

As Economy Turns, Washington Looks Better - domodomo
http://www.nytimes.com/2009/08/08/business/08leonhardt.html?hp

======
nostrademons
This is one of the fastest media turnarounds I've seen in a recession.

IIRC, the 2001 recession didn't end in the media until later 2004 and early
2005, with the sales of Flickr and Del.icio.us and the development of FaceBook
and YouTube. I remember that I didn't even look for sumer internships in 2003
because I figured the market was so bad nobody would hire a mere intern, and
about half the companies I approached in 2004 said "We liked your resume, but
we're not hiring now." In 07 (after this had all ended), I talked with a
fellow computer programmer at a fencing class, and found out he was making
_half_ what I was because he had graduated into the sluggish job market of 04
instead of the growth market of 05.

In the 91 recession, I recall the media being very subdued and depressed right
up until Netscape's IPO in 95.

I don't remember the 79-82 recession, but to hear my parents tell it, there
was a widespread belief that America had permanently lost its technological
edge, and things would _never_ get better. This perception didn't change until
around 1984, and even through my childhood in the 80s, I remember recurrent
fears that we'd lost our economic supremacy to the Japanese.

The only recession I can think of where people started proclaiming "We've
turned the corner; happy days are here again" a mere year after it started was
the Great Depression. If you read <http://newsfrom1930.blogspot.com/>, it
sounds almost exactly like something you could read in the newspapers today.

That alone makes me suspicious of this recovery. The point of a recession is
so you _stop doing what you're doing_ and find new uses for your labor and
capital; that hasn't happened so far. In all the recessions above, that's what
brought the country out of it: new markets opened up and absorbed all the
workers that were laid off by the old ones. I haven't seen that yet (though
there are some interesting developments in mobile and in the revival of
hardware hacking); mostly we've seen government attempts to paper over the
inefficiencies in old industries with taxpayer dollars.

~~~
mynameishere
The whole thing is laughable. Very little bad debt was defaulted--most of it
is hidden on the fed's balance sheet or by mark-to-magic accounting. Banks are
letting people live mortgage-free to avoid booking a loss. The CRE, Prime,
option ARM, and ARM problems are just getting started. And then there's this:

[http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.X...](http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS)

H-50: A PE ratio of 116. This quarter is 118 so far. (!!!) Anything over 20
has been traditionally considered bearish. What do the people in-the-know
think about this?

[http://www.zerohedge.com/article/las-weeks-insiders-
transact...](http://www.zerohedge.com/article/las-weeks-insiders-
transactions-5-buys-134-million-145-sells-1-billion)

~~~
nostrademons
Couple comments on those metrics:

1.) The value of a stock's supposed to reflect its earnings over all future
time, not just current earnings. That's why stocks don't instantly fall to 0
when a company has a bad quarter. Earnings are at a low point now; a P/E of
118 implies that investors think they will get better soon. Whether they're
right remains to be seen.

2.) Insider selling itself doesn't mean much. Many directors and executives
receive a large portion of their compensation in stock; they're _always_
selling, because that's how they get cash to spend. I'm curious how it stacks
up to pre-crisis ratios though.

------
nazgulnarsil
same old story...people manage to keep advancing despite the yoke of heavy
taxation, government takes credit for every inch plowed.

~~~
nazgulnarsil
..is 40%+ taxation not considered heavy? I consider it pretty heavy. taxation
is especially harmful to the primary source of economic growth: new small
businesses. the tax burden of hiring new employees is so strong (and so risky
due to litigation resulting from contract dispute) you'd think the government
liked unemployment.

~~~
Locke1689
You're probably being voted down because you provide little evidence for your
claims. It is practically impossible to "logically deduce" the result of
certain elements of the economy because it is dependent on so many variables.

Consider, for example, the resistance in a wire. One might logically argue
that because the power dissipated instantaneously in a resistor is equal to
I^2 * R, that a decrease in resistance R leads to lower power (and heat)
dissipation. Of course, that would be wrong, as that same resistor relates
current to resistance by V=IR. Now, one can see that by decreasing the
resistance by a factor of x (R/x), one also increases the current by a factor
of x (xI, at a constant voltage). Thus, when the original problem is solved
again, P=(xI)^2 * (R/x), so the power dissipation is actually _increased_ by a
factor of x.

The economy works in the same way. To argue that taxes cause a decrease in
first order capital may be true and may be a logical conclusion. _However_ ,
logically deducing broad statements about the economy through that is a
logical fallacy. The solution to this is data, not more reasoning. Remember,
the variables you forget never appear in your equations.

~~~
nazgulnarsil
I thought my claim was pretty conservative. All my experience with small
businesses (2 just in my immediate family, friends with lots more) is that
dealing with the administrative as well as straight up monetary demands of
taxes actively prevents them from hiring as many people as they'd like to. it
seems like common sense that if you wanted to encourage employment you'd have
like a 3 month moratorium on new payroll taxes when getting new employees up
and productive. considering that you're taking someone OFF unemployment and
turning them into an active taxpayer...seems like a completely unadulterated
win-win for the government...so why is there zero incentive?

~~~
Locke1689
I'm sorry but you've just done the exact same thing again. You've essentially
said that the entire US tax structure is bad, while only providing anecdotal
evidence for your claims.

You claim that common sense will produce certain economic results, however in
most fields claims of "common sense" would be laughed away. Anyone who argued
that we can know both the exact position and velocity of any particle would
probably be regarded as having common sense less than 100 years ago.
Unfortunately, common sense is not proof of any measurable claim.

In addition, you continue to ignore variables in favor of the ones you care
about. Specifically, you argue that the savings would positively benefit very
specific segments of funding and revenue for certain small businesses.
Meanwhile, you completely ignore the effect that the taxes have on other
variables, like infrastructure development. This is the same fallacy of Power
that I proposed before.

~~~
nazgulnarsil
I can't name a scenario in which decreased tax revenue for the government is a
bad thing. the claim that government spending is better than private rests on
the idea that the money in aggregate can be directed more efficiently. the
support for this is...nothing. I tend to think extraordinary claims require
extraordinary proof. so if you make an extraordinary claim: I need to take
your money for your own good, you need extraordinary proof.

the burden of proof does not rest with me, my position is that in the absence
of strong evidence you should leave people alone.

------
johnohara
We're not done by a long shot. The next wave of mortgage resets -- option ARMs
-- comes through late this year and next.

[http://www.businessweek.com/lifestyle/content/apr2009/bw2009...](http://www.businessweek.com/lifestyle/content/apr2009/bw20090416_103126.htm)

~~~
sahaj
information that is already known is always already taken into account by the
futures/stock market.

~~~
joe_the_user
It is amazing to me that anyone still believes this after the last two years!

But I suppose that a little irrational optimism is good thing in tough
times...

------
joe_the_user
And perhaps "Cash For Clunkers" will get credit?

But seriously, it seems like "success" in economic terms these day means
"postponing the day of reckoning till your successor is in office" and failure
means the opposite. By that token Greenspan succeeded but Bush II failed.

~~~
jhancock
by "these day" I assume you mean for at least the last 30 or 40 years?

A common story... (copied from
[http://www.wickedlocal.com/milford/news/lifestyle/columnists...](http://www.wickedlocal.com/milford/news/lifestyle/columnists/x135734224/MARIE-
PARENTE-The-envelopes) )

A CEO was being honored at his retirement party. The toastmaster, his
successor, called on him for parting remarks and advice. After delivering
farewell comments, the outgoing CEO handed his successor two envelopes marked
#1 and #2.

He said, "Place these envelopes in the top drawer of your desk. When you make
your first big mistake, open the #1 envelope and follow the instructions. When
you make your second big mistake, open the #2 envelope and likewise follow
those instructions."

The new CEO was young, handsome and an accomplished public speaker. He and his
family were featured in business magazines and were invited to speak
throughout the business world at home and abroad. For the first few months,
things seemed to go along smoothly in spite of the CEO's frequent criticisms
of the company's founders, business practices and employee performances. The
new CEO seemed to relish pointing out the company's mistakes and perceived
weaknesses. One day, the new CEO committed a huge gaffe that headlined
business newsletters and newspapers nationwide! He remembered the two
envelopes given to him by his predecessor.

He rushed to his desk, seized the #1 envelope, tore it open and read it. The
message was printed in bold black letters. "Blame your predecessor."
Immediately, he convened a series of press conferences, blamed his predecessor
and things seemed to calm down for a few months.

About three months later, he made another gaffe of greater significance than
the first one. Before meeting with the board of directors, he opened his desk
drawer and read the #2 letter. It stated, in bold, black letters, "Prepare two
envelopes!"

~~~
joe_the_user
_by "these day" I assume you mean for at least the last 30 or 40 years?_

I suppose so. But, despite the great difficulty in proving this scientifically
and the great risks of this being a mere effect of nostalgia, I strongly
believe that the intervals of attention are getting shorter.

~~~
jhancock
I"m sure the attention intervals are getting shorter. Mainstream media is
painful to watch. I only picked the period 30-40 years as I'm 40 years old and
it seems our political system has been "passing the buck" through my life.

------
timwiseman
This is article is interesting, and could in the end be correct in its rosy
assessment and its allocation of the credit.

However, I find it interesting that this article does not say a word about
inflation, the creation of currency, or the increasing national debt and the
intermediate to long term affects those will have.

------
mixmax
It ain't over till the fat lady sings.

The economy is basically a chaotic system that is impossible to predict. It's
kind of like the weather: More than a few days out you just don't know since
there are so many variables and feedback loops.

~~~
joe_the_user
Uh, _that_ the housing bubble would end was absolutely predictable. It wasn't
a matter of butterflies in the Himalaya perturbing the system. _When_ the
housing would was hard to predict.

That poor policies result in problems is not unpredictable and so it's quite
predictable that this "recovery" will end in grief. When it will end is a
different matter but your analogy with the weather is misplaced

