Brilliant Economists Can't Figure It Out
Tom Toles perfectly sums up both the present economic environment, and the problem with economists:
Wednesday, August 22, 2007 | 11:39 AM | Permalink
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A picture is worth 1,000 words.
Posted by: bad home cook | Aug 22, 2007 11:46:42 AM
If you keep posting cartoons like that some folks may start calling you a communist.
Posted by: spongetoddsquarepants | Aug 22, 2007 11:49:00 AM
and a million laughs....
this cartoon and hundreds of others like it are 6 years too late....
Posted by: brion | Aug 22, 2007 11:51:00 AM
as the S&P 500 and the top 1% inexorably drain money from the rest of the participants in the economy we will soon have reason to recall Keynes' point about "the marginal propensity to consume".
~~~
BR: Hey! Some of my best friends are in the top 1%!
Posted by: scorpio | Aug 22, 2007 11:54:14 AM
So let me get this straight, companies are making record profits and the American consumer is somehow suffering and unable to buy any of the goods and services corporate America is selling them?
How are the corporations making these profits if workers are faring so poorly? I walk into Best Buy and see people everywhere buying stuff. I look around and see people out shopping, bags bursting with new items they just purchased. If you go to any Starbucks cafe on Saturday morning you have to wait in a long line to get your gourmet latte.
If these are bad times, what do the good ones look like?
~~~
BR: While 70% of the US economy is driven by the consumer, don't forget about the rest of the world: US companies are selling goods and services to overseas corporate/gov't customers in Asia, Europe and Latin America, as well as to each other.
Posted by: Mr. X | Aug 22, 2007 11:55:03 AM
"If these are bad times, what do the good ones look like?"
In the good times, everyone is paying with cash.
Posted by: AlladinsLamp | Aug 22, 2007 11:58:27 AM
Mr. X, you ever heard of credit cards? Equity lines of credit? Stuff like that?
Posted by: Florida | Aug 22, 2007 11:58:49 AM
"How are the corporations making these profits if workers are faring so poorly? I walk into Best Buy and see people everywhere buying stuff. I look around and see people out shopping, bags bursting with new items they just purchased. If you go to any Starbucks cafe on Saturday morning you have to wait in a long line to get your gourmet latte.
If these are bad times, what do the good ones look like?
Posted by: Mr. X | Aug 22, 2007 11:55:03 AM"
__________________________
Uh...I'm going to go out on a limb here...maybe it's credit? Y'know - the debt-driven economy we've been hearing about?
Ignore everything else - just go shopping. The President says so.
Wages down? Buy a $5 cup of coffee - you'll feel better.
Posted by: Marcus Aurelius | Aug 22, 2007 12:01:18 PM
Mr X. you are X actly wrong on so many levels I do not even know where to start but I'm sure others will point that out to you..
Ciao
MS
Posted by: michael schumacher | Aug 22, 2007 12:05:00 PM
Did you see David Kelly of Putnam on CNBC this morning talking about the consumer? His group has calculated a totally rosy figure for disposable income for the near future and when somebody told him that that figure (based on MEW and credit cards, etc) just represents more debt for people he said, "I'm not saying they SHOULD spend it, I am just saying they will spend it."
That about sums it up.
Posted by: Sheeple Investment Co. | Aug 22, 2007 12:12:07 PM
I want to know what news is coming for BSC....all the major financials are up to flat and BSC is down over 2 bucks...or about 2%.
Someone knows something relating to BSC
Ciao
MS
Posted by: michael schumacher | Aug 22, 2007 12:21:18 PM
Paying with cash, credit cards, equity lines of credit? Which is it? You guys seem to have all the methods of payment covered, except explaining how somehow these consumers keep on consuming and never seem to scale back their lifestyles. If they did then maybe those evil, profit-laden corporations wouldn't be raking in record profits. As long as they are, that shows they are supplying the demands of the market, and that people are still willing and able to pay -- no matter what method of payment they choose to use.
10 years ago the economy was supposedly "booming" based on bogus telecom and dot com stocks with zero earnings, false confidence in some ephemeral notion of the economy being in a neverending cycle of productivity gains, IPO's for sock puppets selling pet food over the internet, "this time it's different", NASDAQ-5,100, a fantasy mirage of predicted fiscal budget surpluses based on unsustainable capital gains from the manic stock market, retail investors turning into daytraders, and the lowest savings rate in U.S. history.
But things were "better" back then, right? They felt good, even though the "new economy" was built on false promises, rampant fraud, and runaway speculation in tech and telecom IPO's. When the bubble burst, what was left except a bunch of worthless IPO paper, and Time Warner stuck with a nearly worthless AOL unit?
The good, ole halcyon days of the late 1990's. The true Gilded Age of America. At least when this bubble finally pops there will be real estate left in its wake. Not worth the price paid for it, but definitely worth more than anything left in the aftermath of the dot com bust.
Posted by: Mr. X | Aug 22, 2007 12:25:04 PM
MS
RE: BSC
Todd Harrison over at Minyanville passed along that there was chatter on Monday that BSC was now having currency issues. Not a fact, probably a rumor, but maybe today's price action tells all.
Posted by: TraderGirl | Aug 22, 2007 12:29:35 PM
michael schumacher: I'm merely relaying purely anecdotal evidence of what I observe every weekend in the real economy. It seems to be backed up when the earnings reports come out every 3 months with companies showing record profits. Somehow people are still able to pay, whether on credit or cash. Home equity withdrawals haven't been going on so much for quite some time now, yet consumers are still consuming. It's anecdotal, if you have contrary evidence put it forth, post pictures of the shanty towns springing up across the suburban areas of America, show where the companies are reporting fraudulent profits, provide evidence that workers can't afford to buy things like iPhones and Coach handbags. So, if I'm wrong on so many levels -- prove it.
Posted by: Mr. X | Aug 22, 2007 12:35:22 PM
trickle-up economy in full swing.
Posted by: anon | Aug 22, 2007 12:35:27 PM
They're paying with cash, credit cards, and equity lines of credit. It's not one of the above, it's all of the above. People are running out of cash (negative savings rate) and have no choice but to turn to credit. Also, consumers have been scaling back their lifestyles since the 1970's; the fixed costs are taking a much larger chunk now than ever even with two incomes.
Cue "big screen in every home" fallacy....
Posted by: Mark | Aug 22, 2007 12:38:06 PM
Looks like the cartoon worker is employed by a big bad cartoon corporation. Looking in his cartoon paycheck I wonder if he sees the real world cost of benefits received or the 'employer share' of his fica taxes typical of an employee of an evil corporation. Benefits typically run to about 25% of labor costs and medical costs are increasing at 30-40% clip. Must be the evil corporations in the cartoon healtcare industry. Increasing real world costs of liability insurance and medi-care, medicaid regulations among healthcare providers can't have anything to do with it since the whole evil, greedy cartoon corprate interests narrative becomes unadulterated bunk. We can't have that. You guys need that narrative.
~~~
BR Oh, puh-leeze.
These are the simple facts: Corporate profits are at record highs. At the same time, this post recession recovery has been one of the worst since WWII in terms of job creation, income and wages.
I don't make a moral judgment about it -- I neeed to know what reality is so as to best protect my clients assets.
Posted by: Tom | Aug 22, 2007 12:38:23 PM
"The good, ole halcyon days of the late 1990's. The true Gilded Age of America. At least when this bubble finally pops there will be real estate left in its wake. Not worth the price paid for it, but definitely worth more than anything left in the aftermath of the dot com bust.
Posted by: Mr. X | Aug 22, 2007 12:25:04 PM"
_____________________________
You seem to ignore the fundamentals of finance (don't worry, most people do the same - it's called delusion). Empty houses that have no buyers are worth nothing. Not to a bank, not to an "investor", and not to local government in the form of property taxes. The tech bubble was replaced with the housing bubble - the fundmentals remained unchanged. What bubble do you see on the horizon? Medical stocks? I don't think so.
Check GWB's track record regarding investors in his business ventures (as well as those of his Enron buddies). Then look at finance, taxes, and the middle-class wage earner over the pat 6 years. You are GWB's latest victim, and you have no recourse.
Posted by: Marcus Aurelius | Aug 22, 2007 12:41:25 PM
"If these are bad times, what do the good ones look like?"
TROLL ALERT
You sound like one of the "Brilliant Economists Can't Figure It Out"
Posted by: me | Aug 22, 2007 12:43:07 PM
Mr X....they don't have minimum payments where you come from?
Posted by: KnotRP | Aug 22, 2007 12:43:40 PM
Real estate left? If the current owners are upside down on their mortgages then they are worse off than the dot.com boom left them -- instead of an asset worth zero they have an asset worth less than zero net that continues to drain cash -- but, sure, the real estate is still worth something to someone, somewhere, at least in principle.
My own take though is that the credit debacle is going to continue to unwind far more slowly than expected -- the peak in ARM resets isn't due for another year at least -- with continuing areas of profit but rising volatility and the possibility of serious reversals means more nimbleness will be required; i.e., it has not been a particularly grand time for buy-and-hold strategies the past 7 years and that's probably going to hold doubly true for the next 7 IMHO.
Posted by: RW | Aug 22, 2007 12:45:37 PM
look at consumer credit from March to July....
You see the big spike in it starting from May.
I bet you did'nt. We've just moved the extraction from the house to the credit card.
I see you do not have to provide any evidence at all but I do???... It's all around you...foreclosures at record rates, credit contraction, lending standards raised, corporate profits in question. Add in a consumer that has basically been lied to for over a year as to the state of the mortgage industry, commerce department, and economic growth factors its easy to see how people continue to spend and not have any consequences. Not that it matters to you but that is the very principle of the Bush administration: No CONSEQUENCES.
Now if they can just put off any consequence for say another year or so....then the charade will continue.
You are still wrong on way too many levels to even waste bandwidth on....
Just because we don't look like Mexico does'nt mean we are not on that path of wealth distribution. We are well on that path....however the financially challenged have no clue as to what is really going on because they get there news from Cramer or Paulsen where everyday everything is contained.
Wait....
CiaoMS
Posted by: michael schumacher | Aug 22, 2007 12:46:18 PM
"You guys need that narrative."
Posted by: Tom | Aug 22, 2007 12:38:23 PM
_____________________
So, Mr. Tom "Bull" - where do you see sound financial practices? What is your narrative? If you aren't in the Cabal (and, since you're posting here - I assume you're not), you're one of us (middle class taxpayer). The only difference is that when we're all trying to pick up the pieces, you'll be getting laughed at.
I'll bet you tink Bush has changed America for the better, too. Keep on holding on to the delusion. You are the punch line.
Posted by: Marcus Aurelius | Aug 22, 2007 12:51:07 PM
Marcus-
The dealings at Arbusto should be required reading for anyone that has a vote. Unfortunately many never exercise that right.
How he got elected on his business track record is the greatest story never told...and if you are told then they have to kill you...
Ciao
MS
Posted by: michael schumacher | Aug 22, 2007 12:54:26 PM
Mr. X-actly wrong
here's some evidence that you do not have to collect(based on your own comments) but apparently I do
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aY8m0nta94GA
let's talk about fake corporate profits when you finish reading that.
Ciao
MS
Posted by: michael schumacher | Aug 22, 2007 1:05:53 PM
