about restoring optimal output.

Now someone who really knows his macro can put my post to shame. :)

The crime is the $5 trillion in debt incurred 2001-2009....................which makes it fiscally more difficult to counter this fall in output now.This is a pretty good time to make a hypermiling analogy in a Prius with an EV switch.

Our economy in 2001-2009 was driven like a deluded Prius driver assuming that behind that EV switch was a Hymotion battery pack and is looking at a traction battery pack replacement - spend and borrow. Before the battery pack was broke, there was a forced regen ignored (at least that's what Honda calls it). I hate forced regens and bailouts, but that's an incentive to never get yourself into those situations. Repeat - a recal is the result of bad driving. Our economy is in a recal and the stimulus package is the direct result of the previous eight years.

Advanced hypermiling is not drawing heavily on the batteries and occasionally building the pack with regenative braking - conservatism, not the neo-con variety just mentioned above....it avoids the need for stimulus packages.

The leadfooted driver would be the classic "tax and spend" liberal or even socialist.

mparrish, our treasury and central bank are different organizations. We actually have to sell debt securities to fund deficits.

Open market operations as you described are fine tuning mechanisms and unfortunately, the Fed is freaking tapped out. it has bought so much poo poo (about $2 trillion) and has no dry powder. The Fed can not raise money by issuing its own debt. It is owned by its shareholders, US banks.

Public goods are good. That is why they are called goods instead of bads....We are in a depression. I

Where did this twisted definition of goods come from? Not even an 8th grade social studies text would say this?

Depression? Things aren't great, for sure, but a comparison to the recession of the early 1980's is still more appropriate than the depression of the 1930s.

BTW, I dismiss Rush Limbaugh like most mainstream Americans though I disapprove of your blatant pin-the-disaster-on-the-conservatives ranting (and no, I'm not some card-carrying Republican). Dems thought that everyone was entitled to a home of their own, even those trying to buy a $300 K home on a 40 yr note because their incomes were woefully inadequate. Fingers can and should point to both sides of the aisle.

I am, however, disappointed in a stimulus bill that dishes out useless funding and tax breaks while avoiding things that might be worthwhile to the average consumer such as a tax credit, not deduction, for new car purchases, and will still leave me to buy new rims and tires every spring from potholes in the Chicago area.

Greenrider, are you kidding? google "pubic good". This is classical economics and if you are a "free market" person, then public good are out of the same economic paradigm.

No universally accepted definition of a depression, but I think this will be worse than the 30's. Hope I am wrong. As I recall, Bush loved to talk about the ownership society and how housing ownership was higher than it had ever been. But in any case, this downfall was not created by consumers. It was caused by financiers gambling with other people's money.

I was at the Chicago Auto Show and would love to bring a video of GM's presentation to Congress on additional loans for them. The FSP ads of the past are one thing, but to make a presentation last week giving prominence to the Corvette, and Camero, and a 25-foot Transformer suggests to me they still don't get it....it kind of seems like a drunk that went thru the motions at AA and sneaks back to have a six-pack at his house. Wayne took a GM representative to task at the Volt display...of course I expect her to defend GM, am not necessarily convinced they have said enough to suggest they intend to be truly green.

Depression? Things aren't great, for sure, but a comparison to the recession of the early 1980's is still more appropriate than the depression of the 1930s.

Oh, I'm so glad somebody brought up 1981-82.

I too am hopeful that the downturn will look more like 81-82 than 29-33. Given how horrific 29-33 was, it is likely. But if that is the case, it will be due to the successful expansionary activities of Bernanke & Paulson, Bush ($700b in Tarp) and Obama.

Which brings us to 1981-82.

That recession, the worst since 1933, was created by the Fed. It was arguably a necessary evil...........a politically induced credit crunch to permanently kill not just the lax monetary policies which produced double digit inflation, but also the inflationary expectations among the public.

Volcker clamped down, and clamped down hard. And double digit inflation thankfully died a much needed death. But this necessary evil caused a money supply shortfall & credit crunch that created a huge output gap.

Enter Reagan.

Now, there's much debate about the ultimate budgetary goals of Reagan. But we do know this. His budgets were not only extremely fiscally expansionary, they were sold as such in 1981-82. You often heard the argument that his tax cuts and spending increases were just what the economy needed to return to growth after the Fed's inflation slaying.

The current $800 billion stimulus is roughly 7% of GDP. Reagan's extra tax cuts & spending alone from 1982 to 1984 provided a fiscal stimulus of roughly 7% of GDP as well..............based on cbo.gov figures.

So yes, I too am hopeful that this recession will end up looking like 1981 by Obama following in Reagan's footsteps.

Honestly I still don't see anything wrong with this country. We really don't need a stimulus bill of any kind at all. Let the crap companies die and let the good ones survive.


*gasp* do you speak of a True Free Market Economy ? a novel approach that worked so well in the past ...why won't history repeat itself?

Hi All:

___I started this thread as a news item about how Germany was stimulating its automotive sector the right way albeit an expensive way. It is fast becoming the best thread of the month :)

___About Japan. They are still having problems due to the fact their population is shrinking. No natural resources and a shrinking population lead to a long term disaster for them and thus the lost decade and a Nikkei that is still down ~ 80% from its all time highs almost 20-years ago. They also benefited from the rest of the world allowing the Yen to stay low enough so they could export themselves out of their mess. Unfortunately, the rest of the world is now in also in a similar condition so relying on exports is not going to work.

___The US’ prospects... Imho, the Great Depression was finally buried by WWII. The debt incurred was paid for because we were the only ones left that could build, produce and consume anything and everything with the baby-boom. Add the Interstate Highway system and we were given a 30-year free ride. The 70’s recession had everything to do with the Middle East clamp and once it was relieved a bit, we came back. The 80-81 recession had the 80’s and 90’s technology revolution ahead to bail us out.

___This recession (so far) however could be more problematic. Our overall debt is not just about a % of GDP but the ever increasing absorption of capital from around the world. This is harming other economies as well as our own.

___Secondly, we spent the last 8-years on tax cuts that only enriched the wealthiest 5% and added a debt burden closing in on $6-Trillion additional USD. The problem is we literally have nothing to show for the $6-Trillion dollars! Even those that thought a 10% annualized return in the S&P would save them into their retirement years have been bitten with 11-years of negative returns while the financial system has been literally destroyed thanks to those that received the most benefit on the Street with risk taking that the US population is now having to make good on the losses. This was our own (the US’) lost decade as the middle-class was literally stagnant until the last 6-months when it actually went into decline over those previous 10 years.

___Thirdly, what do we have in terms of future growth to save us from ourselves? The Technology revolution has pretty much run its course. The Infrastructure build out is mostly complete. Healthcare has consumed so much of our GDP that we can barely ask it to take anymore let alone would we want to. Our automotive industry is decimated and in debt up to its breaking point. Our aerospace industry is holding its own but without the government dole, it is not going to be a future growth or job engine. Pharmaceuticals have run their course. Technology is slowing as we simply do not need the latest Intel chip to run IE Explorer or Word.

___Number four and this is the 10’ Gorilla in the room. Peak Oil. Even if we do somehow pull out of this recession/depression, we have a nasty surprise just warming up if or when the growth engine begins anew. Remember how all the pundits thought we could live on $4.00 fuel last summer because it was a smaller percentage of our GDP compared to 73-74 or 80-81? If so, maybe they have not looked at GM’s, Chrysler’s or Ford’s books recently. The Big 3 are in worse condition now than in either the past two recessions given their demise is almost a forgone conclusion. Ford may make it, GM might make it and Chrysler will not make it.

___We are not in the 32 – 33 era yet but with Domestic Auto production down 40% the past three months, another 35% and we are right there. Stocks (the DJIA) would have to go down to the 1,400 to 1,500 range to hit the level of fall off from mid 29 though the bottom in 32. I suspect the Feds have been propping up the market as was rumored in 87 and from the few rumors coming out of the Federal Reserve and Treasury, possibly up to $2 Trillion ahs been spent already to prop up “EVERYTHING”.

___The one positive I can see is the US still has an increasing population. We may be aging but with population comes future demand and with future demand comes future growth and with future growth comes future jobs. Electrification of the Transportation sector will help as well but I am not sure how it is going to work with everyone looking to maximize their incomes at the expense of “others” vs. doing what is good for the common US citizen.

___Good Luck

___Wayne

Marc, I'm not sure I entirely follow you... sounds like futures trading to me (but I'm hardly an economist or market savvy). I guess I'm too much of a "save it before you spend it" kinda guy for this to be anything but an extremely foreign and frighteningly insecure practice in my mind.

Personally, I think the government has been trying to prop up something that is completely unsustainable. To achieve sustainability we are going to have to see drastic changes on the social level with severe implications for economic and fiscal policies. Specifically, we are going to have to kill this "live on credit" mindset and start using real money. I use a credit card, but I only buy as much as I have in the checking account -- essentially a plastic check book tied strongly to my bank account through responsible and disciplined spending habits. That wasn't so odd decades ago, but it sure is now. We as a nation need to get a lot closer to that than where we are now. :(

___Thirdly, what do we have in terms of future growth to save us from ourselves?
...
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___Number four and this is the 10’ Gorilla in the room. Peak Oil.


I know what I will be focussing on. Show me a cylinder of uranium hexafluoride and I will show you what gets me out of bed in the morning. Show me a sunny day, a strong tide, or a stiff gust of wind, I'll show you a welcome competitor. Show me an inefficient appliance, home, public building, or automobile and I'll tell you to get started. (You in particular have your hands full with the inefficient drivers, but everybody else can join, too. ;) )

There's enough work out there to keep your generation and mine busy for a long, long time. And if someone could get to work on an all-inclusive recycling program that would be great, too. We will need the reclaimed materials.

We can still innovate out of this. if we only had a small scale 30KW turbine that weighed less than 50 pounds and achieved 80% efficiency. Our problems would go away.

Marc, I'm not sure I entirely follow you... sounds like futures trading to me (but I'm hardly an economist or market savvy). I guess I'm too much of a "save it before you spend it" kinda guy for this to be anything but an extremely foreign and frighteningly insecure practice in my mind.

Personally, I think the government has been trying to prop up something that is completely unsustainable. To achieve sustainability we are going to have to see drastic changes on the social level with severe implications for economic and fiscal policies. Specifically, we are going to have to kill this "live on credit" mindset and start using real money. I use a credit card, but I only buy as much as I have in the checking account -- essentially a plastic check book tied strongly to my bank account through responsible and disciplined spending habits. That wasn't so odd decades ago, but it sure is now. We as a nation need to get a lot closer to that than where we are now. :(

Sean, without a doubt. Our reliance on debt over the past 30 years to make up for wage stagnation has to end. And it will. And it is. The savings rate has shot up in the past year, as families are finally forced to repair their balance sheets. It's a shame we got this far and it took this long.

But debt is not a bad thing. Without debt, I don't have an education......which has allowed me to earn more income than I otherwise would have. Debt has also allowed me to make the biggest investment I will ever make..........my home. Manageable debt is substantially preferable to "living within our means". As long as the growth of debt is surpassed by growth itself (i.e. my debt grows at 2%, my income at 3%), it's all good.

I think what you may be getting at when you talk about sustainability is a possible paradigm shift (ugh, I used that word :)) now that we are entering the "end of free energy"? The peak oil folks argue that the dramatic increase in growth & wealth over the past 200 years is an anomaly, and that over the subsequent 200 years we're likely to enter a period of something resembling no growth............sustainable population levels and sustainable living standards. If that is the case..............if our energy future means stagnant living standards (and that's the optimistic view!), then yes...........debt will increasingly be something undesirable.

This could be a whole other thread. I guess the big questions are.......what is the future of economic growth? Will it continue? Will it end? Do we want it to continue or end? Can we get wealthier and live sustainably? These are questions to which I don't have answers. They're too big. All I know is we have to move towards sustainability like you say..........come what may.

Debt has always scared me. I managed to make my way through my education without gaining any, paid off my first car loan in 15mo, and don't have anything other than the rest of my Insight (which will take a similar length of time) and the mortgage (for which I had no choice but would happily pay off tomorrow if it was possible). Living within our means (as a nation) seems to have become a lost art.

I may be atypical in this but I generally expect to get the short end of the stick. My entire working career has been one long string of "you're screwed!" instances. 2 raises in 8yrs. 2 bonuses in 8 yrs (one of them was a $20 bill in an envelope for Christmas, the other was a retention bonus to get me to stay for a year while they outsourced everything to India :rolleyes:). At one point as a contractor I didn't get paid for 1.5mo because the company hired a new accountant and she couldn't find the old records?? Debt means that when (not if!) the next bump in the road hits I'll be unable to pay my (effective) "lease" on whatever it is and I'll lose it. Or everything.

I'm in pretty decent shape right now but I haven't had a meaningful savings account (>= $100) in over 3yrs now because of what it took to stay out of debt. This scares me no end. How do people live with the kind of debt that seems to be so common?

You are correct about my attitude about sustainability. It isn't a complete elimination of debt for everyone per say, but it is definitely a return to careful budgeting and money management. I can understand a car loan and a mortgage, if you are a business owner a business loan(s) to get going, and if you can't qualify for scholarships an educational loan. Anything else really out to be saved for, then bought.

Okay, enough of my doom and gloom. ;)